<PAGE>
As filed with the Securities and Exchange Commission on April 4, 2000
Registration Statement No. 333-.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COREL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
---------------
<TABLE>
<S> <C> <C>
Canada 7372 Not Applicable
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
1600 Carling Avenue
Ottawa, Ontario K1Z 8R7
(613) 728-8200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------
Eric J. Smith, Esq.
Vice President, General Counsel and Secretary
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario K1Z 8R7
(613) 728-8200
(Name, Address, Including Zip Code and Telephone Number, Including Area Code,
of Agent for Service)
Copies of all communications to:
<TABLE>
<S> <C> <C>
Robert D. Chapman, Esq. Daniel E. Stoller, Esq. Mark L. Weissler, Esq.
McCarthy Tetrault Richard J. Grossman, Esq. Milbank, Tweed, Hadley &
Suite 1400 Skadden, Arps, Slate, Meagher McCloy LLP
40 Elgin Street & Flom LLP One Chase Manhattan Plaza
Ottawa, Ontario Four Times Square New York, New York 10005
K1P 5K6 New York, New York 10036-6522
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Merger Agreement, dated as of
February 6, 2000, described in the enclosed joint proxy statement/prospectus,
have been satisfied or waived.
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. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Unit(1) Offering Price(2) Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, no par value..... 50,772,908 Not Applicable $442,277,712.20 $116,762
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to (i) the common shares, no par value
per share ("Corel Common Shares"), of the Registrant, issuable to holders
of common shares, par value $.01 per share ("Inprise Common Stock") and
series C preferred shares, par value $.01 per share, of Inprise
Corporation ("Inprise"), pursuant to the merger described in the enclosed
joint proxy statement/prospectus (the "Merger") and (ii) the Corel Common
Share Purchase Rights that will be attached to and represented by the
certificates issued for the Corel Common Shares (which Common Share
Purchase Rights have no market value independent of the Corel Common
Shares to which they are attached). In the Merger, each share of Inprise
Common Stock issued and outstanding immediately prior to the effective
time of the Merger will be converted into, exchanged for, and represent
the right to receive 0.747 of a Corel Common Share. In the Merger, each
share of Inprise series C preferred stock issued and outstanding
immediately prior to the effective time of the Merger will be converted
into, exchanged for, and represent the right to receive 8,032.2576 Corel
Common Shares.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933 based
on (i) the 61,181,724 shares of Inprise Common Stock outstanding as of
March 31, 2000 and using a value of $6.8203 per share (the average of the
high and low sales prices reported on Nasdaq on March 31, 2000) and (ii)
the 625 shares of Inprise series C preferred stock outstanding as of March
31, 2000 and using a value of $40,000 per share (the per share book value
as of March 31, 2000).
---------------
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 this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INPRISE CORPORATION
----------------
NOTICE OF SPECIAL MEETING
TO BE HELD ON . , 2000
Inprise Corporation will hold a special meeting of stockholders at 10:00
a.m., Pacific time, on . , 2000, at . , to consider and vote on a proposal to
approve and adopt the merger agreement dated as of February 6, 2000, among
Inprise, Corel Corporation and a subsidiary of Corel, as described in the
attached joint proxy statement/prospectus.
The Inprise board of directors has fixed the close of business on . , 2000
as the record date for determination of the stockholders entitled to notice of,
and to vote at, the meeting and any adjournment or postponement of the meeting.
A complete list of stockholders entitled to vote at the meeting will be open to
examination by the stockholders, during regular business hours, for a period of
ten days prior to the meeting at the principal executive offices of Inprise,
100 Enterprise Way, Scotts Valley, California 95066-3249.
The board of directors of Inprise has determined that the merger agreement
is advisable, fair to and in the best interests of Inprise stockholders and
unanimously recommends that you vote to adopt the merger agreement at the
special meeting.
Scotts Valley, California,
. , 2000
By order of the board of directors
JoAnne M. Butler
Vice President, General Counsel and
Secretary
Inprise Corporation
Your vote is important. Whether or not you plan to attend the special
meeting in person, and no matter how many shares you own, please sign, date and
promptly return the enclosed proxy in the enclosed envelope, which requires no
postage if mailed in the United States. You may also authorize the individuals
named on the enclosed proxy to vote your shares by calling the toll-free number
or voting on the Internet by following the instructions included on the
enclosed proxy. You may revoke your proxy at any time before the vote is taken
by delivering to the Corporate Secretary of Inprise a written revocation or a
proxy with a later date or by voting your shares in person at the special
meeting.
Please do not send stock certificates with your proxy.
<PAGE>
COREL CORPORATION
----------------
NOTICE OF SPECIAL MEETING
TO BE HELD ON . , 2000
A special meeting of the shareholders of Corel Corporation will be held on
. , 2000 at the Corel Centre, 1000 Palladium Drive, Kanata, Ontario,
commencing at 10:00 a.m., Eastern time, for the following purposes:
1. To consider and to approve the issuance of additional Corel common shares
under the merger agreement dated as of February 6, 2000, by and among Corel, a
subsidiary of Corel and Inprise Corporation;
2. To consider and to approve the Corel Corporation transition stock option
plan which is conditioned on the consummation of the merger; and
3. To consider and to approve an amendment to the Corel Corporation stock
option plan 2000 to increase the number of common shares of Corel reserved for
issuance under that plan from 4,000,000 Corel common shares to . Corel common
shares.
Corel shareholders must approve both of the proposals set forth in numbered
paragraphs 1 and 2 above for the merger to occur. If the shareholders fail to
approve either of these Corel proposals, the merger will not occur. The
proposal set forth in numbered paragraph 3 above is not conditioned on the
approval of the proposals contained in numbered paragraphs 1 and 2 above. The
accompanying joint proxy statement/prospectus, which has been delivered to
Corel shareholders with this notice, provides additional information relating
to matters to be addressed at the special meeting and forms part of this
notice.
Only those Corel shareholders of record at the close of business on . ,
2000 will be entitled to notice of the special meeting. If you transfer your
shares after you receive this notice, the new holder may make a written demand
prior to the special meeting to be included in the list of shareholders
eligible to vote at the special meeting.
You have the right to revoke your proxy at any time before it is exercised
by following the directions on page . of the joint proxy
statement/prospectus.
Corel's board of directors unanimously recommends that you vote "FOR" the
approval of all the Corel proposals above.
Your vote is important. Please sign, date and return the enclosed proxy as
soon as possible, whether or not you plan to attend the special meeting.
Ottawa, Ontario,
. , 2000
By order of the board of directors
Eric J. Smith,
Vice President, General Counsel and Secretary
Corel Corporation
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this joint proxy statement/prospectus is not +
+complete and may be changed. We may not sell these securities until the +
+registration statement filed with the Securities and Exchange Commission is +
+effective. This joint proxy statement/prospectus is not an offer to sell +
+these securities and we are not soliciting an offer to buy these securities +
+in any state or province where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY COPY-SUBJECT TO COMPLETION, DATED APRIL 4, 2000
Corel Corporation Inprise Corporation
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Dear Corel Corporation Shareholders and Inprise Corporation Stockholders:
The boards of directors of Corel Corporation and Inprise Corporation have
approved a merger agreement which provides for the combination of our two
companies. We believe that the combined company will be able to create
substantially more stockholder value than could be achieved by either company
individually.
Our combined company would retain the "Corel Corporation" name and would
continue to trade on Nasdaq under the ticker symbol "CORL" and on The Toronto
Stock Exchange under the ticker symbol "COR."
If the merger is completed, Inprise will become a wholly-owned subsidiary of
Corel. Holders of Inprise common stock will receive 0.747 of a Corel common
share for each share of Inprise common stock and holders of Inprise series C
preferred stock will receive 8,032.2576 Corel common shares for each share of
such preferred stock. Corel shareholders will continue to hold their existing
Corel common shares after the merger.
We are asking Inprise stockholders to approve and adopt the merger agreement.
We are asking Corel shareholders to approve the issuance of Corel common shares
to Inprise stockholders in connection with the merger, and to approve a
transition stock option plan for the grant to former Inprise option holders of
options to acquire Corel common shares.
Your vote is important. We cannot complete the merger unless the shareholders
of Corel and stockholders of Inprise approve these matters. We each have
scheduled special meetings of our respective shareholders and stockholders to
vote on these important matters. The dates, times and places of the meetings
are as follows:
<TABLE>
<C> <S> <C>
For Corel shareholders: For Inprise stockholders:
. , 2000 . , 2000
10:00 a.m., Eastern time 10:00 a.m., Pacific time
Corel Centre .
1000 Palladium Drive street
Kanata, Ontario city, state
</TABLE>
In addition to the above, Corel is asking its shareholders to approve an
amendment to the Corel Corporation stock option plan 2000 to increase the
number of Corel common shares available under that plan.
The document accompanying this letter gives you detailed information about
the special meetings and the proposed merger. You can also get information
about our companies from publicly available documents that our companies have
filed with the United States Securities and Exchange Commission. We encourage
you to read this entire document carefully, including the section entitled
"Risk Factors" on pages . through . .
We enthusiastically support this strategic combination of our two companies
and join with all of the other members of our boards of directors in
recommending that you vote in favor of the matters described above.
<TABLE>
<C> <S>
Michael C.J. Cowpland, Ph.D. Dale Fuller
Chairman of the Board, President and Chief Executive Officer Interim President and Chief Executive Officer
Inprise
Corel Corporation Corporation
</TABLE>
Neither the Securities and Exchange
Commission nor any state securities commission
has approved or disapproved this joint proxy
statement/prospectus or the securities to be
issued in the merger or determined if this
document is accurate or adequate. Any
representation to the contrary is a criminal
offense.
EACH VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR PROXY.
This joint proxy statement/prospectus is dated . , 2000 and is first being
mailed to the shareholders of Corel and the stockholders of Inprise on or about
. , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... iv
SUMMARY................................................................... 1
COMPARATIVE PER SHARE DATA................................................ 7
INPRISE CORPORATION SELECTED HISTORICAL FINANCIAL INFORMATION............. 8
COREL CORPORATION SELECTED HISTORICAL FINANCIAL INFORMATION............... 9
COMPARATIVE MARKET PRICE DATA............................................. 10
RISK FACTORS.............................................................. 12
Risk Factors Regarding the Merger....................................... 12
Risk Factors Regarding Inprise and Corel................................ 14
A CAUTION ABOUT FORWARD-LOOKING STATEMENTS................................ 16
THE INPRISE SPECIAL MEETING............................................... 17
Date and Purpose of the Special Meeting................................. 17
Record Date for the Special Meeting and Who Is Entitled to Vote at the
Special Meeting ....................................................... 17
Quorum.................................................................. 17
Required Vote........................................................... 17
Voting Rights........................................................... 17
Voting by Proxy and How to Revoke Your Proxy............................ 17
Abstentions, Failures to Vote, and Broker Non-Votes..................... 18
Solicitation of Proxies................................................. 18
THE COREL SPECIAL MEETING................................................. 19
Matters to Be Addressed at the Corel Special Meeting.................... 19
Other Matters........................................................... 19
Record Date ............................................................ 20
Voting Securities; Voting Rights........................................ 20
Quorum.................................................................. 20
Votes Required.......................................................... 20
Solicitation of Proxies................................................. 20
Appointment and Revocation of Proxies................................... 21
Voting of Proxies and Discretionary Authority........................... 21
Abstentions, Failures to Vote and Broker Non-Votes...................... 21
THE MERGER................................................................ 22
General................................................................. 22
Background of the Merger................................................ 22
Reasons of Inprise for Agreeing to the Merger with Corel................ 25
Recommendation of the Inprise Board of Directors........................ 28
Reasons of Corel for Agreeing to the Merger with Inprise................ 28
Recommendation of the Corel Board of Directors.......................... 29
Opinion of Inprise's Financial Advisor.................................. 29
Opinion of Corel's Financial Advisor.................................... 38
Interests of Inprise Officers and Directors in the Merger............... 43
Accounting Treatment of the Merger...................................... 47
Material Tax Consequences............................................... 47
Regulatory Approvals Required........................................... 52
Stock Exchange Listings................................................. 53
Resale of Corel Common Shares........................................... 53
Dissenters' Rights of Appraisal......................................... 54
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE MERGER AGREEMENT..................................................... 55
What Inprise Stockholders Will Receive in the Merger................... 55
What Corel Shareholders Will Receive in the Merger..................... 55
Effective Time of the Merger........................................... 55
Procedures for Exchange of Stock Certificates.......................... 56
Stock Options and Warrants............................................. 57
Conduct of Business Before the Merger.................................. 57
Offers from Other Parties.............................................. 58
Conditions to the Completion of the Merger............................. 59
Representation and Warranties.......................................... 60
Termination of the Merger Agreement.................................... 61
Termination Fees....................................................... 61
Expenses............................................................... 62
Indemnification of Inprise Officers and Directors by Corel............. 62
Amendments to the Merger Agreement..................................... 63
Employee Compensation and Benefits..................................... 63
STOCK OPTION AGREEMENTS.................................................. 63
Exercise of the Stock Options.......................................... 63
Termination of the Stock Options....................................... 64
Registration Rights.................................................... 64
Listing Rights......................................................... 64
Put Rights............................................................. 64
Limitation on Total Profit............................................. 64
Effect of Stock Options................................................ 64
COMPARATIVE MARKET PRICE DATA AND DIVIDEND INFORMATION................... 65
Corel.................................................................. 65
Inprise................................................................ 66
Dividend Policy........................................................ 66
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF COREL CORPORATION......... 67
INFORMATION ABOUT INPRISE................................................ 75
Inprise's Business..................................................... 75
Security Ownership by Certain Beneficial Owners and Management......... 75
INFORMATION ABOUT COREL.................................................. 77
Business............................................................... 77
Recent Developments.................................................... 78
Security Ownership of Certain Beneficial Owners and Management......... 78
DESCRIPTION OF COREL CAPITAL STOCK....................................... 79
Authorized Capital Stock............................................... 79
Corel Common Shares.................................................... 79
Corel Preferred Shares................................................. 80
DIRECTORS AND MANAGEMENT OF COREL AFTER THE MERGER....................... 81
Directors.............................................................. 81
Management............................................................. 81
COMPARATIVE RIGHTS OF HOLDERS OF INPRISE CORPORATION COMMON STOCK AND
COREL CORPORATION COMMON SHARES......................................... 81
Vote on Extraordinary Corporate Transactions........................... 81
Dividends and Distributions............................................ 82
Amendment to Charter................................................... 82
Amendment to By-Laws................................................... 82
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Interested Shareholder Transactions..................................... 83
Dissenters' and Appraisal Rights........................................ 83
Derivative Actions...................................................... 85
Director Qualifications................................................. 85
Election of Directors................................................... 85
Removal of Directors.................................................... 86
Vacancies on the Board of Directors..................................... 86
Director and Officer Indemnification.................................... 86
Director Exculpation.................................................... 87
Special Meeting of Shareholders......................................... 87
Stockholder Proposals................................................... 87
Consents in Lieu of Meeting............................................. 88
Quorum Requirements..................................................... 88
Inspection of Books and Records......................................... 88
OTHER MATTERS............................................................. 89
LEGAL MATTERS............................................................. 89
EXPERTS................................................................... 89
INPRISE STOCKHOLDER PROPOSALS............................................. 89
WHERE YOU CAN FIND MORE INFORMATION ...................................... 90
WHAT INFORMATION YOU SHOULD RELY ON ...................................... 92
ANNEX A--Merger Agreement............................................... A-1
ANNEX B--Opinion of Inprise's Financial Advisor......................... B-1
ANNEX C--Opinion of Corel's Financial Advisor........................... C-1
ANNEX D--Stock Option Agreements........................................ D-1
ANNEX E--Corel Shareholders' Resolutions Relating to the Corel
Proposals.............................................................. E-1
ANNEX F--Corel Corporation Transition Stock Option Plan................. F-1
ANNEX G--Corel Corporation Stock Option Plan 2000....................... G-1
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are the companies proposing the merger?
A: We are proposing a "merger of equals" of Corel and Inprise because we
believe that the combined strengths of the two companies will enable us to
compete more efficiently and effectively. We are convinced that this
transaction will enable the combined company to achieve its strategic goals
and enhance its market position more quickly than either Corel or Inprise
could have achieved on its own.
Q: Why is this transaction referred to as a "merger of equals"?
A: The stockholders of Inprise and the shareholders of Corel each will own a
substantial portion of the stock of the combined company, and each company
will have representation on the combined company's board of directors and in
senior management positions. On a fully diluted basis, the stockholders of
Inprise will own approximately 44%, and the shareholders of Corel will own
approximately 56%, of the shares of the combined company immediately after
the merger. The board of directors of Corel following the merger will be
comprised of four current members of the Corel board, including Michael C.J.
Cowpland, the chairman, president and chief executive officer of Corel, Dale
Fuller, the interim president and chief executive officer of Inprise, and an
additional person selected by Inprise and agreed to by Corel. In addition,
Mr. Fuller will be appointed chairman of the board of directors of Corel and
Dr. Cowpland will continue as president and chief executive officer of
Corel.
Q: If I am an Inprise stockholder, what will I receive in the merger?
A: You will receive 0.747 of a Corel common share for each share of Inprise
common stock that you own. The holder of Inprise's series C preferred stock
will receive 8,032.2576 Corel common shares for each share of series C
preferred stock.
Q: If I am a Corel shareholder, what will happen to my Corel common shares in
the merger?
A: Your Corel common shares are not being exchanged and you will continue to
hold the same number of Corel common shares immediately after the merger as
you held immediately before the merger.
Q: When will the merger be completed?
A: Corel and Inprise are working to complete the merger as quickly as possible.
We hope to complete the merger during the second calendar quarter of 2000.
Q: Where will the Corel common shares be listed?
A: The Corel common shares will continue to be listed on both Nasdaq and The
Toronto Stock Exchange.
Q: If I am an Inprise stockholder, should I send in my stock certificates now?
A: No, you should not send in your stock certificates with your proxy. If the
merger is completed, we will send Inprise stockholders written instructions
for exchanging their stock certificates.
Q: What do I need to do now?
A: You should carefully read and consider the information contained in this
joint proxy statement/prospectus. You should then complete, sign and date
your proxy and return it in the enclosed return envelope as soon as
possible, so that your shares of Inprise common stock or your Corel common
shares may be represented at the Inprise special meeting or Corel special
meeting, as applicable.
iv
<PAGE>
Q: Are Corel shareholders or Inprise stockholders entitled to dissenters'
rights?
A: Corel shareholders: No. Under the Canada Business Corporations Act, which
governs the rights of Corel shareholders, the Corel shareholders are not
entitled to dissenters' rights of appraisal or other rights to demand fair
value for their shares in cash by reason of the merger.
Inprise stockholders: No. Under the Delaware corporation law, which governs
Inprise, the Inprise stockholders are not entitled to dissenters' rights of
appraisal or other rights to demand fair value for their shares in cash by
reason of the merger.
Q: Can I change my vote after I have voted by proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting of your company's shareholders or stockholders. You can do
this in a number of ways. First, you may send in a later-dated, signed proxy
card to the Secretary of Inprise or to the transfer agent of Corel, as
applicable, so that it arrives before the appropriate special meeting.
Second, you can send a written notice stating that you would like to revoke
your proxy. Third, you may attend the appropriate special meeting and vote
in person. As an Inprise stockholder, you are allowed to vote by telephone
or through the Internet and you can also change your vote by any of these
methods.
Q: Will Inprise stockholders have to pay taxes as a result of the exchange in
the merger of their shares of Inprise common stock for Corel common shares?
A: It is expected that the exchange by Inprise stockholders of their shares of
Inprise common stock for Corel common shares will generally qualify as a
tax-free exchange of stock for United States federal income tax purposes.
Even with the tax-free treatment, however, the receipt by an Inprise
stockholder of cash instead of a fractional interest in a Corel common share
will be taxable. Also, Inprise stockholders who are liable for taxes in
jurisdictions other than the United States may be required to pay tax in
these jurisdictions as a result of the exchange of their shares of Inprise
common stock for Corel common shares.
Q. Who can help answer my questions?
A: If Inprise stockholders have any questions about the merger or if they need
additional copies of this joint proxy statement/prospectus or the enclosed
Inprise proxy, they should contact Inprise's proxy solicitor:
Georgeson Shareholder Communications Inc.
17 State Street
New York, NY 10004
Call toll-free: 1-800-223-2064
If Corel shareholders have any questions about the merger or if they need
additional copies of this joint proxy statement/prospectus or the enclosed
Corel proxy, they should contact Corel's proxy solicitor:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Call toll-free: 1-800-549-6650
v
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus. It may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read this entire
document and the other documents we have referred you to carefully. For more
information about Inprise and Corel, see "Where You Can Find More Information"
on page . . Each item in this summary refers to the pages where that subject is
discussed more fully.
All dollar amounts indicated by "$" are in United States dollars and all
dollar amounts indicated by "Cdn$" are in Canadian dollars.
The Companies (Pages . and . )
<TABLE>
<S> <C>
COREL CORPORATION INPRISE CORPORATION
1600 Carling Avenue 100 Enterprise Way
Ottawa, Ontario Scotts Valley, California
K1Z 8R7 95066-3249
(613) 728-8200 (831) 431-1000
www.corel.com www.inprise.com
</TABLE>
Corel
Corel was incorporated as Corel Systems Corporation under the Canada
Business Corporations Act by Articles of Incorporation dated May 29, 1985. The
name of the company was changed to Corel Corporation in May 1992. Corel
develops, manufactures, licenses, sells and supports a wide range of software
products including graphics, business productivity and consumer products. Corel
products are available for users of most personal computers, or PCs, including
International Business Machines Corporation and IBM-compatible PCs, Apple
Computer Inc.'s Macintosh, and UNIX-based and Linux-based systems.
Inprise
Inprise Corporation, formerly Borland International, Inc., was incorporated
in California in 1983 and reincorporated in Delaware in 1989. Inprise is a
leading provider of Internet enabling software and services designed to reduce
the complexity of application development for corporations and individual
programmers. Inprise develops and provides integrated, scalable and secure
solutions, distinguished for their ease of use, performance and productivity.
Committed to all major computing platforms as well as the open standards of the
Internet, Inprise provides service and support for software developers
worldwide through its online developer community and E-commerce site--
community.borland.com--offering a range of technical information, value-added
services and third-party products. Inprise's product lines and services are
designed to assist software developers and business enterprises in their
development and deployment of software in the desktop, client/server,
distributed objects and Internet and corporate Intranets environments.
The Merger (Page . )
The merger agreement is attached as ANNEX A to this joint proxy
statement/prospectus and is incorporated by reference into this document. We
encourage you to read the entire merger agreement because it is the legal
document that governs the merger. The merger agreement provides for the
combination of Corel and Inprise in a share-for-share merger of equals.
What Inprise stockholders will receive in the merger. As a result of the
merger, each whole share of Inprise common stock will be converted into 0.747
of a Corel common share. Each share of Inprise's series C preferred stock will
be converted into 8,032.2576 Corel common shares. Inprise stockholders will
receive cash
1
<PAGE>
in payment for any fractional Corel common share that they would otherwise be
entitled to receive in the merger. Each outstanding option, warrant and other
right to purchase shares of Inprise common stock will be converted into an
option, warrant or other right, as the case may be, to purchase Corel common
shares. The number of Corel common shares which may be purchased will equal the
number of shares of Inprise common stock that were subject to the option,
warrant or other right, multiplied by 0.747. The exercise price per share for
each option, warrant or other right will be divided by 0.747. All other terms
will remain unchanged.
Example:
. If you currently own 500 shares of Inprise common stock, then after the
merger you will receive 373 Corel common shares and a check for the
value of .50 of a Corel common share, rounded to the nearest one cent.
. On . , 2000, the last per share sales price of Corel common shares on
Nasdaq was $ . . Applying the 0.747 exchange ratio to the Corel last
reported sales price on that date, each holder of Inprise common stock
would be entitled to receive Corel common shares with a market value of
approximately $ . for each share of Inprise common stock. However, the
market prices for Inprise common stock and Corel common shares are
likely to change between now and the merger. You are urged to obtain
current price quotes for Corel common shares and Inprise common stock.
What Corel shareholders will receive in the merger. Corel shareholders will
not be exchanging any Corel common shares in the merger and will continue to
hold their existing share certificates. Accordingly, holders of Corel common
shares immediately before the merger will hold the same number of Corel common
shares immediately following the merger.
The Inprise Special Meeting (Page . )
The special meeting of Inprise stockholders will be held at . , on . , 2000,
at . , Pacific time.
At the special meeting, Inprise stockholders will be asked to vote to adopt
the merger agreement. Adoption of the merger agreement requires the favorable
vote of a majority of the outstanding shares of Inprise common stock. The vote
of the holders of Inprise's preferred stock is not required to adopt the merger
agreement.
You can vote at the special meeting of Inprise stockholders if you owned
Inprise common stock at the close of business on . , 2000. As of that date,
directors and executive officers of Inprise owned, in the aggregate, . shares
of Inprise common stock, or approximately . % of the outstanding shares of
Inprise common stock. Inprise expects that each of its directors and executive
officers will vote to adopt the merger agreement.
If you do not vote your shares of Inprise common stock, the effect will be
the same as a vote against the adoption of the merger agreement.
The Corel Special Meeting (Page . )
The special meeting of Corel shareholders will be held at the Corel Centre,
1000 Palladium Drive, Kanata, Ontario, on . , 2000, at 10:00 a.m., Eastern
time.
At the special meeting, Corel shareholders will vote on:
.the approval of the issuance of Corel common shares under the merger
agreement,
.the adoption of the Corel transition stock option plan, and
.the amendment to the Corel stock option plan 2000.
2
<PAGE>
For the merger to occur, the holders of a majority of the Corel common
shares voting at the special meeting by proxy or in person must vote in favor
of the share issuance and approval of the Corel transition stock option plan.
Approval by Corel shareholders of the amendment to the Corel stock option plan
2000 is not a condition to the completion of the merger.
You can vote at the special meeting of Corel shareholders if you owned Corel
common shares at the close of business on . , 2000. As of that date, the
directors and executive officers of Corel owned, in the aggregate, . Corel
common shares or approximately . % of the outstanding Corel common shares.
Corel expects that each of its directors and executive officers will vote in
favor of each proposal.
Board Recommendations to Inprise Stockholders and Corel Shareholders
To Inprise stockholders: (Page . )
All of the members of the board of directors of Inprise recommend that
Inprise's stockholders vote "FOR" the adoption of the merger agreement.
To Corel shareholders: (Page . )
All of the members of the board of directors of Corel recommend that Corel's
shareholders vote "FOR" the approval of the following:
.the issuance of Corel common shares under the merger agreement,
.the adoption of the Corel transition stock option plan, and
.the amendment to the Corel stock option plan 2000.
Opinions of Financial Advisors (Pages . and . )
Opinion of Inprise's Financial Advisor. In deciding to approve the merger
agreement, the Inprise board of directors considered a number of factors,
including the opinion of its financial advisor, Broadview International LLC. On
February 6, 2000, Broadview delivered to the Inprise board of directors its
opinion that, as of that date, the exchange ratio of 0.747 of a Corel common
share that Inprise stockholders will receive for each of their shares of
Inprise common stock was fair, from a financial point of view, to the Inprise
stockholders.
The full text of Broadview's opinion, dated February 6, 2000, is attached to
this joint proxy statement/prospectus as ANNEX B. We encourage Inprise
stockholders to read this opinion carefully for a description of the
assumptions made, matters considered and limitations on the review undertaken.
Broadview's opinion is directed to the Inprise board and does not constitute a
recommendation to any stockholder with respect to any matter relating to the
proposed merger. Broadview's opinion speaks only as of its date and Broadview
is under no obligation to confirm its opinion as of a later date.
Opinion of Corel's Financial Advisor. In connection with the merger, the
Corel board of directors received an opinion dated February 6, 2000 of its
financial advisor, CIBC World Markets Inc., as to the fairness, from a
financial point of view, to the holders of Corel common shares of the 0.747
exchange ratio provided for in the merger.
The full text of CIBC World Markets' opinion, dated February 6, 2000, is
attached to this joint proxy statement/prospectus as ANNEX C. We encourage
Corel shareholders to read this opinion carefully for a description of the
assumptions made, matters considered and limitations on the review undertaken.
CIBC World Markets' opinion is directed to the Corel board and does not
constitute a recommendation to any
3
<PAGE>
shareholder with respect to any matters relating to the proposed merger. CIBC
World Markets' opinion speaks only as of its date and CIBC World Markets is
under no obligation to confirm its opinion as of a later date.
Material Federal Income Tax Consequences (Pages . and . )
Inprise and Corel expect the merger to qualify as a tax-free reorganization
for United States federal income tax purposes and that Inprise stockholders in
the United States will generally not recognize any gain or loss in connection
with the exchange of Inprise common stock for Corel common shares. One of the
conditions to the consummation of the merger is that Inprise and Corel each
receive a legal opinion that the merger will qualify as a tax-free
reorganization under U.S. federal income tax laws, and, in the case of the
opinion to be delivered to Inprise, that Inprise stockholders in the United
States will generally not recognize any gain or loss in connection with such
exchange, except with respect to cash received by an Inprise stockholder
instead of a fractional interest in a Corel common share.
A holder of Inprise common stock who, for the purposes of the Income Tax Act
(Canada), is resident in Canada, deals at arm's length with Inprise and Corel,
and holds Inprise common stock as capital property, generally will realize a
capital gain (or capital loss) on the merger equal to the amount by which the
fair market value of the Corel common shares received by the holder in the
merger, plus the amount of any cash received by the holder instead of a
fractional Corel common share, net of disposition costs, exceeds (or is less
than) the adjusted cost base of the shares of Inprise common stock to the
holder immediately before the merger.
We urge you to consider carefully the more detailed discussion of the tax
consequences of the merger contained on page . and to review these tax
consequences with your tax advisor.
Accounting Treatment (Page . )
Corel will account for the merger using the purchase method of accounting.
Regulatory Approvals (Page . )
In order to complete the merger, Inprise and Corel were required to make
filings with the United States Department of Justice and the United States
Federal Trade Commission and wait for the expiration or early termination of
the required waiting period. Inprise and Corel received notice on . , 2000 that
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 had been terminated.
Stock Exchange Listing
The completion of the merger is conditioned on Corel receiving approval for
the listing on The Toronto Stock Exchange of the Corel common shares to be
issued to the Inprise stockholders in the merger and under the Corel transition
stock option plan. Corel has received conditional approval from the Toronto
Stock Exchange for the issuance of the Corel common shares to Inprise
stockholders in the merger and will apply for approval of the Corel transition
stock option plan. In addition, Corel will apply for quotation on Nasdaq of the
Corel common shares issuable in the merger and pursuant to the Corel transition
stock option plan. Following the completion of the merger, Inprise will be a
wholly owned subsidiary of Corel and, accordingly, Inprise common stock will
not trade on any exchange.
Effect of the Merger on Management and Board Members (Page . )
The board of directors of Corel following the merger will be comprised of
four of the existing members of the Corel board, including Michael C.J.
Cowpland, the chairman, president and chief executive officer of Corel, Dale
Fuller, the interim president and chief executive officer of Inprise, and an
additional person selected by Inprise and agreed to by Corel. In addition, Mr.
Fuller will be appointed chairman of the board of directors of
4
<PAGE>
Corel and Dr. Cowpland will continue as president and chief executive officer
of Corel. Corel has agreed that it will recommend and support the election of
Dale Fuller and the other Inprise designee to the Corel board at Corel's 2001
and 2002 annual meetings of shareholders. In addition, without the consent of
Dale Fuller and the other Inprise designee, the Corel board will not have more
than six members prior to the election of directors at Corel's 2003 annual
meeting of shareholders. Corel's obligation to cause Mr. Fuller to be appointed
as chairman of the Corel board continues until Corel's 2003 annual meeting of
shareholders or for such longer time as may be agreed to by Mr. Fuller and the
Corel board.
Conditions to the Merger (Pages . and . )
The merger will not be completed unless customary conditions are satisfied
or waived by Inprise and Corel. Examples of such conditions include Inprise
stockholder and Corel shareholder approvals, regulatory approvals and the
absence of governmental action to block the merger. The merger is also
conditioned on the receipt of legal opinions by Inprise and Corel that the
merger will qualify as a tax-free reorganization within the meaning of the
United States federal income tax laws.
Termination of the Merger Agreement (Pages . and .)
Either Corel or Inprise can decide, without the consent of the other, to
terminate the merger agreement and not complete the merger if any of the
following occurs:
. we do not complete the merger by October 31, 2000. However, that date
will be extended to November 30, 2000 if the reason for not closing by
October 31, 2000 is that the regulatory conditions specified in the
merger agreement have not been satisfied by that date,
. Inprise stockholders or Corel shareholders do not give the required
approvals,
. the other party materially breaches the merger agreement and the breach
is not curable, or, if curable, is not cured within 30 days following
receipt by the non-terminating party of notice of the breach from the
terminating party,
. a law or court order permanently prohibits the merger, or
. the other party's board withdraws or changes, in a manner materially
adverse to the terminating party, in the case of Inprise, its approval
or recommendation of the merger agreement or the merger or, in the case
of Corel, the approval or recommendation of the issuance of Corel common
shares in the merger or the Corel transition stock option plan.
In addition, either party can terminate the merger agreement if its board
determines in good faith that termination is required to comply with its
fiduciary duties by reason of a third party's acquisition proposal. However,
the terminating party may not terminate for this reason unless the following
conditions are met:
. the acquisition proposal involves consideration that the terminating
party's board, based on the advice of its financial advisor, determines
is superior to the merger consideration,
. the terminating party's board has concluded that the acquisition
proposal is superior, is reasonably likely to be consummated and is not
conditioned on the receipt of financing,
. the terminating party gives the other at least three business days'
written notice before announcing its termination of the merger
agreement,
. the terminating party provides the other with a reasonable opportunity
to make an equivalent proposal to enable the parties to proceed with the
merger, and
. the terminating party first pays the termination fee discussed below.
Finally, Corel and Inprise can mutually agree to terminate the merger
agreement.
5
<PAGE>
Termination Fee (Page . )
If the merger agreement is terminated, under certain circumstances, Inprise
may have to pay to Corel, or Corel may have to pay to Inprise, a termination
fee. An example of such circumstances would be if Inprise or Corel terminates
the merger agreement because a third party has made an alternative proposal to
acquire Inprise or Corel which contemplates a transaction that its board of
directors determines is superior to the merger with the other party. The
termination fee would be equal to $29.5 million if payable by Inprise to Corel
and $44.5 million if payable by Corel to Inprise.
Stock Option Agreements (Page . )
In connection with the merger, Inprise granted to Corel an option to
purchase up to 12 million shares of its common stock, which is approximately
19.7% of Inprise's shares of common stock outstanding on February 6, 2000.
Also, Corel granted to Inprise an option to purchase up to 13 million of its
common shares, which is approximately 19.8% of Corel's common shares
outstanding on February 6, 2000. Corel or Inprise may exercise its option under
substantially the same circumstances that require the party granting the option
to pay a termination fee under the merger agreement. The stock option
agreements are attached hereto as ANNEX D and are incorporated by reference
into this joint proxy statement/prospectus.
Interests of Inprise Officers and Directors in the Merger (Page . )
In considering the Inprise board's recommendation that you vote to adopt the
merger agreement, you should be aware that some of the Inprise officers and
directors identified in this joint proxy statement/prospectus have interests in
the merger that are different from, or in addition to, their rights as Inprise
stockholders.
Comparison of Rights of Security Holders (Page . )
When the merger is completed, Inprise stockholders will become holders of
Corel common shares. Their rights will then be governed by the Canada Business
Corporations Act and other Canadian federal and provincial laws, Corel's
certificate and articles of amalgamation and Corel's by-laws. The material
differences between the rights of Inprise stockholders and those of Corel
shareholders are summarized beginning on page . .
Where You Can Find More Information (Page . )
If you would like more information about Inprise or Corel, it can be found
in documents filed by each company with the Securities and Exchange Commission.
Instructions on how you can obtain copies of these documents are on page . .
6
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are the net income and book value per common share data
separately for Corel and Inprise on a historical basis, for Corel on a pro
forma consolidated basis and on a pro forma consolidated basis per Inprise
equivalent share. The exchange ratio for the business combination is 0.747 of a
Corel common share for each share of Inprise common stock. The pro forma and
comparative financial information for Corel is as of and for the fiscal year
ended November 30, 1999. The comparative financial information for Inprise is
as of and for the fiscal year ended December 31, 1999. With respect to Inprise
financial information, the material differences between U.S. GAAP and Canadian
GAAP have been adjusted in the preparation of the unaudited pro forma
consolidated financial information of Corel to conform with Canadian GAAP.
The Inprise equivalent share pro forma information shows the effect of the
merger from the perspective of an owner of Inprise common stock. The
information was computed by multiplying the Corel pro forma information by the
exchange ratio of 0.747.
You should read the information below together with our historical financial
statements and related notes contained in the annual reports and other
information that we have filed with the Securities and Exchange Commission and
incorporated by reference in this joint proxy statement/prospectus. See "Where
You Can Find More Information" on page . . The unaudited pro forma consolidated
and equivalent data below are for illustrative purposes only. The companies may
have performed differently had they always been combined. You should not rely
on this information as being indicative of the historical results that would
have been achieved had the companies always been combined or the future results
that the combined company will experience after the merger.
<TABLE>
<CAPTION>
As at and
for the year
ended
December 31, As at and for the year
1999 ended November 30, 1999
------------ --------------------------
Pro forma Pro forma
Corel Inprise
Inprise Corel combined equivalent
------------ ----- --------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Net income (loss) per share:
Canadian GAAP:
Basic................................. n/a $0.27 $ 0.02 $ 0.01
Fully Diluted......................... n/a $0.26 $ 0.02 $ 0.01
US GAAP:
Basic................................. $0.40 $0.27 $(1.65) $(1.23)
Diluted............................... $0.35 $0.27 $(1.65) $(1.23)
Book value per common share:
Canadian GAAP........................... n/a $0.98 $ 4.93 $ 3.68
US GAAP................................. $3.55 $0.98 $ 9.73 $ 7.26
</TABLE>
7
<PAGE>
INPRISE CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial data for the fiscal years ended
December 31, 1999 and 1998, the nine months ended December 31, 1997, and the
fiscal years ended March 31, 1997 and 1996 have been derived from Inprise's
audited financial statements. The results below include a summary of the one-
time items included for the years then ended. You should not expect the results
for the prior periods to be an indication of the results to be achieved for
future periods. This information is only a summary and you should read it
together with Inprise's historical financial statements and related notes
contained in the Form 10-K and other information that Inprise has filed with
the Securities and Exchange Commission and incorporated by reference in this
joint proxy statement/prospectus. See "Where You Can Find More Information" on
page . .
<TABLE>
<CAPTION>
Year ended Nine months
December 31, ended Year ended March 31,
-------------------- December 31, -----------------------
1999 1998 1997(b)(c) 1997(c) 1996(c)(d)
-------- -------- ------------ --------- ----------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net revenues............ $174,806(a) $189,112 $145,936 $ 170,977 $251,821
Restructuring and other
one-time charges....... $ 49,960(e) $ 15,848 $ -- $ 48,408(f) $ 679
One-time income items... $108,002(g) $ 18,107(h) $ -- $ -- $ --
Net income (loss)....... $ 22,684 $ 8,346 $ (3,894) $(128,228) $ 10,311
Net income (loss) per
share--basic........... $ 0.40 $ 0.16 $ (0.09) $ (2.87) $ 0.26
Net income (loss) per
share--diluted......... $ 0.35 $ 0.14 $ (0.09) $ (2.87) $ 0.22
Shares used in computing
basic earnings
per share.............. 54,810 50,118 49,640 44,703 38,935
Shares used in computing
diluted earnings
per share.............. 63,408 57,384 49,640 44,703 46,577
<CAPTION>
December 31, March 31,
------------------------------------ -----------------------
1999 1998 1997(b)(c) 1997(c) 1996(c)(d)
-------- -------- ------------ --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Selected Consolidated
Balance Sheet Data:
Cash and short term
investments............ $197,693 $ 84,362 $102,551 $ 74,039 $110,269
Total assets............ $313,016 $253,788 $255,824 $ 225,745 $297,343
Total long term
obligations............ $ 19,462 $ 19,138 $ 22,025 $ 22,508 $ 14,583
Mandatorily redeemable
convertible preferred
stock.................. -- $ 36,873 $ 27,358 -- --
</TABLE>
- --------
(a) Excludes one-time payment of license revenue from Microsoft of $100
million.
(b) In July 1997, Inprise changed its fiscal year-end from March 31 to December
31.
(c) Results for the nine months ended December 31, 1997 and the years ended
March 31, 1997 and 1996 and balances as of those dates are restated to
reflect the acquisition of Visigenic Software, Inc. which was accounted for
as a pooling of interests.
(d) Results for the year ended March 31, 1996 and balances as of that date have
been restated to reflect the acquisition of Open Environment Corporation
which was accounted for as a pooling of interests.
(e) Restructuring and other one-time charges for the year ended December 31,
1999 include a write-down on sale of real estate of $29.7 million,
restructuring and merger related expenses of $12.1 million and other non-
recurring charges of $8.2 million.
(f) Restructuring and other one-time charges for the year ended March 31, 1997
include restructuring charges of $18.9 million, a charge for in process
product development of $12.4 million, and other non-recurring charges of
$17.1 million.
(g) One-time income items for the year ended December 31, 1999 consist
primarily of income from a patent cross license agreement with Microsoft of
$100 million.
(h) One-time income items for the year ended December 31, 1998 consist
primarily of a gain on sale of long term investments of $17.0 million.
8
<PAGE>
COREL CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial data for each of the fiscal
years ended November 30, 1995 through 1999 have been derived from Corel's
audited consolidated financial statements. You should not expect the results
for the prior periods to be an indication of the results to be achieved for
future periods. This information is only a summary and you should read it
together with Corel's historical financial statements and related notes
contained in the annual reports and other information that Corel has filed with
the Securities and Exchange Commission and incorporated by reference in this
joint proxy statement/prospectus. See "Where You Can Find More Information" on
page . .
The selected financial information is prepared on the basis of Canadian
generally accepted accounting principles, which are different in some respects
from U.S. generally accepted accounting principles. For a description of
significant differences between Canadian generally accepted accounting
principles and U.S. generally accepted accounting principles, see Corel's Form
10-K for the year ended November 30, 1999 which is incorporated by reference in
this joint proxy statement/prospectus. See "Where You Can Find More
Information" on page . .
<TABLE>
<CAPTION>
Year ended November 30,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- --------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Canadian GAAP
Sales................... $243,051 $246,827 $ 260,581 $334,245 $196,379
Income (loss) from
continuing operations.. 16,716 (30,448) (231,678) (2,750) 14,484
Income (loss) from
continuing operations
per share (fully
diluted)............... 0.26 (0.51) (3.84) (0.05) 0.26
Cash and short-term
investments............ 18,021 24,506 30,629 6,924 81,816
Working capital......... 19,781 (108) 20,356 120,945 149,353
Total assets............ 151,701 140,159 163,743 398,478 221,346
Novell obligations...... 18,579 27,885 37,544 49,330 --
Shareholders' equity.... 64,366 28,583 59,809 290,260 195,858
US GAAP
Income (loss) from
continuing operations.. $ 16,716 $(30,448) $(231,678) $ (2,750) $ 14,484
Net income (loss) from
continuing operations
per share (fully
diluted)............... 0.27 (0.51) (3.84) (0.05) 0.29
</TABLE>
Recent Developments
On March 20, 2000, Corel announced the results for its first quarter ended
February 29, 2000. Revenues for the first quarter of fiscal year 2000 were
$44.1 million. Net loss for the quarter was $12.4 million or $0.19 per share
fully diluted, including a gain on investment of $0.10 per share from the
partial sale of its equity interest in GraphOn, Inc. Corel also reported that,
based on the prospects for revenue and the cost structure in place at Corel,
Corel expects that the results for the next two quarters will mirror those
experienced in the first quarter. Corel also stated that it continues to
examine its cost structure and is focusing more resources on emerging product
markets such as Linux.
9
<PAGE>
COMPARATIVE MARKET PRICE DATA
Corel
The Corel common shares are listed and traded on Nasdaq and The Toronto
Stock Exchange. The following table sets forth the high and low sales prices
per Corel common share as reported on The Toronto Stock Exchange and Nasdaq for
the quarterly fiscal periods presented below:
<TABLE>
<CAPTION>
The Toronto
Stock
Exchange Nasdaq
------------- -------------
High Low High Low
------ ------ ------ ------
(Cdn) (Cdn)
<S> <C> <C> <C> <C>
1998
First quarter ended February 28, 1998............ $ 4.01 $ 2.17 $ 2.94 $ 1.41
Second quarter ended May 31, 1998................ $ 4.24 $ 2.75 $ 3.13 $ 1.94
Third quarter ended August 31, 1998.............. $ 3.30 $ 1.78 $ 2.52 $ 1.16
Fourth quarter ended November 30, 1998........... $ 4.15 $ 1.75 $ 3.00 $ 1.06
1999
First quarter ended February 28, 1999............ $ 7.55 $ 3.76 $ 5.13 $ 2.50
Second quarter ended May 31, 1999................ $ 7.00 $ 3.32 $ 4.63 $ 2.19
Third quarter ended August 31, 1999.............. $ 9.65 $ 4.15 $ 6.38 $ 2.81
Fourth quarter ended November 30, 1999........... $30.40 $ 7.00 $20.88 $ 4.69
2000
First quarter ended February 29, 2000............ $57.95 $19.70 $39.25 $13.18
Second quarter through . , 2000................. $ . $ . $ . $ .
</TABLE>
On February 4, 2000, the last full trading day before the announcement of
the execution of the merger agreement, the last reported sales price per Corel
common share was $20.00 on Nasdaq and Cdn$29.20 on The Toronto Stock Exchange.
On . , 2000, the most recent practicable date prior to the printing of this
joint proxy statement/prospectus, the last reported sales price per Corel
common share was $ . on Nasdaq and Cdn$ . on The Toronto Stock Exchange. We
urge you to obtain current market quotations before making any decisions with
respect to the merger. As of . , 2000, there were approximately . holders of
record of Corel common shares.
10
<PAGE>
Inprise
Inprise common stock is listed and traded on Nasdaq. The following table
sets forth the high and low sales prices per share of Inprise common stock as
reported on Nasdaq for the calendar quarters presented below:
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
1998
First quarter ended March 31, 1998.......................... $ 10.00 $6.5625
Second quarter ended June 30, 1998.......................... $ 11.875 $6.8125
Third quarter ended September 30, 1998...................... $ 8.625 $4.9375
Fourth quarter ended December 31, 1998...................... $ 6.875 $4.8125
1999
First quarter ended March 31, 1999.......................... $ 6.4688 $3.3125
Second quarter ended June 30, 1999.......................... $ 6.00 $2.6875
Third quarter ended September 30, 1999...................... $ 5.5625 $3.4375
Fourth quarter ended December 31, 1999...................... $ 20.00 $3.4375
2000
First quarter ended March 31, 2000.......................... $16.9375 $6.0938
Second quarter through . , 2000.......................... $ . $ .
</TABLE>
On February 4, 2000, the last full trading day before the announcement of
the execution of the merger agreement, the last reported sales price of Inprise
common stock was $12.9375 on Nasdaq. On . , 2000, the most recent practicable
date prior to the printing of this joint proxy statement/prospectus, the last
reported sales price per share of Inprise common stock was $ . on Nasdaq. We
urge you to obtain current market quotations before making any decisions with
respect to the merger. As of . , 2000, there were approximately . holders of
record of Inprise common stock.
11
<PAGE>
RISK FACTORS
In addition to the other information included in this joint proxy
statement/prospectus, you should carefully read and consider the following
factors in evaluating the proposals to be voted on at your company's
shareholders' meeting.
Risk Factors Regarding the Merger
The companies' stock prices could change after you approve the merger, but
the number of shares received by Inprise stockholders will not change. The
number of Corel common shares issuable in exchange for one share of Inprise
common stock is a fixed ratio of 0.747 of a Corel common share for each share
of Inprise common stock. This ratio was determined on February 6, 2000 and will
not vary with increases or decreases in the price of either Corel common shares
or Inprise common stock. The price of Corel common shares and Inprise common
stock may vary for any of the following reasons, among others:
. changes in the business, results of operations, financial condition or
prospects of Corel or Inprise,
. market assessments of the likelihood that the merger will occur,
. the timing of the merger,
. the prospects of the merger and post-merger operations,
. regulatory considerations,
. general stock market conditions,
. general conditions or trends in the software and information technology
industry,
. announcements of technological innovations,
. new products or services offered by Inprise, Corel or any of their
competitors,
. changes in financial estimates by securities analysts,
. the announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments by either Inprise or Corel,
. additions or departures of key personnel, and
. other events that may be beyond the control of either Inprise or Corel.
In addition, Nasdaq, where most publicly-held software companies are traded,
has recently experienced extreme price and volume fluctuations. These
fluctuations often have been unrelated or disproportionate to the operating
performance of these companies. The trading prices of many of these companies'
stocks are, or recently have been, at or near historic highs and these trading
prices and multiples are substantially above historical levels. These trading
prices and multiples may not be sustainable. These broad market and industry
factors may materially adversely affect the market price of the common stock of
either Inprise or Corel, regardless of the company's actual operating
performance. In the past, following periods of volatility in the market price
of an individual company's securities, securities class action litigation often
has been instituted against that company. This type of litigation, if
instituted, could result in substantial costs and a diversion of management's
attention and resources.
Integrating operations in a merger of equals transaction may be
difficult. Corel and Inprise believe that a merger of equals transaction may
present certain difficulties in integrating the operations of the two companies
which are not present in other types of mergers, because neither company is
intended to be dominant. In the case of the merger of Inprise and Corel, the
board of directors and senior executives of the merged company will be drawn
from both companies. The parties intend to integrate their research and
development programs. The parties also intend to coordinate their product
offerings and management information systems.
12
<PAGE>
Management may be temporarily distracted from the company's day-to-day business
until integration is completed. There is a risk that integration will not occur
smoothly or successfully, and could result in some customer dissatisfaction.
The inability of management to successfully integrate the operations of the two
companies could harm the business, results of operations, financial condition
and prospects of Corel after the merger, including, product development cycles
and marketing efforts. As is common in the technology industry, competitors may
attempt to recruit key employees and solicit customers of the companies during
the merger and integration process. A loss of key employees or customers could
also harm the business, results of operations, financial condition and
prospects of Corel after the merger. Even if achieved in an efficient,
effective and timely manner, the combination of the two companies' businesses
may not achieve results of operations and financial condition superior to what
each company could have achieved independently.
The merger may stimulate competition and the companies may not be able to
compete successfully. The merger may cause Inprise's and Corel's competitors to
enter business combinations, accelerate product development or aggressively
reduce prices. These and other competitive practices could create more powerful
or aggressive competitors. There is a risk that Corel will not be able to
compete successfully as future markets evolve. Increased competitive pressure
could lead to lower sales and prices of Corel's products, and this could harm
Corel's business, results of operations, financial condition and prospects.
Ownership will be diluted and voting power will decline. After the merger,
the voting power of the existing Corel shareholders and the Inprise
stockholders will substantially decline. Corel shareholders will own
approximately 56% of the combined company and Inprise stockholders will own
approximately 44% of the combined company.
Availability of additional shares of Corel common shares after the merger
could depress the price of Corel common shares. After the merger, a substantial
amount of additional Corel common shares will be available for trading in the
public market. The additional shares in the market may cause the price of Corel
common shares to decline. In addition, if Corel's shareholders sell substantial
numbers of Corel common shares in the public market following consummation of
the merger, including shares issued on the exercise of outstanding options and
warrants, the market price of Corel common shares could fall. These sales might
also make it more difficult for Corel to sell equity or equity related
securities at a time and price that Corel would deem appropriate. Immediately
after the merger, there will be approximately . million Corel common shares
outstanding. All of the shares issued to Inprise stockholders in the merger
will be freely tradable without restrictions or further registration under the
Securities Act of 1933, unless such shares are held by any Corel "affiliate" or
any "affiliate" of Inprise prior to the merger, as that term is defined under
the Securities Act of 1933. The term "affiliate" would generally include
directors and executive officers of Inprise.
The companies may incur substantial expenses and payments if the merger
fails to occur. The merger may not occur. If the merger does not occur, the
companies will each have incurred substantial expenses in connection with the
transactions described in this document. In addition, under certain
circumstances, if either party receives an alternative transaction proposal
from a third party and the merger agreement is afterwards terminated, the party
receiving the alternative proposal may be required to pay a termination fee of
$44.5 million if payable by Corel or $29.5 million if payable by Inprise.
Customers may defer purchasing decisions pending evaluation of Corel's
future product strategy. Distributors, resellers and potential end users of
Corel's and Inprise's products may not continue their current buying patterns
in light of the announced merger. Customers may defer purchasing decisions as
they evaluate Corel's future product strategy and consider the product
offerings of competitors. If substantial numbers of customers defer purchases,
these deferrals could harm the business, results of operations, financial
condition and prospects of Corel or Inprise.
There may be future charges against earnings. Generally accepted accounting
principles in Canada require Corel to use the purchase method of accounting to
account for the merger. The total purchase price will be allocated to the
assets acquired and liabilities assumed based on their fair value. If the
purchase price
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exceeds the fair value of the net tangible assets, Corel will allocate the
excess purchase price, based on independent expert valuation, to intangible
assets which will include purchased in-process research and development and
acquired technology, with the remainder to goodwill. While the amortization or
write-off of these intangibles will have no effect on Corel's cash flow, such
amortization or write-off will reduce Corel's reported earnings.
It may be difficult to effect service of process or enforce judgments
against Corel's officers and directors and some experts due to their foreign
location. Corel is a corporation organized under the laws of Canada with its
principal place of business in Ottawa, Ontario. All of the current directors
and officers of Corel and some experts named in this document are currently
residents of Canada and their assets and most of Corel's assets are located
outside the United States. Consequently, it may be difficult for United States
investors to effect service of process in a legal action within the United
States against directors, officers or experts, or to collect on a judgment of a
United States court predicated on civil liability under U.S. federal securities
laws. Investors should not assume that courts in Canada would enforce judgments
of U.S. courts based on U.S. securities laws. In the merger agreement, Corel
has agreed that it can be sued in the courts of New York or Delaware in
connection with the merger agreement and has appointed CT Corporation as its
agent for service of process in New York and Delaware with respect to actions
arising in connection with the merger agreement.
Risk Factors Regarding Inprise and Corel
The companies experience quarterly fluctuations in operations. Corel and
Inprise have experienced, and expect to continue to experience, significant
fluctuations in their quarterly operating results due to the following factors:
. market acceptance of new and enhanced products,
. timing and shipment of significant orders,
. mix of products sold,
. exchange rate fluctuations,
. length of sales cycles, and
. cycles in the markets Corel and Inprise serve.
In addition, Corel's and Inprise's net sales and operating results for a
future quarter will depend on generating and shipping orders in the same
quarter that the order is received. The failure to receive anticipated orders
or delays in shipments near the end of a quarter, due to rescheduling,
cancellations or unexpected manufacturing difficulties, may cause net sales in
a particular quarter to fall significantly below expectations. This could hurt
Corel's or Inprise's operating results for such quarter.
Corel's revenues and results of operations following the merger will be
dependent upon Corel's proprietary technology and Corel may not be successful
in protecting its proprietary rights or avoiding claims that it infringes upon
the proprietary rights of others. Inprise and Corel principally rely upon
patent, copyright, trademark, trade secret and contract laws to protect their
proprietary technology. Neither Inprise nor Corel can be certain that it has
taken adequate steps to prevent misappropriation of its technology or that its
competitors will not independently develop technologies that are substantially
equivalent or superior to its technology.
Although neither Inprise nor Corel believes that the software or the
trademarks it uses or any of the other elements of its business infringe on the
proprietary rights of any third parties, third parties may assert claims
against it for infringement of their proprietary rights and these claims may be
successful.
Corel could incur substantial costs and diversion of management resources in
the defense of any claims relating to proprietary rights, which could
materially adversely affect its business, financial condition or results of
operations. These types of claims are common in the software industry. Parties
making these claims could
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secure a judgment awarding substantial damages as well as injunctive or other
equitable relief that could effectively block the ability of Corel to license
its products in the United States, Canada or elsewhere. Such a judgment could
have a material adverse effect on Corel's business, financial condition and
results of operations. If a third party asserts a claim relating to proprietary
technology or information against Corel, Corel may seek licenses to the
intellectual property from the third party. However, Corel cannot be certain
that third parties will extend licenses to it on commercially reasonable terms,
or at all. If Corel fails to obtain the necessary licenses or other rights, it
could materially adversely affect its business, financial condition and results
of operations.
Introduction of new and enhanced products must be timely or the companies
may not be able to compete successfully. The markets for Inprise's products and
Corel's products experience, and the markets for Corel's products after the
merger will experience, rapidly changing technologies, evolving industry
standards, frequent new product introductions and short product life cycles.
These market characteristics could render Corel's technology obsolete. Corel
may have to manage the transition from older products in order to minimize
disruption in customer ordering patterns, avoid excess inventory and ensure
adequate supplies of new products. Corel may not successfully develop,
introduce or manage the transition of new products. Failed market acceptance of
new products or problems associated with new product transitions could harm
Corel's business, results of operations, financial condition and prospects.
The ability of Corel shareholders to effect changes in control of Corel will
be limited. There are provisions in Corel's certificate and articles of
amalgamation, by-laws, and the Investment Canada Act that could delay or impede
the removal of incumbent directors and could make more difficult a merger,
tender offer or proxy contest involving Corel. This could discourage a third
party from attempting to acquire control of Corel, even if these events would
be beneficial to the interests of the shareholders. In particular, Corel has a
shareholder rights plan which enables the board of directors to delay a change
in control of Corel. In addition, Corel's certificate and articles of
amalgamation authorizes its board to provide for the issuance of shares of
preferred stock of Corel, in one or more series, which the board of directors
could issue without further shareholder approval and with terms and conditions
and rights, privileges and preferences determined by the board of directors.
There are no current plans to issue any shares of preferred stock. Also, since
it is a Canadian company, certain investments in Corel are subject to the
provisions of the Investment Canada Act. The Investment Canada Act is
administered by Investment Canada, a Canadian governmental agency. In general,
this statute provides a system for the notification to the agency of certain
acquisitions of Canadian businesses by non-Canadian investors, and for the
review by the Investment Canada agency of certain acquisitions that meet
thresholds specified in the act. To the extent that a non-Canadian person or
company attempted to acquire 33% or more of Corel's common shares, the
threshold for a presumption of control, the transaction would be reviewable by
the Investment Canada agency. These factors could have the effect of delaying,
deferring, or preventing a change of control of Corel.
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A CAUTION ABOUT FORWARD-LOOKING STATEMENTS
The matters discussed throughout this joint proxy statement/prospectus that
are not historical facts are forward-looking and accordingly, involve
estimates, projections, goals, forecasts, assumptions and uncertainties that
could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements.
These forward-looking statements may relate to, but are not limited to,
future capital expenditures, acquisitions, future revenues, earnings, margins,
costs, demand for our products, market trends in the software industry,
inflation and various economic and business trends. You can identify forward-
looking statements by the use of words such as "expect," "estimate," "project,"
"budget," "forecast," "anticipate," "plan" and similar expressions. Forward-
looking statements include all statements regarding expected financial
position, results of operations, cash flows, dividends, financing plans,
business strategies, operating efficiencies or synergies, budgets, capital and
other expenditures, competitive positions, growth opportunities for existing or
proposed products or services, plans and objectives of management, and markets
for stock of Inprise or shares of Corel.
Examples of factors that you should consider with respect to any forward-
looking statements made throughout this joint proxy statement/prospectus
include, but are not limited to, the following:
. general industry trends and the effects of vigorous competition in the
computer software industry,
. changes in the economies of geographic areas served by the companies,
. catastrophic natural disasters,
. unanticipated changes in operating expenses and capital expenditures,
. customer business conditions,
. financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission and similar agencies with regulatory oversight,
. employee workforce factors, including loss or retirement of key
executives,
. technological developments resulting in competitive disadvantages and
creating the potential for impairment of existing assets,
. unexpected costs or difficulties related to the integration of the
businesses of Inprise and Corel,
. regulatory delays or conditions imposed by regulatory bodies in
approving the merger,
. general economic factors including inflation and capital market
conditions,
. other risks and uncertainties described in Inprise's and Corel's public
announcements and public filings,
. changes in tax requirements, including tax rate changes, new tax laws
and revised interpretation of tax laws, and
. adverse changes in the securities markets.
These factors are difficult to predict. They also involve uncertainties that
may materially affect actual results, and may be beyond the control of Inprise
or Corel. New factors may emerge from time to time and it is not possible for
us to predict new factors, nor can we assess the potential effect of any new
factors on Inprise or Corel.
These forward-looking statements are found at various places throughout this
joint proxy statement/prospectus. We caution you not to place undue reliance on
these forward-looking statements, which speak only as of the date they were
made. Neither Inprise nor Corel undertakes any obligation to publicly release
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this joint proxy statement/prospectus or to
reflect the occurrence of events that we do not currently anticipate.
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THE INPRISE SPECIAL MEETING
Date and Purpose of the Special Meeting
The special meeting of Inprise stockholders is scheduled to be held on . ,
2000, at . , Pacific time, at . . It may be adjourned or postponed to another
date and/or place for proper purposes. The purpose of the meeting is to
consider and vote upon a proposal to adopt the merger agreement with Corel.
Record Date for the Special Meeting and Who Is Entitled to Vote at the Special
Meeting
The Inprise board has fixed the close of business on . , 2000, as the record
date for the determination of the Inprise stockholders entitled to receive
notice of and to vote at the Inprise special meeting. A complete list of
stockholders entitled to vote at the meeting will be open to examination by the
stockholders, during regular business hours, for a period of ten days before
the meeting, at the principal executive offices of Inprise at 100 Enterprise
Way, Scotts Valley, California 95066-3249. As of the record date, . shares of
Inprise common stock were outstanding and entitled to vote on the adoption of
the merger agreement.
Quorum
A majority of the holders of Inprise common stock outstanding and entitled
to vote, represented in person or by proxy, constitutes a quorum for
consideration of each matter at the Inprise special meeting. If a quorum is not
present at the Inprise special meeting, management will adjourn it in order to
solicit additional proxies.
Required Vote
The affirmative vote of the holders of a majority of the outstanding shares
of Inprise common stock entitled to vote at the Inprise special meeting will be
sufficient to adopt the merger agreement.
As of the record date, Inprise directors and executive officers owned, in
the aggregate, approximately . shares of the Inprise common stock, or
approximately . % of the shares entitled to vote at the Inprise special
meeting. It is currently expected that each director or executive officer will
vote the shares of Inprise common stock owned by him or her for adoption of the
merger agreement.
Voting Rights
Each Inprise stockholder is entitled to one vote for each share of Inprise
common stock held on the record date. Shares of Inprise series C preferred
stock do not have any voting rights.
Voting by Proxy and How to Revoke Your Proxy
You may vote shares either in person or by duly authorized proxy. In
addition, you may vote your shares by telephone or through the Internet by
following the instructions provided in the enclosed proxy. You may use the
proxy accompanying this joint proxy statement/prospectus if you are unable to
attend the Inprise special meeting in person or if you wish to have your shares
voted by proxy even if you do attend the Inprise special meeting. You may
revoke any proxy given by you in response to this solicitation at any time
before the proxy is voted at the Inprise special meeting by delivering a
written notice of revocation, by delivery to Inprise of a subsequently dated,
properly executed proxy or by attending the Inprise special meeting and
electing to vote in person. Your attendance at the Inprise special meeting, by
itself, will not constitute a revocation of a proxy. You should address any
written notices of proxy revocation to: Inprise Corporation, at 100 Enterprise
Way, Scotts Valley, California 95060, Attention: Corporate Secretary.
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All shares represented by effective proxies on the accompanying form of
Inprise proxy received by Inprise at or before the Inprise special meeting, and
not revoked before they are exercised, will be voted at the Inprise special
meeting in accordance with their terms. If no instructions are given, the
Inprise proxies will be voted "FOR" the adoption of the merger agreement and at
the discretion of the persons acting under the proxies on any other matters
that properly come before the Inprise special meeting. The Inprise board is not
aware of any other matters to be presented at the Inprise special meeting other
than matters incidental to the conduct of the Inprise special meeting. If the
special meeting is adjourned to solicit additional proxies for the adoption of
the merger agreement, no proxy voted against the adoption of the merger
agreement will be voted in favour of the adjournment.
Abstentions, Failures to Vote and Broker Non-Votes
Abstentions may be specified with respect to the proposal being considered
at the Inprise special meeting. A properly executed proxy marked "ABSTAIN" will
be counted as present for purposes of determining whether there is a quorum.
Because the affirmative votes of a majority of the outstanding shares of the
Inprise common stock are required for adoption of the merger agreement, a proxy
marked "ABSTAIN" with respect to the merger agreement will have the effect of a
vote "AGAINST" the merger agreement. In addition, the failure of an Inprise
stockholder to return a proxy or vote in person at the Inprise special meeting
or by other permitted means will have the effect of a vote "AGAINST" the
adoption of the merger agreement. Brokers who hold shares in street name for
customers have the authority to vote on "routine" proposals when they have not
received instructions from beneficial owners. Brokers are precluded from
exercising their voting discretion with respect to proposals for non-routine
matters such as the adoption of the merger agreement. Thus, absent specific
instructions from the beneficial owner of shares of Inprise common stock,
brokers are not permitted to vote these shares with respect to the adoption of
the merger agreement. Since the affirmative vote described above is required
for adoption of the merger agreement, a broker non-vote will have the effect of
a vote "AGAINST" adoption of the merger agreement.
Because adoption of the merger agreement requires the affirmative vote of a
majority of the votes entitled to be cast by the holders of Inprise common
stock at the Inprise special meeting, abstentions and broker non-votes will
have the same effect as negative votes. The failure to vote your shares will
also have the same effect as a negative vote. Accordingly, the Inprise board
urges you to sign and date the accompanying proxy and return it promptly in the
enclosed, postage-paid envelope.
Solicitation of Proxies
Inprise will bear the entire cost of the solicitation of proxies for the
Inprise special meeting, half of the cost of the printing and mailing of this
joint proxy statement/prospectus and half the cost of filing the registration
statement of which this joint proxy statement/prospectus forms a part. In
addition to the solicitation of proxies by mail, officers, directors, employees
and agents of Inprise may solicit proxies by correspondence, telephone,
telegraph, telecopy, Internet or other electronic means, or in person, but
without extra compensation. Inprise has retained Georgeson Shareholder
Communications Inc., a proxy solicitation firm, to assist it in the
solicitation of proxies for the Inprise special meeting at a cost of
approximately $ . , plus reimbursement of reasonable out-of-pocket expenses.
Inprise will request banks, brokers and other record holders to send proxies
and proxy materials to the beneficial owners of Inprise common stock and secure
their voting instructions and will reimburse their reasonable charges and
expenses incurred in forwarding those materials.
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THE COREL SPECIAL MEETING
Matters to Be Addressed at the Corel Special Meeting
Corel shareholders at the Corel special meeting will be asked to approve the
issuance of Corel common shares to be issued in the merger in exchange for
shares of Inprise common stock. Based on the . fully diluted shares of Inprise
common stock outstanding as of the Inprise record date, . , 2000, and the
exchange ratio of 0.747 of a Corel common share for each share of Inprise
common stock, approximately . Corel common shares will be issued to Inprise
stockholders on a fully diluted basis under the merger agreement. These shares
will represent approximately 44% of Corel's common shares on a fully diluted
basis immediately after the merger. You will also be asked to approve the Corel
Corporation transition stock option plan to enable Corel to meet its
obligations under the merger agreement to assume all options to purchase shares
of Inprise outstanding at the effective time of the merger. Approximately .
Corel common shares will be issuable pursuant to the new plan upon the exercise
of new Corel options substituted for assumed Inprise stock options. Finally,
you will be asked to approve an increase of . Corel common shares reserved for
issuance under the Corel stock option plan 2000 to allow Corel to include
employees of Inprise in the grant of options in the future.
The Corel transition stock option plan will be administered by the
compensation committee of the board of directors of Corel. Under the transition
plan, the committee will grant options to purchase Corel's common shares in
substitution for options to purchase Inprise common stock outstanding under
existing Inprise stock option plans. The number of Corel common shares under
each new option will be equal to the number of shares of Inprise common stock
under each Inprise option multiplied by 0.747, and the exercise price will be
the exercise price under each such Inprise option divided by 0.747. All options
granted under the transition plan are non-transferable and the exercise price
thereof must be paid at the time of exercise. Options are exercisable for the
periods previously determined under the existing Inprise stock option plans.
The 2000 plan is administered by the compensation committee of the Corel
board. Under the 2000 plan, the committee may grant options to purchase Corel
common shares to all eligible participants, including directors and persons
appointed as officers of Corel by the board of directors. The factors which the
committee considers when granting options include outstanding performance
and/or contribution to Corel. The exercise price for such options may not be
less than the closing price of the Corel common shares on The Toronto Stock
Exchange on the trading day immediately preceding the date of the grant. All
options granted under the 2000 plan are non-transferable and the exercise price
thereof must be paid at the time of exercise. Options are exercisable for a
period of four years from the date of grant unless otherwise determined by the
committee. Options held by a participant who ceases to hold a board or officer
position or whose employment is terminated for any reason, including death, are
exercisable for 30 days following termination, unless otherwise determined by
Corel's chief executive officer. The number of Corel common shares available
for issuance under the 2000 plan is determined by shareholder resolution and is
currently fixed at 4,000,000. The number of stock options is restricted for
certain participants to 10% of the issued and outstanding capital of Corel from
time to time. Corel may lend to participants a portion of the purchase price of
the Corel common shares issued pursuant to an option on such terms, including
with respect to interest, as the committee may determine in its discretion. The
shareholders of Corel will be asked to approve an amendment to the 2000 plan to
increase the number of shares available for issuance from 4,000,000 to . .
The shareholders of Corel will consider the issuance of Corel common shares
in the merger, the Corel transition stock option plan and the amendment to the
Corel stock option plan 2000 and if thought fit, pass the resolutions included
in Annex E to this document. Each of these resolutions must be approved by a
majority of the votes cast by the Corel shareholders who vote on the resolution
at the special meeting.
Other Matters
Other than the approval of the preceding matters, Corel is not presently
aware of any other business to be brought before the Corel special meeting. If
any matters properly come before the special meeting which are
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not directly referred to in this document or the enclosed proxy, including
incidental matters, the management proxyholders will vote the shares
represented by the proxies based on the recommendations of the management of
Corel.
The Corel board of directors has unanimously approved the merger and the
merger agreement. The board of directors recommends that shareholders vote
"FOR" the approval of the issuance of Corel common shares in the merger, "FOR"
the Corel transition stock option plan and "FOR" the increase in the number of
Corel common shares under the 2000 plan.
Record Date
The Corel board of directors has fixed the close of business on . , 2000 as
the record date for determining those Corel shareholders entitled to receive
notice of the Corel special meeting. If a Corel shareholder does not receive a
notice, however, the shareholder is not deprived of a vote at the special
meeting. A person who has acquired Corel common shares after the Corel record
date is entitled to vote those shares at the Corel special meeting by:
. producing properly endorsed share certificates or otherwise establishing
share ownership, and
. prior to the special meeting, demanding in writing to be included on the
list of Corel shareholders entitled to vote at the special meeting.
Voting Securities; Voting Rights
Corel is authorized to issue an unlimited number of common shares of
which . were issued and outstanding on the record date and are entitled to
vote at the special meeting. Corel shareholders are entitled to one vote for
each common share registered in their name.
Quorum
A quorum is required to conduct business at the Corel special meeting. A
quorum for the Corel special meeting is five persons present in person, each
being a shareholder or a duly appointed proxyholder for a shareholder and
together holding or representing by proxy not less than 10% of the outstanding
shares of Corel common shares entitled to vote at the meeting.
Votes Required
Each of the issuance of the Corel common shares in the merger, the Corel
transition stock option plan and the amendment to the 2000 plan must be
approved by the holders of a majority of the outstanding Corel common shares
voting at the special meeting. The stock issuance and the Corel transition
stock option plan are each conditioned on the completion of the merger. The
merger will not proceed unless both the proposal to approve the issuance of the
Corel common shares in the merger and the proposal to approve the Corel
transition stock option plan are approved. The merger is not conditioned on
approval by Corel shareholders of the amendment to the 2000 plan. As of the
Corel record date, the directors and executive officers of Corel and their
affiliates beneficially owned, in the aggregate, approximately . of Corel
common shares or approximately . % of Corel's outstanding common shares. Corel
expects that they will vote in favor of all of the Corel proposals.
Solicitation of Proxies
Corel is providing this document in connection with a special meeting of
Corel shareholders. Corel will hold the special meeting at the time and place
and for the purposes described in the accompanying notice and at any
adjournments or postponements. Corel expects to solicit proxies primarily by
mail. In addition, certain officers, directors, employees and agents of Corel
may also solicit proxies by correspondence, telephone, telegraph, telecopy,
Internet, or other electronic means, or in person, without extra compensation.
Corel will bear the entire cost of the solicitation of proxies for the Corel
special meeting and half the cost of the printing
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and mailing of this joint proxy statement/prospectus as well as half the cost
of filing the registration statement of which this joint proxy
statement/prospectus forms a part. Corel has retained D.F. King & Co., Inc., a
proxy solicitation firm, to assist it in the solicitation of proxies for the
Corel special meeting at a cost of approximately $ . , plus reimbursement of
reasonable out-of-pocket expenses. Corel will request banks, brokers and other
record holders to send proxies and proxy materials to the beneficial owners of
Corel common shares and secure their voting instructions and will reimburse
their reasonable charges and expenses incurred in forwarding those materials.
Appointment and Revocation of Proxies
The individuals named as proxyholders in Corel's form of proxy are directors
or executive officers of Corel. A Corel shareholder may appoint a proxyholder
who is not listed on the form of proxy by striking out the names in the Corel
proxy, inserting a person's name in the blank space provided, and returning the
proxy or by completing a substitute form of proxy and returning it, in either
case, to Corel.
A proxy will only be valid if it is complete and received by Corel's
transfer agent 48 hours or more before the day of the special meeting.
Saturdays, Sundays and holidays are not included in the calculation of time.
Corel's transfer agent is Montreal Trust Company of Canada, 151 Front Street
West, 8th Floor, Toronto, Ontario M5J 2NI.
A Corel shareholder who has given a proxy has the right to revoke it at any
time before it is voted at the special meeting. In addition to attending the
meeting and voting in person, a Corel shareholder may revoke a proxy by doing
all of the following:
. preparing a written request to revoke a proxy,
. signing the request or having an attorney sign the request. If an
attorney signs the request, the attorney must have written authority to
do so. If the shareholder is a corporation, an authorized officer or
attorney must sign the request, and
. sending the request to Corel's transfer agent, Montreal Trust Company of
Canada, at 151 Front Street West, 8th Floor, Toronto, Ontario M5J 2NI,
or to Corel at 1600 Carling Avenue, Ottawa, Ontario K1Z 8R7, Attention:
Corporate Secretary. In each case the request must be received before
4:30 p.m. Ottawa time on the business day before the day of the Corel
special meeting or giving the request to the chairman of the special
meeting before the meeting begins.
Voting of Proxies and Discretionary Authority
You may direct management how to vote your shares on each proposal. If you
give no specific voting instructions, management of Corel will vote your shares
"FOR" each matter.
The person holding your proxy will have the right to exercise discretionary
authority to vote on any amendments to or variations in any matters identified
in the notice, and other matters which may properly come before the Corel
special meeting. Management will use their best judgment on such matters. The
management of Corel knows of no amendment, variation or other matter which may
be presented to the Corel special meeting.
A person appointed as a proxyholder by a shareholder will be entitled to
vote the shares represented by the proxy if the form of proxy is properly
completed and delivered and has not been revoked.
Abstentions, Failures to Vote and Broker Non-Votes
Abstentions may not be specified with respect to the proposals being
considered at the Corel special meeting. The failure of a Corel shareholder to
return a proxy or vote in person at the Corel special meeting or by other
permitted means will not have the effect of a vote "AGAINST" the adoption of
the Corel proposals. Brokers who hold shares in street name for customers have
the authority to vote on "routine" proposals when they have not received
instructions from beneficial owners. Brokers are precluded from exercising
their voting discretion with respect to proposals for non-routine matters such
as the adoption of the Corel proposals. Broker non-votes will not have the
effect of a vote "AGAINST" the adoption of the Corel proposals.
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THE MERGER
The following information relating to the merger is not intended to be a
complete description of all the information relating to the merger but is
intended to include the material terms of the merger. More detailed information
is contained elsewhere in this joint proxy statement/prospectus, including the
annexes. A copy of the merger agreement is set forth in ANNEX A and is
incorporated by reference into this joint proxy statement/prospectus. You are
urged to read the merger agreement carefully for a complete description of the
terms of the merger.
General
The merger agreement provides that, as a part of the merger, a wholly owned
subsidiary of Corel will merge into Inprise. The merger will become effective
when the certificate of merger is filed with the Secretary of State of the
State of Delaware or at the specific times set forth in the certificates of
merger.
Immediately following completion of the merger:
. Corel's merger subsidiary will have been merged into Inprise and will no
longer exist as a separate entity,
. Inprise will be a wholly owned subsidiary of Corel,
. former holders of Inprise common stock will be entitled to receive 0.747
of a Corel common share in exchange for each share of Inprise common
stock,
. former holders of Inprise's series C preferred stock will be entitled to
receive 8,032.2576 Corel common shares in exchange for each share of
such preferred stock,
. the number of Corel common shares held by Corel shareholders before the
merger will not be affected by the merger,
. Corel will assume all options and warrants to purchase Inprise common
stock and those warrants and options will represent the right to
purchase Corel common shares,
. approximately . million Corel common shares will be issuable upon the
exercise of Inprise options and warrants that will be assumed by Corel,
. on a fully diluted basis, former Inprise stockholders will collectively
own approximately 44% of the outstanding Corel common shares, and
holders of Corel common shares immediately prior to the merger will
collectively own the remainder,
. Michael C.J. Cowpland, Dale Fuller, a designee of Inprise approved by
Corel, and three other individuals who are presently members of the
Corel board, will be directors of Corel, and
. officers of Corel will include Dr. Cowpland, as president and chief
executive officer, and Mr. Fuller as chairman of the board.
Background of the Merger
Commencing in the summer of 1999, the management and board of directors of
Inprise undertook a detailed analysis of Inprise's business and operations, and
began an active review of Inprise's strategic alternatives including, among
other things, the prospects of Inprise on a stand-alone basis, the sale or
other disposition of substantial portions of Inprise's business and the sale
to, or merger of Inprise with, a third party. In early August 1999, Inprise
requested Broadview International LLC to assist Inprise in its evaluation of
strategic alternatives.
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Starting in mid-August 1999, Broadview, acting at the request of Inprise,
contacted eight potential strategic partners to ascertain their level of
interest in a possible business combination with Inprise. Four of the eight
parties contacted engaged in preliminary discussions with Inprise and one of
such parties indicated an interest in pursuing a possible acquisition of
Inprise.
The third party that indicated an interest in pursuing acquisition
discussions with Inprise conducted a due diligence review in late October and
early November 1999, and indicated a willingness to pursue a cash acquisition
of all of Inprise's shares, initially at a price of $6.00 per share. After
further discussions with Inprise and Broadview, such third party indicated a
willingness to increase its price to $6.25 per share. Following an increase in
the market price for Inprise shares, during November 1999 the third party
increased its proposal to approximately $8 per share, with the purchase price
payable in a combination of cash and stock. As a result of further increases in
the market price for Inprise shares, Inprise and the third party terminated
discussions in early December 1999.
The Inprise board of directors held a meeting on December 13, 1999. At such
meeting, the Inprise board discussed the termination of the discussions with
the third party and reviewed other possible strategic alternatives, including
other possible merger partners.
On December 21, 1999, Mr. Dale Fuller, Interim President and Chief Executive
Officer of Inprise, contacted Dr. Michael C.J. Cowpland, Chairman, President
and Chief Executive Officer of Corel, to discuss the merits of a potential
business combination between the two companies. Following such discussion, Mr.
Fuller and Dr. Cowpland agreed to speak further in early January 2000.
On January 11, 2000, following further discussions between representatives
of the parties, Inprise and Corel entered into a mutual confidentiality
agreement.
On January 11 and 12, 2000, representatives of Inprise and Corel met in
California to present an overview of their respective businesses to each other.
At such meeting, Inprise provided the representatives of Corel with a detailed
overview of Inprise's product lines, organization, results of operations and
financial condition.
On January 13, 2000, the board of directors of Corel met to discuss a
potential business combination with Inprise. At this meeting, Corel management
provided the board with an overview of the discussions to date between the two
companies. Corel management also provided the Corel board with an overview of
Inprise and the merits of a business combination. The board authorized Corel
management to continue discussions with Inprise and to retain CIBC World
Markets to assist in the negotiations.
On January 18, 2000, the board of directors of Corel met to review Corel's
financial results for the fourth fiscal quarter of 1999 and to receive an
update on the status of negotiations with Inprise.
On January 19 and 20, 2000, representatives of Inprise's and Corel's senior
management, and their respective financial advisors, met in Ottawa, Ontario. At
such meeting, Corel presented a detailed overview of its product lines,
organization, results of operations and financial condition. At such meeting,
the parties also discussed the potential terms of a business combination
transaction between the companies.
During the period from January 21 to January 24, 2000, at the direction of
Inprise and Corel, representatives of Broadview and CIBC World Markets held
several conversations regarding the potential terms of a transaction, including
the relative ownership interest that shareholders of each company would have in
the combined company.
During the week of January 24, 2000, two additional third parties that
recently had been contacted by Broadview, with Inprise's authorization,
indicated that they were not interested in pursuing a business combination with
Inprise.
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<PAGE>
On January 26, 2000, the board of directors of Inprise met to receive an
update on the status of discussions with Corel. At such meeting, Broadview
provided the Inprise board with an overview of Corel, the merits of a business
combination and a preliminary valuation analysis of Inprise. The Inprise board
authorized Inprise's management to continue discussions with Corel. On this
date, Corel's counsel delivered a first draft of a proposed merger agreement to
Inprise.
On January 27, 2000, Inprise's board met to review Inprise's pending
earnings announcement and to receive an update on the status of discussions
with Corel.
During the period from January 28, 2000 through February 5, 2000, each of
Corel and Inprise conducted business, legal and financial due diligence of the
other party's business and operations.
On February 1, 2000, the board of directors of Corel met telephonically to
receive an update on the status of negotiations with Inprise. At the meeting,
CIBC World Markets provided the board with an overview of the benefits and
strategic rationale for the proposed merger, as well as a summary of the
proposed terms of the merger.
Commencing on February 2, 2000, and continuing through February 6, 2000,
Inprise and Corel, and their respective counsel, negotiated the terms of the
definitive merger agreement and related stock option agreements. Also on
February 2, 2000, the Inprise board held a telephone meeting to discuss the
status of the negotiations and to review the terms and conditions of the draft
merger agreement and the significant issues which remained to be negotiated.
On February 4, 2000, the Inprise board met to receive an update on the
status of the negotiations. At such meeting, the board provided Inprise's
counsel with guidance on certain of the business and legal issues which
remained unresolved in the agreements. The Inprise board also requested that
management and Broadview prepare a detailed presentation concerning the
benefits and strategic rationale of the proposed combination.
On February 5, 2000, representatives of Inprise and Corel discussed the
integration plan for the two companies.
On February 6, 2000, the Inprise board held a meeting at which the senior
management of Inprise, together with Inprise's financial and legal advisors,
reviewed the discussions and negotiations with Corel regarding the proposed
business combinations as well as the results of their due diligence
investigations of Corel. The senior management of Inprise, as well as
Broadview, made detailed presentations regarding the benefits and strategic
rationale for the combination. At this meeting, Broadview made a detailed
financial presentation, which is summarized below, and rendered its opinion to
the Inprise board to the effect that the exchange ratio of 0.747 of a Corel
common share in exchange for each share of Inprise common stock was fair to the
stockholders of Inprise from a financial point of view.
Also at this meeting, counsel to Inprise reviewed with the Inprise board the
terms of the proposed merger agreement and the related stock option agreements.
After questions by and discussion among the members of the board, and after
consideration of the factors described below under "Reasons of Inprise for
Agreeing to the Merger with Corel" on page . , the board unanimously
determined that the merger agreement and the related transactions, including
the merger, are advisable, fair to and in the best interests of Inprise's
stockholders, approved the merger agreement and the stock option agreements and
resolved to recommend that Inprise's stockholders adopt the merger agreement.
The Inprise board also approved an amendment to Inprise's stockholder rights
plan. The purpose of the amendment is to prevent the rights issued under the
stockholder rights plan from becoming exercisable as a result of, among other
things, the entering into of the merger agreement with Corel.
Also, on February 6, 2000, the Corel board held a meeting at which senior
management of Corel, together with Corel's financial and legal advisors,
reviewed the discussions and negotiations with Inprise regarding the proposed
business combination as well as the results of their due diligence
investigations of Inprise. Senior management of Corel, together with CIBC World
Markets, reviewed in detail the benefits and strategic rationale for the
combination. At this meeting, counsel to Corel reviewed with the Corel board
the terms of the
24
<PAGE>
proposed merger agreement and the related stock option agreements. Also at the
meeting, CIBC World Markets made a detailed financial presentation which is
summarized below and rendered its opinion to the Corel board to the effect
that, as of the date of the opinion and based on and subject to the assumptions
made, matters considered and limitations on the review undertaken, the 0.747
exchange ratio was fair, from a financial point of view, to the holders of
Corel common shares.
After questions by and discussion among the members of the Corel board, and
after consideration of the factors described below under "Reasons of Corel for
Agreeing to the Merger with Inprise," the Corel board voted unanimously to
approve the merger agreement and the transactions contemplated by the merger
agreement, as well as the stock option agreements.
The merger agreement was executed in the morning of February 7, 2000 and
Inprise and Corel issued a joint press release announcing the transaction on
February 7, 2000 prior to the opening of financial markets in the United States
and Canada.
Reasons of Inprise for Agreeing to the Merger with Corel
At its meeting held on February 6, 2000, the board of directors of Inprise
voted unanimously to approve the transactions contemplated by the merger
agreement, determined that such transactions were fair to, in the best
interests of, and advisable for the stockholders of Inprise, and resolved to
recommend that the Inprise stockholders adopt the merger agreement. In arriving
at its decision to approve the merger agreement and to recommend its adoption
to the Inprise stockholders, the Inprise board gave careful consideration to
the following factors, among others:
. The financial condition, results of operations, cash flows, earnings,
assets and prospects of Inprise, if it remained an independent company,
. The financial presentation of Broadview and the opinion of Broadview to
the effect that, as of February 6, 2000, the exchange ratio of 0.747 of
a Corel common share in exchange for each share of Inprise common stock
was fair, from a financial point of view, to Inprise's stockholders. The
opinion of Broadview contains a description of the factors considered,
the assumptions made and the scope of the review undertaken by Broadview
in rendering its opinion. A more detailed description of Broadview's
fairness opinion is provided below under the caption "Opinion of
Inprise's Financial Advisor"and the full text of the fairness opinion
received by the Inprise board of directors from Broadview is included as
ANNEX B to this joint proxy statement/prospectus,
. The presentations by, and discussions of the terms of the merger
agreement with, Inprise's senior management, Inprise's counsel and
Broadview,
. The fact that Inprise had been actively reviewing its strategic options
since the summer of 1999 and had held discussions with various third
parties (including both traditional tool providers and Linux companies)
and that, in view of such discussions, management of Inprise believed
that it would be unlikely that any party would propose an acquisition or
strategic business combination that, taken as a whole, would be more
favorable to Inprise and its stockholders than the merger,
. The information gathered during Inprise's due diligence review of Corel
and the reports by Inprise's management, accountants and legal counsel
with respect to such due diligence,
. The recent and historical stock price performance of Inprise's common
stock and Corel's common shares, including the historic volatility
associated with both stocks,
. The potential strategic alternatives available to Inprise and the
viability and risks associated with each alternative including the
prospects for Inprise on a stand-alone basis,
. The fact that the computer software industry is extremely competitive
and is characterized by rapid change and uncertainty due to new and
emerging technologies and low barriers to entry and the fact that
Inprise derives a substantial portion of its revenue from mature
software products and from markets where Inprise competes against
dominant competitors,
25
<PAGE>
. The nature of the software industry and the fact that greater size and
resources are increasingly required for companies to compete in this
industry,
. The consistency of the strategies that Inprise and Corel are pursuing,
especially as it related to the Linux platform, and the potential
ability of the combined company to become the premier provider of
Internet access infrastructure tools and services for all major
platforms,
. The growing popularity of the Linux operating system and the belief by
Inprise's management that the combined company would be better
positioned to capitalize on the demand for software developed around the
Linux platform and would be well positioned to provide an end-to-end
Linux platform solution,
. The potential commercial impact of having access to Corel's marketing
and distribution channels,
. That the merger will present the opportunity for the holders of Inprise
common stock to participate in a larger and more diversified company
and, as shareholders of the combined company, benefit from any future
growth of the combined company, and the greater resources of the
combined company,
. The opportunity of the combined company to reduce costs through
economies of scale, particularly in sales and distribution capabilities,
that would not have been readily achievable by Inprise independently,
and the elimination of redundant operations and duplicate administrative
functions,
. The opportunity of the combined company to expand research and
development, including more rapid development of products as a result of
shared knowledge between development teams,
. The possibility that the combined company might experience a multiple
expansion in the valuation of its equity securities in the public
financial markets,
. The increasing competition in Inprise's markets from both existing and
potential competitors, some of which have far greater assets and
resources, in part as a result of the consolidation taking place in the
computer software industry,
. The ability of the combined company to develop products quicker and to
attract and retain critical and scarce engineering talent as a result of
having access to both companies' financial, development and personnel
resources,
. The fact that the exchange ratio of 0.747 of a Corel common share for
each share of Inprise common stock will result in Inprise stockholders
owning approximately 44% of the outstanding stock of the combined
company on a fully-diluted basis,
. The strengths and weaknesses of Corel's businesses and the key
attributes of the combined company in terms of, among other things,
products, sales, customers, management and competitive position,
. The fact that the merger is expected to qualify as a tax-free
reorganization for United States federal income tax purposes and that
Inprise stockholders generally will not recognize any gain or loss for
United States federal income tax purposes on the exchange in the merger
of their shares of Inprise common stock for Corel common shares, except
for any gain or loss recognized in connection with cash received instead
of a fractional interest of Corel's common shares,
. The terms and conditions of the merger agreement and the nature of the
arm's-length negotiations of such merger agreement,
. The fact that Inprise's board of directors, in the exercise of its
fiduciary duties, would be able to provide information to, and engage in
negotiations with, a third party that makes an unsolicited acquisition
proposal that the Inprise board determines is likely to result in a
proposal superior to the merger,
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<PAGE>
. The fact that the Inprise board would be able to terminate the merger
agreement and accept a superior acquisition proposal upon the payment to
Corel of a termination fee of $29.5 million if the Inprise board
determined that such termination was necessary for it to comply with its
fiduciary duties to its stockholders,
. The board of directors and management structure of the combined company,
including that two of the members of the combined company's board will
be designees of Inprise,
. The fact that Dale Fuller will serve as chairman of the board of the
combined company,
. The composition of Corel's management and Inprise management's
anticipated role in the combined company,
. The consents and approvals required to consummate the merger and the
favorable prospects for receiving such consents and approvals,
. The terms and conditions of the option that Inprise granted to Corel to
purchase up to 12 million shares of Inprise common stock, which is
approximately 19.7% of Inprise's shares of common stock outstanding on
February 6, 2000, including that the option is only exercisable when a
termination fee would become payable to Corel under the merger agreement
and that the sum of the profit that Corel can obtain pursuant to the
option plus the termination fee payable to Corel is limited to $30
million, and
. The terms and conditions of the option that Corel granted to Inprise to
purchase up to 13 million shares of Corel common shares, which is
approximately 19.8% of Corel's common shares outstanding on February 6,
2000, including that the option is only exercisable when a termination
fee would become payable to Inprise under the merger agreement and that
the sum of the profit that Inprise can obtain pursuant to the option
plus the termination fee payable to Inprise is limited to $45 million.
The Inprise board also considered potentially negative factors in its
deliberations concerning the merger, including:
. The potential disruption of Inprise's business that might result from
the announcement of the merger,
. The potential effect of the public announcement of the merger on
Inprise's ability to attract and retain key management, sales, marketing
and technical personnel,
. The market valuation and historic trading range of Corel's common
shares, including the volatility that the price of Corel's common shares
has experienced, and the associated risk that the price of Corel's
common shares might decline prior to the closing of the merger, thus
reducing the value per share to be received by Inprise's stockholders,
. The risk that anticipated benefits of the merger for Inprise
stockholders may not be realized as a result of possible changes in the
computer software industry in general or potential difficulties in
integrating the businesses of Inprise and Corel,
. The significant costs involved in consummating the merger, the
substantial management time and effort required to effect the merger and
integrate the businesses of Inprise and Corel and the related disruption
to Inprise's operations,
. The possible difficulties of integrating the operations, management and
corporate cultures of Inprise and Corel, and
. The risk that the merger would not be consummated and that, under some
circumstances, Inprise could be required to pay a termination fee to
Corel and Corel would be able to exercise its option to purchase up to
12 million shares of Inprise common stock.
The Inprise board did not believe that the negative factors were sufficient,
individually or in the aggregate, to outweigh the potential advantages of the
merger.
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<PAGE>
In light of all of the factors set forth above, the Inprise board
unanimously approved the transactions contemplated by the merger agreement and,
in order to induce Corel to enter into the merger agreement, unanimously
approved the grant of an option to Corel to purchase up to 12 million shares,
or approximately 19.7%, of Inprise's outstanding common stock at an exercise
price of $14.94 per share. In view of the variety of factors considered in
connection with its evaluation of these transactions, the Inprise board did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
the Inprise board's ultimate decision, but rather the Inprise board conducted
an overall analysis of the factors described above, including through
discussions with and questioning of Inprise's management and legal, financial
and accounting advisors. In considering the factors described above, individual
directors may have given different weight to different factors.
Recommendation of the Inprise Board of Directors
The Inprise board believes that the terms of the merger agreement are
advisable, fair to and in the best interests of Inprise and its stockholders.
The Inprise board has unanimously approved the merger agreement, and
unanimously recommends that the stockholders of Inprise vote for the adoption
of the merger agreement.
Reasons of Corel for Agreeing to the Merger with Inprise
At a meeting held on February 6, 2000, the board of directors of Corel:
. voted unanimously to approve the transactions contemplated by the merger
agreement,
. determined that those transactions were fair to, in the best interests
of, and advisable for the shareholders of Corel, and
. resolved to recommend that the Corel shareholders vote to approve the
issuance of Corel common shares necessary to consummate the exchange of
shares contemplated by the merger agreement, and a transition option
plan so that Inprise stock options can be converted into Corel options.
In arriving at its decision to approve the merger agreement and to recommend
that Corel's shareholders give these approvals, the Corel board gave careful
consideration to the following factors, among others:
. the merger will enable Corel to become a single source provider of Linux
operating systems, productivity applications, development tools and
professional services,
. Corel will have greater resources and be better able to service
customers by creating new and innovative products as a result of
combining the proprietary information and technology of each company and
integrating the expertise of each company,
. the merger will enable Corel to sell complementary products to customers
of the separate companies which prior to the merger only purchased
products from one of the companies,
. Corel will have greater financial resources and industry presence,
domestically and internationally,
. the merger will enable the combined entity to realize cost savings by
eliminating duplication in their respective infrastructures, and
. the merger is expected to result in increased coverage of Corel by
industry and financial analysts.
In addition, the Corel board of directors:
. reviewed the management, business, properties, financial condition,
operating results and prospects of Inprise and the current industry,
economic and market conditions,
. reviewed the merger agreement and the stock option agreements, including
the circumstances under which Corel and Inprise could terminate the
merger agreement and the termination fees payable by Corel and Inprise
under certain circumstances, and
. received an opinion of CIBC World Markets, dated February 6, 2000, as to
the fairness, from a financial point of view, to the holders of Corel
common shares of the 0.747 exchange ratio provided for in the merger.
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The Corel board of directors also considered potentially negative factors
associated with the merger, including the following:
. the fact that Corel's profit margins exceeded those of Inprise in recent
periods,
. the possibility that a termination fee would become payable to Inprise
or the stock option granted to Inprise would become exercisable,
. the potential effects of failing to complete the merger after having
announced it, including providing information to competitors and
disrupting Corel's ongoing business, and
. the possibility that the market for Linux-based products may not grow as
rapidly as presently expected.
In view of the wide variety of factors considered, the Corel board of
directors did not find it practical to, and did not, quantify or otherwise
assign relative weights to the specific factors considered, and individual
directors may have given differing weights to different factors. After taking
into consideration all the factors set forth above, the Corel board determined
that, in its business judgment, the potential benefits of the merger outweighed
the potential detriments associated with the proposed merger.
Recommendation of the Corel Board of Directors
The Corel board of directors believes that the terms of the merger agreement
are advisable, fair to and in the best interests of Corel and its shareholders.
The Corel board of directors has unanimously approved the merger agreement, and
unanimously recommends that shareholders of Corel vote for the adoption of
Corel's shareholder proposals, including the issuance of Corel common shares to
Inprise's stockholders pursuant to the merger agreement.
Opinion of Inprise's Financial Advisor
Broadview International LLC has acted as the exclusive financial advisor to
Inprise in connection with the merger. In its role as financial advisor to
Inprise, Broadview was asked by Inprise to render an opinion to the board of
directors of Inprise as to the fairness, from a financial point of view, of the
exchange ratio of 0.747 of a Corel common share in exchange for each share of
Inprise common stock to the holders of Inprise common stock. On February 6,
2000, at a meeting of the Inprise board of directors held to evaluate the
merger, Broadview delivered to the Inprise board a written opinion, dated
February 6, 2000, to the effect that, as of the date of the opinion and based
on and subject to the assumptions, limitations and qualifications stated in the
opinion, the exchange ratio of 0.747 of a Corel common share in exchange for
each share of Inprise common stock was fair, from a financial point of view, to
the holders of Inprise common stock.
A copy of Broadview's opinion is attached hereto as ANNEX B and should be
read carefully for a description of the procedures followed, assumptions made,
other matters considered and limitations of the review undertaken by Broadview
in arriving at its opinion. The summary of Broadview's opinion set forth in
this joint proxy statement/prospectus, although materially complete, is
qualified in its entirety by reference to the full text of the opinion.
Broadview's opinion was prepared for the Inprise board and is directed only to
the fairness of the exchange ratio of 0.747 of a Corel common share in exchange
for each share of Inprise common stock, from a financial point of view, to the
holders of Inprise common stock and does not constitute a recommendation to any
Inprise stockholder as to how that stockholder should vote on the adoption of
the merger agreement.
The Inprise board selected Broadview to act as its exclusive financial
advisor in connection with the merger because Broadview is a nationally
recognized investment banking firm with substantial expertise in the software
development tools industry and in transactions similar to the merger and
because Broadview is familiar with Inprise and its business. Broadview, as part
of its investment banking services, is regularly
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<PAGE>
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
Broadview was not requested to, and did not, make any recommendation as to
the terms of the merger exchange ratio, which was determined through arm's
length negotiations between Inprise and Corel. Broadview's opinion does not
address the terms and conditions of the merger agreement and the related
documents, other than the fairness, from a financial point of view, of the
exchange ratio of 0.747 of a Corel common share in exchange for each share of
Inprise common stock. In addition, Broadview's opinion does not address the
relative merits of the merger agreement or the other business strategies
considered by the Inprise board, nor does it address the decision of Inprise's
board to approve the merger. No restrictions or limitations were imposed by
Inprise upon Broadview with respect to the investigations made or procedures
followed by Broadview in rendering its opinion.
In arriving at its opinion, Broadview:
. reviewed the terms of the draft of the merger agreement furnished to
Broadview by Inprise on February 5, 2000,
. reviewed certain publicly available financial statements and other
information of Inprise and Corel,
. reviewed certain financial projections for Inprise prepared and provided
to Broadview by Inprise management,
. participated in discussions with Inprise management and Corel management
concerning the operations, business strategy, financial performance and
prospects for Inprise and Corel,
. discussed the strategic rationale for the merger with Inprise management
and Corel management,
. reviewed the reported closing prices and trading activity for Inprise
common stock and Corel common shares,
. compared certain aspects of the financial performance of Inprise and
Corel with other comparable public companies,
. analyzed available information, both public and private, concerning
other comparable mergers and acquisitions,
. reviewed recent equity research analyst reports covering Inprise and
Corel,
. analyzed the anticipated effect of the merger on the future financial
performance of Corel,
. assisted in negotiations and discussions related to the merger among
Inprise, Corel and their respective financial and legal advisors, and
. conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of its opinion.
In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information, including the representations and warranties contained in the
merger agreement, that was publicly available or furnished to Broadview by
Inprise, Corel or Corel's advisors. With respect to the financial projections
examined by Broadview, Broadview assumed that they were reasonably prepared and
reflected the best currently available estimates and good faith judgment of
Inprise's management as to the future performance of Inprise. Broadview also
assumed that neither Inprise nor Corel is currently involved in any material
transaction as of February 6, 2000, the date of Broadview's opinion, other than
the merger, other publicly announced transactions and those activities
undertaken in the ordinary course of conducting their respective businesses.
Broadview did not make or obtain any independent appraisal or valuation of any
of Inprise's assets or liabilities.
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<PAGE>
Broadview's opinion is necessarily based upon market, economic, financial
and other conditions as they existed and could be evaluated as of February 6,
2000. Any change in such conditions since that date would require a
reevaluation of Broadview's opinion. Broadview expressed no opinion as to the
prices at which Corel common shares will actually trade at any time.
The following is a summary of the material analyses that Broadview presented
to the Inprise board at its February 6, 2000 meeting in connection with the
rendering of its opinion. The financial analyses summarized below include
information presented in tabular format. In order to fully understand
Broadview's financial analyses, the tables must be read together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses. Considering the data in the tables below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analysis, could create a
misleading or incomplete view of Broadview's financial analyses.
Inprise Stock Performance Analysis
Broadview compared the recent stock performance of Inprise with that of the
Nasdaq Composite and the Inprise Comparable Index. The Inprise Comparable Index
is comprised of public companies that Broadview deemed comparable to Inprise.
Broadview selected companies competing in the software development tools
industry with revenues between $50 million and $500 million and revenue growth
less than 30% for the last reported twelve months. The Inprise Comparable Index
consists of the following companies:
. ILOG S.A.,
. eXcelon Corp. (Object Design, Inc.),
. Centura Software Corp.,
. Saga Systems, Inc.,
. MERANT plc,
. Progress Software Corp.,
. Rogue Wave Software, Inc., and
. Viasoft, Inc.
Comparable Public Company Analysis
Broadview considered ratios of market capitalization, adjusted for cash and
debt when necessary, to selected historical and projected operating results in
order to derive multiples placed on a company in a particular market segment.
In order to perform this analysis, Broadview compared financial information of
Inprise with publicly available information for the companies comprising the
Inprise Comparable Index. For this analysis, as well as other analyses,
Broadview examined publicly available information, as well as a range of
estimates based on securities research analyst reports.
The following table presents, as of February 6, 2000, the median multiples
and the range of multiples for the Inprise Comparable Index of total market
capitalization which is defined as equity market capitalization plus total debt
minus cash and cash equivalents, divided by selected operating metrics:
<TABLE>
<CAPTION>
Median Range of
multiple multiples
-------- ------------
<S> <C> <C>
Total market capitalization to last
twelve months revenue............................... 3.16x 0.66x-10.21x
Total market capitalization to projected
calendar year 2000 revenue.......................... 2.71x 1.37x-7.81x
</TABLE>
31
<PAGE>
The following table presents, as of February 6, 2000, the median implied per
share values and the range of implied per share values of Inprise's common
stock, calculated by using the multiples shown above and the appropriate
Inprise operating metric:
<TABLE>
<CAPTION>
Median Range of
implied implied
value values
------- ------------
<S> <C> <C>
Total market capitalization to last twelve
months revenue...................................... $10.17 $4.10-$27.32
Total market capitalization to projected
calendar year 2000 revenue.......................... $10.21 $6.40-$24.78
</TABLE>
No company utilized in the "Comparable Public Company Analysis" as a basis
for comparison is identical to Inprise. Accordingly, an analysis of the above
results necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of Inprise and other
factors that could affect the public trading values of Inprise and the selected
companies to which it is being compared. In evaluating the comparable
companies, Broadview made numerous assumptions with respect to the performance
of the software development tools industry and general economic conditions,
many of which are beyond the control of Inprise or Corel. Mathematical
analysis, such as determining the median, average or range, is not in itself a
meaningful method of using selected comparable company data.
Comparable Transactions Analysis
Broadview considered ratios of equity purchase price, adjusted for the
seller's cash and debt when appropriate, to selected historical operating
results in order to indicate multiples that strategic and financial acquirers
have been willing to pay for companies in a particular market segment. In order
to perform this analysis, Broadview reviewed a number of transactions that it
considered similar to the merger. Broadview selected these transactions by
choosing recent transactions involving sellers in the software development
tools industry with revenues between $50 million and $500 million for the last
reported twelve months. For this analysis, as well as other analyses, Broadview
examined publicly available information, as well as information from
Broadview's proprietary database of published and confidential merger and
acquisition transactions in the information technology, communication and media
industries. These transactions consisted of the acquisition of:
. Forte Software Inc. by Sun Microsystems Inc.,
. Ardent Software Inc. by Informix Corporation,
. Logic Works Inc by Platinum Technology Inc.,
. INTERSOLV, Inc. by Micro Focus Group PLC,
. Information Advantage Inc. by Sterling Software Inc.,
. Synon Corporation by Sterling Software Inc., and
. Seer Technologies Inc. by Level 8 Systems.
The following table presents, as of February 6, 2000, the median multiple
and the range of multiples of Adjusted Price (defined as equity price plus
total debt minus cash and cash equivalents) divided by the seller's revenue in
the last reported twelve months prior to its acquisition in each of the
transactions listed above:
<TABLE>
<CAPTION>
Median Range of
multiple multiples
-------- -----------
<S> <C> <C>
Adjusted Price to Last Reported
Twelve Months Revenue.................................. 2.50x 0.79x-6.19x
</TABLE>
32
<PAGE>
The following table presents, as of February 6, 2000, the median implied per
share value and the range of implied per share values of Inprise's common
stock, calculated by multiplying the multiples shown above by Inprise's revenue
for the twelve months ended December 31, 1999:
<TABLE>
<CAPTION>
Median Range of
implied implied
value values
------- ------------
<S> <C> <C>
Adjusted Price to Last Reported
Twelve Months Revenue.................................. $8.58 $4.41-$17.54
</TABLE>
No transaction utilized as a comparable in the comparable transactions
analysis is identical to the merger. In evaluating the comparable transaction
data, Broadview made numerous assumptions with respect to the software
development tools industry's performance and general economic conditions, many
of which are beyond the control of Inprise or Corel. Mathematical analysis,
such as determining the average, median, or range, is not in itself a
meaningful method of using comparable transaction data.
Transaction Premiums Paid Analysis
Broadview considered the premiums paid above a seller's share price in order
to determine the additional value that strategic and financial acquirers, when
compared to public stockholders, are willing to pay for companies in a
particular market segment. In order to perform this analysis, Broadview
reviewed a number of transactions involving publicly-held software companies.
Broadview selected two sets of transactions. The first set includes sixteen
recent software transactions with an equity purchase price between $500 million
and $2.0 billion. The second set includes fourteen recent software and web
services "mergers of equals" transactions with an equity purchase price between
$50 million and $2.0 billion. Transactions were selected from Broadview's
proprietary database of published and confidential merger and acquisition
transactions in the information technology, communication and media industries.
The software transactions with an equity purchase price between $500 million
and $2.0 billion that were used were the acquisition of:
. Medical Manager Corp. by Synetic, Inc.,
. Ardent Software, Inc. by Informix Corp.,
. USCS International, Inc. by DST Systems, Inc.,
. Boole & Babbage, Inc. by BMC Software, Inc.,
. Forte Software, Inc. by Sun Microsystems, Inc.,
. INTERSOLV, Inc. by Micro Focus Group PLC,
. NetGravity, Inc. by DoubleClick, Inc.,
. Genesys Telecommunications Laboratories, Inc. by Alcatel SA,
. Interleaf Inc. by Broadvision, Inc.,
. Visio Corp. by Microsoft Corp.,
. Wang Laboratories, Inc. by Getronics NV,
. Memco Software, LTD by Platinum Technology, Inc.,
. Cube, Inc. by Razorfish, Inc.,
. Arbor Software, Corp. by Hyperion Software, Corp.,
. C-Cube Microsystems, Inc. by Harmonic, Inc., and
. GeoTel Communications, Corp. by Cisco Systems, Inc.
33
<PAGE>
The following table presents, as of February 6, 2000, the median premium and
the range of premiums for these transactions calculated by dividing
(1) the offer price per share minus the closing share price of the seller's
common stock twenty trading days or one trading day prior to the public
announcement of the transaction, by
(2) the closing share price of the seller's common stock twenty trading
days or one trading day prior to the public announcement of the
transaction:
<TABLE>
<CAPTION>
Median Range of
premium premiums
------- ------------
<S> <C> <C>
Premium paid to seller's stock price twenty
trading days prior to announcement.................. 51.7% (31.4%)-99.0%
Premium paid to seller's stock price one
trading day prior to announcement................... 19.8% (31.6%)-76.9%
</TABLE>
The following table presents the median implied value and the range of
implied values of Inprise's common stock, calculated by using the premiums
shown above and Inprise's share price twenty trading days and one trading day
prior to February 7, 2000:
<TABLE>
<CAPTION>
Median Range of
implied implied
value values
------- ------------
<S> <C> <C>
Premium paid to seller's stock price twenty
trading days prior to announcement.................... $20.30 $9.17-$26.61
Premium paid to seller's stock price one
trading day prior to announcement..................... $15.49 $8.84-$22.88
</TABLE>
The "merger of equals" software and web services transactions used are the
acquisition of:
. Sulcus Hospitality by Eltrax Systems, Inc.,
. Medical Manager Corp. by Synetic, Inc.,
. INTERSOLV, Inc. by Micro Focus Group PLC,
. Egghead.com, Inc. by Onsale, Inc.,
. IQ Software Corp. by Information Advantage, Inc.,
. Raptor Systems, Inc. by AXENT Technologies, Inc.,
. iCube, Inc. by Razorfish, Inc.,
. Boston Technology, Inc. by Comverse Technology, Inc.,
. Interactive Pictures Corp. by Bamboo.com,
. Fractal Design Corp. by Metatools, Inc.,
. Individual, Inc. by Desktop Data, Inc.,
. Arbor Software Corp. by Hyperion Software Corp.,
. N2K, Inc. by CDNOW, Inc., and
. Pure Atria Corp by Rational Software.
34
<PAGE>
The following table presents, as of February 6, 2000, the median premium and
the range of premiums for these transactions calculated by dividing
(1) the offer price per share minus the closing share price of the seller's
common stock twenty trading days or one trading day prior to the public
announcement of the transaction, by
(2) the closing share price of the seller's common stock twenty trading
days or one trading day prior to the public announcement of the
transaction:
<TABLE>
<CAPTION>
Median Range of
premium premiums
------- -------------
<S> <C> <C>
Premium paid to seller's stock price twenty
trading days prior to announcement................. 14.0% (27.9%)-217.8%
Premium paid to seller's stock price one
trading day prior to announcement.................. 12.8% (4.7%)-128.8%
</TABLE>
The following table presents the median implied value and the range of
implied values of Inprise's stock, calculated by using the premiums shown above
and Inprise's share price twenty trading days and one trading day prior to
February 7, 2000:
<TABLE>
<CAPTION>
Median Range of
implied implied
value values
------- -------------
<S> <C> <C>
Premium paid to seller's stock price twenty
trading days prior to announcement................. $15.25 $9.65-$ 42.50
Premium paid to seller's stock price one
trading day prior to announcement.................. $14.59 $12.33-$29.60
</TABLE>
No transaction utilized as a comparable in the transaction premiums paid
analysis is identical to the merger. In evaluating the comparable transactions,
Broadview made numerous assumptions with respect to the performance of the
software and web services industries and general economic conditions, many of
which are beyond the control of Inprise or Corel. Mathematical analysis, such
as determining the average, median, or range is not in itself a meaningful
method of using comparable transaction data.
Present Value of Projected Share Price Analysis
Broadview calculated the present value of potential future share prices of
Inprise common stock on a standalone basis using analyst estimate projections
for the twelve months ending December 31, 2001. The implied share price,
calculated using the median price to last twelve months earnings multiple for
the Inprise Comparable Index and a discount rate determined by the Capital
Asset Pricing Model with the risk implied by the past stock performance of the
Inprise Comparable Index, was $23.35. The implied share price, calculated using
the price to the last twelve months earnings multiple for Inprise and a
discount rate determined by the Capital Asset Pricing Model with the risk
implied by the past stock performance of Inprise, was $25.34.
Exchange Ratio Analysis
Broadview reviewed the ratios of the closing prices of Inprise common stock
divided by the corresponding prices of Corel common shares over the period from
February 4, 1999 through February 4, 2000 in contrast with the exchange ratio
provided for in the merger agreement. Based on this analysis, the historical
exchange ratio has ranged from 1.7634 to 0.4356 with a three-month average of
0.6455, a six-month average of 0.6761, and a one-year average of 0.9429.
35
<PAGE>
Relative Contribution Analysis
Broadview examined the relative contribution of Inprise to Corel for a
number of historical and projected operating metrics. In this analysis,
projected figures for Inprise and Corel are based on selected analysts'
estimates. The following reflect the relative contribution of Inprise and Corel
for each operating metric:
<TABLE>
<CAPTION>
Corel Inprise
----- -------
<S> <C> <C>
Corel's last twelve months revenue............................ 60.2% 39.8%
Corel's projected fiscal year 2000 revenue.................... 59.6% 40.4%
Corel's projected fiscal year 2001 revenue.................... 57.5% 42.5%
Corel's projected fiscal year 2001 net income................. 43.4% 56.6%
</TABLE>
Relative Ownership Analysis
A relative ownership analysis measures each of the merging companies'
relative equity ownership and relative entity ownership. Entity ownership
compares the relative entity values of the combining companies and entity value
equals equity value minus cash and cash equivalents plus total debt. At the
exchange ratio provided for in the merger agreement of 0.747 of a Corel common
share for each share of Inprise common stock, the implied equity ownership is
44.0% for Inprise and 56.0% for Corel, while the implied entity ownership is
39.6% for Inprise and 60.4% for Corel.
Corel Share Performance Analysis
Broadview compared the recent stock performance of Corel with that of the
Nasdaq Composite and the Corel Comparable Index. The Corel Comparable Index is
comprised of public companies that Broadview deemed comparable to Corel.
Broadview selected six public companies in the Desktop Application Software
industry and five public companies in the Operating System Infrastructure
industry. The Desktop Application Software public companies consist of:
. Trend Micro, Inc.,
. Macromedia, Inc.,
. Adobe Systems, Inc.,
. Network Associates, Inc.,
. Symantec Corp., and
. Autodesk, Inc.
The Operating System Infrastructure public companies consist of:
. Red Hat, Inc.,
. Be Inc.,
. Banyan Systems, Inc.,
. Novell, Inc., and
. Santa Cruz Operation, Inc.
Evaluation of Corel Equity
Broadview compared financial information of Corel with publicly available
information for companies comprising the Corel Comparable Index. For this
analysis, as well as other analyses, Broadview examined publicly available
information, as well as a range of estimates based on securities research
analyst reports.
36
<PAGE>
Pro Forma Combination Analysis
Broadview calculated the pro forma impact of the merger on the combined
entity's projected earnings per share for Corel's fiscal years ending November
30, 2000 and November 30, 2001 taking into consideration various financial
effects which will result from consummation of the merger. This analysis relies
upon certain financial and operating assumptions provided by equity research
analysts and publicly available data about Corel and Inprise. Broadview assumed
that the merger would be accounted for using the purchase method of accounting
and that no opportunities for cost savings or revenue enhancements exist. Based
on this analysis, the pro forma purchase model indicates EPS accretion
dilution, excluding goodwill amortization and in-process purchased research and
development write-off, of $0.01 for the fiscal year ending November 30, 2000,
and $0.22 EPS accretion (dilution), excluding Goodwill Amortization and In-
Process Purchased Research & Development Write-Off, for the fiscal year ending
November 30, 2001. Broadview also examined the effects of potential cost
savings and revenue enhancements, and the incremental accretion or dilution
related to those synergies.
Consideration of the Discounted Cash Flow Methodology
While discounted cash flow is a commonly used valuation methodology,
Broadview did not employ such an analysis for the purposes of rendering its
opinion. Discounted cash flow analysis is most appropriate for companies which
exhibit relatively steady or somewhat predictable streams of future cash flow.
For a company with high projected revenue growth, such as Inprise, a
preponderance of the value in a valuation based on discounted cash flow will be
in the terminal value of the entity, which is extremely sensitive to
assumptions about the sustainable long-term growth rate of the company. Given
the uncertainty in estimating both the future cash flows and a sustainable
long-term growth rate for Inprise, Broadview considered a discounted cash flow
analysis inappropriate for valuing Inprise.
Fairness Opinion Process
In connection with the review of the merger by the Inprise board, Broadview
performed a variety of financial and comparative analyses. The summary set
forth above does not purport to be a complete description of the analyses
performed by Broadview in connection with the merger. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. In arriving at its opinion, Broadview
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Furthermore,
Broadview believes that selecting any portion of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion.
In performing its analyses, Broadview made numerous assumptions with respect
to industry performance and general business and economic conditions and other
matters, many of which are beyond the control of Inprise or Corel. The analyses
performed by Broadview are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. The exchange ratio in the merger of 0.747 of a
Corel common share in exchange for each share of Inprise common stock and the
other terms of the agreement were determined through arm's length negotiations
between Inprise and Corel, and were approved by the Inprise board. While
Broadview provided advice to the Inprise board during such negotiations,
Broadview did not recommend any specific consideration to the Inprise board or
that any specific consideration constituted the only appropriate consideration
for the merger. In addition, Broadview's opinion and presentation to the
Inprise board was one of many factors taken into consideration by the Inprise
board in making its decision to approve the merger. Consequently, the Broadview
analyses as described above should not be viewed as determinative of the
opinion of the Inprise board with respect to the value of Inprise or of whether
the Inprise board would have been willing to agree to a different
consideration.
Engagement Letter with Broadview
Pursuant to an engagement letter dated September 15, 1999, Inprise engaged
Broadview to provide financial advisory services, which included, among other
things, rendering its opinion and making the
37
<PAGE>
presentation referred to above. Under the terms of the engagement letter,
Inprise has agreed to pay Broadview a "success" fee upon the closing of a
business combination transaction, such as the merger, as follows:
. in the event the transaction is consummated with consideration below $7.35
per fully diluted share, the success fee would be 1.25% of the consideration
received by Inprise and/or its stockholders, and
. in the event the transaction is consummated with consideration at or above
$7.35 per fully diluted share, the success fee would be 1.50% of the
consideration received by Inprise and/or its stockholders.
For purposes of calculating the success fee, the value of the consideration
received will be based on the average of the closing sales prices of Corel's
shares for the ten trading days ending two trading days prior to the closing of
the merger. Upon consummation of the merger and assuming an average Corel share
price during such ten day period of $ . which is the average price for the ten
trading day period preceding the printing of this document, Inprise would be
obligated to pay Broadview a transaction fee of approximately $ . . Inprise has
already paid Broadview a fairness opinion fee of $500,000, which amount will be
credited against the success fee. In addition, Inprise has agreed to reimburse
Broadview for its reasonable expenses, including fees and expenses of its
counsel, provided that such expenses shall not exceed $15,000 per month without
Inprise's consent. Inprise has also agreed to indemnify Broadview and its
affiliates against certain liabilities and expenses related to their
engagement, including liabilities under the federal securities laws. The terms
of the fee arrangement with Broadview, which Inprise and Broadview believe are
customary in transactions of this nature, were negotiated at arm's length
between Inprise and Broadview, and the Inprise board was aware of the nature of
the fee arrangement, including the fact that a significant portion of the fees
payable to Broadview were contingent upon completion of the merger.
Opinion of Corel's Financial Advisor
At a meeting of the Corel board of directors held on February 6, 2000 to
evaluate the proposed merger, CIBC World Markets presented its financial
analysis of the 0.747 exchange ratio provided for in the merger agreement and
delivered to the Corel board its oral opinion, which opinion was confirmed by
delivery of a written opinion dated February 6, 2000, to the effect that, as of
that date and based on and subject to the matters stated in the opinion, the
exchange ratio was fair, from a financial point of view, to the holders of
Corel common shares.
The full text of CIBC World Markets' opinion, which describes the
assumptions made, procedures followed, matters considered and limitations on
the review undertaken by CIBC World Markets, is attached as ANNEX C to this
joint proxy statement/prospectus. CIBC World Markets' opinion is addressed to
the Corel board of directors and relates only to the fairness of the 0.747
exchange ratio from a financial point of view. CIBC World Markets' opinion does
not address any other aspect of the proposed merger or any related transaction
and does not constitute a recommendation to any Corel shareholder as to how
such Corel shareholder should vote with respect to any matters relating to the
merger. The description of CIBC World Markets' opinion included in this joint
proxy statement/prospectus is qualified in its entirety by the full text of
CIBC World Markets' opinion attached as ANNEX C. Corel shareholders are urged
to read the opinion carefully in its entirety.
CIBC World Markets, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. CIBC World
Markets provides a full range of financial advisory and securities services
and, in the course of its normal trading activities, may from time to time
effect transactions and hold securities, including derivative securities, of
Corel or Inprise for its own account and for the accounts of its customers.
In connection with its opinion, CIBC World Markets reviewed, among other
things:
. a draft, dated February 5, 2000, of the merger agreement,
38
<PAGE>
. audited consolidated financial statements for Corel for the four years
ended November 30, 1998,
. unaudited financial results of Corel for the year ended November 30,
1999,
. unaudited quarterly financial statements for Corel for the quarters
ended February 28, 1999, May 31, 1999, and August 31, 1999,
. the Annual Information Form dated April 19, 1999 for Corel,
. the Management Proxy Circular dated March 8, 1999 of Corel,
. Inprise's Forms 10-K for the fiscal year ended December 31, 1998, the
nine months ended December 31, 1997, and the fiscal years ended March
31, 1997 and 1996,
. Inprise's Forms 10-Q for the quarters ended March 31, 1999, June 30,
1999, and September 30, 1999,
. unaudited financial results of Inprise for the year ended December 31,
1999,
. discussions with members of the management of each of Corel and Inprise
concerning Corel's and Inprise's current business operations, financial
condition and results and prospects,
. other publicly available information regarding Corel's and Inprise's
operations,
. financial and stock market data of Corel, Inprise and other companies in
the software industry,
. recent public and non-public transactions in the software industry,
. a certificate, dated the date of CIBC World Markets' opinion, from
senior officers of Corel as to the accuracy and completeness of the
information provided to CIBC World Markets relating to Corel and the
merger, and
. other information, financial studies, analyses and investigations and
financial, economic and market criteria that CIBC World Markets deemed
relevant.
In rendering its opinion, CIBC World Markets relied on and assumed, without
independent verification, the accuracy, completeness and fair presentation of
all of the financial and other information obtained by it from public sources
or provided to it by Corel, Inprise or their senior management, agents or
advisors. In that regard, CIBC World Markets assumed, with Corel's consent,
that the financial forecasts, including the synergies expected to be achieved
as a result of the merger, had been reasonably prepared on a basis reflecting
the best currently available judgments and estimates of Corel and Inprise and
that the forecasts will be realized in the amounts and at the times
contemplated.
CIBC World Markets was not requested to, and did not, prepare a formal
valuation of Corel or Inprise within the meaning of applicable Canadian
securities regulatory policy. CIBC World Markets' February 6, 2000 opinion was
necessarily based on information available to, and financial, economic, market
and other conditions as they existed and could be evaluated by CIBC World
Markets, on the date of its opinion. CIBC World Markets did not express an
opinion as to the underlying valuation, future performance or long-term
viability of Corel or Inprise or the prices at which the Corel common shares
may trade at any time in the future. In addition, CIBC World Markets' opinion
does not address the relative merits of the merger as compared to any
alternative business transactions that might be available to Corel.
CIBC World Markets assumed, with Corel's consent, that the merger would be
accounted for as a purchase under Canadian generally accepted accounting
principles and that obtaining any necessary governmental, regulatory or other
consents and approvals necessary for the consummation of the merger or
otherwise would not have a material adverse effect on Corel, Inprise or the
combined company or on the contemplated benefits of the merger. In addition,
CIBC World Markets assumed, for the purposes of its opinion, that the
representations and warranties of each of Corel, Inprise and each of their
subsidiaries and affiliates in the merger agreement were true and accurate in
all material respects.
39
<PAGE>
In preparing its opinion to the Corel board of directors, CIBC World Markets
performed a variety of financial and comparative analyses, including those
described below. The summary of CIBC World Markets' analyses below is not a
complete description of the analyses underlying CIBC World Markets' opinion.
The preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, CIBC World Markets made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, CIBC World Markets believes that its
analyses and factors must be considered as a whole and that selecting portions
of its analyses and factors or focusing on information presented in tabular
format, without considering all analyses and factors or the narrative
description of the analyses, could create a misleading or incomplete view of
the processes underlying its analyses and opinion.
In its analyses and in preparing its opinion, CIBC World Markets made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters as they existed and could be evaluated by
CIBC World Markets as of February 6, 2000, the date of its opinion, many of
which are beyond the control of Corel or Inprise. No company, transaction or
business used in CIBC World Markets' analyses as a comparison is identical to
Corel or Inprise or the proposed merger, and an evaluation of the results of
these analyses is not entirely mathematical. Rather, the analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
analyzed.
The estimates contained in CIBC World Markets' analyses and the ranges of
valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by its
analyses. In addition, analyses relating to the value of businesses or
securities do not necessarily purport to be appraisals or to reflect the prices
at which businesses or securities actually may be sold. Accordingly, CIBC World
Markets' analyses and estimates are inherently subject to substantial
uncertainty.
The type and amount of consideration payable in the merger was determined
through negotiation between Corel and Inprise. Although CIBC World Markets
provided financial advice to Corel during the course of negotiations, the
decision to enter into the merger agreement was solely that of Corel's board of
directors. CIBC World Markets' opinion and financial analyses were only one of
many factors considered by the Corel board of directors in its evaluation of
the proposed merger and should not be viewed as determinative of the views of
Corel's board of directors or management with respect to the merger or the
0.747 exchange ratio provided for in the merger.
Under the terms of CIBC World Markets' engagement, Corel has agreed to pay
CIBC World Markets, upon completion of the merger, an aggregate fee equal to
0.5% of the equity value of Inprise, calculated based on the number of fully
diluted Inprise common shares outstanding multiplied by the Inprise common
share price at closing. The total fees payable to CIBC World Markets will not
be more than $6.0 million or less than $4.0 million. In addition, Corel has
agreed to reimburse CIBC World Markets for its reasonable out-of-pocket
expenses incurred in connection with the services provided by it and to
indemnify and hold harmless CIBC World Markets, its affiliates and their
respective directors, officers, employees and agents, to the extent lawful,
against any and all losses, claims, liabilities or expenses of any kind,
including liabilities under the securities laws of Canada and the United
States, arising out of its engagement.
Financial Analyses
The following is a summary of the material financial analyses presented by
CIBC World Markets to the Corel board of directors in connection with its
opinion dated February 6, 2000. The financial analyses summarized below include
information presented in tabular format. In order to fully understand the
financial analyses of CIBC World Markets, the tables must be read together with
the text of each
40
<PAGE>
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by CIBC World
Markets.
Relative Equity Value Analysis
CIBC World Markets analyzed the implied equity interest of Corel in the pro
forma combined company based on a "Selected Precedent Transactions Analysis,"
"Market Capitalization Analysis," "Contribution Analysis" and "Discounted Cash
Flow Analysis," each as more fully described below. CIBC World Markets then
compared the implied mean equity interest for Corel resulting from those
analyses against the equity ownership of Corel's shareholders in the pro forma
combined company upon completion of the merger based on the exchange ratio
provided for in the merger. The aggregate results of those analyses indicated
the following mean equity interest and adjusted mean equity interest,
calculated as the mean equity interest excluding high and low statistics, for
Corel in the pro forma combined company, as compared to the pro forma equity
ownership of Corel's shareholders in the combined company upon completion of
the merger based on the exchange ratio provided for in the merger:
<TABLE>
<CAPTION>
Corel implied Corel implied
equity interest equity ownership
in combined company in combined company
------------------- -------------------
<S> <C> <C>
Mean............................. 54.6% to 56.4% 56%
Adjusted mean.................... 56.4% to 58.2% 56%
</TABLE>
Selected Precedent Transactions
Based on publicly available information, CIBC World Markets analyzed, among
other things, the consideration paid or proposed to be paid in 19 selected
merger and acquisition transactions in the software industry as a multiple of
12 months sales. CIBC World Markets then applied a range of selected multiples
of latest 12 months sales derived from the selected transactions to
corresponding financial data of Corel and Inprise. This analysis indicated an
implied equity interest for Corel in the pro forma combined company of
approximately 58%. CIBC World Markets also reviewed the average multiples of
latest 12 months sales of the selected transactions and the average premiums,
excluding outliers, payable in the selected transactions, as well as a range of
premiums payable in selected mergers of equals transactions in the selected
tool, middleware and database software industries, based on the closing stock
prices of the acquired companies one day and one week prior to public
announcement of the transaction. This analysis indicated the following results:
<TABLE>
<CAPTION>
Selected graphics, productivity
Selected tool, middleware and and consumer products
database software transactions software transactions
------------------------------ -------------------------------
<S> <C> <C>
Average multiples of
latest 12 months
sales.................. 7.4x 6.3x
Average premiums:
One day............... 38% 37%
Four weeks............ 49% 84%
Range of premiums in
selected
mergers of equals
transactions:
One day............... 19% - 56% n/a
Four weeks............ 18% - 52% n/a
</TABLE>
Market Capitalization Analysis
CIBC World Markets reviewed the relative stock market price performance of
Corel common shares and Inprise common stock over the one, 10, 20, 30, 60 and
90 day trading periods, and the six month and one year calendar periods, ended
February 4, 2000. This analysis indicated an implied equity interest for Corel
in the pro forma combined company of approximately 57.7% to 61.8%.
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<PAGE>
Contribution Analysis
CIBC World Markets analyzed the relative contributions of Corel and Inprise
to the calendar years 1999 and estimated calendar year 2000 sales and gross
profits of the combined company based on publicly available research analysts'
estimates, a review of industry and company research, and discussions with
Corel's and Inprise's managements. The relative contributions were then
adjusted to reflect Corel's and Inprise's cash balances and Corel's investments
in non-core assets. This analysis indicated an implied equity interest for
Corel in the pro forma combined company of approximately 55.0% to 57.4% based
on the following approximate relative contributions for Corel and Inprise:
<TABLE>
<CAPTION>
Corel Inprise
----- -------
<S> <C> <C>
Sales
1999........................................................... 55.1% 44.9%
2000 estimated................................................. 57.2% 42.8%
Gross Profit
1999........................................................... 55.0% 45.0%
2000 estimated................................................. 57.4% 42.6%
</TABLE>
Discounted Cash Flow Analysis
CIBC World Markets performed a discounted cash flow analysis for both Corel
and Inprise on a stand-alone basis using underlying operating projections based
on actual historical results, a review of industry and company research, and
discussions with Corel's and Inprise's managements. Using a range of discount
rates, CIBC World Markets calculated the estimated net present value of free
unlevered cash flows for calendar years 2000 through 2004 and the estimated
free cash flows at the end of calendar year 2004 assuming a range of perpetual
growth rates. CIBC World Markets then added Corel's and Inprise's cash and
subtracted each company's debt to arrive at present value estimates
attributable to the common equity for each company. In addition, CIBC World
Markets conducted a sensitivity analysis assuming a range of growth rates for
the new Linux initiatives of each of Corel and Inprise. This analysis resulted
in an implied equity interest for Corel in the pro forma combined company of
approximately 43.5% to 60.1%.
Selected Companies Analysis
CIBC World Markets compared financial and operating information of Corel and
Inprise with corresponding information for the following selected companies in
the software industry:
Corel Selected Companies: Inprise Selected Companies:
Graphics Software: Development Tools:
. Adobe Systems, Incorporated . Brio Technology, Inc.
. Micromedia Solutions Inc. . Magic Software Enterprises Ltd
. Micrografx, Inc. . Mercury Interactive Corporation
. Progress Software Corporation
Productivity Software: . Rational Software Corporation
. Microsoft Corporation
. Novell, Inc. Middleware:
. Sun Microsystems, Inc. . BEA Systems, Inc.
. Symantec Corporation . Computer Associates
International, Inc.
Consumer Products Software: . IONA Technologies
. Getty Images, Inc. . New Era of Networks, Inc.
. MetaCreations Corporation
Database Software:
. Informix Corporation
. Oracle Corporation
. Pervasive Software, Inc.
. Sybase, Inc.
42
<PAGE>
CIBC World Markets compared enterprise values, calculated as equity market
value, plus debt, less cash, and equity values of Corel, Inprise and the
selected companies as multiples of latest 12 months and estimated calendar
years 2000 and 2001 sales and earnings, as reflected in the table below.
Historically based multiples were computed from publicly available information
disclosed in year-end and quarterly reports of Corel, Inprise and the selected
companies. Projected earnings multiples were based on mean per share earnings
estimates of Institutional Brokers Estimate Services for Corel, Inprise and the
selected companies. Multiples for Corel and Inprise were based on the Nasdaq
per share closing prices of Corel common shares and Inprise common stock on
February 4, 2000, the last trading day prior to execution of the merger
agreement, of $20.00 and $12.94 per share, respectively. Financial statistics
that were negative, not meaningful or not available have been reflected as
"neg", "nmf" or "na", as the case may be.
<TABLE>
<CAPTION>
Median of Median of Median of
Corel's development Median of database
selected tools middleware software
Operational Measure Corel Inprise companies companies companies companies
------------------- ------ ------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Enterprise value /
latest 12 months
sales.................. 5.4x 3.5x 8.3x 10.9x 12.1x 2.8x
Enterprise value / 2000
estimated sales........ 5.5x na 7.5x 8.8x 8.6x 2.7x
Enterprise value / 2001
estimated sales........ na na 6.3x 6.6x 5.1x 2.4x
Equity value / latest 12
months earnings........ 110.3x neg 61.9x 77.4x nmf 42.5x
Equity value / 2000
estimated earnings..... 42.6x 258.8x 49.1x 59.6x 156.2x 31.0x
Equity value / 2001
estimated earnings..... na 18.5x 55.3x 45.8x 68.1x 59.7x
</TABLE>
Historical Exchange Ratio Analysis
CIBC World Markets compared the daily closing share prices for Corel common
shares and Inprise common stock over the period from January 1, 1999 to
February 4, 2000. The average implied exchange ratio during this period was
0.968, as compared to the exchange ratio provided for in the merger of 0.747.
Pro Forma Merger Analysis
CIBC World Markets analyzed the potential pro forma financial impact of the
merger on the estimated cash earnings per share of Corel in calendar year 2000
based on publicly available research analysts' estimates, a review of industry
and company research, and discussions with Corel's and Inprise's managements,
after taking into account potential synergies anticipated by the managements of
Corel and Inprise to result from the merger. This analysis indicated that the
merger could be neutral to Corel's estimated cash earnings per share in
calendar year 2000. The actual results achieved by the combined company may
vary from projected results and the variations may be material.
Interests of Inprise Officers and Directors in the Merger
In considering the recommendation of Inprise's board with respect to the
merger agreement, stockholders should be aware that various officers and
directors of Inprise may have interests in the merger that are in addition to,
or different from, their interests as stockholders generally. The Inprise board
was aware of these interests and considered them along with other matters in
recommending that you support the merger agreement.
Representation on the Corel Board Following the Merger
When the merger becomes effective, the Corel board will be comprised of six
members. The initial Corel board is expected to include Michael C.J. Cowpland,
three individuals who currently serve as a directors of Corel, Dale Fuller and
an individual selected by Inprise and agreed to by Corel. Unless agreed to by
Mr. Fuller
43
<PAGE>
and the other Inprise designee, the Corel board will not have more than six
members prior to the election of directors at Corel's 2003 annual meeting of
shareholders. Mr. Fuller will be chairman of the board of Corel until Corel's
2003 annual meeting of shareholders, or such other time as may be agreed to by
Mr. Fuller and the Corel board. Dr. Cowpland will continue as president and
chief executive officer of Corel. Corel has agreed to nominate, recommend and
support for re-election Mr. Fuller and the other Inprise designee at Corel's
2001 and 2002 annual meetings of shareholders.
Change in Control Agreements
Dale Fuller, JoAnne M. Butler and Hobart McK. Birmingham are each a party to
a change in control agreement with Inprise. Mr. Fuller and Ms. Butler entered
into their respective change in control agreements when they became executive
officers. Mr. Birmingham entered into his change in control agreement shortly
after the Inprise Board approved the form of the agreement in April 1998. Mr.
Birmingham's agreement was subsequently amended in certain respects by his
resignation agreement. See "Employment and Other Agreements" for a description
of Mr. Birmingham's resignation agreement. Mr. Fuller's agreement and Ms.
Butler's agreement provide severance benefits in the event Mr. Fuller or Ms.
Butler, as the case may be, are "involuntarily terminated" within one year
following a change in control of Inprise. An involuntary termination of
employment includes a termination of an executive officer's employment by
Inprise without cause or a constructive termination of an executive officer's
employment. The merger with Corel will constitute a change in control of
Inprise.
Upon a qualifying involuntary termination of employment after the merger,
the change in control agreements, other than Mr. Birmingham's agreement,
provide that an executive officer will be entitled to receive severance pay
from Inprise in a lump sum amount equal to the executive officer's annual base
salary in effect at the time of the termination. In addition, other than in
respect of Mr. Birmingham, Inprise must continue an executive officer's
existing health insurance coverage, or reimburse an executive officer for COBRA
premiums paid by the executive officer if health coverage continuation is not
permitted by law. The health coverage benefit will continue until the earlier
of (i) the expiration of twelve months from the date of the termination of the
executive officer's employment or (ii) the date on which the executive officer
commences new employment. The change in control agreements provide that, during
the two year period following a qualifying involuntary termination of
employment, Inprise shall retain a terminated executive officer as a consultant
to provide services to Inprise at Inprise's request for up to eight hours per
week. For actually providing services, an executive officer will be entitled to
a payment of $1,000 per day and reimbursement for reasonable out-of-pocket
expenses.
Each change in control agreement further provides that if any payment or
benefit to be received by an executive officer pursuant to the agreement or
otherwise would result in an "excess parachute payment," such payment or
benefit shall be reduced if the executive officer's after tax position is
improved by the reduction. In general, Section 4999 of the U.S. Internal
Revenue Code imposes an excise tax on the recipient of any excess parachute
payment equal to 20% of such payment. However, the U.S. Internal Revenue Code
provides a "safe harbor" from the excise tax if an employee does not receive
parachute payments with a value in excess of 2.99 times the employee's base
amount. An employee's base amount is the average taxable compensation received
by the employee from his employer over the five taxable years preceding the
year in which the change in control occurs. A parachute payment is any payment
or benefit which is contingent on a change in control.
44
<PAGE>
Each change in control agreement also provides that unvested stock options
to purchase shares of Inprise stock held by an executive officer will vest and
become exercisable upon a change in control of Inprise (e.g., upon the
consummation of the merger with Corel). Information on these options and
options granted to non-employee directors (as a group) is set forth in the
following table.
<TABLE>
<CAPTION>
Aggregate value of
options on
Inprise executive Options which February 4, 2000(2)
officers and non- become exercisable Weighted average (i.e., stock value
employee directors as a upon the closing exercise price less exercise
group of the merger (1) per share price)
----------------------- ------------------ ---------------- -------------------
<S> <C> <C> <C>
Dale Fuller (3)......... -- -- --
Hobart McK. Birmingham.. 51,018 $6.4274 $ 332,522
JoAnne M. Butler........ 131,249 $4.2377 $1,141,842
Frederick A. Ball....... 406,249 $4.0313 $3,618,135
John Walshe (4)......... -- -- --
Non-employee directors
as a group
(3 persons) (5)........ -- -- --
</TABLE>
--------
(1) Assumes a merger consummation date of July 1, 2000.
(2) February 4, 2000 was the last trading day prior to the signing of the
merger agreement.
(3)All of Mr. Fuller's options are fully vested.
(4) Neither Mr. Walshe nor 54th Street Partners, LLC has been granted
options.
(5) Options granted to non-employee directors will neither vest nor become
exercisable upon the merger.
Employment and Other Agreements
Dale Fuller. Inprise is a party to an employment agreement with Dale Fuller,
dated April 9, 1999, pursuant to which Mr. Fuller serves as Interim President
and Chief Executive Officer of Inprise. The employment agreement was for a six
month term which expired on October 9, 1999. For his services during the term,
Mr. Fuller was paid the sum of one dollar and was entitled to benefits
generally provided to other Inprise executives. Pursuant to the employment
agreement, Mr. Fuller was also granted an option to purchase 1,000,000 shares
of Inprise common stock at an exercise price of $3.625 per share under the
Inprise Corporation Dale Fuller Individual Stock Option Plan. The option vested
ratably on a monthly basis over the six-month term of the agreement and is now
fully vested. The option is exercisable for a period of twenty-four months
following a termination of Mr. Fuller's employment.
The employment agreement also provides for Mr. Fuller to be paid a "gross-
up" payment if any benefit or payment to be received by Mr. Fuller under the
employment agreement is subject to the excise tax imposed under Section 4999 of
the U.S. Internal Revenue Code. The gross-up payment will offset fully the
effect of any excise tax imposed on any "excess parachute payment" Mr. Fuller
may receive. In general, Section 4999 of the Code imposes an excise tax on the
recipient of any excess parachute payment equal to 20% of such payment.
However, the Code provides a "safe harbor" from the excise tax if an employee
does not receive parachute payments with a value in excess of 2.99 times the
employee's base amount. An employee's base amount is the average taxable
compensation received by the employee from his employer over the five taxable
years preceding the year in which the change in control occurs. A parachute
payment is any payment or benefit which is contingent on a change in control. A
gross-up payment will be payable to Mr. Fuller if he receives parachute
payments with a value in excess of his safe harbor.
The term of Mr. Fuller's employment agreement expired on October 9, 1999.
Subsequent to such expiration date, Inprise and Mr. Fuller entered into an
agreement which extended the term of Mr. Fuller's employment agreement and
provided for certain payments to him upon engagement by Inprise of a successor
Chief Executive Officer or in the event of a change in control of Inprise.
Thereafter, at Mr. Fuller's request, such extension agreement was terminated,
and is no longer of any force or effect. Mr. Fuller has not received, and will
not receive, any payments thereunder.
45
<PAGE>
Hobart McK. Birmingham. Inprise is a party to resignation agreement with
Hobart McK. Birmingham, which was effective as of March 17, 2000. Pursuant to
this agreement, Mr. Birmingham resigned as an executive officer and will resign
from his employment with Inprise effective upon consummation of the merger. If
the merger is terminated, his employment will terminate, but not prior to June
30, 2000. In no event will his employment continue beyond March 17, 2001.
During the period from March 17, 2000 until June 30, 2000, or until the date
he resigns from employment, if such resignation occurs prior to June 30, 2000,
Mr. Birmingham will be paid the sum of $50,000 and will continue to be provided
with fringe benefits and the use of an office. After March 17, 2000, Mr.
Birmingham will have no specific duties or responsibilities at Inprise, except
as mutually agreed to with Inprise. If Mr. Birmingham provides any services to
Inprise after March 17, 2000, other than services related to the sale of
Inprise's corporate headquarters or to the transition of his duties and
responsibilities to other Inprise employees, he will be paid $1,000 per day
plus reimbursement for reasonable out-of-pocket expenses.
In lieu of any severance pay or benefits that he would otherwise be entitled
to, on March 17, 2000, Mr. Birmingham received a lump sum severance payment in
the amount of $332,000. Notwithstanding the foregoing, Mr. Birmingham will be
entitled to continued vesting of his Inprise stock options during the period,
if any such period occurs, between June 30, 2000 and the date on which he
resigns, and if the consummation of the merger with Corel occurs on or before
March 17, 2001, any unvested Inprise stock options that Mr. Birmingham holds
will become vested and exercisable pursuant to Mr. Birmingham's change in
control agreement. Mr. Birmingham will continue to be bound by the provisions
of any proprietary rights or confidentiality agreements with Inprise and has
executed a general release of claims in favor of Inprise and has received a
similar release from Inprise.
JoAnne M. Butler. Inprise is a party to an employment agreement with JoAnne
M. Butler, dated July 29, 1999, pursuant to which Ms. Butler serves as Vice
President and General Counsel of Inprise at a salary of $190,000 per year. The
employment agreement provides that Ms. Butler is eligible for an annual bonus
based on an annual target bonus of $76,000. Pursuant to the employment
agreement, Ms. Butler was granted an option to purchase 176,500 shares of
Inprise common stock at an exercise price of $4.125 per share under Inprise's
1997 Stock Option Plan. The agreement provides that all of the options granted
to Ms. Butler under the agreement, to the extent not already vested and
exercisable, shall become vested and exercisable upon a change in control
(e.g., upon the consummation of the merger with Corel). The employment
agreement also entitles Ms. Butler to a severance payment in an amount equal to
twelve months of her base salary if her employment is terminated by Inprise
without cause or upon a constructive termination of her employment.
Frederick A. Ball. Inprise is a party to an employment agreement with
Frederick A. Ball, dated September 16, 1999, pursuant to which Mr. Ball serves
as the Vice President and Chief Financial Officer of Inprise at a salary of
$300,000 per year. The employment agreement provides that Mr. Ball is eligible
for an annual bonus of $100,000. Pursuant to the employment agreement, Mr. Ball
was granted an option to purchase 500,000 shares of Inprise common stock at an
exercise price of $4.0313 per share under Inprise's 1997 Stock Option Plan. The
agreement provides that all of the options granted to Mr. Ball under the
agreement, to the extent not already vested and exercisable, shall become
vested and exercisable upon a change in control (e.g., upon the consummation of
the merger with Corel). The employment agreement also entitles Mr. Ball to a
severance payment in an amount equal to twelve months of his base salary if his
employment is terminated by Inprise without cause or upon a constructive
termination of his employment.
John Walshe. Inprise is a party to a consulting agreement with 54th Street
Partners, LLC, pursuant to which Mr. Walshe provided his services to Inprise.
Mr. Walshe is a partner in 54th Street Partners. The consulting agreement also
provides for 54th Street Partners to provide the services of five other
individuals in respect of sales, customer service, professional services, human
resources and technical support. In return for providing Mr. Walshe's services,
54th Street Partners was entitled to a monthly fee of $50,000. 54th Street
Partners is entitled to receive an aggregate monthly fee of $119,000 in respect
of the services rendered by the
46
<PAGE>
individuals who currently provide services under the consulting agreement. 54th
Street Partners is also entitled to a performance bonus that is dependent on
the price of Inprise common stock. The maximum performance bonus may not exceed
$500,000. The consulting agreement provides customary indemnity provisions for
both 54th Street Partners and the individuals placed with Inprise. Mr. Walshe's
service under the consulting agreement expired on March 31, 2000.
Indemnification of Officers and Directors
Corel has agreed in the merger agreement that, after consummation and until
the sixth anniversary of the merger, it will indemnify Inprise's directors and
officers against losses incurred in connection with any action that arises out
of actions or omissions occurring at or before consummation of the merger and
all losses arising out of the merger, in each case to the full extent permitted
under applicable law.
Except to the extent required by law, until the sixth anniversary of the
consummation of the merger, Corel has agreed not to take any action so as to
amend, modify or repeal the provisions for indemnification and limitation of
liability of Inprise's directors or officers contained in Inprise's certificate
of incorporation or by-laws (which at the effective time of the merger will be
no less favorable to such individuals than those maintained by Inprise on
February 6, 2000, the date of the merger agreement) in such a manner as would
adversely affect the rights of any individual who has served as a director or
officer of Inprise prior to the consummation of the merger to be indemnified or
limited in their liability in respect of their serving in such capacities prior
to the consummation of the merger. Corel has also agreed to honor the
indemnification agreements between Inprise and any officer or director of
Inprise.
Directors' and Officers' Insurance
Corel is required by the merger agreement to maintain for at least six years
directors' and officers' liability insurance for the benefit of Inprise's
directors and officers similar to the directors' and officers' liability
insurance currently provided by Inprise. The insurance policy must be no less
favorable than the Inprise policy in effect on February 6, 2000. However, Corel
will be obligated to pay only up to 200% of the annual premium paid by Inprise
for such insurance in 1999.
Accounting Treatment of the Merger
Canadian and United States generally accepted accounting principles require
that Corel use the purchase method of accounting to account for the merger. The
total purchase price will be allocated to the assets acquired and liabilities
assumed, based on their respective fair values. To the extent that this
purchase price exceeds the fair value of the net tangible assets acquired at
the effective time of the merger, Corel will allocate the excess purchase
price, based on independent expert valuation, to intangible assets which will
include purchased in-process research and development and acquired technology,
with the remainder to goodwill.
Material Tax Consequences
United States Federal Income Tax Consequences
The following is a summary of the material anticipated U.S. federal income
tax consequences to U.S. persons of their exchange of Inprise common stock for
Corel common shares in the merger and their ownership of Corel common shares.
The discussion which follows is based on the U.S. Internal Revenue Code,
applicable Treasury regulations, administrative rulings and pronouncements and
judicial decisions as of the date of this summary, all of which could change.
Any change, which may be retroactive, could affect the tax consequences
discussed herein. This discussion is also based on representations made by
Corel, Inprise, and others, that are consistent with the state of facts
expected to exist at the effective time of the merger. However, if any of these
representations is inaccurate, the tax consequences of the merger and the
ownership of Corel common shares could differ from those described herein.
This discussion does not address all aspects of U.S. federal income taxation
that may be relevant to U.S. persons in light of their particular circumstances
and, except where specifically noted, does not address the effects of any
state, local or non-United States tax laws. In addition, the discussion below
relates to
47
<PAGE>
U.S. persons, as described below under "U.S. Persons", who hold Inprise common
stock and will hold Corel common shares as capital assets. These persons will
be referred to as U.S. stockholders. The U.S. federal income tax treatment of
an Inprise stockholder may vary depending upon the shareholder's particular
situation, and some stockholders may be subject to special rules not discussed
below. These stockholders include, for example
. insurance companies,
. tax-exempt organizations,
. financial institutions,
. broker-dealers or traders in securities,
. stockholders whose functional currency is not the U.S. dollar,
. stockholders who hold Inprise common stock or Corel common shares as a
hedge against currency risks or as part of a straddle, synthetic
security, conversion transaction or other integrated investment
consisting of Inprise or Corel common shares and one or more other
investments,
. stockholders who are foreign persons or U.S. expatriates, and
. individuals who received Inprise common stock pursuant to the exercise
of employee stock options or otherwise as compensation.
In addition, the following discussion, including the legal opinions
discussed below, does not address the U.S. federal income tax consequences to
any Inprise stockholder who will own 5 percent or more of either the total
voting power or the total value of the outstanding Corel common shares after
the merger, determined after taking into account ownership under the applicable
attribution rules of the U.S. Internal Revenue Code and Treasury regulations.
These persons will be referred to as 5 percent transferee shareholders.
EACH INPRISE STOCKHOLDER IS STRONGLY ADVISED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND THE
OWNERSHIP OF COREL COMMON SHARES, INCLUDING THE PARTICULAR FACTS AND
CIRCUMSTANCES THAT MAY BE UNIQUE TO SUCH STOCKHOLDER, AND AS TO ANY ESTATE,
GIFT, STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES THEREOF.
U. S. Persons
As stated above, this summary is limited to U.S. persons who hold Inprise
common stock as a capital asset. Generally, a U.S. person is
. an individual that is a citizen or resident of the U.S.,
. a corporation, partnership or other entity, other than a trust, created
or organized in or under the laws of the United States or any political
subdivision thereof,
. an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
. a trust if, in general, a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.
EACH INPRISE STOCKHOLDER WHO IS NOT A U.S. PERSON IS STRONGLY ADVISED TO
CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE U.S. FEDERAL, STATE, LOCAL AND
NON-U.S. TAX CONSEQUENCES OF THE MERGER AND THE OWNERSHIP OF COREL COMMON
SHARES.
Consequences of the Merger
The obligations of Corel and Inprise to complete the merger are conditioned
on the receipt of opinions from their respective U.S. counsel, Milbank, Tweed,
Hadley & McCloy LLP for Corel and Skadden, Arps, Slate, Meagher & Flom LLP for
Inprise. These opinions, which will be dated as of the closing date of the
48
<PAGE>
merger and will be based on facts, representations and assumptions set forth or
referred to therein which are consistent with the state of facts existing at
that time, will be substantially to the effect that for U.S. federal income tax
purposes:
. the merger will be treated as a reorganization within the meaning of
section 368(a) of the Internal Revenue Code, and
. in the case of the opinion to be received by Inprise, provided that
Inprise complies with reporting requirements contained in the applicable
regulations of the U.S. Treasury Department, no gain or loss will be
recognized by a U.S. stockholder of Inprise who exchanges Inprise common
stock for Corel common shares pursuant to the merger, except with
respect to any cash received in lieu of a fractional interest in Corel
common shares.
Based on the above opinions to be delivered at the effective time of the
merger, the following U.S. federal income tax consequences should result:
. Gain or loss. None of Corel, Inprise or Carleton Acquisition will
recognize any gain or loss as a result of the merger. Provided that
Inprise complies with reporting requirements contained in the applicable
U.S. Treasury regulations, no gain or loss will be recognized by a U.S.
stockholder of Inprise who exchanges Inprise common stock for Corel
common shares pursuant to the merger, except with respect to any cash
received in lieu of a fractional interest in Corel common shares.
. Tax basis. The aggregate tax basis of the Corel common shares received
by an Inprise U.S. stockholder in exchange for Inprise common stock
pursuant to the merger, including any fractional interest in Corel
common shares for which cash is received, will equal such shareholder's
tax basis in the Inprise common stock surrendered in exchange therefor.
. Holding period. The holding period of the Corel common shares received
by an Inprise U.S. stockholder pursuant to the merger will include the
holding period of the Inprise common stock surrendered in exchange
therefor.
. Fractional shares. An Inprise U.S. stockholder who receives cash in
payment for a fractional interest in Corel common shares pursuant to the
merger will be treated as having actually received the fractional
interest and then exchanging it for cash, and, consequently, will
generally recognize capital gain or loss on the deemed exchange in an
amount equal to the difference between the amount of cash received and
the tax basis of the Inprise stock allocable to that fractional
interest.
THE TAX CONSEQUENCES DESCRIBED ABOVE DO NOT APPLY TO A 5 PERCENT TRANSFEREE
STOCKHOLDER. EACH 5 PERCENT TRANSFEREE STOCKHOLDER IS STRONGLY ADVISED TO
CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, INCLUDING ENTERING INTO A GAIN RECOGNITION
AGREEMENT IN ACCORDANCE WITH APPLICABLE TREASURY REGULATIONS.
Ownership of Corel Common Shares
Distributions. The amount of any distribution made to a U.S. shareholder on
or with respect to Corel common shares, without subtraction for foreign taxes
(including Canadian taxes) withheld from the amounts received, will be treated
as a dividend and be taxable as ordinary income to the extent that the
distribution is made out of Corel's current or accumulated earnings and profits
as determined for U.S. federal income tax purposes. To the extent that the
amount of any distribution exceeds Corel's accumulated earnings and profits for
a taxable year, the excess will be treated as a tax-free return of capital
which reduces a U.S. shareholder's tax basis in the Corel common shares to the
extent of the tax basis, and thereafter as capital gain from the sale or
exchange of property. Corel U.S. shareholders that are corporations generally
will not be entitled to claim a dividends received deduction with respect to
distributions by Corel because Corel is a foreign corporation. Distributions
paid in Canadian dollars will be taken into account by a U.S. shareholder at a
U.S. dollar amount calculated by reference to the exchange rate on the date the
distributions are received or treated as received, including the amount of any
Canadian withholding tax thereon, whether or not the distributions are
converted
49
<PAGE>
into U.S. dollars. If a U.S. shareholder does not convert the Canadian dollars
received as a distribution into U.S. dollars on such date, the shareholder will
have a basis in the Canadian dollars equal to their U.S. dollar value on the
date of receipt. Any gain or loss realized on a subsequent disposition of the
Canadian dollars should generally be treated as ordinary income or loss.
A Corel U.S. shareholder will have the option of claiming any amount of
Canadian tax withheld at the source on the distribution of dividends on the
Corel common shares as either a deduction from adjusted gross income or,
subject to specific complex limitations on foreign tax credits generally, as a
dollar-for-dollar credit against the shareholder's U.S. federal income tax
liability. For a discussion of the Canadian taxes that may be withheld from
dividends paid by Corel to U.S. shareholders see "Canadian Federal Income Tax
Consequences" below. EACH INPRISE STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE AVAILABILITY OF, AND THE LIMITATION ON, THE U.S. FOREIGN
TAX CREDIT.
Disposition. Gain or loss realized by a Corel U.S. shareholder on the sale,
exchange or other taxable disposition of Corel common shares will be subject to
U.S. federal income taxation as capital gain or loss in an amount equal to the
difference between the amount realized on that sale, exchange or other
disposition and the U.S. shareholder's adjusted tax basis in the Corel common
shares surrendered. The gain or loss will be long term capital gain or loss if
the U.S. shareholder's holding period for its Corel common shares is more than
one year. Any gain or loss realized generally will be U.S. source.
Special Provisions Applicable to Foreign Corporations.
The United States has a special tax regime whereunder a U.S. shareholder of
a passive foreign investment company, or PFIC, may be disadvantageously
treated. The PFIC regime applies to any U.S. shareholder, without regard to the
magnitude of its interest, that owns shares of a PFIC. A PFIC is defined to be
any foreign corporation if 75% or more of its gross income is "passive income"
or the average percentage of its assets, by value, that produce passive income
or that are held for the production of passive income is at least 50%. Under
the applicable U.S. federal income tax law, the receipts from the licensing of
software may be treated as royalty income. While royalty income may be passive
income under the relevant provision of the U.S. federal tax law, royalty income
earned by a corporation that actively developed and marketed the property
generating the royalty is not passive income so long as the corporation engages
in the business of developing and/or marketing such property. Corel believes
that it is not a PFIC and, does not expect to become a PFIC after the merger.
ACCORDINGLY, THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE POTENTIAL
APPLICATION OF THE PFIC PROVISIONS. EACH INPRISE U.S. STOCKHOLDER SHOULD
CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE POTENTIAL APPLICATION OF THE PFIC
PROVISIONS TO COREL NOW OR IN THE FUTURE.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to dividends in
respect of the Corel common shares or the proceeds received on the sale,
exchange, or redemption of the Corel common shares paid within the United
States, and in some cases, outside of the United States, to shareholders other
than certain exempt recipients, such as corporations, and a 31% backup
withholding may apply to the amounts if the stockholder fails to provide an
accurate taxpayer identification number or to report dividends required to be
shown on its U.S. federal income tax returns. The amount of any backup
withholding from a payment to a stockholder will be allowable as a refund or
credit against the shareholder's U.S. federal income tax liability.
Canadian Federal Income Tax Consequences
The following is a discussion of the material Canadian federal income tax
consequences to holders of Inprise common stock who acquire Corel common shares
as a result of the merger.
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This discussion applies only to a holder of Inprise common stock who, for
the purposes of the Income Tax Act (Canada), at all relevant times, deals at
arm's length with Inprise and Corel, holds Inprise common stock and Corel
common shares acquired as a result of the merger as capital property, is not
affiliated with Inprise or Corel, and does not use or hold and is not deemed to
use or hold Inprise common stock or Corel common shares in connection with the
carrying on of a business in Canada.
Inprise common stock and Corel common shares will generally be considered to
be capital property to a holder for purposes of the Income Tax Act (Canada)
unless the holder holds such shares in the course of carrying on a business of
trading or dealing in securities or otherwise as part of a business of buying
and selling securities or the holder acquired such shares as part of a
transaction considered to be an adventure or concern in the nature of trade.
This summary is not applicable to a holder which is a "financial
institution" as defined in the Income Tax Act (Canada) for purposes of the
mark-to-market rules.
This discussion is based on the current provisions of the Income Tax Act
(Canada) and the regulations thereunder in force as of the date hereof, all
specific proposals to amend the Income Tax Act (Canada) and the regulations
publicly announced by the Minister of Finance (Canada) prior to the date hereof
and the current published administrative practices of the Canada Customs and
Revenue Agency. This discussion is not exhaustive of all possible Canadian
federal income tax consequences and, except for the publicly announced
proposals, does not take into account or anticipate any changes in law, whether
by legislative, governmental or judicial action, nor does it take into account
provincial, territorial or foreign tax consequences which may differ
significantly from those discussed herein.
Holders of Inprise common stock should consult with their own tax advisors
for advice relating to the tax consequences to them having regard to their own
particular circumstances.
U.S. Resident Holders.
The following portion of this summary of Canadian federal income tax
consequences is applicable to a holder of Inprise common stock who acquires
Corel common shares pursuant to the merger, who is not a resident of Canada for
purposes of the Income Tax Act (Canada), and who is a resident of the United
States, for purposes of the Canada-United States Income Tax Convention,
referred to as a "U.S. holder".
This summary does not apply to a U.S. holder which is an organization exempt
from tax in the United States and described in Article XXI of the income tax
convention or a U.S. holder which is a non-resident insurer carrying on an
insurance business in Canada and elsewhere.
Dividends on Corel Common Shares. Subject to the provisions of the income
tax convention, Canadian withholding tax at a rate of 25% will be payable on
dividends paid or credited, or deemed to be paid or credited, by Corel to a
U.S. holder on Corel common shares. Under the income tax convention, the
withholding tax rate is generally reduced to 15% or, if the U.S. holder is a
corporation that owns 10% or more of Corel voting stock, to 5%.
Disposition of Corel Common Shares. Upon a disposition or deemed disposition
by a U.S. holder of Corel common shares, a capital gain or capital loss will
generally be realized by the U.S. holder to the extent that the proceeds of
disposition, less reasonable costs of disposition, exceed, or are exceeded by,
the adjusted cost base of the Corel common shares to such U.S. holder. A deemed
disposition of Corel common shares will arise on the death of a U.S. holder.
Subject to the provisions of the income tax convention, capital gains
realized by a U.S. holder on a disposition or deemed disposition of Corel
common shares will not be subject to tax under the Income Tax Act (Canada)
unless the Corel common shares constitute "taxable Canadian property", as
defined in the Income Tax Act (Canada), to such U.S. holder at the time of the
disposition or deemed disposition, in which case the
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capital gains will be subject to tax under the Canadian Tax Act at rates which
will approximate those payable by a Canadian resident. Please see discussion
below for further details. Corel common shares generally will not be taxable
Canadian property to a U.S. holder at the time of a disposition or deemed
disposition of such shares unless, at that time, the shares are not listed on a
prescribed stock exchange, which includes the Nasdaq and The Toronto Stock
Exchange, or, at any time during the 60 month period immediately preceding such
time, the U.S. holder, persons with whom the U.S. holder did not deal at arm's
length or the U.S. holder together with such persons, owned or had an interest
in or a right to acquire 25% of more of the issued shares of any class or
series of shares of capital stock of Corel.
Further, under the income tax convention, a U.S. holder will not be subject
to tax under the Income Tax Act (Canada) on a disposition or deemed disposition
of Corel common shares, even if the shares constitute taxable Canadian property
to such U.S. holder at the time of the disposition or deemed disposition,
unless, at the time of the disposition or deemed disposition, the value of the
Corel common shares is derived principally from real property situated in
Canada. Corel believes that the Corel common shares do not now derive their
value principally from real property situated in Canada. However, the
determination must be made at the time of the disposition or deemed
disposition.
Canadian Resident Holders.
The following portion of this summary of Canadian federal income tax
consequences is applicable to a holder of Inprise common stock who acquires
Corel common shares pursuant to the merger and who, for purposes of the Income
Tax Act (Canada), is resident in Canada. These persons will be referred to as
"Canadian holders."
Disposition of Inprise Common Stock. A Canadian holder of Inprise common
stock who acquires Corel common shares pursuant to the merger will realize a
capital gain, or capital loss, equal to the amount by which the fair market
value of the Corel common shares received on the merger plus the amount of any
cash received instead of a fractional interest in a Corel common share, net of
any reasonable costs of disposition, exceeds, or is less than, the adjusted
cost base of the Inprise common stock to the Canadian holder immediately before
the disposition.
A Canadian holder generally will be required to include in his or her income
two-thirds of the amount of any capital gain, a "taxable capital gain,"
resulting from the disposition of Inprise common stock and generally will be
entitled to deduct two-thirds of the amount of any capital loss, an "allowable
capital loss", resulting from the disposition of Inprise common stock against
taxable capital gains realized by the Canadian holder in the year of
disposition. Allowable capital losses in excess of taxable capital gains for a
taxation year, generally may be carried back and deducted in any of the three
preceding years or carried forward and deducted in any following year against
taxable capital gains realized in such years to the extent and under the
circumstances permitted in the Income Tax Act (Canada). Where a Canadian holder
is an individual, a capital gain may give rise to alternative minimum tax under
the Income Tax Act (Canada).
Canadian-controlled private corporations are subject to an additional
refundable tax of 6 2/3% of investment income, which includes taxable capital
gains.
Disposition of Corel Common Shares. The disposition of Corel common shares
acquired pursuant to the merger will be taxed in the same manner as described
immediately above in "Disposition of Inprise Common Stock." In determining the
adjusted cost base to a Canadian holder of Corel common shares, the cost of
such shares acquired in the merger, which will equal the fair market value of
such shares at the time of the merger, will be averaged with that of all other
Corel common shares held by such holder immediately before the disposition.
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Dividends. Dividends received on the Corel common shares will be subject to
the tax treatment generally applicable to dividends received from Canadian
public corporations on ordinary common shares.
Regulatory Approvals Required
U.S. Antitrust. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
its related rules and regulations prohibit Corel and Inprise from consummating
the merger until Corel and Inprise make a filing with the Antitrust Division of
the U.S. Department of Justice and the U.S. Federal Trade Commission and the
specified Hart-Scott-Rodino Antitrust Improvements Act waiting period
requirements have been satisfied. On March 9, 2000, Inprise made a filing with
the Antitrust Division and the Federal Trade Commission. On March 10, 2000,
Corel made a filing with the Antitrust Division and the Federal Trade
Commission. Under the applicable provisions of the Hart-Scott-Rodino Antitrust
Improvements Act, the merger cannot be consummated until the expiration or
early termination of a 30 calendar day waiting period that began on March 11,
2000. Either the Federal Trade Commission or the Antitrust Division may issue a
request for additional information or documentary material, which will extend
the waiting period until 20 days following substantial compliance with the
request by both parties, unless the waiting period is terminated earlier. If it
believes that the merger would violate the federal antitrust laws by
substantially lessening competition in any line of commerce affecting U.S.
consumers, the Federal Trade Commission may challenge the merger by seeking a
federal court order temporarily enjoining the transaction pending conclusion of
an administrative hearing. The Federal Trade Commission may also proceed with
an administrative proceeding if the injunction is denied, and if the merger is
found to be anticompetitive, challenge it after the fact. There is a risk that
a challenge to the merger will be made and, if such a challenge is made, that
it would succeed. Expiration or termination of the HSR Act waiting period is a
condition to the merger. See "The Merger Agreement--Conditions to the
Completion of the Merger."
Other Laws. Inprise and Corel conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the merger. Inprise and Corel
are currently in the process of reviewing whether other filings or approvals
may be required or desirable in these other jurisdictions. Some of these
filings may not be completed before the closing, and some of these approvals,
which are not as a matter of practice required to be obtained prior to
effectiveness of a merger transaction, may not be obtained prior to the
closing.
Stock Exchange Listings
For the merger to occur, the Corel common shares to be issued to Inprise
stockholders in the merger and under options granted in substitution for
options under Inprise's stock option plans must be approved for listing on The
Toronto Stock Exchange, subject to official notice of issuance. The Toronto
Stock Exchange has conditionally granted approval for the issuance of the
shares of Corel to be issued to Inprise stockholders subject to Corel
fulfilling all of its requirements. Corel will apply to The Toronto Stock
Exchange for approval of the Corel transition stock option plan and will apply
for approval of the quotation on Nasdaq of the Corel common shares issuable in
the merger and pursuant to the Corel transition stock option plan. Following
the completion of the merger, Inprise common stock will not trade on any
exchange.
Resale of Corel Common Shares
Corel common shares to be issued to Inprise stockholders in the merger have
been registered under the Securities Act of 1933 and generally may be traded
freely. However, transfer of Corel common shares held by persons who are deemed
affiliates of Inprise at the time of the Inprise special meeting will require
either:
. the further registration under the Securities Act of the Corel common
shares to be transferred,
. compliance with Rule 145 under the Securities Act, which permits limited
sales under certain circumstances, or
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. the availability of another exemption from registration.
An "affiliate" of Inprise is a person who directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control
with, Inprise. These restrictions are expected to apply to the directors and
executive officers of Inprise and the holders of 10% or more of Inprise common
stock. The same restrictions apply to certain relatives or the spouse of those
persons and any trusts, estates, corporations or other entities in which those
persons have a 10% or greater beneficial or equity interest.
Under Rule 145, for one year following the effective time of the merger, an
affiliate together with certain related persons would be entitled to sell any
Corel common shares acquired in connection with the merger publicly only
through unsolicited brokers' transactions or in transactions directly with a
market maker. Also, the number of shares to be sold within any three-month
period may not exceed the greater of 1% of the outstanding Corel common shares
or the average weekly trading volume of the stock during the four calendar
weeks preceding the sale. Rule 145 would remain available to affiliates only if
Corel remains current with its informational filings with the Securities and
Exchange Commission under the Exchange Act.
One year after the effective time of the merger, a person who was an
affiliate of Inprise at the time of the Inprise special meeting would be able
to sell Corel common shares acquired in the merger free of the manner of sale
and volume limitations if Corel is current with its Exchange Act filings and
the person is not then an affiliate of Corel. Two years after the effective
time of the merger, a person who was an affiliate of Inprise at the time of the
Inprise special meeting would be able to sell Corel common shares acquired in
the merger without restrictions so long as the person had not been an affiliate
of Corel for at least three months.
The merger agreement requires that at least 30 days prior to the closing of
the merger, Inprise will deliver a letter to Corel identifying all persons who,
at the time of the Inprise special meeting, may, in Inprise's reasonable
judgment, be deemed to be affiliates of Inprise and use its reasonable best
efforts to cause each affiliate of Inprise to deliver to Corel on or prior to
the closing of the merger a written agreement to the effect that such persons
will not sell or dispose of any of the Corel common shares issued to them in
the merger unless the sale or disposition has been registered under the
Securities Act, complies with Rule 145, in the opinion of the affiliate's legal
counsel, is otherwise exempt from the registration requirements under the
Securities Act.
Under Canadian provincial securities laws, Corel common shares issued in
connection with the merger will be freely transferable subject to restrictions
applicable to so-called control persons. Generally, a control person is a
shareholder holding more than 20% of the Corel common shares or holding a
sufficient number of Corel common shares to affect materially the control of
Corel.
Dissenters' Rights of Appraisal
Inprise stockholders.
Inprise is a Delaware corporation. Under Delaware corporation law, Inprise
stockholders are not entitled to dissenters' rights of appraisal in connection
with the merger because their shares of common stock are traded on Nasdaq and
the stockholders will receive stock of the surviving corporation that is listed
on Nasdaq and cash instead of fractional shares in exchange for their common
stock as a result of the merger.
Corel shareholders.
Corel is a corporation organized under the Canada Business Corporations Act.
Under that statute, Corel shareholders do not have dissenters' rights of
appraisal in connection with the merger.
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THE MERGER AGREEMENT
Although this section describes the material provisions of the merger
agreement not discussed elsewhere in this joint proxy statement/prospectus, it
does not purport to describe all of its provisions. A copy of the merger
agreement is attached to this joint proxy statement/prospectus as ANNEX A, and
is incorporated in this document by reference. All stockholders of Inprise and
shareholders of Corel are urged to read the entire merger agreement carefully.
What Inprise Stockholders Will Receive in the Merger
Each share of Inprise common stock issued and outstanding at the effective
time of the merger will be converted automatically into the right to receive
0.747 of a Corel common share. Shares of Inprise common stock owned by Inprise
as treasury stock or by Corel or its subsidiaries will be cancelled. Each share
of Inprise series C preferred stock will be converted automatically into the
right to receive 8,032.2576 Corel common shares.
If the conversion of shares of Inprise common stock into Corel common shares
results in any former Inprise stockholder being entitled to receive a fraction
of a Corel common share, no fraction of a Corel common share will be delivered.
Rather than receiving a fraction of a share, former Inprise stockholders will
receive a cash payment, without interest and subject to the payment of
applicable withholding taxes, based on the average of the closing sales prices
of Corel common shares for the ten trading days prior to the closing date of
the merger, as reported on Nasdaq.
If before the merger, either Inprise or Corel changes its common shares into
a different number or kind of shares or securities, then a proportionate
adjustment will be made to the number of Corel common shares to be received by
Inprise stockholders so that the equity interest to be received by Inprise
stockholders is equivalent to what they would have received had no such change
occurred.
Example:
. If you currently own 500 shares of Inprise common stock, then after the
merger you will receive 373 Corel common shares and a check for the
value .50 of a Corel common share, rounded to the nearest one cent. The
value of the shares that you will receive will fluctuate as the price of
Corel common shares changes after the merger.
. On . , 2000, the last per share sales price of Corel common shares on
Nasdaq was $ . . Applying the 0.747 exchange ratio to the Corel last
reported sales price on that date, each holder of Inprise common stock
would be entitled to receive Corel common shares with a market value of
approximately $ . for each share of Inprise common stock. However, the
market prices for Inprise common stock and Corel common shares are
likely to change between now and the merger. You are urged to obtain
current price quotes for Corel common shares and Inprise common stock.
What Corel Shareholders Will Receive in the Merger
The holders of Corel common shares prior to the merger will continue to hold
the same number of Corel common shares following the merger. However, following
the merger, such shareholders will no longer hold, collectively, 100% of the
issued and outstanding Corel common shares. After completion of the merger, it
is expected that, on a fully diluted basis, Corel's shareholders will own
approximately 56% of Corel's common shares and Inprise's stockholders will hold
approximately 44% of Corel's common shares.
Effective Time of the Merger
The closing of the transactions contemplated by the merger agreement is
expected to take place at 10:00 a.m., Eastern time, on the second business day
following the date when all of the conditions to the obligations
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of Inprise and Corel set forth in the merger agreement have been satisfied or
waived. On the date of the closing, Inprise will file a certificate of merger
with the Secretary of State of the State of Delaware under which Corel's merger
subsidiary will be merged into Inprise. The merger will become effective when
such certificate of merger is deemed filed by the Delaware Secretary of State.
Procedures for Exchange of Stock Certificates
Corel has appointed Montreal Trust Company of Canada as exchange agent in
connection with the merger. Immediately prior to the time the merger becomes
effective, Corel will deposit with the exchange agent, in trust for the benefit
of former Inprise stockholders, certificates representing Corel common shares
to be issued and the cash to be paid instead of fractional shares under the
terms of the merger agreement.
As soon as practicable after the merger is consummated, the exchange agent
will send to each former stockholder of Inprise a letter and instructions for
exchanging the stockholder's Inprise stock certificates for the share
certificates of Corel. After the merger becomes effective, shares of Inprise
common stock and Inprise preferred stock will represent only the right to
receive:
. certificates representing Corel common shares into which the
stockholder's shares of Inprise common stock or Inprise preferred stock
are converted, and
. a check for any fractional share interests and any dividends or
distributions as described below.
The Corel common share certificates and any checks will be delivered to each
former Inprise stockholder upon receipt by the exchange agent of certificates
representing the stockholder's shares of Inprise common stock and Inprise
preferred stock, along with a properly completed letter transmitting the
certificates. If any of the certificates of Inprise common stock or Inprise
preferred stock have been lost, stolen or destroyed, the stockholder must
deliver an affidavit of loss to Corel or the exchange agent. No interest will
be paid on any cash to be paid instead of fractional shares.
You should not send in your certificates representing Inprise common stock
or Inprise preferred stock until you receive instructions from the exchange
agent.
The exchange agent, on Corel's demand, will deliver to Corel any
certificates representing Corel common shares or cash which remain
undistributed to the Inprise stockholders for six months after the merger.
Inprise stockholders who have not then submitted their Inprise certificates may
look only to Corel as general creditors for payment of their claim for Corel
common shares, cash in lieu of fractional Corel common shares and dividends or
distributions on Corel common shares. Neither Inprise, Corel nor the exchange
agent will be liable to any former Inprise stockholder for any shares or cash
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Certificates representing Inprise common stock or Inprise preferred stock
surrendered for exchange by any person constituting an affiliate of Inprise for
purposes of Rule 145 under the U.S. Securities Act of 1933 may not be exchanged
until Corel has received an affiliate agreement from such person. The form of
such affiliate agreement is included as Exhibit A to the merger agreement which
is attached to this joint proxy statement/prospectus as ANNEX A.
Until their outstanding certificates representing Inprise common stock or
Inprise preferred stock are surrendered, former stockholders of Inprise will
not receive any dividends payable to Corel shareholders for any period after
the merger becomes effective. When Inprise stockholders surrender their
certificates formerly representing Inprise common stock or Inprise preferred
stock, the certificates will be canceled and exchanged for certificates of
Corel common shares and cash representing fractional shares. In addition, when
Corel share certificates are issued to former stockholders of Inprise, any
dividend declared by Corel with a record date, for common shareholders entitled
to receive the dividend, corresponding to or after the date the merger becomes
effective and a payment date prior to the date the Inprise certificates are
surrendered will be paid promptly to the former Inprise stockholders. No
interest will be paid on these dividends.
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The exchange agent may deduct any amounts required to be withheld under the
federal, state or local income tax laws of the United States, Canada or any
other applicable jurisdiction from any shares of common stock or cash payments
made to a former Inprise stockholder. For United States and Canadian federal
income tax purposes, former Inprise stockholders will be treated as having
received any amounts withheld by the exchange agent.
Stock Options and Warrants
Treatment of Options and Warrants to Purchase Inprise Common Stock
Each outstanding option, warrant or other right to purchase Inprise common
stock as of the effective time of the merger will become an option, warrant or
other right to acquire a number of Corel common shares, rounded down to the
nearest whole number, equal to the product of the number of shares of Inprise
common stock purchasable under such option, warrant or other right immediately
prior to the effective time of the merger and 0.747. The option, warrant or
other right exercise price will be the amount, rounded up to the nearest cent,
equal to the exercise price of the option, warrant or other right divided by
0.747. Corel will comply with the Inprise stock option plans and take actions
within its control that are reasonably necessary to ensure that each Inprise
stock option that is an incentive stock option as defined in Section 422 of the
U.S. Internal Revenue Code will continue to qualify under that section.
As soon as practicable after the merger, Corel will file with the SEC a
registration statement on Form S-8 with respect to the shares of Corel common
shares purchasable under such options and will use its best efforts to maintain
the effectiveness of the registration statement for so long as such options
remain outstanding.
Treatment of Options and Warrants to Purchase Corel Common Shares
Each outstanding option, warrant or other right to purchase Corel common
shares as of the effective time of the merger will remain outstanding without
any change to its terms.
Conduct of Business Before the Merger
Inprise and Corel have each agreed that, until either the merger is
completed or the merger agreement is terminated, it will conduct its business
only in the ordinary course consistent with past practice. Specifically, each
of Inprise and Corel have agreed to use all commercially reasonable efforts to:
. preserve its present business organization and reputation,
. keep its key personnel,
. maintain its assets in good working order,
. maintain insurance,
. preserve its relationships with customers and suppliers, and
. comply in all material respects with applicable laws and orders.
In addition, neither company will take actions outside the ordinary course
of business, except as permitted by the merger agreement or required by law.
The merger agreement limits each company's right to:
. amend its charter documents,
. pay dividends or make distributions,
. reclassify its capital stock,
. adopt a plan of reorganization,
. repurchase capital stock or options,
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. sell its stock or options,
. make acquisitions,
. dispose of assets,
. change pricing, marketing, purchasing, investment, accounting, financial
reporting, inventory, credit, allowance or tax practices or policies,
. change its method of calculating reserves for accounting, financial
reporting or tax purposes,
. make tax elections or settle income tax liabilities,
. incur or repay indebtedness,
. enter into or amend employee benefit plans,
. increase employee compensation or fringe benefits,
. make capital expenditures,
. pay, discharge or settle claims or obligations, including those relating
to the merger,
. enter into or modify contracts with affiliates, or
. make changes in its lines of business.
The parties have agreed to confer on a regular basis with the other party
relating to matters relevant to the merger, and to promptly advise the other
party of any change which could harm such party or its ability to complete the
merger. No party will be required, however, to make any disclosure that would
violate applicable law.
Each party will use all commercially reasonable efforts to cure any
circumstance that will cause the merger agreement to be breached. The parties
will also take all commercially reasonable steps to satisfy the conditions to
the other party's obligations in the merger agreement and to consummate and
make effective the transactions contemplated by the merger agreement.
Finally, each party has agreed not to amend or take any action or fail to
take any action with respect to its rights plan which would result in its
rights plan applying to the merger or to the stock option agreements.
Offers from Other Parties
In the merger agreement, Inprise and Corel agreed that until either the
termination of the merger agreement or the time of the merger, neither party
will initiate, solicit or knowingly encourage any inquiries or proposal to
acquire:
. all or any significant portion of its assets,
. 25% or more of the outstanding shares of its common stock, or
. 25% of the outstanding shares of the capital stock of any of its
subsidiaries.
If a third party contacts either Inprise or Corel with such a proposal, that
party must notify the other party immediately.
Under the merger agreement, however, neither party's board is prohibited
from furnishing information to or entering into discussions or negotiations
with any person or group that makes an unsolicited bona fide proposal if the
following conditions are satisfied:
. the party has entered into a confidentiality agreement with the person
or group containing terms and conditions no less favorable to the party
than the confidentiality agreement between Inprise and Corel,
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. the party's board based on the advice of outside counsel, determines in
good faith and in its reasonable judgment that this action is required
for the board to comply with its fiduciary duties to its shareholders as
imposed by law,
. the party's board, based on the advice of its financial advisor,
determines in good faith and in its reasonable judgment that the
alternative proposal is likely to result in a proposal superior to the
merger, and
. the party considering the alternative proposal keeps the other party to
the merger agreement fully informed of all discussions or negotiations.
Conditions to the Completion of the Merger
Mutual Closing Conditions. Before the merger can occur, the following
conditions must be satisfied or, to the extent legally permissible, waived by
the appropriate party or parties.
. the waiting period applicable to the consummation of the merger under
the Hart-Scott-Rodino Antitrust Improvements Act shall have expired or
been terminated,
. the requisite vote of the Corel shareholders and Inprise stockholders
shall have been obtained,
. the Corel common shares issuable to Inprise stockholders in the merger
and under Inprise stock plans following the effective time of the merger
shall have been conditionally approved for listing on The Toronto Stock
Exchange and approved for quotation on Nasdaq,
. no regulatory authority shall have enacted or enforced any law or order
which has the effect of restricting the merger,
. specified consents from, actions of, filings with and notices to
governmental or regulatory authorities and third parties shall have been
made or obtained,
. the representations and warranties made by the other party in the merger
agreement, taken as a whole, must be true and correct on the date of the
merger. However, this condition would be deemed satisfied unless the
failure of the representation and warranty to be true and correct would
have a material adverse effect on the business, financial condition or
results of operations of the company making the representation and
warranty,
. the other party must have performed and complied with, in all material
respects, each agreement it is required to perform before closing, and
. Corel and Inprise each shall have received a tax opinion from its
counsel substantially to the effect that the merger will be treated as a
reorganization under section 368(a) of the U.S. Internal Revenue Code
and, in the case of the opinion to be received by Inprise, no gain or
loss will be recognized by an Inprise stockholder for U.S. federal
income tax purposes, except with respect to any cash received instead of
a fractional interest in Corel common shares.
Additional Closing Conditions for Inprise's Benefit. Inprise's obligation to
complete the merger is subject to the following additional conditions:
. Corel shall have appointed Mr. Fuller and one other Inprise designee, to
be agreed upon with Corel, directors of Corel, and
. Corel shall have appointed Mr. Fuller chairman of the Corel board.
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<PAGE>
Representations and Warranties
In the merger agreement, each of Inprise and Corel made reciprocal
representations and warranties, subject to exceptions which were disclosed by
the appropriate party, concerning their business and assets. The
representations and warranties must be true and correct at the time of the
merger or else the other party will not be required to complete the merger,
except that the other party would be required to complete the merger if the
failure of the representations and warranties to be true and correct would not
have a material adverse effect on the business, financial condition or results
of operations of the company making the representations and warranties. A
material adverse effect does not include any of the following:
. a change in the market price or trading volume of the party's common
stock,
. a change in the party's financial performance that is temporary in
nature, resulting from the public announcement or the pendency of the
merger,
. conditions affecting the industries in which the party operates,
. a failure by the party to meet internal earnings or revenue projections
or the earnings or revenue projections of equity analysts unless the
failure results from a non-temporary underlying change, effect, event,
state of facts or development,
. any adverse change, event or effect that is caused by conditions
affecting the economy of the United States or Canada generally or the
economy of any nation or region in which the party or any of its
subsidiaries conducts business that is material to the business of the
entity and its subsidiaries, taken as a whole,
. any disruption of customer or supplier relationships arising primarily
out of or resulting primarily from actions contemplated by the parties
in connection with, or which is primarily attributable to, the execution
or announcement of the merger agreement and the transactions
contemplated thereby, and
. the loss of employees or other adverse effects resulting from the
announcement and pendency of the merger.
The representations and warranties made by the parties include
representations and warranties as to:
. due organization, valid existence and good standing,
. capitalization,
. corporate authority to enter into the merger agreement,
. non-contravention, governmental approvals and required consents,
. documents, financial statements and other reports that have been or will
be filed with the Securities and Exchange Commission,
. absence of certain changes or events,
. absence of undisclosed liabilities,
. legal actions and proceedings,
. information to be supplied in filings with the Securities and Exchange
Commission related to the merger,
. compliance with laws and governmental orders,
. compliance with agreements,
. taxes,
. employee benefits plans,
. labor matters,
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<PAGE>
. environmental matters,
. intellectual property,
. required vote by stockholders of Inprise and shareholders of Corel,
. ownership of the other party's common stock or shares,
. the applicability of takeover laws to the transactions contemplated by
the merger agreement, and
. amendments to shareholders rights agreements.
Termination of the Merger Agreement
Inprise or Corel may terminate the merger agreement and abandon the merger,
whether before or after receiving shareholder approval, if:
. we do not complete the merger by October 31, 2000. However, this date
will be extended to November 30, 2000 if the reason for not closing by
October 31, 2000 is that the regulatory conditions specified in the
merger agreement have not been satisfied by that date,
. Inprise stockholders or Corel shareholders do not give the required
approvals,
. the other party materially breaches the merger agreement and the breach
is not curable, or, if curable, is not cured within 30 days following
receipt by the non-terminating party of notice of the breach from the
terminating party,
. a law or court order permanently prohibits the merger, or
. the other party's board withdraws or changes, in a manner materially
adverse to the terminating party, in the case of Inprise, its approval
or recommendation of the merger agreement or the merger or, in the case
of Corel, the approval or recommendation of the issuance of Corel common
shares in the merger or the Corel transition stock option plan.
In addition, either party can terminate the merger agreement if its board
determines in good faith that termination is required to comply with its
fiduciary duties by reason of a third party's acquisition proposal. However,
the terminating party may not terminate for this reason unless the following
conditions are met:
. the acquisition proposal involves consideration that the terminating
party's board, based on the advice of its financial advisor, determines
is superior to the merger consideration,
. the terminating party's board has concluded that the acquisition
proposal is superior, is reasonably likely to be consummated and is not
conditioned on the receipt of financing,
. the terminating party gives the other at least three business days'
written notice before announcing its termination of the merger
agreement,
. the terminating party provides the other with a reasonable opportunity
to make an equivalent proposal to enable the parties to proceed with the
merger, and
. the terminating party first pays the termination fee discussed below.
Finally, Corel and Inprise can mutually agree to terminate the merger
agreement.
Termination Fees
Under certain circumstances, the termination of the merger agreement will
result in a termination fee becoming due. Where Corel is owed a termination
fee, the amount payable is $29.5 million. Where Inprise is owed a termination
fee, the amount payable is $44.5 million. A termination fee will become payable
by a party upon the occurrence of any of the following events:
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<PAGE>
. if the party terminates the agreement to accept a superior proposal as
described above,
. if the other party's board withdraws or changes, in a manner materially
adverse to the terminating party, in the case of Inprise, its approval
or recommendation of the merger agreement or the merger or, in the case
of Corel, the approval or recommendation of the issuance of Corel common
shares in the merger or the Corel transition stock plan.
. if any person makes an alternative acquisition proposal with respect to
the party, the party's stockholders do not approve the transaction and
thereafter either party terminates the merger agreement and the party
that received the alternative acquisition proposal enters into a
definitive agreement with respect to an alternative proposal within nine
months of the date of such termination.
. if any person makes an alternative acquisition proposal with respect to
a party, and thereafter the other party shall terminates the merger
agreement because of a material breach of the agreement, and the party
that received the alternative acquisition proposal enters into a
definitive agreement with respect to an alternative acquisition within
nine months of the date of such termination.
. if any person makes an alternative acquisition proposal with respect to
the party and thereafter the merger agreement is terminated because of
the failure to close by October 31, 2000 or because of a governmental
restraint, and the party that received the alternative acquisition
proposal enters into a definitive agreement with the party who has made
the alternative acquisition proposal within nine months after
termination.
If a party fails to pay the amount due, and the other party files a lawsuit
that results in a judgment against that party, then that party must also pay
all costs and expenses, including attorneys' fees and expenses, incurred by the
other party in connection with the suit, together with interest.
Expenses
The parties will share equally:
. the fee required for the filings under the Hart-Scott-Rodino Antitrust
Improvements Act,
. the filing fee payable to the SEC in respect of the registration
statement of which this joint proxy statement/prospectus forms a part,
and
. the expenses incurred in connection with the printing and mailing of
this joint proxy statement/prospectus.
Each of Inprise and Corel will pay all other costs and expenses incurred by
it in connection with the merger agreement and the related transactions,
including any termination fees which become payable as described above.
Indemnification of Inprise Officers and Directors by Corel
Corel has agreed that:
. for six years after the closing of the merger, it will indemnify each of
Inprise's directors and officers for liabilities from their acts or
omissions in those capacities occurring prior to closing,
. for six years after the closing of the merger, it will not modify the
provisions for indemnification and limitation of liability of Inprise's
directors and officers contained in the surviving company's certificate
of incorporation or by-laws so as to adversely affect their rights,
. it will honor the indemnification agreements between Inprise and any
officer or director of Inprise, and
. for six years after the closing of the merger, it will provide
directors' and officers' liability insurance covering acts or omissions
occurring before closing by each person currently covered by Inprise's
directors' and officers' liability insurance policy. The policy must be
no less favorable than the Inprise policy in effect on February 6, 2000.
However, Corel will be obligated to pay only up to 200% of the annual
premium paid by Inprise for this insurance in 1999.
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<PAGE>
Amendments to the Merger Agreement
Any provision of the merger agreement may be amended or waived. However,
after the approval of the merger agreement by the stockholders of Inprise or
the shareholders of Corel, no amendment or waiver that by law requires further
approval by stockholders may be made without that approval.
Employee Compensation and Benefits
Corel will for one year following the closing of the merger provide the
employees of Inprise and its subsidiaries that continue in Corel's employment
with compensation and benefits no less favorable taken as a whole than the
benefits currently provided to those employees.
STOCK OPTION AGREEMENTS
The following summary of the material terms of the stock option agreements
is qualified by reference to the complete text of the agreements which are
incorporated by reference and attached to this joint proxy statement/prospectus
as ANNEX D.
As a condition to each party entering into the merger agreement, each party
entered into a stock option agreement.
Under the stock option agreements:
. Corel granted to Inprise an irrevocable option to purchase up to 13
million Corel common shares, approximately 19.8% of Corel's common
shares outstanding on February 6, 2000, at an exercise price of $20 per
share, subject to adjustment under specified circumstances, and
. Inprise granted to Corel an irrevocable option to purchase up to 12
million shares of Inprise common stock, approximately 19.7% of Inprise's
shares of common stock outstanding on February 6, 2000, at an exercise
price of $14.94 per share, subject to adjustment under specified
circumstances.
The option exercise price for Inprise to purchase Corel common shares is
equal to the closing price of a Corel common share on Nasdaq on February 4,
2000. The option exercise price for Corel to purchase shares of Inprise common
stock is equal to the closing price of a Corel common share on Nasdaq on
February 4, 2000 multiplied by the merger exchange ratio of 0.747.
Exercise of the Stock Options
Inprise can exercise its stock option in whole or in part at any time after
the occurrence of any event which could entitle Inprise to receive the cash
termination fee payable by Corel pursuant to the merger agreement. Corel can
exercise its stock option in whole or in part at any time after the occurrence
of any event which could entitle Corel to receive the cash termination fee
payable by Inprise pursuant to the merger agreement. See "The Merger Agreement-
Termination of the Merger Agreement." Notwithstanding the foregoing, neither of
the stock options is exercisable until a termination fee becomes due and
payable. As of the date of this joint proxy statement/prospectus, neither stock
option has become exercisable.
The issuance of shares pursuant to the exercise of each stock option is
subject to the satisfaction of customary conditions. These include receipt of
applicable governmental approvals and absence of any court or governmental
order that restrains the exercise of the stock option.
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<PAGE>
Termination of the Stock Options
Each of the stock option agreements provides that the applicable options
will terminate upon the earliest of:
. the closing of the merger,
. the termination of the merger agreement, except where the grantor of the
stock option may be required to pay a termination fee, or
. one year after termination of the merger agreement under circumstances
where a termination fee may be payable by the grantor of the stock
option.
Registration Rights
At any time within two years of exercise of a stock option, the grantee will
have certain registration rights with respect to the shares issued under the
option. In connection therewith, the grantor of the stock option will use its
reasonable best efforts to:
. cause the filing of a registration statement under the U.S. Securities
Act or a prospectus under the Securities Act (Ontario), as applicable,
to cover the shares, and
. cause the registration statement or prospectus to remain effective for a
period of 120 calendar days.
Listing Rights
Inprise will have the right to require Corel to have the Corel common shares
issued to Inprise under the stock option granted to Inprise approved for
listing on The Toronto Stock Exchange and Nasdaq. Corel will have the right to
require Inprise to have the shares of Inprise common stock issued to Corel
under the stock option granted to Corel approved for listing on Nasdaq.
Put Rights
At any time after the stock option is exercisable, upon request of the
grantee the company that granted the option will repurchase the option and any
shares purchased by the holder on exercise of the option. The company that
granted the option must purchase the option at a price equal to the greater of:
. the average closing price of one share of the common stock of the issuer
on Nasdaq for the five trading days before the date the party seeking to
sell such option or shares gives notice, or
. the price per share that a third party offers to pay in a tender offer
or acquisition,
minus the exercise price, multiplied by the number of shares subject to the
option. If the company that granted the option is required to repurchase shares
that were acquired under an option, it must pay a price per share equal to the
exercise price of the option, as adjusted, plus the difference between the
highest price per share offered for the relevant shares by a third party during
the repurchase period and the exercise price, multiplied by the number of
option shares.
Limitation on Total Profit
The maximum aggregate amount of profit which a party may receive with
respect to any termination fee that would be payable to such party and the
stock option granted to such party is $45 million in the case of Inprise and
$30 million in the case of Corel.
Effect of Stock Options
The stock options are intended to make it more likely that the merger will
be completed on the agreed terms and to compensate the grantee for its efforts
and costs if the merger is not completed under circumstances
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<PAGE>
involving a third party proposal for a business combination with the grantor or
where the grantor's board changes its recommendation or approval of the merger
agreement or the merger. Among other effects, the stock options could prevent
an alternative business combination with the grantor from being accounted for
as a "pooling of interests." The stock options may therefore discourage
proposals for alternative business combinations with each of Corel and Inprise.
In particular, even if a third party were prepared to offer Inprise's
stockholders consideration with a higher market value than the value of the
Corel common shares to be exchanged for Inprise common stock in the merger, the
third party might be discouraged from doing so due to the potential inability
to account for such an acquisition using the "pooling of interests" method.
COMPARATIVE MARKET PRICE DATA AND DIVIDEND INFORMATION
Corel
The Corel common shares are listed and traded on Nasdaq and The Toronto
Stock Exchange. The following table sets forth the high and low sales prices
per Corel common share as reported on The Toronto Stock Exchange and Nasdaq for
the quarterly fiscal periods presented below:
<TABLE>
<CAPTION>
The Toronto
Stock Exchange Nasdaq
--------------- -------------
High Low High Low
------- ------- ------ ------
(Cdn) (Cdn)
<S> <C> <C> <C> <C>
1998
First quarter ended February 28, 1998........... $4.01 $2.17 $2.94 $1.41
Second quarter ended May 31, 1998............... $4.24 $2.75 $3.13 $1.94
Third quarter ended August 31, 1998............. $3.30 $1.78 $2.52 $1.16
Fourth quarter ended November 30, 1998.......... $4.15 $1.75 $3.00 $1.06
1999
First quarter ended February 28, 1999........... $7.55 $3.76 $5.13 $2.50
Second quarter ended May 31, 1999............... $7.00 $3.32 $4.63 $2.19
Third quarter ended August 31, 1999............. $9.65 $4.15 $6.38 $2.81
Fourth quarter ended November 30, 1999.......... $30.40 $7.00 $20.88 $4.69
2000
First quarter ended February 29, 2000........... $57.95 $19.70 $39.25 $13.18
Second quarter through . , 2000................ $ . $ . $ . $ .
</TABLE>
On February 4, 2000, the last full trading day before the announcement of
the execution of the merger agreement, the last reported sales price per Corel
common share was $20.00 on Nasdaq and Cdn$29.20 on The Toronto Stock Exchange.
On . , 2000, the most recent practicable date prior to the printing of this
joint proxy statement/prospectus, the last reported sales price per Corel
common share was $ . on Nasdaq and Cdn $ . on The Toronto Stock Exchange. We
urge you to obtain current market quotations before making any decisions with
respect to the merger. As of . , 2000, there were approximately . holders of
record of Corel common shares.
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<PAGE>
Inprise
The Inprise common stock is listed and traded on Nasdaq. The following table
sets forth the high and low sales prices per share of Inprise common stock as
reported on Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
1998
First quarter ended March 31, 1998.......................... $10.0000 $6.5625
Second quarter ended June 30, 1998.......................... $11.8750 $6.8125
Third quarter ended September 30, 1998...................... $ 8.6250 $4.9375
Fourth quarter ended December 31, 1998...................... $ 6.8750 $4.8125
1999
First quarter ended March 31, 1999.......................... $ 6.4688 $3.3125
Second quarter ended June 30, 1999.......................... $ 6.0000 $2.6875
Third quarter ended September 30, 1999...................... $ 5.5625 $3.4375
Fourth quarter ended December 31, 1999...................... $20.0000 $3.4375
2000
First quarter ended March 31, 2000.......................... $16.9375 $6.0938
Second quarter through ., 2000.............................. $ . $ .
</TABLE>
On February 4, 2000, the last full trading day before the announcement of
the execution of the merger agreement, the last reported sales price of Inprise
common stock was $12.9375 on Nasdaq. On . , 2000, the most recent practicable
date prior to the printing of this joint proxy statement/prospectus, the last
reported sales price per share of Inprise common stock was $ . on Nasdaq. We
urge you to obtain current market quotations before making any decisions with
respect to the merger. As of . , 2000, there were approximately . holders of
record of Inprise common stock.
Dividend Policy
Neither Inprise nor Corel has paid any cash dividends on its shares. The
merger agreement prohibits Inprise and Corel from declaring or paying any
dividends to holders before the closing of the merger. After the merger, the
Corel board will determine future dividends, if any, in light of business
conditions, Corel's earnings and financial condition and other factors.
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<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF COREL CORPORATION
The following unaudited pro forma consolidated financial information of
Corel was prepared to illustrate the estimated effects of the merger for
balance sheet purposes as at November 30, 1999 and for purposes of the results
of operations for the fiscal year ended November 30, 1999.
The pro forma information has been prepared in accordance with Canadian GAAP
using the purchase method of accounting for the merger which is consistent in
all material respects with the method expected to be used under U.S. GAAP,
except as indicated in Note 6. The unaudited pro forma consolidated financial
information of Corel presented is derived from a combination of Inprise
financial information, which is prepared in accordance with U.S. GAAP, and
Corel financial information, which is prepared in accordance with Canadian
GAAP. With respect to Inprise financial information, the material differences
between U.S. GAAP and Canadian GAAP have been adjusted in the preparation of
the unaudited pro forma consolidated financial information of Corel to conform
with Canadian GAAP.
The balance sheets and statements of operations of Corel and Inprise have
been summarized and reclassified so that they may be presented on a consistent
basis for purposes of the unaudited pro forma consolidated financial
information of Corel. The pro forma consolidated balance sheet as at November
30, 1999 gives effect to the transaction set out in the merger agreement, more
fully described in Note 2, as though it had occurred on November 30, 1999. The
pro forma consolidated statement of operations for the year ended November 30,
1999 gives effect to this transaction as if it had occurred on December 1,
1998.
The allocation of the aggregate purchase price reflected in the unaudited
pro forma consolidated financial information of Corel is preliminary. The
actual purchase price allocation to reflect the fair values of assets acquired
and liabilities assumed will be based upon management's evaluation of such
assets and liabilities following the effective time of the merger and,
accordingly, the adjustments that have been included will change based upon the
final allocation of the total purchase price, including any purchase price
adjustment. Such allocation may differ significantly from the preliminary
allocation included herein.
The unaudited pro forma consolidated financial information does not reflect
possible realization of cost savings from operating efficiencies, synergies or
other restructuring resulting from the merger.
The pro forma financial information is provided for illustrative purposes
only and does not purport to represent what the consolidated results of
operations or the consolidated financial position of Corel would have been had
the merger occurred on the dates assumed. You should not rely on the pro forma
financial information as being indicative of the historical results that would
have been achieved had the companies always been combined or the future results
that the combined company will experience after the merger.
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COREL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Pro forma
Corel Inprise Adjustments Notes consolidated
-------- -------- ----------- ----- ------------
(in thousands )
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 18,021 $192,013 $ 39,652 2.0
(15,000) 2.3 $234,686
Short-term
investments.......... -- 5,680 5,680
Accounts receivable--
trade................ 54,770 27,303 82,073
Accounts receivable--
other................ 3,954 2,305 6,259
Inventory............. 13,567 520 14,087
Prepaid expenses...... 2,042 668 2,710
Other current assets.. -- 4,646 (1,761) 2.4 2,885
-------- -------- -------- --------
Total current
assets............. 92,354 233,135 22,891 348,380
-------- -------- -------- --------
Non-current assets:
Investment............ 2,873 -- 2,873
Capital assets........ 49,697 75,002 (44,066) 2.0 80,633
Other non-current
assets............... -- 4,879 3,734 2.0 8,613
-------- -------- -------- --------
Total non-current
assets............. 52,570 79,881 (40,332) 92,119
-------- -------- -------- --------
Intangibles:
Workforce............. -- -- 10,000 2.6 10,000
Customer lists........ -- -- 30,000 2.6 30,000
Trademarks............ -- -- 17,000 2.6 17,000
Patents/core
technology........... -- -- 20,000 2.6 20,000
Current products...... -- -- 38,000 2.6 38,000
In-process research
and development...... -- -- 12,000 2.6 12,000
Goodwill.............. -- -- 233,414 2.6 233,414
-------- -------- -------- --------
Total intangibles... -- -- 360,414 360,414
-------- -------- -------- --------
Total assets........ $144,924 $313,016 $342,973 $800,913
======== ======== ======== ========
</TABLE>
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<PAGE>
COREL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Pro forma
Corel Inprise Adjustments Notes consolidated
--------- --------- ----------- ----- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Liabilities and
shareholders' equity
Current liabilities:
Accounts payable and
accrued liabilities..... $ 50,284 $ 41,733 $ 92,017
Current portion of long-
term debt............... 10,594 -- 10,594
Income taxes payable..... (5,135) 5,808 673
Deferred revenue......... 18,472 12,273 30,745
Other current
liabilities............. -- 18,083 (680) 2.0 17,403
--------- --------- -------- ---------
Total current
liabilities............. 74,215 77,897 (680) 151,432
Future income tax
liability............... (1,642) 5,700 50,800 2.6 54,858
Long term debt........... 7,985 8,943 16,928
Other long term
liabilities............. -- 4,819 4,819
--------- --------- -------- ---------
Total long term
liabilities............. 6,343 19,462 50,800 76,605
Share capital--Corel..... 222,155 -- 499,039 2.6 721,194
Contributed surplus...... 1,099 -- 1,099
Share capital--Inprise... -- 607 (607) 2.5 --
Additional paid-in
capital................. -- 464,527 (464,527) 2.5
9,471 2.6 9,471
Cumulative comprehensive
income.................. -- 5,300 (5,300) 2.5 --
Deficit.................. (158,888) (229,572) 229,572 2.5 (158,888)
Common stock in
treasury................ -- (25,205) 25,205 2.5 --
--------- --------- -------- ---------
Total shareholders'
equity.................. 64,366 215,657 292,853 572,876
--------- --------- -------- ---------
Total liabilities and
shareholders' equity.... $ 144,924 $ 313,016 $342,973 $ 800,913
========= ========= ======== =========
</TABLE>
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<PAGE>
COREL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Pro forma
Corel Inprise Adjustments Notes consolidated
-------- -------- ----------- ----- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $243,051 $174,806 $ 417,857
Cost of sales........... 59,516 41,943 101,459
-------- -------- -------- ---------
Gross profit............ 183,535 132,863 316,398
-------- -------- -------- ---------
Expenses:
Advertising............. 47,964 16,933 64,897
Selling, general and
administrative......... 82,229 91,266 3,734 2.0 177,229
Research and
development............ 40,049 42,257 82,306
Depreciation and
amortization........... 6,443 15,331 (5,338) 2.7
107,205 2.8 123,641
Restructuring charges... -- 49,960 (49,960) 2.7 --
Settlement proceeds..... (6,342) -- (6,342)
Loss (gain) on foreign
exchange............... (246) -- (246)
-------- -------- -------- ---------
Total operating
expenses............... 170,097 215,747 55,641 441,485
-------- -------- -------- ---------
Income (loss) from
operations............. 13,438 (82,884) (55,641) (125,087)
Interest income
(expense).............. (190) 6,232 6,042
Gain on long-term
investment............. -- 2,937 2,937
Income from patent cross
license agreement...... -- 105,065 105,065
-------- -------- -------- ---------
Income (loss) before
taxes.................. 13,248 31,350 (55,641) (11,043)
Income tax recovery
(expense).............. 3,946 (8,666) 18,534 2.8 13,814
Loss on equity
investment............. (478) -- (478)
-------- -------- -------- ---------
Net income (loss)....... $ 16,716 $ 22,684 $(37,107) $ 2,293
======== ======== ======== =========
Earnings per share:
Net income per common
share.................. --Basic $ 0.02
--Fully diluted $ 0.02
Average number of common
shares outstanding..... --Basic 112,909
--Fully diluted 115,331
</TABLE>
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<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Basis of Presentation
The pro forma statements have been prepared using the purchase method of
accounting for the merger. The total purchase price will be allocated to the
assets acquired and liabilities assumed, based on their respective fair values.
The allocation of the aggregate purchase price reflected in the pro forma
statements is preliminary and is based upon the closing Corel share price on
March 24, 2000 of $9.84 and Inprise's number of common shares and options
outstanding as at March 13, 2000. The actual purchase allocation to reflect the
fair values of the assets acquired and liabilities assumed will be based upon
management's evaluation of such assets and liabilities and, accordingly, the
adjustments that have been included in the pro forma statements will change
based upon the final allocation of the total purchase price, including any
purchase price adjustment. Such allocation may differ significantly from the
preliminary allocation included in this joint proxy statement/prospectus. In
addition, under Canadian GAAP, the purchase price will be determined based on
Corel's stock price on the date of the merger, which cannot be determined at
this time. Under U.S. GAAP, the purchase price is determined based on the
period surrounding the announcement date. This could result in a significant
difference between the Canadian GAAP and the U.S. GAAP calculation of the total
purchase price as described in Note 6.
The accompanying pro forma statements have been prepared by management of
Corel based on the audited consolidated financial statements of Corel as at and
for the year ended November 30, 1999, prepared in accordance with Canadian
GAAP, and the audited consolidated financial statements of Inprise as of and
for the year ended December 31, 1999, prepared in accordance with U.S. GAAP,
adjusted to reflect those adjustments necessary to conform the Inprise
financial statements with the accounting policies used by Corel in the
preparation of its consolidated financial statements.
It is the opinion of Corel's management that these pro forma statements
include all adjustments necessary for a fair presentation of pro forma
financial statements.
The pro forma statements also are not necessarily indicative of the results
that actually would have been achieved if the transactions reflected therein
had been completed on the dates indicated or the results which may be obtained
in the future.
The pro forma statements should be read in conjunction with the description
of the merger in this joint proxy statement/prospectus, the audited
consolidated financial statements of Corel as at and for the year ended
November 30, 1999 and notes thereto, incorporated by reference in this joint
proxy statement/prospectus, and the audited consolidated financial statements
for Inprise as at and for the year ended December 31, 1999 and notes thereto,
also incorporated by reference in this joint proxy statement/prospectus.
2. Pro Forma Assumptions and Adjustments
These pro forma statements assume the completion of the transactions
contemplated by the merger agreement, as more fully described elsewhere in this
joint proxy statement/prospectus, resulting in the combination of the
businesses of Corel and Inprise and give effect to the following adjustment as
if they had occurred on November 30, 1999 in respect of the pro form
consolidated balance sheet and on December 1, 1998 in respect of the pro forma
consolidated statement of operations:
2.0 March 17, 2000 completion of the sale/leaseback transaction on the
Scotts Valley Building owned by Inprise providing $39,652 of cash,
$3,734 of long-term assets, a reduction in current liabilities of $680
and resulting in annual rental payments of $3,734.
71
<PAGE>
2.1 The issuance by Corel of 50,715,493 common shares at $9.84 per share
in exchange for all 67,892,226 outstanding shares of Inprise common
stock and series C convertible preferred stock (collectively, the
"Inprise Shares") on the basis of an exchange ratio of 0.747 of a
Corel common share for each Inprise share.
2.2 To record $9,471 as paid-in capital and to reflect the cost to Corel
of assuming Inprise stock options. A total of 6,399,573 Corel stock
options, equal to 8,567,032 Inprise stock options multiplied by the
exchange ratio were valued at $9.84 per Corel stock option, less the
average exercise price of $8.36 per option.
2.3 To record the estimated costs of $15,000 associated with the
transaction which will be capitalized as goodwill.
2.4 To eliminate Inprise' goodwill of $1,761 prior to allocation of the
purchase price by Corel.
2.5 To eliminate on consolidation the stockholders' equity of Inprise in
the amount of $215,657.
2.6 To allocate the aggregate purchase price to Inprise's net assets, in
accordance with the purchase method of accounting as follows:
<TABLE>
<S> <C>
Inprise stockholders' equity acquired before goodwill adjustment
described in Note 2.4........................................... $215,657
Goodwill adjustment described in Note 2.4........................ (1,761)
--------
Pro forma fair value of net tangible assets acquired............. 213,896
--------
Fair value of the shares to be issued as noted in Note 2.1....... 499,039
Cost of Inprise stock options as noted in Note 2.2............... 9,471
Estimated acquisition costs described in Note 2.3................ 15,000
--------
Total purchase price............................................. 523,510
--------
Excess purchase price over fair value of net tangible assets
acquired........................................................ $309,614
========
Allocation of purchase price in excess of fair value of net
tangible assets acquired:
Workforce........................................................ $ 10,000
Customer lists .................................................. 30,000
Trademarks....................................................... 17,000
Patents/core technology.......................................... 20,000
Current products................................................. 38,000
Purchased in-process research and development.................... 12,000
Goodwill......................................................... 233,414
Future/deferred income taxes..................................... (50,800)
--------
$309,614
========
</TABLE>
A future/deferred income tax liability of $50,800 has been recognized
on the acquisition of intangible assets other than goodwill as part of
this transaction, to reflect the difference between the fair value and
tax basis of these assets.
2.7 To eliminate depreciation and amortization of acquired capital assets
and restructuring charges, net of pro forma depreciation and
amortization to reflect the fair values of these and other assets and
liabilities as at the acquisition date, exclusive of acquired
intangible assets described in Note 2.8 below.
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<PAGE>
2.8 To record amortization of acquired intangible assets as a result
of the purchase price allocation as reflected. Each category of
intangible will be amortized over the useful life which on a
preliminary basis has been estimated by Corel as:
<TABLE>
<S> <C>
Workforce..................... 3 years, straight line basis
Customer lists................ 3 years, straight line basis
Trademarks.................... 3 years, straight line basis
Patents/core technology....... 3 years, straight line basis
Current products.............. 3 years, straight line basis
In-process research and
development.................. 18 months, straight line basis
Goodwill...................... 3 years, straight line basis
</TABLE>
The above amortization adjustments are preliminary and could vary
significantly based upon the final allocation of the total purchase
price, including any purchase price adjustment, and the final
determination of the estimated useful life of each category of
intangibles.
The impact on the pro forma net income of these amortizations was a
charge of $107,205, or $0.95 per share, for the year ended November
30, 1999. The actual amortization of intangibles arising from the
transaction will take place subsequent to the merger.
3. Shareholders' Equity and Common Shares
The number of pro forma common shares outstanding, including the conversion
of Inprise shares to Corel common shares, after giving effect to the
transaction is:
<TABLE>
<S> <C>
Corel common shares outstanding at November 30, 1999............ 65,532
Inprise shares outstanding at March 13, 2000 converted to
equivalent Corel common shares (67,892 x 0.747)................ 50,715
-------
Pro forma common shares outstanding............................. 116,247
=======
</TABLE>
4. Items Not Adjusted
The pro forma statements do not reflect any operating efficiencies, cost
savings and other benefits anticipated by Corel's management as a result of the
merger. Those benefits include potential opportunities for increased revenue
that arise from offering a more extensive end-to-end product portfolio through
broad channels, as well as cost savings at the corporate level.
5. Per Share Information
The pro forma net income per common share, basic and fully diluted, was
calculated based on the weighted average number of common shares outstanding,
including the conversion of Inprise shares to Corel common shares, during the
period as calculated below:
<TABLE>
<CAPTION>
Basic
-----
<S> <C>
Corel average common shares outstanding for the year ended November
30, 1999--basic.................................................... 62,194
Inprise shares outstanding at March 13, 2000 as converted to
equivalent Corel common shares (0.747 exchange ratio).............. 50,715
-------
Total............................................................. 112,909
=======
<CAPTION>
Fully Diluted
-------------
<S> <C>
Corel average common shares outstanding for the year ended November
30, 1999--fully diluted............................................ 64,616
Inprise shares outstanding at March 13, 2000 as converted to
equivalent Corel common shares (0.747 exchange ratio).............. 50,715
-------
Total............................................................. 115,331
=======
</TABLE>
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<PAGE>
6. Reconciliation of Pro Forma Results Reported under Canadian GAAP with U.S.
GAAP
Corel's accounting policies are consistent in all material aspects with U.S.
GAAP with the following exceptions:
Net pro forma loss reconciliation:
<TABLE>
<S> <C>
Net income applicable to common shares under Canadian GAAP... $ 2,293
Adjustments:
(i) In-process research and development amortization/write-
off........................................................ (4,000)
(ii) Goodwill amortization................................... (185,814)
(iii) Future/deferred income taxes for in-process research
and development............................................. 1,600
---------
Net loss applicable to common shares U.S. GAAP............... $(185,921)
=========
Loss per common share U.S. GAAP, basic and fully diluted..... $ (1.65)
Loss per Inprise equivalent share U.S. GAAP, basic and
diluted..................................................... $ (1.23)
</TABLE>
- --------
(i) In-process research and development amortization/write-off:
For the purposes of reporting under U.S. GAAP, companies are required to
immediately write off in-process research and development. Under Canadian
GAAP, in-process research and development would be capitalized and
amortized over its useful life, estimated at 18 months. As at November 30,
1999, the capitalized in-process research and development under Canadian
GAAP was $12,000 and resulted in amortization of $8,000 on the pro forma
statement of operations. Under U.S. GAAP, the in-process research and
development has been written off immediately.
(ii) Goodwill amortization:
Under Canadian GAAP, the cost of the acquisition is determined at the date
on which the shares are issued to the Inprise stockholders, whereas under
U.S. GAAP, the cost of the purchase is determined based on the market price
of the securities to be issued for a reasonable period before and after the
date the terms of the acquisition are agreed to and announced. For U.S.
GAAP purposes, fair value of the securities to be issued has been
determined to be $19.60 which represents an average of Corel's stock price
for the period from February 3, 2000 to February 9, 2000. Under Canadian
GAAP, the fair value of the securities to be issued has been estimated to
be $9.84. The difference in these two amounts results in an estimated
increase in the cost of the purchase of $557,435, which is allocated to
goodwill for U.S. GAAP purposes and amortized over a three year period.
(iii) Future/deferred income taxes related to in-process research and
development:
The future/deferred income tax adjustment is a result of the difference in
in-process research and development amortization/write-off as described in
part (i) above.
At November 30, 1999, there were no material differences between balance
sheet item amounts calculated under U.S. GAAP and those calculated under
Canadian GAAP with the exception of the in-process research and development and
future/deferred income taxes related thereto as discussed in parts (i) and
(iii) above and the cost of the purchase as discussed in part (ii) above.
74
<PAGE>
INFORMATION ABOUT INPRISE
Inprise, formerly Borland International, was incorporated in California in
1983 and was reincorporated in Delaware in 1989. Inprise maintains its
executive offices at 100 Enterprise Way, Scotts Valley, California 95066-3249
and its main telephone number at that location is 831-431-1000. Inprise also
maintains Internet web sites at www.inprise.com and www. borland.com.
Inprise's Business
The following is a summary description of Inprise's business. A more
detailed description of Inprise's business is contained in Inprise's Form 10-K
for the year ended December 31, 1999 which is incorporated by reference in this
joint proxy statement/prospectus. See "Where You Can Find More Information" on
page . .
Inprise is a leading provider of Internet enabling software and services
designed to reduce the complexity of application development for corporations
and individual programmers. Inprise develops and provides integrated, scalable
and secure solutions, distinguished for their ease of use, performance and
productivity. Committed to most major computing platforms as well as the open
standards of the Internet, Inprise provides service and support for software
developers worldwide through our online developer community and E-commerce site
community.borland.com--offering a range of technical information, value-added
services and third-party products.
Inprise's product lines and services are designed to assist software
developers and business enterprises in their development and deployment of
software in the desktop, client/server, distributed objects and
Internet/intranet environments. In addition to its products, Inprise offers a
wide range of consulting, training and support services to customers.
Inprise markets and distributes its products worldwide primarily through
independent distributors, dealers, value-added resellers and independent
software vendors. Inprise also markets and sells to corporations, governments,
educational institutions and other end-user customers through direct sales and
through the Internet. Inprise sells its products to a broad customer base,
which includes businesses, educational institutions, government bodies and
individual software developers.
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<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table shows, as of February 29, 2000, how many shares of
Inprise common stock are owned by persons who, to the best knowledge of
Inprise, are beneficial owners of more than 5% of the outstanding shares of
Inprise common stock, Inprise's only class of voting security, each current
director and executive officer of Inprise and all current directors and
executive officers of Inprise as a group. Except as indicated in the footnotes
to this table, the percentage of ownership has been calculated based on the
number of outstanding shares of Inprise common stock as of February 29, 2000.
Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Percent of
Number of shares outstanding
Name beneficially owned shares
---- ------------------ -----------
5% Stockholders:
<S> <C> <C>
Corel Corporation (1).......................... 12,000,000 19.70%
Merrill Lynch & Co., Inc. (2).................. 4,621,300 7.98%
Named Executive Officers and Directors:
Dale Fuller (3)................................ 800,000 1.31%
David Heller (4)............................... 212,500 *
William K. Hooper, Jr. ........................ -- *
William Miller (5)............................. 120,000 *
Frederick A. Ball (6).......................... 72,916 *
Hobart McK. Birmingham (7)..................... 151,640 *
JoAnne M. Butler (8)........................... 42,428 *
John Walshe.................................... -- *
John Floisand (9).............................. -- *
James Weil (9)................................. -- *
Delbert Yocam (9).............................. -- *
All current directors and executive officers as
a group (8 persons)........................... 1,399,484 2.29%
</TABLE>
- --------
* Less than 1%.
(1) Information is based on a Schedule 13D filed by Corel on February 18, 2000.
Pursuant to the option agreement Corel was granted by Inprise an
irrevocable option to purchase up to 12,000,000 shares of Inprise common
stock, subject to adjustments, at a purchase price per share equal to
$14.94 per share. Corel expressly disclaims beneficial ownership of all
such shares. The option is not currently exercisable and may only be
exercised under certain circumstances described in the option agreement.
The address of Corel Corporation is 1600 Carling Avenue, Ottawa, Ontario,
Canada, K1Z 8R7.
(2) Information is based on a Schedule 13G/A filed on February 7, 2000. Number
of shares which may be deemed beneficially owned includes shares held by
various fund related to or managed by Merrill Lynch & Co., Inc. The address
of Merrill Lynch & Co., Inc. is World Financial Center, North Tower, 250
Vesey Street, New York, New York 10281.
(3) Represents options exercisable within 60 days of February 29, 2000 to
acquire 800,000 shares.
(4) Represents options exercisable within 60 days of February 29, 2000 to
acquire 212,500 shares.
(5) Represents options exercisable within 60 days of February 29, 2000 to
acquire 120,000 shares.
(6) Represents options exercisable within 60 days of February 29, 2000 to
acquire 72,916 shares.
(7) Includes options exercisable within 60 days of February 29, 2000 to acquire
150,503 shares.
(8) Includes options exercisable within 60 days of February 29, 2000 to acquire
40,286 shares.
(9) Individual is a former executive officer of Inprise. Mr. Yocam left Inprise
on March 31, 1999. Mr. Floisand left Inprise on October 29, 1999. Mr. Weil
left Inprise on August 19, 1999.
76
<PAGE>
INFORMATION ABOUT COREL
General
Corel was incorporated as Corel Systems Corporation under the Canada
Business Corporations Act by Articles of Incorporation dated May 29, 1985. The
name of the company was changed to Corel Corporation in May 1992. Corel was
continued under the Canada Business Corporations Act by articles of
amalgamation dated December 1, 1998. Corel maintains its executive offices at
1600 Carling Ave., Ottawa, Ontario K1N 6X3.
Business
The following is a summary description of Corel's business. A more detailed
description of Corel's business is contained in Corel's Form 10-K which is
incorporated by reference in this joint proxy statement/prospectus. See "Where
You Can Find More Information" on page . .
Corel develops, manufactures, licenses, sells and supports a wide range of
software products including graphics, business productivity, and consumer
products. Corel products are available for users of most PCs, including
International Business Machines Corporation ("IBM(R)") and IBM-compatible PCs,
Apple Computer Inc.'s Macintosh(R), UNIX-based and Linux-based systems.
Corel's business strategy emphasizes the development of a broad line of PC
software application products for business and personal use, marketed through
multiple channels of distribution. Corel is divided into three broad areas: the
Software Development Group; the Sales and Customer Support Group; and the
Operations and Administration Group.
The Software Development Group consists of four divisions, each responsible
for a particular area of software development. The Graphics Applications
Division develops graphics software applications and products designed for the
business, academic and home markets. The Productivity Applications Division
creates business productivity applications and products designed for the
business, academic and home markets. The Consumer Products Software Division
develops various software applications for retail users. The Emerging
Technologies Division develops new products for all markets.
The Sales and Customer Support Group is responsible for building long-term
business relationships with customers. This group is organized to serve three
customer types: end-users, original equipment manufacturers ("OEMs") and
enterprises. The group also focuses directly on large organizations, offering
tailored license programs and organization-wide support. The group manages the
channels that serve customers by working with distributors, resellers and OEMs.
The group supports Corel's products with technical support and customer service
for end-users and organizations.
The Operations and Administration Group is responsible for managing business
operations and overall business planning. This includes the process of
manufacturing and delivering finished goods and licenses, as well as corporate
functions such as finance, administration, human resources, legal, business
development and information technology.
Corel, formerly Corel Systems Corporation, was founded by Dr. Michael C.J.
Cowpland in 1985. Corel is an internationally recognized developer of award-
winning business productivity, graphics and operating system solutions on the
Windows(R), Linux(R), UNIX(R), Macintosh(R) and Java(TM) platforms.
Corel also develops Web-based solutions including applications, contents, e-
commerce and online services. As part of the company's commitment to increase
its presence on the Internet, Corel launched ClipartCity.com, the company's
largest online graphics offering. Corel also launched Designer.com and
OfficeCommunity.com, two free online resources tailored to the graphics
community and the small business community, respectively. Both sites serve as a
bridge to customers, keeping Corel in touch with their changing needs.
In recognition of the importance Linux will play in the future, Corel is
taking great strides toward advancing the platform worldwide. By cooperatively
working on projects with two major noncommercial, open
77
<PAGE>
source developer communities--the K Desktop Environment and Debian--Corel is on
track to advance development of a new Linux-based, user-friendly installation
and graphical user interface for the desktop.
Corel markets and distributes its products worldwide.
Recent Developments
On March 13, 2000, Corel was served with a complaint filed against it and
Michael C.J. Cowpland, Corel's chairman, president and chief executive officer,
in the United States District Court for the Eastern District of Pennsylvania.
The plaintiffs are seeking class certification in this action and have filed
the complaint on behalf of all persons who purchased or acquired Corel common
shares during the period between December 7, 1999 and December 21, 1999
inclusive. The complaint alleges that the defendants violated various
provisions of the federal securities laws, including Section 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule
10b-5, by misrepresenting or failing to disclose material information about
Corel's financial results for its fiscal quarter ending November 30, 1999. The
complaint seeks an unspecified amount of money damages. Corel is currently
reviewing the complaint and intends to defend itself against this litigation.
On March 29, 2000, Corel was served with a complaint similar to the above claim
which was also filed against Corel and Dr. Cowpland in the United States
District Court for the Eastern District of Pennsylvania. Corel is currently
reviewing the complaint and intends to defend itself against this litigation.
In addition, a recent press release issued by a law firm in the United States
indicates that a third complaint has been filed against Corel and Dr. Cowpland
alleging damages arising from similar circumstances. Corel has neither been
served with nor seen a copy of the complaint in the third alleged lawsuit.
On March 20, 2000, Corel announced its results for its first quarter ended
February 29, 2000. Revenues for the first quarter of fiscal year 2000 were
$44.1 million. Net loss for the quarter was $12.4 million or $0.19 per share
fully diluted, including a gain on investment of $0.10 per share from the
partial sale of its equity interest in GraphOn, Inc. Corel also reported that,
based on the prospects for revenue and the cost structure in place at Corel,
Corel expects that the results for the next two quarters will mirror those
experienced in the first quarter. Corel also stated that it continues to
examine its cost structure and is focusing more resources on emerging product
markets such as Linux.
Security Ownership of Certain Beneficial Owners and Management
The following table shows, as of March 17, 2000, certain information with
respect to the beneficial ownership of Corel common shares by (1) each person
known by Corel to be a beneficial owner of more than 10% of the outstanding
Corel common shares, (2) by each director and executive officer of Corel and
(3) by all directors and executive officers as a group.
<TABLE>
<CAPTION>
Corel Shares
common shares underlying
beneficially options
owned exercisable Percentage(1)
------------- ----------- -------------
<S> <C> <C> <C>
Inprise Corporation(2)................ -- 13,000,000 19.8%
Dr. Michael C.J. Cowpland............. 5,150,558 1,383,076 9.7
Lyle B. Blair......................... -- 20,000 *
Hon. William G. Davis................. 1,500 27,852 *
Hunter S. Grant....................... -- 27,852 *
Jean Louis Malouin.................... -- 20,000 *
Barbara McDougall..................... -- 20,000 *
Derek Burney.......................... -- 22,809 *
Sandra Gibson......................... -- 7,801 *
Tony O'Dowd........................... 500 73,452 *
Steve Houck........................... -- 10,000 *
Eric J. Smith......................... -- 11,911 *
Carey Stanton......................... -- 30,264 *
Ross Cammalleri....................... -- 15,000 *
Kerry D. Williams..................... 3,790 36,800 *
Directors and executive officers as a
group (15 persons)(3)................ 5,156,348 1,706,817 10.0
</TABLE>
- --------
* Indicates less than 1%.
78
<PAGE>
(1) Percentage ownership is calculated using as a denominator the total number
of Corel common shares outstanding plus the number of Corel common shares
to which the beneficial owner indicated has a right to acquire pursuant to
options currently exercisable or exercisable within 60 days.
(2) In connection with the merger agreement, Corel granted to Inprise an option
to purchase up to 13 million of its common shares (approximately 19.8% of
Corel's common shares outstanding on February 6, 2000) at an exercise price
of $20 per share. This option may be exercised under substantially the same
circumstances that require Corel to pay the termination fee to Inprise.
Inprise's principal place of business is located at 100 Enterprise Way,
Scotts Valley, California 95066-3249.
(3) The address for each director and executive officer is c/o Corel
Corporation, 1600 Carling Avenue, Ottawa, Ontario, Canada K1Z 8R7.
DESCRIPTION OF COREL CAPITAL STOCK
The following summary of the current terms of the capital stock of Corel is
not meant to be complete and is qualified by reference to the Corel certificate
and articles of amalgamation and the Corel by-laws. Copies of the Corel
certificate and articles of amalgamation and Corel's by-laws are incorporated
by reference and will be sent to Inprise stockholders and Corel shareholders
upon request. See "Where You Can Find More Information" on page . .
Authorized Capital Stock
Under the Corel certificate and articles of amalgamation, Corel's authorized
capital stock consists of an unlimited number of common shares, without par
value, and an unlimited number of preferred shares, without par value, issuable
in series.
Corel Common Shares
Corel Common Shares Outstanding. As of . , 2000, there were approximately
. Corel common shares outstanding, held of record by approximately .
shareholders. The outstanding Corel common shares are, and the Corel common
shares to be issued pursuant to the merger will be, duly authorized, validly
issued, fully paid and nonassessable.
Voting Rights. Each holder of a Corel common share is entitled to one vote
for each Corel common share held of record on the applicable record date on all
matters submitted to a vote of shareholders.
Dividend Rights. The holders of Corel common shares are entitled to receive
dividends as declared by resolution of the Corel board, subject to any
preferential dividend rights granted to the holders of any outstanding Corel
preferred shares.
Rights on Liquidation. In liquidation, each Corel common share is entitled
to share pro rata in any distribution of Corel's assets after providing for the
payment of liabilities and the liquidation preference of any outstanding Corel
preferred shares.
Preemptive Rights. Holders of Corel common shares have no preemptive rights
to purchase, subscribe for or otherwise acquire any unissued or treasury shares
or other securities.
Rights Plan. With every issued Corel common share, the Corel common share
holders also hold one common share purchase right which was issued under
Corel's Rights Agreement, dated February 11, 1999. The Form 8-A, to which the
Corel rights agreement is attached as an exhibit, was filed with the SEC on
March 25, 1999 and is incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page . .
Transfer Agent and Registrar. The Montreal Trust Company of Canada is the
transfer agent and registrar for the Corel common shares. The Montreal Trust
Company of Canada is located at 151 Front Street West, 8th Floor, Toronto,
Ontario M5J 2NI.
79
<PAGE>
Stock Exchange Listing. Corel common shares are listed under The Toronto
Stock Exchange under the symbol "COR" and are listed on Nasdaq under the symbol
"CORL." It is a condition to the completion of the merger that the Corel common
shares issuable in the merger be approved for listing on The Toronto Stock
Exchange and approved for quotation on Nasdaq before the closing of the merger.
Corel Preferred Shares
No shares of Corel preferred shares are outstanding. The board of Corel may,
without further action by the shareholders of Corel, issue a series of Corel
preferred shares and fix the rights and preferences of those shares.
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<PAGE>
DIRECTORS AND MANAGEMENT OF COREL AFTER THE MERGER
Directors
The merger agreement provides that, immediately following the completion of
the merger, the Corel board shall consist of Dale Fuller, Michael C.J.
Cowpland, a designee of Inprise agreed to by Corel and three individuals who
are current members of the Corel board. Corel has agreed that it will recommend
and support the election of Dale Fuller and the other Inprise designee to the
Corel board at Corel's 2001 and 2002 annual meetings of shareholders. In
addition, without the consent of Dale Fuller and the other Inprise designee,
the Corel board shall not have more than six members prior to the election of
directors at Corel's 2003 annual meeting of shareholders.
Management
The merger agreement provides that, immediately following the completion of
the merger, Mr. Fuller will serve as chairman of the Corel board and Dr.
Cowpland shall serve as president and chief executive officer. Corel's
obligation to cause Mr. Fuller to be appointed as chairman of the Corel board
continues until Corel's 2003 annual meeting of shareholders or for such longer
time as may be agreed to by Mr. Fuller and the Corel board.
COMPARATIVE RIGHTS OF HOLDERS OF INPRISE CORPORATION COMMON STOCK AND
COREL CORPORATION COMMON SHARES
The rights of Inprise stockholders are currently governed by the corporate
laws of Delaware, particularly the Delaware General Corporation Law, the
restated certificate of incorporation of Inprise, as amended, and the Inprise
by-laws. Upon consummation of the merger, Inprise stockholders will become
shareholders of Corel, a Canadian corporation governed by the Canada Business
Corporations Act. Thereafter, their rights will be as provided under the
Canadian Business Corporations Act, other applicable Canadian law, the Corel
certificate and articles of amalgamation and the Corel by-laws. The following
is a summary comparison of certain differences between the rights of holders of
shares of Corel common shares under the Canada Business Corporations Act, the
Corel certificate and articles of amalgamation and the Corel by-laws and the
rights of Inprise stockholders under the Delaware General Corporation Law, the
Inprise Certificate of Incorporation and the Inprise by-laws. This summary does
not purport to be a complete discussion of, and is qualified in its entirety by
reference to, the Delaware General Corporation Law, the Canada Business
Corporation Act, the respective common laws of Delaware and Canada and the full
texts of the governing corporate instruments of Inprise and Corel. Copies of
the Inprise restated certificate of incorporation and by-laws and the Corel
articles and certificate of amalgamation and by-laws are incorporated by
reference and will be sent to a holder of Inprise stock upon request. See
"Where You Can Find More Information" on page . .
Vote on Extraordinary Corporate Transactions
Inprise. Delaware corporation law generally requires the affirmative vote of
the holders of a majority of the outstanding voting stock to authorize any
merger, consolidation, dissolution or sale of all or substantially all of the
assets of a corporation. Unless required by the corporation's certificate of
incorporation, no authorizing stockholder vote is required of a corporation
surviving a merger if:
. the merger agreement does not amend the surviving corporation's
certificate of incorporation,
. each share of stock of the surviving corporation outstanding immediately
prior to the effective date of the merger will be an identical
outstanding or treasury share of the surviving corporation after the
merger, and
. the number of shares to be issued in the merger does not exceed 20% of
the surviving corporation's outstanding common stock immediately prior
to the merger.
Approval by a parent corporation's stockholders is not required under
Delaware corporation law for any merger or consolidation of a subsidiary with
its parent corporation if the parent corporation owns at least 90% of the
outstanding shares of each class of stock of the subsidiary.
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Corel. Under the Canada Business Corporations Act, certain extraordinary
corporate actions, such as amalgamations (other than an amalgamation between a
parent corporation and one or more of its wholly-owned subsidiaries or between
two or more of such subsidiaries), continuances, sales, leases or exchanges of
all or substantially all the assets of a corporation other than in the ordinary
course of business, and other extraordinary corporate actions such as
liquidations, dissolutions or other arrangements, if ordered by a court, are
required to be approved by a resolution passed by not less than two-thirds of
the votes cast by the shareholders entitled to vote in person or by proxy at
the annual or special meeting called for such purpose, whether or not the
shares held by them are designated as voting shares in the corporation's
articles of incorporation and, in certain cases, such action is also required
to be approved by not less than two-thirds of the votes cast by shareholders
entitled to vote in person or by proxy at the annual or special meeting called
for such purpose separately by each affected class or series, including by a
class or series that does not otherwise carry the right to vote. The foregoing
provisions apply to Corel.
Dividends and Distributions
Inprise. Subject to restrictions contained in a corporation's certificate of
incorporation, Delaware corporation law generally provides that a corporation
may declare and pay dividends out of the excess, if any, of net assets over
capital (the "surplus") or, when no surplus exists, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
However, dividends may not be paid out of net profits if the capital of the
corporation is less than the aggregate amount of capital represented by the
issued and outstanding stock of all classes having a preference upon the
distribution of assets. The Inprise certificate of incorporation and the
Inprise by-laws do not have additional restrictions on the declaration or
payment of dividends. Inprise has not paid any dividends on its common stock.
Corel. Under the Canada Business Corporations Act, a corporation may not
declare or pay a dividend if there are reasonable grounds for believing that
(i) the corporation is, or would after the payment of the dividend be, unable
to pay its liabilities as they become due, or (ii) the realizable value of the
corporation's assets would thereby be less than the aggregate of its
liabilities and its stated capital of all classes. Other than the preferential
rights of the holders of Corel preferred shares, of which none are issued, with
respect to dividends and liquidations, the Corel certificate and articles of
amalgamation contain no additional restrictions on the declaration or payment
of dividends. Corel has not paid any dividends on its common shares.
Amendments to Charter
Inprise. Delaware corporation law generally requires a vote of the
corporation's board of directors and the affirmative vote of the holders of a
majority of the outstanding stock of each class entitled to vote for any
amendments to the certificate of incorporation.
Corel. Under the Canada Business Corporations Act, amendments to the
articles of incorporation of a corporation generally require approval by not
less than two-thirds of the votes cast by shareholders entitled to vote in
person or by proxy at the annual or special meeting called for such purpose. If
the amendment is of a nature affecting a particular class or series in a manner
requiring a separate class or series vote, that class or series is entitled to
vote on the amendment whether or not it otherwise carries the right to vote.
The foregoing provisions apply to Corel.
Amendments to By-Laws
Inprise. Delaware corporation law states that stockholders entitled to vote
shall have the power to adopt, amend, or repeal the by-laws of a corporation,
although the corporation in its certificate of incorporation may confer such
power on the board of directors in addition to the stockholders. The Inprise
certificate of incorporation expressly authorizes the board of directors to
adopt, amend or repeal the Inprise by-laws. The Inprise by-laws authorize the
stockholders to alter, amend or repeal the Inprise by-laws by the affirmative
vote of the holders of a majority of the shares represented and entitled to
vote at a meeting of stockholders.
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Corel. The Canada Business Corporations Act provides that unless the
articles of incorporation or by-laws of a corporation provide otherwise, the
directors may, by resolution, make, amend or repeal any by-laws that regulate
the business or affairs of a corporation. Where the directors make, amend or
repeal a by-law, they are required under Canadian corporation law to submit the
by-law or amendment or repeal of a by-law to the shareholders for confirmation
at the next annual or special meeting of shareholders. The shareholders
entitled to vote at shareholder meetings may confirm, reject or amend any by-
law or amendment or repeal of a by-law by a resolution passed by a majority of
the votes cast by shareholders entitled to vote at the annual or special
meeting of shareholders represented in person or by proxy. The foregoing
provisions apply to Corel.
Interested Shareholder Transactions
Inprise. Delaware corporation law prohibits a business combination between a
corporation such as Inprise and an "interested stockholder" for a period of
three years following the time that such stockholder becomes an interested
stockholder. An interested stockholder is generally one who beneficially owns
or has the right to acquire 15% or more of the outstanding voting stock at any
time within the prior three-year period. This provision does not apply where:
. a business combination is approved by the corporation's board of
directors prior to the date the stockholder acquired its shares,
. the corporation's board of directors approved in advance the transaction
which resulted in the stockholder becoming an interested stockholder,
. the interested stockholder acquired at least 85% of the voting stock of
the corporation (excluding shares owned by directors and officers and
shares held under employee stock plans which lack confidentiality with
regard to tendering shares in a tender offer) in the transaction in
which the stockholder become an interested stockholder, or
. the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of the votes entitled
to be cast by disinterested stockholders at an annual or special
meeting.
The Inprise certificate of incorporation, as allowed by Delaware corporation
law, contains a provision specifically electing that the restrictions set forth
in this paragraph do not apply to Inprise.
Corel. The Canada Business Corporations Act does not contain a comparable
provision with respect to business combinations. However, policies of certain
Canadian securities regulatory authorities, including Policy Statement 9.1 of
the Ontario Securities Commission ("Policy 9.1"), contain requirements in
connection with related party transactions. A related party transaction means,
generally, any transaction by which an issuer, directly or indirectly, acquires
or transfers an asset or acquires or issues treasury securities or assumes or
transfers a liability from or to, as the case may be, a related party by any
means in any one or any combination of transactions. "Related party" is defined
in Policy 9.1 and includes directors, senior officers and holders of at least
10% of the voting securities of the issuer. Policy 9.1 requires more detailed
disclosure in any proxy material required to be sent to security holders in
connection with a related party transaction, and, subject to certain
exceptions, the preparation of a formal valuation of the subject matter of the
related party transaction and any non-cash consideration offered therefor and
the inclusion of a summary of the valuation in the proxy material. Policy 9.1
also requires in certain circumstances, and subject to certain exceptions, that
the minority shareholders of the issuer separately approve the transaction, by
a simple majority or two-thirds of the votes cast, depending on the
circumstances. The foregoing provisions apply to Corel.
Dissenters' and Appraisal Rights
Inprise. Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation for which a stockholder's vote is required
are, in certain instances, entitled to demand payment in
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cash for the fair value of their shares (excluding any appreciation or
depreciation as a consequence, or in expectation of the transaction), as
determined by an independent appraiser appointed by the Delaware Court of
Chancery. There are, however, no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock, at the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting of stockholders to act upon the merger or consolidation, are
either:
. listed on a national securities exchange or designated as a national
market system security on a interdealer quotation system by the National
Association of Securities Dealers, Inc., or
. held of record by more than 2,000 stockholders,
unless the agreement of merger or consolidation requires the stockholders to
receive anything other than
. stock of the surviving corporation,
. stock of another corporation which is 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 held of record by more than 2,000
stockholders,
. cash in lieu of fractional shares, or
. some combination of the above.
Holders of Inprise common stock are not entitled to appraisal rights in
connection with the merger.
Corel. Shareholders of a Canada Business Corporations Act corporation are
entitled to exercise dissent rights and to be paid the fair value of their
shares in connection with:
. an amendment to a corporation's articles of incorporation to add, change
or remove any provisions restricting or constraining the issue, transfer
or ownership of shares of the class held by holders by the class so
affected,
. an amendment to a corporation's articles of incorporation to add, change
or remove any restriction upon the business or businesses that the
corporation may carry on,
. certain other amendments to a corporation's articles of incorporation of
a nature requiring a separate class or series vote,
. an amalgamation (other than an amalgamation between a parent corporation
and one or more of its wholly-owned subsidiaries or between two or more
of such subsidiaries),
. a continuance under the laws of another jurisdiction,
. a sale, lease or exchange of all or substantially all the property of
the corporation other than in the ordinary course of business, or
. a court order permitting a shareholder to dissent in connection with an
application to the court for an order approving an arrangement proposed
by the corporation; provided that a shareholder is not entitled to
dissent if an amendment to the articles of incorporation is effected by
a court order approving a reorganization or a court order rectifying a
matter that is oppressive or unfairly prejudicial to or that unfairly
disregards the interests of any security holder, creditor, director or
officer.
In addition, under the Canada Business Corporations Act there is no right of
partial dissent and, accordingly, a dissenting shareholder may only dissent
with respect to all shares held by him or her on behalf of any one beneficial
owner and which are registered in the name of the dissenting shareholder.
Holders of Corel common shares are not entitled to appraisal rights in
connection with the merger.
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Derivative Actions
Inprise. Delaware corporation law provides that a stockholder must state in
the complaint that he or she was a stockholder of the corporation at the time
of the transaction of which he or she complains. A stockholder may not sue
derivatively unless he or she first makes demand on the corporation that it
bring suit and such demand has been refused, unless it is shown that such
demand would have been futile.
Corel. Under the Canada Business Corporations Act, a complainant may apply
to the court for leave to bring an action in the name of and on behalf of a
corporation or any of its subsidiaries, or to intervene in an existing action
to which any such corporation is a party, for the purpose of prosecuting,
defending or discontinuing the action on behalf of the corporation. Under the
Canada Business Corporations Act, no action may be brought and no intervention
in an action may be made unless the complainant has given reasonable notice to
the directors of the corporation or its subsidiary of the complainant's
intention to apply to the court and the court is satisfied that,
. the directors of the corporation or its subsidiary will not bring,
diligently prosecute or defend or discontinue the action,
. the complainant is acting in good faith, and
. it appears to be in the interest of the corporation or its subsidiary
that the action be brought, prosecuted, defended or discontinued.
Under Canada Business Corporations Act, the court in a derivative action may
make any order it thinks fit including, without limitation,
. an order authorizing the complainant or any other person to control the
conduct of the action,
. an order giving directions for the conduct of the action,
. an order directing that any amount adjudged payable by a defendant in
the action shall be paid, in whole or in part, directly to former and
present security holders of the corporation or its subsidiary instead of
to the corporation or its subsidiary, and
. an order requiring the corporation or its subsidiary to pay reasonable
legal fees reasonably incurred by the complainant in connection with the
action. Additionally, under Canadian corporation law, a court may order
a corporation or its subsidiary to pay the complainant's interim costs,
including legal fees and disbursements. Although the complainant may be
held accountable for the interim costs on final disposition of the
complaint, it is not required to give security for costs in a derivative
action.
Director Qualifications
Inprise. Delaware corporation law does not have any residency or other
director qualification requirements.
Corel. A majority of the directors of a Canadian corporation generally must
be resident Canadians. The Canada Business Corporations Act also requires that
a corporation whose securities are publicly traded have not fewer than three
directors, at least two of whom are not officers or employees of the
corporation or any of its affiliates. The foregoing provisions apply to Corel.
Election of Directors
Inprise. Under Delaware corporation law, directors are elected at each
annual stockholder meeting unless their terms are staggered. Vacancies on the
board of directors may be filled by the stockholders or directors, unless the
certificate of incorporation or a by-law provides otherwise. The certificate of
incorporation may authorize the election of certain directors by one or more
classes or series of shares, and the certificate of incorporation, or an
initial by-law, or a by-law adopted by a vote of the stockholders, may provide
for staggered terms for the directors. The Inprise certificate of incorporation
provides for classification of the board of directors into three classes of
directors with the classes as nearly equal in number as possible and elected
for a three year term with only one class standing for election each year.
There is no cumulative voting.
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Corel. The Corel certificate and articles of amalgamation and the Corel by-
laws do not provide for a classified board of directors or for cumulative
voting in the election of directors.
Removal of Directors
Inprise. The Inprise certificate of incorporation provides that any
director, or the entire board of directors, may be removed, with or without
cause, by the affirmative vote of the holders of at least a majority of all
shares then entitled to vote at an election of directors, voting together as a
single class.
Corel. The shareholders of a Canada Business Corporations Act corporation
may, by resolution passed by a majority of the votes cast thereon at a meeting
of shareholders called for that purpose, remove any director, with or without
cause, before the expiration of such director's term of office and may elect
any qualified person in such director's stead for the remainder of such
director's term.
Vacancies on the Board of Directors
Inprise. Under the Inprise certificate of incorporation, any vacancy on the
board, however occurring, may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director, or, if
any vacancy is not filled by the remaining directors, by the stockholders, and
directors chosen in this way would hold office until the annual meeting of the
stockholders of Inprise at which the term of the class to which they have been
elected expires.
Corel. Generally, under the Canada Business Corporations Act, if a vacancy
should occur in the board of directors, the remaining directors, if
constituting a quorum, may appoint a qualified person to fill the vacancy for
the remainder of the vacating director's term. In the absence of a quorum, the
remaining directors shall call a meeting of shareholders to fill the vacancy.
In addition, if the articles of a corporation so provide, the directors may
increase the number of directors within the range provided in the articles and
may fill the vacancies thereby created for a term expiring not later than the
next annual meeting of shareholders provided that the total number of directors
so appointed does not exceed one-third of the number of directors elected at
the previous annual meeting of shareholders. The Corel certificate and articles
of amalgamation do not provide for the filling of vacancies caused by an
increase in the number of directors.
Director and Officer Indemnification
Inprise. Delaware corporation law authorizes a corporation to indemnify its
present and former directors and officers against all reasonable expenses
including attorneys' fees and, except in actions initiated by or in right of
the corporation, against all judgments, fines and amounts paid in settlement,
in actions brought against them, provided that such individual is determined to
have acted in good faith, for a purpose which he reasonably believed to be in,
or not opposed to, the best interests of the corporation and, in the case of a
criminal proceeding, had no reason to believe his conduct was unlawful. The
Inprise certificate of incorporation requires indemnification to the full
extent authorized by Delaware corporation law. Delaware corporation law also
allows for the advance payment of an indemnitee's expenses prior to the final
disposition of an action, provided that the indemnitee undertakes to repay any
amount advanced if it is later determined that the indemnitee is not entitled
to indemnification with regard to the action for which the expenses were
advanced. The Inprise certificate of incorporation provides for advance
payments, as permitted by Delaware corporation law.
Corel. The Canada Business Corporations Act also generally provides that a
corporation may indemnify its present and former directors or officers or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is made a party by
reason of being or having been a
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director or officer of such corporation. However, such indemnity is limited to
circumstances in which the director or officer acted honestly and in good faith
with a view to the best interests of the corporation, and in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, the director or officer must have had reasonable grounds for believing
that his or her conduct was lawful. Subject to the above mentioned limitations,
a corporation may, with the approval of a court, also indemnify its present and
former directors or officers or a person who acts or acted at the corporation's
request as a director or officer of a body corporate of which the corporation
is or was a shareholder or creditor, and his or her heirs and legal
representatives in respect of an action by or on behalf of the corporation or
body corporate to procure a judgment in its favor, to which such person is made
a party by reason of being of having been a director or an officer of the
corporation or body corporate. The Corel by-laws require indemnification to the
full extent authorized by the Canada Business Corporations Act. Where an
officer or director is substantially successful on the merits in his or her
defense of such action or proceeding, such officer or director is entitled to
indemnification from the corporation for such costs, charges and expenses,
which were reasonably incurred. The Canada Business Corporations Act does not
expressly contemplate the advance payment of an indemnitee's expenses prior to
the final disposition of an action.
Director Exculpation
Inprise. Under Delaware corporation law, a corporation is permitted to
include a provision in its certificate of incorporation which eliminates the
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided such liability
does not arise from certain proscribed conduct, including intentional
misconduct, deriving an improper personal benefit from a transaction and breach
of the duty of loyalty. The Inprise certificate of incorporation contains such
a provision limiting the liability of its directors.
Corel. The Canada Business Corporations Act has no comparable provision.
Special Meeting of Security Holders
Inprise. Under Delaware corporation law, a special meeting of the
stockholders can be called by the board of directors or any person so
authorized in the certificate of incorporation or in the by-laws. The Inprise
by-laws enable a special meeting to be called only by the board of directors,
chairman of the board or the president.
Corel. Under the Canada Business Corporations Act, a special meeting of
shareholders may be called by the directors of a corporation. Under the Corel
by-laws, in addition to the Corel board, the chairman of the board of Corel or
the president of Corel has the power to call a special meeting of shareholders.
The holders of not less than five per cent of the issued shares of a
corporation that carry the right to vote may request that directors to call a
meeting of shareholders. If the meeting is not called within 21 days after
receiving such a request, any shareholder that signed the request may call the
meeting.
Stockholder Proposals
Inprise. Generally, under U.S. securities laws, a stockholder may submit a
proposal to be included in a company's proxy statement if the stockholder:
. owns at least 1% or $2,000 market value of the securities entitled to be
voted on the proposal,
. has owned the securities for at least one year prior to the date of the
proposal, and
. continues to own the securities through the date of the meeting.
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A stockholder must also comply with procedural requirements described in the
Exchange Act.
Corel. Under the Canada Business Corporations Act, a shareholder entitled to
vote at an annual meeting of stockholders may submit to the corporation a
proposal with matters that the shareholder proposes to raise at the next annual
meeting. Upon receipt of a proposal, a corporation that solicits proxies will
include the proposal in the management proxy circular and, if requested by the
shareholder, include in the management proxy circular a statement by the
shareholder of not more than 200 words in support of the proposal, and the name
and address of the shareholder.
A corporation may, within 10 days after receiving a shareholder proposal,
notify the shareholder of its intention to omit the proposal from the
management proxy circular if:
. the proposal is not submitted at least 90 days before the anniversary
date of the previous annual meeting,
. it appears that the proposal is submitted by the shareholder for the
purpose of securing publicity or enforcing a personal claim or
grievance, or primarily for the purpose of promoting general economic,
political, racial, religious, social or similar causes,
. the corporation, in the previous two years, included a substantially
similar proposal at the request of the shareholder and the shareholder
failed to present the proposal at the annual meeting, or
. a substantially similar proposal was submitted to shareholders within
the past two years and the proposal was defeated.
Consents in Lieu of Meetings
Inprise. Under Delaware corporation law, unless otherwise provided in the
certificate of incorporation, any action required to be taken or which may be
taken at an annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize the action at a meeting.
Inprise's certificate of incorporation provides that any action be effected
only at a duly called annual or special meeting.
Corel. The Canada Business Corporations Act provides shareholder action may
be taken without a meeting only by a written resolution signed by all
shareholders who would be entitled to vote on that action at a meeting.
Quorum Requirements
Inprise. Under Delaware corporation law, a quorum of stockholders is a
majority of the outstanding shares entitled to vote, present in person or
represented by proxy unless otherwise specified in the certificate of
incorporation or in the by-laws, but in no event can the quorum be less than
one-third of the outstanding shares entitled to vote. The Inprise by-laws state
that a quorum shall be the holders, present in person or by proxy, of a
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at the meeting.
Corel. Under the Canada Business Corporations Act, a quorum of shareholders
is a majority of the outstanding shares entitled to vote at a meeting of
shareholders unless otherwise specified in the by-laws. The Corel by-laws
generally state that a quorum shall be five persons present in person and
representing in their own right, or by proxy, or as the duly authorized
representative of any shareholder that is a body corporate or association, not
less than 10% in number of the outstanding shares of Corel carrying voting
rights at the meeting of shareholders.
Inspection of Books and Records
Inprise. Under Delaware corporation law, any stockholder of record of a
corporation, its agents or legal representatives may make a written demand to
examine the records of that corporation. Such a demand to examine the
corporation's records, which must be made under oath, must have a "proper
purpose" and be directed to the corporation at its principal place of business
or its registered office in Delaware.
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Corel. The Canada Business Corporations Act provides that shareholders,
creditors, their agents and legal representatives may examine certain of the
records of a corporation such as Corel during usual business hours and take
extracts therefrom, free of charge.
OTHER MATTERS
Neither of the boards of directors of Inprise nor Corel currently intends to
bring before either Inprise's or Corel's special meeting any matters other than
those specified in the notices of the special meetings and neither board has
knowledge of any other matters that may be brought up by other persons.
However, if any other matters properly come before either company's special
meeting or any adjournment or postponement of either company's special meeting,
and are voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the persons named as proxies to vote the shares represented by
those proxies as to those other matters. Those persons named as Inprise proxies
intend to vote with respect to other matters, if any, in accordance with the
recommendation of the management of Inprise. Those persons named in the Corel
proxies intend to vote with respect to other matters, if any, in accordance
with the recommendation of the management of Corel.
LEGAL MATTERS
McCarthy Tetrault of Ottawa, Canada has provided an opinion as to the
validity of the Corel common shares to be issued in connection with the merger.
EXPERTS
The audited financial statements of Corel incorporated by reference in this
joint proxy statement/prospectus for the years ended November 30, 1999 and 1998
and of Inprise for the years ended December 31, 1999 and 1998 and for the nine
months ended December 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants and have been so incorporated in reliance upon the
reports of PricewaterhouseCoopers LLP given on their authority as experts in
accounting and auditing.
The consolidated statements of operations and retained earnings (deficit)
and cash flows of Corel for the year ended November 30, 1997 incorporated by
reference in this joint proxy statement/prospectus have been audited by KPMG
LLP, independent accountants and have been so incorporated in reliance upon the
report of KPMG LLP given on their authority as experts in accounting and
auditing.
INPRISE STOCKHOLDER PROPOSALS
Inprise will hold an annual meeting in the year 2000 only if the merger has
not already been completed. Stockholder proposals would have been eligible for
inclusion in the proxy statement and form of proxy for Inprise's 2000 annual
meeting pursuant to Rule 14a-8 under the Exchange Act, if such proposals were
received by Inprise by January 11, 2000. Notwithstanding the foregoing, if
Inprise does not hold its annual meeting on or prior to July 5, 2000, then the
deadline for such proposals will be a reasonable time period before Inprise
begins to print and distribute proxy materials in connection with its 2000
annual meeting. Notices of stockholder proposals submitted outside of Rule 14a-
8 in connection with an annual meeting will be considered timely, for purposes
of Rule 14a-4(c) under the Exchange Act and Inprise's By-laws, if such notices
are received not less than 30 days prior to the annual meeting; provided,
however, that in the event that less than 40 days' notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
notice by the stockholder to be timely must be received not later than the
close of business on the 10th day
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following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made, whichever first occurs. Such
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting:
. a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the
annual meeting,
. the name and record address of the stockholder proposing such business,
. the class, series and number of shares of capital stock of Inprise which
are beneficially owned by the stockholder, and
. any material interest of the stockholder in such business.
Any such proposal or notice should be directed to the attention of the
Corporate Secretary, Inprise Corporation, 100 Enterprise Way, Scotts Valley,
California 95066-3249.
WHERE YOU CAN FIND MORE INFORMATION
Corel has filed a Registration Statement on Form S-4 to register with the
Securities and Exchange Commission the Corel common shares to be issued to
Inprise stockholders in the merger. This document is a part of that
registration statement and constitutes a prospectus of Corel in addition to
being part of the special meeting proxy statement of Corel and Inprise. As
allowed by the rules of the Securities and Exchange Commission, this joint
proxy statement/prospectus does not, however, contain all the information you
can find in the registration statement or the exhibits to the registration
statement.
Inprise and Corel file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information filed by
Inprise or Corel at the Securities and Exchange Commission's public reference
rooms at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Citicorp Center,
450 Fifth Street,
N.W., 7 World Trade Center, 500 West Madison Street,
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. You may also obtain copies
of documents filed with the Securities and Exchange Commission from commercial
document retrieval services (some of which also provide on-line delivery) and
at the world wide web site maintained by the Securities and Exchange Commission
at www.sec.gov.
Inprise common stock and Corel common shares are each traded on Nasdaq and
are each required to file reports, proxy statements and other information with
Nasdaq. Reports, proxy statements and other information concerning Inprise and
Corel may be inspected at the offices of The Nasdaq Stock Market, Inc. which is
located at 1735 K Street, N.W., Washington, D.C. 20006.
Corel common shares are also traded on The Toronto Stock Exchange and Corel
is required to file reports, proxy statements and other information with such
exchange. Reports, proxy statements and other information concerning Corel can
be inspected at the offices of The Toronto Stock Exchange at 2 First Canadian
Place, Toronto, Ontario, Canada M5X 1J2.
Corel also files annual, quarterly and special reports, proxy statements and
other information with the Canadian securities regulatory authorities in such
provinces where such filings are required to be made. Copies of such filings
are available to the public over the Internet at www.sedar.com, the web site
maintained on behalf of the Canadian securities administrators for accessing
filings made through SEDAR (System for Electronic Document Analysis and
Retrieval). SEDAR is the system used for electronically filing most securities
related information with the Canadian securities regulatory authorities.
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The Securities and Exchange Commission allows us to "incorporate by
reference" information into this joint proxy statement/prospectus. This means
that we can disclose important information to you by referring you to another
document filed separately with the Securities and Exchange Commission. The
information incorporated by reference is deemed to be part of this joint proxy
statement/prospectus, except for any information superseded by information
contained directly in this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the
documents set forth below that have previously been filed with the Securities
and Exchange Commission. These documents contain important information about
our companies and our financial condition.
<TABLE>
<CAPTION>
Inprise SEC Filings (File No. 0-16096) Period
-------------------------------------- ------
<C> <S>
Annual Report on Form 10-K of Inprise...... Fiscal year ended December 31,
1999 (filed on April 4, 2000).
Current Reports on Form 8-K of Inprise..... Dated July 2, 1999 (filed on July
6, 1999) and dated February 9,
2000 (filed on February 10,
2000).
Proxy Statement of Inprise................. Annual Meeting of Stockholders
held on June 4, 1999 (filed on
May 11, 1999).
<CAPTION>
Corel SEC Filings (File No. 0-20562) Period
------------------------------------ ------
<C> <S>
Annual Report on Form 10-K of Corel........ Fiscal year ended November 30,
1999 (filed on February 28,
2000).
Registration Statement on Form 8-A......... Dated March 19, 1999 (filed on
March 25, 1999).
</TABLE>
Information has been incorporated by reference in this document from
documents filed with the securities commissions or similar authorities in
Canada. The following documents are specifically incorporated by reference into
and form an integral part of this document:
<TABLE>
<CAPTION>
Corel SEDAR Filings Period
------------------- ------
<C> <S>
Material change report in connection with Dated February 11, 2000 (filed on
the merger................................ February 11, 2000).
Management Proxy Circular.................. Dated February 2, 2000 (filed on
February 11, 2000).
Audited Consolidated Financial Statements.. Fiscal year ended November 30,
1999 (filed on February 11,
2000).
Management's Discussion and Analysis of
Financial Condition and Results of Fiscal year ended November 30,
Operations................................ 1999 (filed on February 11,
2000).
Unaudited Consolidated Financial Quarter ended February 29, 2000
Statements................................ (filed on April 3, 2000).
</TABLE>
Corel and Inprise are also incorporating by reference additional documents
that they file with the Securities and Exchange Commission between the date of
this joint proxy statement/prospectus and the dates of their respective special
meetings. In addition, any document of the type referred to above, and any
material change reports (excluding confidential reports), interim financial
statements and information circulars, all as filed by Corel with the various
securities commissions or any similar authorities in the provinces of Canada
between the date of this document and the date of the meetings, shall be deemed
to be incorporated by reference in this joint proxy statement/prospectus. Any
statement contained in a document incorporated or deemed to be incorporated by
reference shall be deemed to be modified or superseded for the purposes of this
document to the extent that a statement contained in this document, or in any
other subsequently filed document that is also incorporated or deemed to be
incorporated by reference, modifies or supersedes such statement.
91
<PAGE>
Inprise has provided all information contained or incorporated by reference
in this joint proxy statement/prospectus with respect to Inprise. Corel has
provided all information contained or incorporated by reference in this joint
proxy statement/prospectus with respect to Corel.
If you are a shareholder of Corel or a stockholder of Inprise, you may have
been sent some of the documents incorporated by reference, but you can obtain
any of the incorporated documents by contacting us or the Securities and
Exchange Commission. Documents filed by Corel with the various securities
commissions or any similar authorities in the provinces of Canada can be
requested from Micromedia, 20 Victoria Street, Toronto, Canada MSC 2NC. Please
request these documents by . , in order to receive them before the meetings.
We will send you the documents incorporated by reference, without charge,
excluding all exhibits, unless we have specifically incorporated by reference
the exhibit in this joint proxy statement/prospectus.
You may obtain documents incorporated by reference in this joint proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate party at the following addresses:
<TABLE>
<S> <C>
Inprise Corporation Corel Corporation
Attention: Corporate
Secretary Attention: Investor Relations
100 Enterprise Way 1600 Carling Avenue
Scotts Valley, California 95066-
3249 Ottawa, Ontario K1Z 8R7
Telephone: (831) 431-1000 Telephone: (613) 728-0826
</TABLE>
If you would like to request documents from us, please do so by . , 2000 to
receive them before the meetings.
You can also get more information by visiting Inprise's web site at
www.inprise.com and Corel's web site at www.corel.com. Web site materials are
not a part of this joint proxy statement/prospectus.
WHAT INFORMATION YOU SHOULD RELY ON
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the Inprise
proposal and the Corel proposals. Neither Corel nor Inprise has authorized any
person to give any information or to make any representation that differs from,
or adds to, the information discussed in this joint proxy statement/prospectus
or in the annexes attached hereto which are specifically incorporated by
reference. Therefore, if anyone gives you different or additional information,
you should not rely on it.
This joint proxy statement/prospectus is dated . , 2000. The information
contained in this joint proxy statement/prospectus speaks only as of that date
unless the information specifically indicates that another date applies. You
should not assume that the information contained in this joint proxy
statement/prospectus is accurate as of any date other than the date hereof.
Neither the delivery of this joint proxy statement/prospectus nor the issuance
of Corel common shares pursuant to the merger agreement creates any implication
to the contrary.
This joint proxy statement/prospectus does not constitute an offer to
exchange or sell, or a solicitation of an offer to exchange or purchase,
Inprise common stock or Corel common shares or a proxy solicitation to or from
any person to whom it is unlawful to direct these activities.
92
<PAGE>
COREL DIRECTORS' APPROVAL UNDER CANADIAN LAW
The contents and the sending of this joint proxy statement/prospectus
insofar as it relates to Corel have been approved by the directors of Corel.
COREL CORPORATION
/s/ Eric J. Smith
By: _________________________________
Vice President, General Counsel
and Secretary
April 4, 2000
93
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX A
MERGER AGREEMENT
dated as of February 6, 2000
by and among
COREL CORPORATION
CARLETON ACQUISITION CO.
--and--
INPRISE CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
ARTICLE I
THE MERGER
<TABLE>
<CAPTION>
Page
No.
----
<C> <S> <C>
1.01 The Merger........................................................ 1
1.02 Closing........................................................... 1
1.03 Effective Time.................................................... 2
1.04 Certificate of Incorporation and Bylaws of the Surviving 2
Corporation.......................................................
1.05 Directors and Officers of the Surviving Corporation............... 2
1.06 Effects of the Merger............................................. 2
1.07 Further Assurances................................................ 2
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock....................................... 2
2.02 Exchange of Certificates.......................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INPRISE
3.01 Organization and Qualification.................................... 6
3.02 Capital Stock..................................................... 7
3.03 Authority Relative to this Agreement.............................. 7
3.04 Non-Contravention; Approvals and Consents......................... 8
3.05 Reports and Financial Statements.................................. 9
3.06 Absence of Certain Changes or Events.............................. 9
3.07 Absence of Undisclosed Liabilities................................ 9
3.08 Legal Proceedings................................................. 10
3.09 Information Supplied.............................................. 10
3.10 Compliance with Laws and Orders................................... 10
3.11 Compliance with Agreements; Certain Agreements.................... 10
3.12 Taxes............................................................. 11
3.13 Employee Benefit Plans; ERISA..................................... 12
3.14 Labor Matters..................................................... 12
3.15 Environmental Matters............................................. 12
3.16 Intellectual Property Rights...................................... 13
3.17 Vote Required..................................................... 15
3.18 Opinion of Financial Advisor...................................... 15
3.19 Ownership of Corel Common Stock................................... 15
3.20 Takeover Laws..................................................... 15
3.21 Rights Agreement.................................................. 15
</TABLE>
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COREL AND SUB
<TABLE>
<CAPTION>
Page
No.
----
<C> <S> <C>
4.01 Organization and Qualification...................................... 16
4.02 Capital Stock....................................................... 16
4.03 Authority Relative to this Agreement................................ 17
4.04 Non-Contravention; Approvals and Consents........................... 17
4.05 Reports and Financial Statements.................................... 18
4.06 Absence of Certain Changes or Events................................ 19
4.07 Absence of Undisclosed Liabilities.................................. 19
4.08 Legal Proceedings................................................... 19
4.09 Information Supplied................................................ 19
4.10 Compliance with Laws and Orders..................................... 20
4.11 Compliance with Agreements; Certain Agreements...................... 20
4.12 Taxes............................................................... 20
4.13 Employee Benefit Plans; ERISA....................................... 21
4.14 Labor Matters....................................................... 21
4.15 Environmental Matters............................................... 21
4.16 Intellectual Property Rights........................................ 22
4.17 Vote Required....................................................... 23
4.18 Opinion of Financial Advisor........................................ 23
4.19 Ownership of Inprise Common Stock................................... 23
4.20 Takeover Laws....................................................... 23
4.21 Rights Agreement.................................................... 23
ARTICLE V
COVENANTS
5.01 Covenants of Inprise and Corel...................................... 24
5.02 No Solicitations.................................................... 26
5.03 Conduct of Business of Sub.......................................... 27
5.04 Third Party Standstill Agreements................................... 27
5.05 Purchases of Capital Stock of the Other Party....................... 28
5.06 Actions Regarding Rights............................................ 28
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality.............................. 28
6.02 Preparation of Registration Statement and Proxy Statements.......... 28
6.03 Approval of Shareholders............................................ 29
6.04 Inprise Affiliates.................................................. 29
6.05 Stock Exchange Listing.............................................. 30
6.06 Certain Tax Matters................................................. 30
6.07 Regulatory and Other Approvals...................................... 30
6.08 Inprise Option Plans................................................ 30
6.09 Employee Benefits................................................... 31
6.10 Directors' and Officers' Indemnification and Insurance.............. 32
6.11 Corel Governance.................................................... 33
6.12 Stock Option Agreements............................................. 34
6.13 Expenses............................................................ 34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
No.
----
<C> <S> <C>
6.14 Brokers or Finders................................................ 34
6.15 Takeover Statutes................................................. 34
6.16 Conveyance Taxes.................................................. 34
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligations to Effect the Merger....... 34
7.02 Conditions to Obligation of Corel and Sub to Effect the Merger.... 35
7.03 Conditions to Obligation of Inprise to Effect the Merger.......... 36
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination....................................................... 37
8.02 Effect of Termination............................................. 38
8.03 Amendment......................................................... 39
8.04 Waiver............................................................ 39
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and 39
Agreements........................................................
9.02 Notices........................................................... 39
9.03 Entire Agreement; Incorporation of Exhibits....................... 40
9.04 Public Announcements.............................................. 41
9.05 No Third Party Beneficiaries...................................... 41
9.06 No Assignment; Binding Effect..................................... 41
9.07 Headings.......................................................... 41
9.08 Interpretation.................................................... 41
9.09 Invalid Provisions................................................ 41
9.10 Governing Law..................................................... 42
9.11 Enforcement of Agreement.......................................... 42
9.12 Jursidiction...................................................... 42
9.13 Service of Process................................................ 42
9.14 Waiver of Trial by Jury........................................... 43
9.15 Remedies Cumulative............................................... 43
9.16 Obligations of Corel and Inprise.................................. 43
9.17 Limitations on Warranties......................................... 43
9.18 Certain Definitions............................................... 43
9.19 Counterparts...................................................... 45
9.20 Disclosure Letters................................................ 45
9.21 Execution......................................................... 45
9.22 Personal Liability................................................ 45
9.23 Currency.......................................................... 45
9.24 Date for Any Action............................................... 45
</TABLE>
EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT A....................................... Form of Affiliate Agreement
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings ascribed
to them in the corresponding Sections of this Agreement listed below:
<TABLE>
<S> <C>
"affiliate".............................................. Section 9.11(a)
"Affiliate Agreement".................................... Section 6.04
"this Agreement"......................................... Preamble
"Alternative Proposal"................................... Section 5.02
"Antitrust Division"..................................... Section 6.07
"beneficially"........................................... Section 9.11(b)
"business day"........................................... Section 9.11(c)
"Canadian GAAP".......................................... Section 4.05
"CERCLA"................................................. Section 3.15(b)
"Certificate of Merger".................................. Section 1.03
"Certificates"........................................... Section 2.02(b)
"Closing"................................................ Section 1.02
"Closing Date"........................................... Section 1.02
"Code"................................................... Preamble
"Common Stock Trust"..................................... Section 2.02(e)(iii)
"Confidentiality Agreement".............................. Section 6.01(a)
"Confidential Information"............................... Section 6.01(a)
"Constituent Corporations"............................... Section 1.01
"Contracts".............................................. Section 3.04(a)
"control," "controlling," "controlled by" and "under Section 9.11(a)
common control with"....................................
"Conversion Number"...................................... Section 2.01(c)
"Corel Common Stock"..................................... Section 2.01(c)(i)
"Corel Disclosure Letter"................................ Section 4.01
"Corel Employee Benefit Plan"............................ Section 4.13(b)
"Corel Financial Statements"............................. Section 4.05
"Corel License Agreements"............................... Section 4.16(b)
"Corel Permits".......................................... Section 4.10
"Corel Reports".......................................... Section 4.05
"Corel Rights"........................................... Section 2.01(c)(i)
"Corel Rights Agreement"................................. Section 2.01(c)(i)
"Corel Shareholders' Approval"........................... Section 6.03(a)
"Corel Shareholders' Meeting"............................ Section 6.03(a)
"Corel Shareholders' Proposals".......................... Section 6.03(a)
"Corel Stock Option"..................................... Section 4.02(a)
"Corel's Counsel"........................................ Section 7.02(c)
"Current Inprise Directors".............................. Section 6.11
"Current Corel Directors"................................ Section 6.11
"DL"..................................................... Section 1.01
"Dissenting Share"....................................... Section 2.01(d)(i)
"Effective Time"......................................... Section 1.03
"Environmental Law"...................................... Section 3.15(e)(i)
"Environmental Permits".................................. Section 3.15(a)
"ERISA".................................................. Section 3.13(b)(i)
"ESPP"................................................... Section 2.01(f)
"Excess Shares".......................................... Section 2.02(e)(ii)
"Exchange Act"........................................... Section 3.04(b)
"Exchange Agent"......................................... Section 2.02(a)
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
"Exchange Fund"............................................ Section 2.02(a)
"FTC"...................................................... Section 6.07
"Governmental or Regulatory Authority"..................... Section 3.04(a)
"group".................................................... Section 9.11(f)
"Hazardous Material"....................................... Section 3.15(e)(ii)
"HSR Act".................................................. Section 3.04(b)
"Indemnified Liabilities".................................. Section 6.10(a)
"Indemnified Parties"...................................... Section 6.10(a)
"Indemnifying Party"....................................... Section 6.10(a)
"Inprise".................................................. Preamble
"Inprise Affiliates"....................................... Section 6.04
"Inprise Common Stock"..................................... Section 2.01(b)
"Inprises Counsel"......................................... Section 7.03(d)
"Inprise Employee Benefit Plan"............................ Section 3.13(b)(i)
"Inprise Financial Statements"............................. Section 3.05
"Inprise License Agreements"............................... Section 3.16(b)
"Inprise Option Plans"..................................... Section 2.01(e)
"Inprise Permits".......................................... Section 3.10
"Inprise Preferred Stock".................................. Section 3.02
"Inprise Proxy Statement".................................. Section 3.09
"Inprise Reports".......................................... Section 3.05
"Inprise Rights"........................................... Section 2.01(c)(i)
"Inprise Rights Agreement"................................. Section 2.01(c)(i)
"Inprise Series A Stock"................................... Section 3.02(a)
"Inprise Series B Stock"................................... Section 3.02(a)
"Inprise Series C Stock"................................... Section 3.02(a)
"Inprise Stock Option"..................................... Section 6.08
"Inprise Stock Option Agreement"........................... Section 3.02(a)
"Inprise Shareholders' Approval"........................... Section 6.03(b)
"Inprise Shareholders' Meeting"............................ Section 6.03(b)
"Intellectual Property Rights"............................. Section 3.16
"laws"..................................................... Section 3.04(a)
"Lien"..................................................... Section 3.02(b)
"Material Corel Systems"................................... Section 4.16(j)
"Merger"................................................... Preamble
"Orders"................................................... Section 3.04(a)
"person"................................................... Section 9.11(f)
"Plan"..................................................... Section 3.13(b)(ii)
"Principal Party".......................................... Section 5.01
"Proxy Statement".......................................... Section 3.09
"qualified stock options".................................. Section 6.09(a)
"Registration Statement"................................... Section 4.09
"Representatives".......................................... Section 9.11(g)
"SEC"...................................................... Section 3.04(b)
"Secretary of State"....................................... Section 1.03
"Securities Act"........................................... Section 3.04(b)
"Shareholders' Meetings"................................... Section 6.03(b)
"Specified Amount"......................................... Section 8.02(b)
"Stock Option Agreements".................................. Preamble
"Sub"...................................................... Preamble
"Sub Common Stock"......................................... Section 2.01(a)
"Subsidiaries"............................................. Section 9.11(h)
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
"Subsidiary".................................................... Section 9.11(h)
"Superior Proposal "............................................ Section 8.01(c)
"Surviving Corporation"......................................... Section 1.01
"Surviving Corporation Common Stock"............................ Section 2.01(a)
"Takeover Laws"................................................. Section 3.20
"taxes"......................................................... Section 3.12(c)
"TSE"........................................................... Section 2.01(e)
"U.S. GAAP"..................................................... Section 3.05
</TABLE>
vi
<PAGE>
This MERGER AGREEMENT dated as of February 6, 2000 (the "Agreement") is made
and entered into by and among Corel Corporation, a corporation continued under
the laws of Canada ("Corel"), Carleton Acquisition Co., a Delaware corporation
and a wholly owned subsidiary of Corel ("Sub"), and Inprise Corporation, a
Delaware corporation ("Inprise").
WHEREAS, the Boards of Directors of Corel, Sub, and Inprise have each
previously determined that it is advisable and in the best interests of their
respective shareholders to consummate, and have approved, the merger
transaction provided for herein in which Sub would merge with and into Inprise
and Inprise would become a wholly-owned subsidiary of Corel (the "Merger");
WHEREAS, the respective Boards of Directors of Corel and Inprise have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is advisable, fair to and in the
best interests of their respective shareholders, and this Agreement and the
Merger have been approved and adopted by the sole shareholder of Sub;
WHEREAS, the parties intend that for U.S. federal income tax purposes, the
merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and that this Agreement
shall constitute a plan of reorganization for the purposes of Section 368 of
the Code;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the parties' willingness to enter into this
Agreement, Inprise and Corel entered into reciprocal Stock Option Agreements of
even date herewith (collectively, the "Stock Option Agreements") providing for
the granting by each to the other of options to purchase stock of the other
exercisable upon the occurrence of certain events; and
WHEREAS, Corel, Sub and Inprise desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.03), Sub shall be
merged with and into Inprise in accordance with the General Corporation Law of
the State of Delaware, as amended (the "DL"). At the Effective Time, the
separate existence of Sub shall cease and Inprise shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). Sub and
Inprise are sometimes referred to herein as the "Constituent Corporations". As
a result of the Merger, the outstanding shares of capital stock of the
Constituent Corporations shall be converted or cancelled in the manner provided
in Article II.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Article VII, the closing of the Merger (the "Closing")
will take place at the offices of McCarthy Tetrault located at The Chambers, 40
Elgin Street, Suite 1400, Ottawa, Ontario, K1P 5K6, at 10:00 a.m., local time,
on the second business day following satisfaction of the condition set forth in
Section 7.0l(a) unless another date, time or place is agreed to in writing by
the parties hereto (the "Closing Date"). At the Closing there shall be
delivered to Corel, Sub and Inprise the certificates and other documents and
instruments required to be delivered under Article VII.
A-1
<PAGE>
1.03 Effective Time. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by the Surviving
Corporation and thereafter delivered to the Secretary of State of Delaware (the
"Secretary of State") for filing, as provided in Section 251 of the DL, as soon
as practicable on the Closing Date. The Merger shall become effective at the
time of the filing of the Certificate of Merger with the Secretary of State
(the date and time of such filing being referred to herein as the "Effective
Time").
1.04 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Certificate of Incorporation of the
Surviving Corporation shall be amended to read in its entirety (except for the
corporate name) as set forth in the Certificate of Incorporation of Sub as in
effect immediately prior to the Effective Time until thereafter amended as
provided by law and such Certificate of Incorporation, and (ii) the Bylaws of
Sub as in effect immediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.05 Directors and Officers of the Surviving Corporation.
(a) The directors of Sub immediately prior to the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Corporation
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
(b) The officers of Inprise immediately prior to the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the DL including,
without limitation, Section 259 thereof.
1.07 Further Assurances. Each party hereto will, either prior to or after
the Effective Time, execute such further documents, instruments, deeds, bills
of sale, assignments and assurances and take such further actions as may
reasonably be requested by one or more of the others to consummate the Merger,
to vest the Surviving Corporation with full title to all assets, properties,
privileges, rights, approvals, immunities and franchises of either of the
Constituent Corporations or to effect the other purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
capital stock of either Inprise or Sub, each of the following shall occur:
(a) Capital Stock of Sub. Each issued and outstanding share of the
common stock, par value $.01 per share, of Sub ("Sub Common Stock") shall
be converted into and become one fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation
(Surviving Corporation Common Stock). Each certificate representing
outstanding shares of Sub Common Stock shall at the Effective Time
represent an equal number of outstanding shares of Surviving Corporation
Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Corel and
Subsidiaries. All shares of common stock, par value $.01 per share, of
Inprise ("Inprise Common Stock") and preferred stock, par value $.01 per
share, of Inprise ("Inprise Preferred Stock"), that are owned by Inprise as
treasury stock or owned by Corel, Sub or any other wholly-owned Subsidiary
(as defined in Section 9.18) of Corel (other
A-2
<PAGE>
than shares of Surviving Corporation Common Stock) shall be cancelled and
retired and shall cease to exist and no stock of Corel or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Inprise Common Stock.
(i) Each issued and outstanding share of Inprise Common Stock
(other than shares to be cancelled in accordance with Section 2.01
(b)) , together with the associated common stock purchase rights
(the "Inprise Rights") attached thereto issued pursuant to the
Rights Agreement, dated as of December 20, 1991, as amended, between
the predecessor to Inprise and Manufacturers Hanover Trust Company
of California, as Rights Agent (the "Inprise Rights Agreement"),
shall be converted into the right to receive 0.747 (the Conversion
Number) validly issued, fully paid and nonassessable common shares
of Corel, no par or nominal value per share (Corel Common Stock).
Holders of shares of Inprise Common Stock or Inprise Preferred Stock
shall also receive, together with each whole share of Corel Common
Stock issued to them in the Merger, one associated common stock
purchase right (all such rights, the "Corel Rights") in accordance
with the terms and conditions of the Rights Agreement, dated as of
February 11, 1999, as amended and restated as of March 31, 1999,
between Corel and The Montreal Trust Company of Canada, as Rights
Agent (the "Corel Rights Agreement"). References herein to the
shares of Corel Common Stock issuable in the Merger shall also be
deemed to include the associated Corel Rights.
(ii) If, prior to the Effective Time, Corel shall pay a dividend
in, subdivide, combine into a smaller number of shares or issue by
reclassification of its shares any shares of Corel Common Stock, the
Conversion Number shall be multiplied by a fraction, the numerator
of which shall be the number of shares of Corel Common Stock
outstanding immediately after, and the denominator of which shall be
the number of such shares outstanding immediately before, the
occurrence of such event, and the resulting product shall from and
after the date of such event be the Conversion Number, subject to
further adjustment in accordance with this paragraph. If, prior to
the Effective Time, Inprise shall pay a dividend in, subdivide,
combine into a smaller number of shares or issue by reclassification
of its shares any shares of Inprise Common Stock, the Conversion
Number shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Inprise Common Stock outstanding
immediately before, and the denominator of which shall be the number
of such shares outstanding immediately after, the occurrence of such
event, and the resulting product shall from and after the date of
such event be the Conversion Number, subject to further adjustment
in accordance with this paragraph.
(iii) All shares of Inprise Common Stock converted in accordance
with paragraph (i) of this Section 2.01(c) shall no longer be
outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing
any such shares shall cease to have any rights with respect thereto,
except the right to receive the shares of Corel Common Stock and any
cash in lieu of fractional shares of Corel Common Stock to be issued
or paid in consideration therefor (determined in accordance with
Section 2.02(e)), upon the surrender of such certificate in
accordance with Section 2.02, without interest.
(d) Conversion of Inprise Preferred Stock. Each issued and outstanding
share of Inprise's Series C Stock shall be converted into the right to
receive such number of validly issued, fully paid and nonassessable shares
of Corel Common Stock to the same extent as if the Inprise Series C Stock
had first been converted into Inprise Common Stock.
(e) Stock Option Plans. Subject to Canadian securities law and The
Toronto Stock Exchange (the "TSE") rules and subject to the terms and
conditions of the 1985 Stock Option Plan, the Non-Employee Directors Stock
Option Plan, the 1992 Stock Option Plan, the 1993 Stock Option Plan, the
1994 Directors Stock Option Plan, the 1995 Directors Stock Option Plan, the
1995 Equity Incentive Plan, the 1995 Stock Option Plan, the 1997 Stock
Option Plan, the 1998 Stock Option Plan, Stock Guarantee Program and the
Dale Fuller Individual Stock Option Plan (collectively, the "Inprise Option
Plans") and the stock option
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agreements executed pursuant thereto, the Inprise Option Plans and each
warrant or option to purchase Inprise Common Stock granted thereunder that
is outstanding at the Effective Time shall be assumed by Corel and
continued in accordance with their respective terms (taking into account
any acceleration provisions that apply to such options under any agreement
between Inprise and an optionee) and each such warrant or option shall
become a right to purchase a number of shares of Corel Common Stock equal
to the Conversion Number multiplied by the number of shares of Inprise
Common Stock subject to such warrant or option immediately prior to the
Effective Time, as more fully described in Section 6.08.
(f) Stock Purchase Plans. The current offerings in process as of the
date of this Agreement under the Inprise employee stock purchase plans
(collectively, the "ESPP") shall continue, and shares of Inprise Common
Stock shall be issued to participants thereunder on the next currently
scheduled purchase dates thereunder occurring after the date hereof as
provided under, and subject to the terms and conditions of, the ESPP.
Inprise may, consistent with past practice, commence new offering periods
under the ESPP on or after the date hereof and prior to the Effective Time
at an exercise price for each such offering not less than as is required
under the ESPP. Immediately prior to the Effective Time, pursuant to the
ESPP, all offerings under the ESPP shall be terminated, and each
participant shall be deemed to have purchased immediately prior to the
Effective Time, to the extent of payroll deductions accumulated by such
participant as of such offering period end, the number of whole shares of
Inprise Company Stock at a per share price determined pursuant to the
provisions of the ESPP, and each participant shall receive a cash payment
equal to the balance, if any, of such accumulated payroll deductions
remaining after such purchase of such shares. As of the Effective Time,
each participant shall receive, by virtue of the Merger, the number of
whole shares of Corel Common Stock or cash into which the shares of Inprise
Common Stock such participant has so purchased under the ESPP have been
converted pursuant to the Merger as provided in Section 2.01 hereof, plus
the cash value of any fraction of a share of Corel Common Stock as provided
in Section 2.02(e) hereof, plus any dividends or distributions as provided
in Section 2.02(c). The ESPP and all purchase rights thereunder shall
terminate effective as of the Effective Time.
(g) Consideration for Corel Common Stock and Assumption of Inprise
Option Plans. Effective as of the Effective Time, the Surviving Corporation
shall (i) in consideration for Corel's issuance of Corel Common Stock in
accordance with Section 2.01(c) and (d), issue shares of Surviving
Corporation to Corel, and (ii) in consideration for Corel's assumption of
the Inprise Option Plans in accordance with Section 2.01(e), issue shares
of Surviving Corporation common stock to Corel.
2.02 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Corel shall enter into an
agreement (the terms of which shall be reasonably satisfactory to Inprise) with
such bank or trust company as may be designated by Corel and reasonably
satisfactory to Inprise (the "Exchange Agent"), which shall provide that Corel
shall deposit with the Exchange Agent as of the Effective Time, for the benefit
of the holders of shares of Inprise Common Stock and Inprise Preferred Stock,
for exchange in accordance with this Article II, through the Exchange Agent,
certificates representing the number of duly authorized whole shares of Corel
Common Stock issuable in connection with the Merger plus an amount of cash
equal to the aggregate amount payable in lieu of fractional shares in
accordance with Section 2.02(e), to be held for the benefit of and distributed
to such holders in accordance with this Section (such shares of Corel Common
Stock and funds, together with earnings thereon, being referred to herein as
the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Corel shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Inprise Common Stock or
Inprise Preferred Stock (the "Certificates") whose shares are converted
pursuant to Section 2.01 (c) into the right to receive shares of Corel Common
Stock (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 the Surviving Corporation may reasonably
specify) and
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(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Corel Common Stock and cash in
lieu of fractional shares. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal duly executed and
completed in accordance with its terms, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Corel Common Stock, plus the cash amount payable in lieu of
fractional shares in accordance with Section 2.02(e), which such holder has the
right to receive pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be cancelled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of Inprise
Common Stock which is not registered in the transfer records of Inprise, a
certificate representing that number of whole shares of Corel Common Stock,
plus the cash amount payable in lieu of fractional shares in accordance with
Section 2.02(e), may be issued to a transferee if the Certificate representing
such Inprise Common Stock is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Corel Common Stock to a person other than
the registered holder of such Certificate or establish to the reasonable
satisfaction of Corel that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent ownership of the
number of shares of Corel Common Stock into which the number of shares of
Inprise Common Stock shown thereon have been converted as contemplated by this
Article II. Notwithstanding the foregoing, Certificates representing Inprise
Common Stock surrendered for exchange by any person constituting an "affiliate"
of Inprise for purposes of Section 6.04 shall not be exchanged until Corel has
received an Affiliate Agreement (as defined in Section 6.04) executed by such
person as provided in Section 6.04.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Corel
Common Stock with a record date on or after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Corel
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.02(e) until the
holder of record of such Certificate shall surrender such Certificate in
accordance with this Section (or affidavits of loss with respect to lost,
stolen or destroyed certificates). Subject to the effect of applicable laws,
following surrender of any such Certificate or affidavit, there shall be paid
to the record holder of the certificates representing whole shares of Corel
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions, if any, with a
record date on or after the Effective Time which theretofore became payable,
but which were not paid by reason of the immediately preceding sentence, with
respect to such whole shares of Corel Common Stock, and the amount of any cash
payable in lieu of a fractional share of Corel Common Stock to which such
holder is entitled pursuant to Section 2.02(e), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
on or after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Corel
Common Stock.
(d) No Further Ownership Rights in Inprise Common Stock. All shares of Corel
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
2.02(e)) shall be deemed to have been issued at the Effective Time in full
satisfaction of all rights pertaining to the shares of Inprise Common Stock or
Inprise Preferred Stock represented thereby, as applicable. From and after the
Effective Time, the stock transfer books of Inprise shall be closed and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Inprise Common Stock or Inprise
Preferred Stock 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 Section.
(e) No Fractional Shares, (i) No certificate or scrip representing
fractional shares of Corel Common Stock will be issued in the Merger upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a shareholder of
Corel. In lieu of any such fractional shares, each holder of Certificates who
would otherwise have been entitled to a fraction of a share of
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Corel Common Stock in exchange for such Certificates pursuant to this Section
shall receive from the Exchange Agent a cash payment in U.S. dollars without
interest in lieu of such fractional share determined by multiplying such
fraction by the average of the last sale prices of Corel Common Stock, on the
NASDAQ National Market System as reported in The Wall Street Journal, Eastern
Edition, or, if not reported therein, any other authoritative source for the
ten consecutive TSE trading days immediately preceding the Closing Date. As
promptly as practicable after the determination of the amount of cash, if any,
to be paid to holders of fractional interests, the Exchange Agent shall so
notify Corel, and Corel shall cause the Surviving Corporation to deposit such
amount with the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional interests subject to and in accordance
with the terms hereof.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains unclaimed by the former shareholders of Inprise for six months after
the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any shareholders of Inprise who have not theretofore complied with
this Article II shall thereafter look only to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws) as general
creditors for payment of their claim for Corel Common Stock, any cash in lieu
of fractional shares of Corel Common Stock and any dividends or distributions
with respect to Corel Common Stock. Neither Corel nor the Surviving Corporation
shall be liable to any holder of shares of Inprise Common Stock or Inprise
Preferred Stock for shares of Corel Common Stock (or dividends or distributions
with respect thereto) or cash payable in respect of fractional share interests
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INPRISE
Inprise represents and warrants to Corel and Sub as follows:
3.01 Organization and Qualification. Each of Inprise and its Subsidiaries
(as defined in Section 9.11) is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its
assets and properties, except for such failures to be so existing and in good
standing or to have such power and authority which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect (as defined in Section 9.11) on Inprise and its
Subsidiaries taken as a whole. Each of Inprise and its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Inprise and its Subsidiaries taken as a whole.
Section 3.01 of the letter dated the date hereof and delivered to Corel by
Inprise concurrently with the original execution and delivery of this Agreement
(the "Inprise Disclosure Letter") sets forth (other than such Subsidiaries of
Inprise which in the aggregate would not constitute a Significant Subsidiary)
(i) the name and jurisdiction of incorporation of each Subsidiary of Inprise,
(ii) its authorized capital stock, (iii) the number of issued and outstanding
shares of its capital stock and (iv) the record owners of such shares. Except
for interests in the Subsidiaries of Inprise and as disclosed in Section 3.01
of the Inprise Disclosure Letter, Inprise does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity (other than (i) non-controlling investments in
the ordinary course of business and corporate partnering, development,
cooperative marketing and similar undertakings and arrangements entered into in
the ordinary course of business and (ii) other investments of less than
$1,000,000). Inprise has previously made available to Corel correct and
complete copies of the certificate or articles of incorporation and bylaws (or
other comparable charter documents) of Inprise.
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3.02 Capital Stock.
(a) As of the date of this Agreement, the authorized capital stock of
Inprise consists solely of (A) 100,000,000 shares of Inprise Common Stock, and
(B) 1,002,095 shares of preferred stock, par value $.01 per share ("Inprise
Preferred Stock"), of which 1,000,000 shares have been designated Series A
Junior Participated Preferred Stock ("Inprise Series A Stock"), 1,470 shares
have been designated Series B Mandatorily Redeemable Convertible Preferred
Stock ("Inprise Series B Stock"), and 625 shares have been designated Series C
Convertible Preferred Stock ("Inprise Series C Stock"). As of the date of this
Agreement, no shares of Series A Stock are issued or outstanding, no shares of
Series B Stock are issued and outstanding and 625 shares of Series C Stock are
issued and outstanding. As of the close of business on January 31, 2000,
60,921,826 shares of Inprise Common Stock are issued and outstanding and
4,473,800 shares of Inprise Common Stock are held in the treasury of Inprise.
As of the date hereof, 13,139,369 shares of Inprise Common Stock are reserved
for issuance upon the exercise of options and upon the purchase of shares under
the Inprise Option Plans of which options for 8,940,657 shares of Inprise
Common Stock have been granted and are outstanding, 12,000,000 shares of
Inprise Common Stock are reserved for issuance pursuant to the Stock Option
Agreement, dated as of the date hereof, by and between Inprise and Corel (the
"Inprise Stock Option Agreement"), 682,000 shares of Inprise Common Stock are
reserved for issuance under the Inprise ESPP and 308,000 shares of Inprise
Common Stock are reserved for issuance upon the exercise of Series B Stock
warrants. All of the issued and outstanding shares of Inprise Common Stock are,
and all shares reserved for issuance will be, upon issuance in accordance with
the terms specified in the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable. Except
for shares of Inprise Common Stock issuable upon conversion of the Series C
Stock and except pursuant to this Agreement, the Inprise Rights Agreement and
the Inprise Stock Option Agreement and except as set forth in Section 3.02 of
the Inprise Disclosure Letter, there are no outstanding subscriptions, options,
warrants, rights (including "phantom" stock rights), preemptive rights or other
contracts, commitments, understandings or arrangements, including any right of
conversion or exchange under any outstanding security, instrument or agreement
(together, "Options"), obligating Inprise or any of its Subsidiaries to issue
or sell any shares of capital stock of Inprise or to grant, extend or enter
into any Option with respect thereto.
(b) Except as disclosed in Section 3.02 of the Inprise Disclosure Letter,
all of the outstanding shares of capital stock of each Subsidiary of Inprise
are duly authorized, validly issued, fully paid and nonassessable and are
owned, beneficially and of record, by Inprise or a Subsidiary wholly owned,
directly or indirectly, by Inprise, free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind (each a "Lien") other than with respect to such Subsidiaries which in
the aggregate would not constitute a Significant Subsidiary. Except pursuant to
this Agreement, the Inprise Rights Agreement and as set forth in the Inprise
Stock Option Agreement or as disclosed in Section 3.02 of the Inprise
Disclosure Letter, there are no (i) outstanding Options obligating Inprise or
any of its Subsidiaries to issue or sell any shares of capital stock of any
Subsidiary of Inprise or to grant, extend or enter into any such Option; (ii)
outstanding bonds, debentures or other evidences of indebtedness of Inprise
having the right to vote (or that are convertible for or exercisable into
securities having the right to vote) with the holders of Inprise Common Stock
on any matter; or (iii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
Inprise or a Subsidiary wholly owned, directly or indirectly, by Inprise with
respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of Inprise.
(c) Except as set forth in the Inprise Stock Option Agreement or as
disclosed in Section 3.02 of the Inprise Disclosure Letter, there are no
outstanding contractual obligations of Inprise or any Subsidiary of Inprise to
repurchase, redeem or otherwise acquire any shares of Inprise Common Stock or
any capital stock of any Subsidiary of Inprise or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any Subsidiary of Inprise or any other person.
3.03 Authority Relative to This Agreement. Inprise has full corporate power
and authority to enter into this Agreement and, subject to obtaining the
Inprise Shareholders' Approval (as defined in Section 6.03(b)), to
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perform its obligations hereunder and to consummate the transactions
contemplated hereby. On or prior to the date hereof, the execution, delivery
and performance of this Agreement by Inprise and the consummation by Inprise of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Inprise, the Board of Directors of Inprise has
recommended adoption of this Agreement by the shareholders of Inprise and
directed that this Agreement be submitted to the shareholders of Inprise for
their consideration, and no other corporate proceedings on the part of Inprise
or its shareholders are necessary to authorize the execution, delivery and
performance of this Agreement by Inprise and the consummation by Inprise of the
transactions contemplated hereby, other than obtaining the Inprise
Shareholders' Approval. This Agreement has been duly and validly executed and
delivered by Inprise and, assuming due and valid authorization, execution and
delivery hereof by the other parties hereto, constitutes a legal, valid and
binding agreement of Inprise enforceable against Inprise in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by Inprise do not, and the
performance by Inprise of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give rise to any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of
Inprise or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of Inprise or any of its Subsidiaries, or
(ii) subject to the obtaining of Inprise Shareholders' Approval and the taking
of the actions described in paragraph (b) of this Section, (x) any statute,
law, rule, regulation or ordinance (together, "laws"), or any judgment, decree,
order, writ, permit or license (together, "orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state,
province, county, city or other political subdivision (a "Governmental or
Regulatory Authority") applicable to Inprise or any of its Subsidiaries or any
of their respective assets or properties, or (y) any note, bond, mortgage,
security agreement, indenture, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind
(together, "Contracts") to which Inprise or any of its Subsidiaries is a party
or by which Inprise or any of its Subsidiaries or any of their respective
assets or properties is bound, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on Inprise and its Subsidiaries taken as a whole or on the ability of
Inprise to consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by Inprise
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"), (ii) for the filing of
the Proxy Statement (as defined in Section 3.09) and the Registration Statement
(as defined in Section 4.09) with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), and the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the "Securities
Act"), the declaration of the effectiveness of the Registration Statement by
the SEC and filings with various Canadian provincial and state securities
authorities that are required in connection with the transactions contemplated
by this Agreement, (iii) for the filing of the Certificate of Merger and other
appropriate merger documents required by the DL with the Secretary of State and
appropriate documents with the relevant authorities of other states in which
the Constituent Corporations are qualified to do business, (iv) the filing(s)
as may be required by the Investment Canada Act and/or the Competition Act
(Canada, (v) such filings as are required to be made under Canadian securities
law, (vi) such filings as are required to be made with NASDAQ and the TSE, and
(vii) as disclosed in Section 3.04 of the Inprise Disclosure Letter, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
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required under any of the terms, conditions or provisions of any law or order
of any Governmental or Regulatory Authority or any Contract to which Inprise or
any of its Subsidiaries is a party or by which Inprise or any of its
Subsidiaries or any of their respective assets or properties is bound for the
execution and delivery of this Agreement by Inprise, the performance by Inprise
of its obligations hereunder or the consummation by Inprise of the transactions
contemplated hereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually
or in the aggregate, could not be reasonably expected to have a material
adverse effect on Inprise and its Subsidiaries taken as a whole or on the
ability of Inprise to consummate the transactions contemplated by this
Agreement.
3.05 Reports and Financial Statements. Inprise has made available to Corel
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed
by Inprise or any of its Subsidiaries with the SEC since January 1, 1997 (as
such documents have since the time of their filing been amended or
supplemented, the "Inprise Reports"), which are all the documents (other than
preliminary material) that Inprise and its Subsidiaries were required to file
with the SEC since such date. Except as disclosed in Section 3.05 of the
Inprise Disclosure Letter, as of their respective dates, the Inprise Reports
(i) complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Inprise Reports (the "Inprise Financial Statements")
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles in the United States ("U.S. GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present (subject,
in the case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments and to the absence of complete notes (which are not
expected to be, individually or in the aggregate, materially adverse to Inprise
and its Subsidiaries taken as a whole)) the consolidated financial position of
Inprise and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except as set forth in Section 3.05 of the
Inprise Disclosure Letter, each Subsidiary of Inprise is treated as a
consolidated subsidiary of Inprise in the Inprise Financial Statements for all
periods covered thereby.
3.06 Absence of Certain Changes or Events. Except as disclosed in Inprise
Reports filed prior to the date of this Agreement or in Section 3.06 of the
Inprise Disclosure Letter:
(a) since September 30, 1999, there has not been any change, event or
development having, or that could be reasonably expected to have,
individually or in the aggregate, a material adverse effect on Inprise and
its Subsidiaries taken as a whole, and
(b) between such date and the date hereof (i) Inprise and its
Subsidiaries have conducted their respective businesses only in the
ordinary course substantially consistent with past practice and (ii)
neither Inprise nor any of its Subsidiaries has taken any action which, if
taken after the date hereof, would constitute a breach of any provision of
clause (ii) of Section 5.01 (b).
3.07 Absence of Undisclosed Liabilities. Except as disclosed in the Inprise
Reports filed prior to the date of this Agreement, or for matters reflected or
reserved against in the consolidated balance sheet of Inprise and its
consolidated subsidiaries, dated September 30, 1999, included in the Inprise
Financial Statements or as disclosed in Section 3.07 of the Inprise Disclosure
Letter, neither Inprise nor any of its Subsidiaries had at such date, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of
any nature that would be required by U.S. GAAP to be reflected on a
consolidated balance sheet of Inprise and its consolidated subsidiaries
(including the notes
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thereto), except liabilities or obligations (i) which were incurred in the
ordinary course of business consistent with past practice or (ii) which have
not been, and could not be reasonably expected to be, individually or in the
aggregate, materially adverse to Inprise and its Subsidiaries taken as a whole.
3.08 Legal Proceedings. Except as disclosed in the Inprise Reports filed
prior to the date of this Agreement or in Section 3.08 of the Inprise
Disclosure Letter, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of Inprise, threatened against, relating to or
affecting, nor to the knowledge of Inprise are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting, Inprise or any of its Subsidiaries or affiliates or
any of their respective assets and properties which, individually or in the
aggregate, could be reasonably expected to have a material adverse effect on
Inprise and its Subsidiaries taken as a whole or on the ability of Inprise to
consummate the transactions contemplated by this Agreement, and (ii) neither
Inprise nor any of its Subsidiaries nor any of its affiliates is subject to any
order of any Governmental or Regulatory Authority which, individually or in the
aggregate, is having or could be reasonably expected to have a material adverse
effect on Inprise and its Subsidiaries taken as a whole or on the ability of
Inprise to consummate the transactions contemplated by this Agreement.
3.09 Information Supplied. The joint proxy statement relating to the
Shareholders' Meetings (as defined in Section 6.03 (b)), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by Inprise with the SEC, the
Ontario Securities Commission, the TSE or any other Governmental or Regulatory
Authority in connection with the Merger and the other transactions contemplated
hereby will (in the case of the Proxy Statement and any such other documents
filed with the SEC under the Exchange Act or the Securities Act) comply as to
form in all material respects with the requirements of the Exchange Act and the
Securities Act, respectively, and will not, on the date of its filing or, in
the case of the Proxy Statement, at the date it is mailed to shareholders of
Inprise and of Corel and at the times of the Shareholders' Meetings, contain
any untrue statement of a material fact or 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, except that no representation is made by Inprise with respect to
information supplied in writing by or on behalf of Corel or Sub expressly for
inclusion therein and information incorporated by reference therein from
documents filed by Corel or any of its Subsidiaries with the SEC.
3.10 Compliance with Laws and Orders. Inprise and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses as presently conducted (the "Inprise Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on
Inprise and its Subsidiaries taken as a whole. Inprise and its Subsidiaries are
in compliance with the terms of the Inprise Permits, except failures so to
comply which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Inprise and its
Subsidiaries taken as a whole. Except as disclosed in the Inprise Reports filed
prior to the date of this Agreement, Inprise and its Subsidiaries are not in
violation of or default under any law or order of any Governmental or
Regulatory Authority, except for such violations or defaults which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Inprise and its Subsidiaries
taken as a whole.
3.11 Compliance with Agreements; Certain Agreements.
(a) Except as disclosed in the Inprise Reports filed prior to the date of
this Agreement, neither Inprise nor any of its Subsidiaries nor, to the
knowledge of Inprise, any other party is in breach or violation of, or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, could be
reasonably expected to result in a default under, (i) the certificates or
articles of incorporation or bylaws (or other comparable charter documents) of
Inprise or any of its Subsidiaries or (ii) any Contract to which Inprise or any
of its Subsidiaries is a party or by which Inprise or any of its
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Subsidiaries or any of their respective assets or properties is bound, except
in the case of clause (ii) for breaches, violations and defaults which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Inprise and its Subsidiaries
taken as a whole. Except for this Agreement and those agreements and other
documents filed as exhibits to the Inprise Reports or set forth in Section 3.11
of the Inprise Disclosure Letter, as of the date of this Agreement, neither
Inprise nor any of its Subsidiaries is a party to or bound by any non-
competition agreement or other agreement or arrangement that materially
restricts it or any of its Subsidiaries from competing in any line of business.
(b) Except as disclosed in Section 3.11 of the Inprise Disclosure Letter or
in the Inprise Reports filed prior to the date of this Agreement or as provided
for in this Agreement, as of the date hereof, neither Inprise nor any of its
Subsidiaries is a party to any oral or written (i) consulting agreement not
terminable on 30 days' or less notice involving the payment of more than
$250,000 per annum in the aggregate for all such agreements, (ii) union or
collective bargaining agreement which covers any employees, (iii) agreement
with any executive officer or other employee of Inprise or any of its
Subsidiaries, the benefits of which in the aggregate for all such executive
officers and employees exceed $5 million, and which are contingent or vest, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Inprise or any of its Subsidiaries of the nature contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other
employee of Inprise or any of its Subsidiaries providing any term of employment
or compensation guarantee or (v) agreement or plan, including any stock option,
stock appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
3.12 Taxes.
(a) Each of Inprise and its Subsidiaries has filed all material tax returns
and reports required to be filed by it, or requests for extensions to file such
returns or reports have been timely filed or granted and have not expired, and
all such tax returns and reports are complete and accurate in all respects,
except to the extent that such failures to file, have extensions granted that
remain in effect or be complete and accurate in all respects, as applicable,
individually or in the aggregate, would not have a material adverse effect on
Inprise and its Subsidiaries taken as a whole. Inprise and each of its
Subsidiaries has paid (or Inprise has paid on its behalf) all taxes shown as
due on such tax returns and reports. The most recent financial statements
contained in the Inprise Reports reflect a reserve for all taxes payable by
Inprise and its Subsidiaries which is adequate in accordance with U.S. GAAP for
all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against Inprise or any of its Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a material adverse effect on Inprise and its Subsidiaries taken
as a whole.
(b) To the knowledge of Inprise, there are no liens for material amounts of
taxes on the assets of Inprise or any of its Subsidiaries except for statutory
liens for current taxes not yet due and payable.
(c) Inprise has not taken any action to prevent, nor has it any knowledge of
any fact or circumstance reasonably likely to prevent, the Merger from
qualifying as a tax free reorganization within the meaning of Section 368 of
the Code.
(d) As used in this Section 3.12 and in Section 4.12, "taxes" shall include
all federal, provincial, state, local and foreign income, capital, franchise,
property, sales, use, goods and services, excise, land transfer, workers
compensation, employment insurance, workers health and other taxes, including
obligations for taxes and other amounts required to be withheld from payments
due or made to any other person (including employees and non-resident persons)
and any interest, penalties or additions to tax.
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3.13 Employee Benefit Plans; ERISA.
(a) Except as described in the Inprise Reports filed prior to the date of
this Agreement or as would not have a material adverse effect on Inprise and
its Subsidiaries taken as a whole, (i) all Inprise Employee Benefit Plans (as
defined below) are in compliance with all applicable requirements of law,
including ERISA and the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) neither Inprise nor any of its Subsidiaries has any liabilities or
obligations with respect to any such Inprise Employee Benefit Plans, whether
accrued, contingent or otherwise, nor to the knowledge of Inprise are any such
liabilities or obligations expected to be incurred. The execution of, and
performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Inprise Employee Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. The only severance
agreements or severance policies applicable to Inprise or any of its
Subsidiaries are the agreements and policies specifically referred to in
Section 3.13 of the Inprise Disclosure Letter. The last date on which stock
options were granted to any executive officer or director of Inprise was
September 24, 1999. The last date on which stock options were granted to any
employee of Inprise was January 27, 2000.
(b) As used herein:
(i) "Inprise Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by Inprise or any of its Subsidiaries for the benefit of the
current or former employees or directors of Inprise or any of its
Subsidiaries and existing on the date of this Agreement or at any time
subsequent thereto and on or prior to the Effective Time and, in the case
of a Plan which is subject to Part 3 of Title I of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), Section 412 of the Code or Title IV of ERISA, at any
time during the five-year period preceding the date of this Agreement; and
(ii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock,
leave of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability, workmen's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy, program or
arrangement of any kind, whether written or oral, including, but not
limited to any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
3.14 Labor Matters. Except as disclosed in the Inprise Reports filed prior
to the date of this Agreement or in Section 3.14 of the Inprise Disclosure
Letter, there are no material controversies pending or, to the knowledge of
Inprise, threatened between Inprise or any of its Subsidiaries and any
representatives of its employees, except as would not, individually or in the
aggregate, have a material adverse effect on Inprise and its Subsidiaries taken
as a whole, and, to the knowledge of Inprise, there are no material
organizational efforts presently being made involving any of the now
unorganized employees of Inprise or any of its Subsidiaries. Since January 1,
1997, there has been no work stoppage, strike or other concerted action by
employees of Inprise or any of its Subsidiaries except as would not,
individually or in the aggregate, have a material adverse effect on Inprise and
its Subsidiaries taken as a whole.
3.15 Environmental Matters.
(a) Except as set forth in Section 3.15 of the Inprise Disclosure Letter,
each of Inprise and its Subsidiaries has obtained all licenses, permits,
authorizations, approvals and consents from Governmental or Regulatory
Authorities which are required under any applicable Environmental Law (as
defined below) in respect of its business or operations ("Environmental
Permits"), except for such failures to have Environmental Permits which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on Inprise and its Subsidiaries taken as a whole. Each
of such Environmental Permits is in full force and effect and
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each of Inprise and its Subsidiaries is in compliance with the terms and
conditions of all such Environmental Permits and with any applicable
Environmental Law, except for such failures to be in compliance which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on Inprise and its Subsidiaries taken as a whole.
(b) To the knowledge of Inprise, no site or facility now or previously
owned, operated or leased by Inprise or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List promulgated pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and the rules and regulations thereunder ("CERCLA"), or on
any similar state or local list of sites requiring investigation or clean-up.
(c) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by Inprise or any of its
Subsidiaries, other than any such real property not individually or in the
aggregate material to Inprise and its Subsidiaries taken as a whole, and no
action of any Governmental or Regulatory Authority has been taken or, to the
knowledge of Inprise, is in process which could subject any of such properties
to such Liens, and neither Inprise nor any of its Subsidiaries would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any such site or facility owned by it in any deed to
the real property on which such site or facility is located.
(d) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of. Inprise or any of its Subsidiaries in relation to any site or facility now
or previously owned, operated or leased by Inprise or any of its Subsidiaries
which have not been delivered to Corel prior to the execution of this
Agreement.
(e) As used herein in this Section 3.15 and in Section 4.15:
(i) "Environmental Law" means any law or order of any Governmental or
Regulatory Authority relating to the regulation or protection of human
health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes; and
(ii) "Hazardous Material" means (A) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar import under any
Environmental Law; and (C) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated by any Governmental or Regulatory Authority under any
Environmental Law.
3.16 Intellectual Property Rights. Except as set forth in Section 3.16 of
the Inprise Disclosure Letter:
(a) Inprise and its Subsidiaries have all right, title and interest in,
or a valid and binding license to use, all Intellectual Property Rights (as
defined below) individually or in the aggregate material to the conduct of
the businesses of Inprise and its Subsidiaries taken as a whole. Neither
Inprise nor any Subsidiary of Inprise is in default (or with the giving of
notice or lapse of time or both, would be in default) under any license to
use such Intellectual Property Rights, to the knowledge of Inprise, such
Intellectual Property Rights are not being infringed by any third party,
and neither Inprise nor any Subsidiary of Inprise is infringing any
Intellectual Property Rights of any third party, except for such defaults
and infringements which, individually or in the aggregate, are not having
and could not be
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reasonably expected to have a material adverse effect on Inprise and its
Subsidiaries taken as a whole. For purposes of this Agreement,
"Intellectual Property Rights" means patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
(b) Section 3.16 of the Inprise Disclosure Letter contains (or will be
supplemented to prior to Closing to contain) an accurate and complete list
as of the date of this Agreement of all licenses, sublicenses, assignments
and other agreements under which Inprise and its Subsidiaries are licensed
to use third party Intellectual Property Rights which are material to the
business of Inprise as currently conducted (the "Inprise License
Agreements").
(c) Except as set forth in Section 3.16 of the Inprise Disclosure Letter
(including as it may be supplemented prior to Closing), Inprise and its
Subsidiaries are not required to pay any royalties, fees or other amounts
to any Person in connection with the Inprise License Agreements or the
development, manufacture or commercial exploitation of any products of
Inprise or its Subsidiaries in each such case in excess of $500,000 per
annum.
(d) Section 3.16 of the Inprise Disclosure Letter contains an accurate
and complete list as of the date of this Agreement of all registered
patents, registered trademarks, trade names, registered service marks and
registered copyrights (in each case that are currently in use), as well as
all applications for any and all of the foregoing, included in the Inprise
Intellectual Property Rights (excluding third party Intellectual Property
Rights), including the jurisdiction in which each such Inprise Intellectual
Property Rights has been issued or registered or in which any such
application for such issuance, approval or registration has been filed. All
registered patents, registered trademarks, trade names, registered service
marks and registered copyrights owned by Inprise or any of its Subsidiaries
and which are material to the conduct of their business as currently
conducted are valid and enforceable.
(e) Section 3.16 of Inprise Disclosure Letter contains an accurate and
complete list as of the date of this Agreement of all material licenses and
sublicenses under which Inprise or any of its Subsidiaries has granted the
right to manufacture, reproduce, market or exploit any products of Inprise
or any Subsidiaries or any adaptation, derivative or reformulation based on
any such product or any portion thereof.
(f) Neither Inprise nor any of its Subsidiaries is or will be as a
result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in breach of any Inprise License
Agreements. Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause or will
result in a material change to the terms of any material license,
sublicense or other similar agreement.
(g) Except as set forth in Section 3.16 of the Inprise Disclosure
Letter, neither Inprise nor its Subsidiaries (A) has been named as a party
in any suit, action or proceeding which involves a claim of infringement or
violation of any Intellectual Property Right of any third party or (B) has
received any written claim or allegation that the manufacturing,
importation, marketing, licensing, sale, offer for sale, or use of any of
its products infringes Intellectual Property Rights of any third party.
(h) Inprise and its Subsidiaries have taken all reasonable steps to
protect and preserve the confidential information, trade secrets and know-
how of Inprise and its Subsidiaries, including appropriate non-disclosure
agreements with all employees and third persons having access to any
confidential information, trade secrets or know-how of Inprise and its
Subsidiaries.
(i) Neither Inprise nor any of its Subsidiaries has made any written
claim or allegation that any third person is or has infringed,
misappropriated, breached or violated the rights of Inprise or its
Subsidiaries in any of the Inprise Intellectual Property Rights which are
material to the business of Inprise as currently conducted.
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(j) Except as set forth in Section 3.16 of the Inprise Disclosure
Letter, all internal computer systems that are material to the business,
finances or operations of Inprise ("Material Inprise Systems") are (i) able
to receive, record, store, process, calculate, manipulate and output dates
from and after January 1, 2000, time periods that include January 1, 2000
and information that is dependent on or relates to such dates or time
periods, in the same manner and with the same accuracy, functionality, data
integrity and performance as when dates or time periods prior to January 1,
2000 are involved and (ii) able to store and output date information in a
manner that is unambiguous as to century (collectively with clause (i)
above, "Year 2000 Ready") or can be freely modified to be made Year 2000
Ready without breaching any third party license agreements or otherwise
infringing any intellectual property rights of any third party. All
Material Inprise Systems that are not Year 2000 Ready as of the date of
this Agreement are set forth in Section 3.16 of the Inprise Disclosure
Letter.
3.17 Vote Required. Assuming the accuracy of the representation and warranty
contained in Section 4.19, the affirmative vote of the holders of record of at
least a majority of the outstanding shares of Inprise Common Stock with respect
to the adoption of this Agreement is the only vote of the holders of any class
or series of the capital stock of Inprise required to adopt this Agreement and
to approve the Merger and the other transactions contemplated hereby and by the
Stock Option Agreements.
3.18 Opinion of Financial Advisor. Inprise has received the opinion of
Broadview International LLC, dated the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Merger by the
shareholders of Inprise is fair from a financial point of view to the
shareholders of Inprise, and a true and complete copy of such opinion has been
or will be, as promptly as practicable after the execution of this Agreement,
delivered to Corel.
3.19 Ownership of Corel Common Stock. Except as to shares of Corel Common
Stock which Inprise may be deemed to beneficially own pursuant to the Corel
Stock Option Agreement, neither Inprise nor any of its Subsidiaries or other
affiliates beneficially owns any shares of Corel Common Stock.
3.20 Takeover Laws. The approval of this Agreement and the Merger and the
Inprise Stock Option Agreement by the Board of Directors of Inprise constitutes
approval of this Agreement and the Merger and the Inprise Stock Option
Agreement and the transactions contemplated hereby and thereby for purposes of
Section 203 of DL. To the knowledge of Inprise except for Section 203 of DL
(which has been rendered inapplicable), no "moratorium", "control share", "fair
price" or other antitakeover laws and regulations of any state (collectively,
"Takeover Laws") are applicable to the Merger or other transactions
contemplated by this Agreement and the Inprise Stock Option Agreement.
3.21 Rights Agreement. The Board of Directors of Inprise has approved an
amendment (substantially in the form provided to Corel) to the Inprise Rights
Agreement to the effect that none of Corel, Sub or any of their respective
affiliates shall become an "Acquiring Person", and that no "Stock Acquisition
Date" or "Distribution Date" (as such terms are defined in the Inprise Rights
Agreement) will occur as a result of the approval, execution or delivery of
this Agreement or the Inprise Stock Option Agreement or the consummation of the
transactions contemplated hereby or thereby, provided that the Merger or the
Inprise Stock Option Agreement, as the case may be, or such other transactions
contemplated hereby or thereby are consummated in accordance with the terms
hereof and thereof. Nothing has occurred to cause the Rights to be distributed
in the form of separate Rights certificates or to become exercisable. The
Inprise Rights Agreement shall terminate and be of no further effect upon the
Effective Time, without any consideration being payable with respect to
outstanding Inprise Rights thereunder.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COREL AND SUB
Corel and Sub, jointly and severally, represent and warrant to Inprise as
follows:
4.01 Organization and Qualification. Each of Corel and its Subsidiaries
(including Sub) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for such
failures to be so existing and in good standing or to have such power and
authority which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on Corel and its
Subsidiaries taken as a whole. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby. Each of Corel and its Subsidiaries is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for such failures to be so qualified, licensed or admitted
and in good standing which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on Corel
and its Subsidiaries taken as a whole. Section 4.01 of the letter dated the
date hereof and delivered by Corel and Sub to Inprise concurrently with the
original execution and delivery of this Agreement (the "Corel Disclosure
Letter") sets forth (i) the name and jurisdiction of incorporation of each
Subsidiary of Corel, (ii) its authorized capital stock, (iii) the number of
issued and outstanding shares of its capital stock and (iv) the record owners
of such shares. Except for interests in the Subsidiaries of Corel and as
disclosed in Section 4.01 of the Corel Disclosure Letter, Corel does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or other business association or entity (other than (i) non-controlling
investments in the ordinary course of business and corporate partnering,
development, cooperative marketing and similar undertakings and arrangements
entered into in the ordinary course of business and (ii) other investments of
less than $1,000,000). Corel has previously made available to Inprise correct
and complete copies of the Certificate and Articles of Amalgamation and bylaws
(or other comparable charter documents) of Corel.
4.02 Capital Stock.
(a) The authorized capital stock of Corel consists solely of an unlimited
number of shares of Corel Common Stock and an unlimited number of preferred
shares, issuable in series. As of the close of business on January 31, 2000,
65,733,135 shares of Corel Common Stock and no preferred shares are issued and
outstanding, and, except as disclosed in Section 4.02 of the Disclosure Letter,
3,083,166 shares are reserved for issuance upon the exercise of options under
the Corel Stock Option Plan as last amended as of January 31, 2000 (the "Corel
Stock Option Plan") and 4,000,000 shares are reserved for issuance under the
Corel Stock Option Plan 2000 as amended and restated as of February 2, 2000
(the "Corel Stock Option Plan 2000"), of which options for 2,836,410 shares
were granted and are outstanding under the Corel Stock Option Plan, and
13,000,000 shares of Corel Common Stock are reserved for issuance pursuant to
the Stock Option Agreement dated as of the date hereof by and between Corel,
Inprise and Sub (the "Corel Stock Option Agreement"). Since such date, there
has been no change in the number of issued and outstanding shares of Corel
Common Stock or shares of Corel Common Stock held in treasury or (other than
pursuant to the Stock Option Agreements) reserved for issuance since such date.
All of the issued and outstanding shares of Corel Common Stock are, and all
shares reserved for issuance will be, upon issuance in accordance with the
terms specified in the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable. Except
pursuant to this Agreement, the Corel Rights Agreement and the Corel Stock
Option Agreement and except as set forth in Section 4.02 of the Corel
Disclosure Letter, there are no outstanding Options obligating Corel or any of
its Subsidiaries to issue or sell any shares of capital stock of Corel or to
grant, extend or enter into any Option with respect thereto.
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(b) Except as disclosed in Section 4.02 of the Corel Disclosure Letter, all
of the outstanding shares of capital stock of each Subsidiary of Corel are duly
authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by Corel or a Subsidiary wholly owned, directly or
indirectly, by Corel, free and clear of any Liens. Except pursuant to the Corel
Rights Agreement and as set forth in the Corel Stock Option Agreement or as
disclosed in Section 4.02 of the Corel Disclosure Letter, there are no (i)
outstanding Options obligating Corel or any of its Subsidiaries to issue or
sell any shares of capital stock of any Subsidiary of Corel or to grant, extend
or enter into any such Option; (ii) outstanding bonds, debentures or other
evidences of indebtedness of Corel having the right to vote (or that are
convertible for or exercisable into securities having the right to vote) with
the holders of Corel Common Stock on any matter; or (iii) voting trusts,
proxies or other commitments, understandings, restrictions or arrangements in
favor of any person other than Corel or a Subsidiary wholly owned, directly or
indirectly, by Corel with respect to the voting of or the right to participate
in dividends or other earnings on any capital stock of any Subsidiary of Corel.
(c) Except as set forth in the Corel Stock Option Agreement and as disclosed
in Section 4.02 of the Corel Disclosure Letter, there are no outstanding
contractual obligations of Corel or any Subsidiary of Corel to repurchase,
redeem or otherwise acquire any shares of Corel Common Stock or any capital
stock of any Subsidiary of Corel or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Subsidiary
of Corel or any other person.
4.03 Authority Relative to This Agreement. Each of Corel and Sub has full
corporate power and authority to enter into this Agreement and, subject (in the
case of this Agreement) to obtaining the Corel Shareholders' Approval (as
defined in Section 6.03 (a)), to perform its obligations hereunder and to
consummate the transactions contemplated hereby. On or prior to the date
hereof, the execution, delivery and performance of this Agreement by each of
Corel and Sub and the consummation by each of Corel and Sub of the transactions
contemplated hereby have been duly and validly approved by its Board of
Directors and by the sole shareholder of Sub, the Board of Directors of Corel
has adopted a resolution declaring the advisability of the Corel Shareholders'
Proposals (as defined in Section 6.03 (a)) and directed that the Corel
Shareholders' Proposals be submitted for consideration by the shareholders of
Corel in accordance with applicable laws, and no other corporate proceedings on
the part of either of Corel or Sub or their shareholders are necessary to
authorize the execution, delivery and performance of this Agreement by Corel
and Sub and the consummation by Corel and Sub of the transactions contemplated
hereby, other than obtaining the Corel Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by each of Corel and Sub and,
assuming due and valid authorization, execution and delivery hereof by the
other parties hereto, constitutes a legal, valid and binding agreement of each
of Corel and Sub enforceable against each of Corel and Sub in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by each of Corel and Sub do
not, and the performance by each of Corel and Sub of its obligations hereunder
and the consummation of the transactions contemplated hereby will not, conflict
with, result in a violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give rise to any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of Corel or any of its Subsidiaries under, any of
the terms, conditions or provisions of (i) the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of Corel or any
of its Subsidiaries, or (ii) subject to the obtaining of the Corel
Shareholders' Approval and the taking of the actions described in paragraph (b)
of this Section, (x) any laws or orders of any Governmental or Regulatory
Authority applicable to Corel or any of its Subsidiaries or any of their
respective assets or properties or (y) any Contracts to which Corel or any of
its Subsidiaries is a party or by which Corel or any of its Subsidiaries or any
of their respective assets or properties is bound, excluding from the foregoing
clauses (x) and (y) conflicts,
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violations, breaches, defaults, terminations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
could not be reasonably expected to have a material adverse effect on Corel and
its Subsidiaries taken as a whole or on the ability of Corel and Sub to
consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by Corel
under the HSR Act, (ii) for the filing of the Registration Statement with the
SEC pursuant to the Exchange Act and the Securities Act, the declaration of the
effectiveness of the Registration Statement by the SEC and filings with various
Canadian provincial and state securities authorities that are required in
connection with the transactions contemplated by this Agreement, (iii) for the
filing of the Certificate of Merger and other appropriate merger documents
required by the DL with the Secretary of State and appropriate documents with
the relevant authorities of other states in which the Constituent Corporations
are qualified to do business, (iv) as may be required under applicable
requirements of the Competition Act (Canada) and the Investment Canada Act, (v)
as may be required by the by-laws, rules, regulations or policies of the TSE in
respect of the Corel Common Stock to be issued in the Merger and upon the
exercise of the Inprise Options to be assumed by Corel by reason of the Merger
and the listing of such Corel Common Stock on such stock exchanges, (vi) such
filings as are required to be made under the Canada Business Corporations Act
or under Canadian securities laws, and (vii) as disclosed in Section 4.04 of
the Corel Disclosure Letter, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or private
third party is necessary or required under any of the terms, conditions or
provisions of any law or order of any Governmental or Regulatory Authority or
any Contract to which Corel or any of its Subsidiaries is a party or by which
Corel or any of its Subsidiaries or any of their respective assets or
properties is bound for the execution and delivery of this Agreement by each of
Corel and Sub, the performance by each of Corel and Sub of its obligations
hereunder or the consummation by Corel of the transactions contemplated hereby,
other than such consents, approvals, actions, filings and notices which the
failure to make or obtain, as the case may be, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect
on Corel and its Subsidiaries taken as a whole or on the ability of Corel and
Sub to consummate the transactions contemplated by this Agreement.
4.05 Reports and Financial Statements. Corel has made available to Inprise
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed
by Corel or any of its Subsidiaries with Canadian securities regulatory
authorities and the SEC, the TSE and Nasdaq since January 1, 1997 (as such
documents have since the time of their filing been amended or supplemented, the
"Corel Reports"), which are all the documents (other than preliminary material)
that Corel and its Subsidiaries were required to file with the SEC, Canadian
securities regulatory authorities and the TSE since such date. As of their
respective dates, the Corel Reports (i) complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act or
Canadian securities laws and the TSE, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in
the Corel Reports (the "Corel Financial Statements") complied as to form in all
material respects with the published rules and regulations of the Canadian
securities regulatory authorities with respect thereto, were prepared in
accordance with generally accepted accounting principles in Canada ("Canadian
GAAP") applied on a consistent basis during the periods involved (except as may
be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Canadian securities laws) and fairly
present (subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments and to the absence of complete
notes (which are not expected to be, individually or in the aggregate,
materially adverse to Corel and its Subsidiaries taken as a whole)) the
consolidated financial position of Corel and its consolidated subsidiaries as
at the respective dates thereof and the consolidated results of their
operations and cash flows for the respective periods then ended. Except as set
forth in Section 4.05 of the Corel Disclosure Letter, each Subsidiary of Corel
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is treated as a consolidated subsidiary of Corel in the Corel Financial
Statements for all periods covered thereby.
4.06 Absence of Certain Changes or Events. Except as disclosed in the Corel
Reports filed prior to the date of this Agreement or in Section 4.06 of the
Corel Disclosure Letter:
(a) since August 31, 1999, there has not been any change, event or
development having, or that could be reasonably expected to have,
individually or in the aggregate, a material adverse effect on Corel and
its Subsidiaries taken as a whole, and
(b) between such date and the date hereof (i) Corel and its Subsidiaries
have conducted their respective businesses only in the ordinary course
substantially consistent with past practice and (ii) neither Corel nor any
of its Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii) of
Section 5.01 (b).
4.07 Absence of Undisclosed Liabilities. Except as disclosed in the Corel
Reports filed prior to this Agreement, or for matters reflected or reserved
against in the consolidated balance sheet of Corel and its consolidated
subsidiaries dated August 31, 1999 included in the Corel Financial Statements
or as disclosed in Section 4.07 of the Corel Disclosure Letter, neither Corel
nor any of its Subsidiaries had at such date, or has incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be
required by Canadian GAAP to be reflected on a consolidated balance sheet of
Corel and its consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) which were incurred in the ordinary course of
business consistent with past practice or (ii) which have not been, and could
not be reasonably expected to be, individually or in the aggregate, materially
adverse to Corel and its Subsidiaries taken as a whole.
4.08 Legal Proceedings. Except as disclosed in the Corel Reports filed prior
to the date of this Agreement or in Section 4.08 of the Corel Disclosure
Letter, (i) there are no actions, suits, arbitrations or proceedings pending
or, to the knowledge of Corel, threatened against, relating to or affecting,
nor to the knowledge of Corel are there any Governmental or Regulatory
Authority investigations or audits pending or threatened against, relating to
or affecting, Corel or any of its Subsidiaries or affiliates or any of their
respective assets and properties which, individually or in the aggregate, could
be reasonably expected to have a material adverse effect on Corel and its
Subsidiaries taken as a whole or on the ability of Corel and Sub to consummate
the transactions contemplated by this Agreement, and (ii) neither Corel nor any
of its Subsidiaries nor affiliates is subject to any order of any Governmental
or Regulatory Authority which, individually or in the aggregate, is having or
could be reasonably expected to have a material adverse effect on Corel and its
Subsidiaries taken as a whole or on the ability of Corel and Sub to consummate
the transactions contemplated by this Agreement.
4.09 Information Supplied. The registration statement on Form S-4 to be
filed with the SEC by Corel in connection with the issuance of shares of Corel
Common Stock in the Merger, as amended or supplemented from time to time (as so
amended and supplemented, the "Registration Statement"), and any other
documents to be filed by Corel with the SEC, Canadian securities regulatory
authorities, the TSE or any other Governmental or Regulatory Authority in
connection with the Merger and the other transactions contemplated hereby will
(in the case of the Registration Statement and any such other documents filed
with the SEC under the Securities Act or the Exchange Act, with Canadian
securities regulatory authorities under Canadian securities laws or with the
TSE) comply as to form in all material respects with the requirements of the
Exchange Act, the Securities Act or comparable Canadian laws, respectively, and
will not, on the date of its filing or, in the case of the Registration
Statement, at the time it becomes effective under the Securities Act, at the
date the Proxy Statement is mailed to shareholders of Inprise and of Corel and
at the times of the Shareholders' Meetings, contain any untrue statement of a
material fact or 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, except that no
representation is made by Corel or Sub with respect to information supplied in
writing by or on behalf of Inprise expressly for inclusion therein and
information
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incorporated by reference therein from documents filed by Inprise or any of its
Subsidiaries with the SEC, Canadian securities regulatory authorities or the
TSE.
4.10 Compliance with Laws and Orders. Corel and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses as presently conducted (the "Corel Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on Corel
and its Subsidiaries taken as a whole. Corel and its Subsidiaries are in
compliance with the terms of the Corel Permits, except failures so to comply
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Corel and its
Subsidiaries taken as a whole. Except as disclosed in the Corel Reports filed
prior to the date of this Agreement, Corel and its Subsidiaries are not in
violation of or default under any law or order of any Governmental or
Regulatory Authority, except for such violations or defaults which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Corel and its Subsidiaries taken
as a whole.
4.11 Compliance with Agreements; Certain Agreements.
(a) Except as disclosed in the Corel Reports filed prior to the date of this
Agreement, neither Corel nor any of its Subsidiaries nor, to the knowledge of
Corel, any other party thereto is in breach or violation of, or in default in
the performance or observance of any term or provision of, and no event has
occurred which, with notice or lapse of time or both, could be reasonably
expected to result in a default under, (i) the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of Corel or any
of its Subsidiaries or (ii) any Contract to which Corel or any of its
Subsidiaries is a party or by which Corel or any of its Subsidiaries or any of
their respective assets or properties is bound, except in the case of clause
(ii) for breaches, violations and defaults which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Corel and its Subsidiaries taken as a whole. Except
for this Agreement and those agreements and other documents filed as exhibits
to the Corel Reports or set forth in Section 4.11 of the Corel Disclosure
Letter, as of the date of this Agreement, neither Corel nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or other
agreement or arrangement that materially restricts it or any of its
Subsidiaries from competing in any line of business.
(b) Except as disclosed in Section 4.11 of the Corel Disclosure Letter or in
the Corel Reports filed prior to the date of this Agreement or as provided for
in this Agreement, as of the date hereof, neither Corel nor any of its
Subsidiaries is a party to any oral or written (i) consulting agreement not
terminable on 30 days' or less notice involving the payment of more than
$250,000 per annum in the aggregate for all such agreements, (ii) union or
collective bargaining agreement which covers any employees, (iii) agreement
with any executive officer or other employee of Corel or any of its
Subsidiaries, the benefits of which in the aggregate for all such executive
officers and employees exceed $5 million, and which are contingent or vest, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Corel or any of its Subsidiaries of the nature contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other
employee of Corel or any of its Subsidiaries providing any term of employment
or compensation guarantee or (v) agreement or plan, including any stock option,
stock appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
4.12 Taxes.
(a) Each of Corel and its Subsidiaries has filed all material tax returns
and reports required to be filed by it, or requests for extensions to file such
returns or reports have been timely filed or granted and have not expired, and
all such tax returns and reports are complete and accurate in all respects,
except to the extent that such failures to file, have extensions granted that
remain in effect or be complete and accurate in all respects, as applicable,
individually or in the aggregate, would not have a material adverse effect on
Corel and its
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Subsidiaries taken as a whole. Corel and each of its Subsidiaries has paid (or
Corel has paid on its behalf) all taxes shown as due on such tax returns and
reports. The most recent financial statements contained in the Corel Reports
reflect an adequate reserve for all taxes payable by Corel and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against Corel or any of its Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a material adverse effect on Corel and its Subsidiaries taken
as a whole.
(b) To the knowledge of Corel, there are no liens for material amounts of
taxes on the assets of Corel or any of its Subsidiaries except for statutory
liens for current taxes not yet due and payable.
(c) Corel has not taken any action to prevent, nor has it any knowledge of
any fact or circumstance reasonably likely to prevent, the Merger from
qualifying as a tax free reorganization within the meaning of Section 368 of
the Code.
4.13 Employee Benefit Plans; ERISA.
(a) Except as described in the Corel Reports filed prior to the date of this
Agreement or as would not have a material adverse effect on Corel and its
Subsidiaries taken as a whole, (i) all Corel Employee Benefit Plans (as defined
below) are in compliance with all applicable requirements of law, including
ERISA and the Code, and (ii) neither Corel nor any of its Subsidiaries has any
liabilities or obligations with respect to any such Corel Employee Benefit
Plans, whether accrued, contingent or otherwise, nor to the knowledge of Corel
are any such liabilities or obligations expected to be incurred. The execution
of, and performance of the transactions contemplated in, this Agreement will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Corel Employee Benefit Plan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect "to any employee. The only
severance agreements or severance policies applicable to Corel or any of its
Subsidiaries are the agreements and policies specifically referred to in
Section 4.13 of the Corel Disclosure Letter. The last date on which stock
options were granted to any officer or director of Corel was January 18, 2000.
(b) As used herein "Corel Employee Benefit Plan" means any Plan entered
into, established, maintained, sponsored, contributed to or required to be
contributed to by Corel or any of its Subsidiaries for the benefit of the
current or former employees or directors of Corel or any of its Subsidiaries
and existing on the date of this Agreement or at any time subsequent thereto
and on or prior to the Effective Time and, in the case of a Plan which is
subject to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of
ERISA, at any time during the five-year period preceding the date of this
Agreement.
4.14 Labor Matters. Except as disclosed in the Corel Reports filed prior to
the date of this Agreement or in Section 4.14 of the Corel Disclosure Letter,
there are no material controversies pending or, to the knowledge of Corel,
threatened between Corel or any of its Subsidiaries and any representatives of
its employees, except as would not, individually or in the aggregate, have a
material adverse effect on Corel and its Subsidiaries taken as a whole, and, to
the knowledge of Corel, there are no material organizational efforts presently
being made involving any of the now unorganized employees of Corel or any of
its Subsidiaries. Since January 1, 1997, there has been no work stoppage,
strike or other concerted action by employees of Corel or any of its
Subsidiaries except as would not, individually or in the aggregate, have a
material adverse effect on Corel and its Subsidiaries taken as a whole.
4.15 Environmental Matters.
(a) Each of Corel and its Subsidiaries has obtained all Environmental
Permits which are required under any applicable Environmental Law in respect of
its business or operations, except for such failures to have Environmental
Permits which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on Corel and its Subsidiaries taken
as a whole. Each of such Environmental Permits is
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in full force and effect and each of Corel and its Subsidiaries is in
compliance with the terms and conditions of all such Environmental Permits and
with any applicable Environmental Law, except for such failures to be in
compliance which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on Corel and its Subsidiaries taken
as a whole.
(b) To the knowledge of Corel, no site or facility now or previously owned,
operated or leased by Corel or any of its Subsidiaries is listed or proposed
for listing on the National Priorities List promulgated pursuant to CERCLA or
on any similar state, Canadian federal, provincial or local list of sites
requiring investigation or clean-up.
(c) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by Corel or any of its
Subsidiaries, other than any such real property not individually or in the
aggregate material to Corel and its Subsidiaries taken as a whole, and no
action of any Governmental or Regulatory Authority has been taken or, to the
knowledge of Corel, is in process which could subject any of such properties
to such Liens, and neither Corel nor any of its Subsidiaries would be required
to place any notice or restriction relating to the presence of Hazardous
Materials at any such site or facility owned by it in any deed to the real
property on which such site or facility is located.
(d) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of. Corel or any of its Subsidiaries in relation to any site or facility now
or previously owned, operated or leased by Corel or any of its Subsidiaries
which have not been delivered to Inprise prior to the execution of this
Agreement.
4.16 Intellectual Property Rights. Except as set forth in Section 4.16 of
the Corel Disclosure Letter:
(a) Corel and its Subsidiaries have all right, title and interest in, or a
valid and binding license to use, all Intellectual Property Rights
individually or in the aggregate material to the conduct of the businesses of
Corel and its Subsidiaries taken as a whole. Neither Corel nor any Subsidiary
of Corel is in default (or with the giving of notice or lapse of time or both,
would be in default) under any license to use such Intellectual Property
Rights, to the knowledge of Corel, such Intellectual Property Rights are not
being infringed by any third party, and neither Corel nor any Subsidiary of
Corel is infringing any Intellectual Property Rights of any third party,
except for such defaults and infringements which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Corel and its Subsidiaries taken as a whole.
(b) Section 4.16 of the Corel Disclosure Letter contains (or will be
supplemented prior to Closing to contain) an accurate and complete list as of
the date of this Agreement of all licenses, sublicenses, assignments and other
agreements under which Corel and its Subsidiaries are licensed to use third
party Intellectual Property Rights which are material to the business of Corel
as currently conducted (the "Corel License Agreements").
(c) Except as set forth in Section 4.16 of the Corel Disclosure Letter
(including as it may be supplemented prior to Closing), Corel and its
Subsidiaries are not required to pay any royalties, fees or other amounts to
any Person in connection with the Corel License Agreements or the development,
manufacture or commercial exploitation of any products of Corel or its
Subsidiaries in each such case in excess of $500,000 per annum.
(d) Section 4.16 of the Corel Disclosure Letter contains an accurate and
complete list as of the date of this Agreement of all registered patents,
registered trademarks, trade names, registered service marks and registered
copyrights (in each case that are currently in use), as well as all
applications for any and all of the foregoing, included in the Corel
Intellectual Property Rights (excluding third party Intellectual Property
Rights), including the jurisdiction in which each such Corel Intellectual
Property Rights has been issued or registered or in which any such application
for such issuance, approval or registration has been filed. All registered
patents, registered trademarks, trade names, registered service marks and
registered copyrights owned by Corel or any of its Subsidiaries and which are
material to the conduct of their business as currently conducted are valid and
enforceable.
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(e) Section 4.16 of the Corel Disclosure Letter contains an accurate and
complete list as of the date of this Agreement of all licenses and sublicenses
under which Corel or any of its Subsidiaries has granted the right to
manufacture, reproduce, market or exploit any material products of Corel or its
Subsidiaries or any material adaptation, derivative or reformulation based on
any such product or any portion thereof.
(f) Neither Corel nor any of its Subsidiaries is or will be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any Corel License Agreements.
Neither the execution or delivery of this Agreement nor the consummation of the
transactions contemplated hereby will cause or will result in a material change
to the terms of any material license, sublicense or other similar agreement.
(g) Except as set forth in Section 4.15 of the Corel Disclosure Letter,
neither Corel nor its Subsidiaries (A) has been named as a party in any suit,
action or proceeding which involves a claim of infringement or violation of any
Intellectual Property Right of any third party or (B) has received any written
claim or allegation that the manufacturing, importation, marketing, licensing,
sale, offer for sale, or use of any of its products infringes Intellectual
Property Rights of any third party.
(h) Corel and its Subsidiaries have taken all reasonable steps to protect
and preserve the confidential information, trade secrets and know-how of Corel
and its Subsidiaries, including appropriate non-disclosure agreements with all
employees and third persons having access to any confidential information,
trade secrets or know-how of Corel and its Subsidiaries.
(i) Neither Corel nor any of its Subsidiaries has made any written claim or
allegation that any third person is or has infringed, misappropriated, breached
or violated the rights of Corel or its Subsidiaries in any of the Corel
Intellectual Property Rights which are material to the business of Corel as
currently conducted.
(j) Except as set forth in Section 4.16 of the Corel Disclosure Letter, all
internal computer systems that are material to the business, finances or
operations of Corel ("Material Corel Systems") are Year 2000 Ready or can be
freely modified to be made Year 2000 Ready without breaching any third party
license agreements or otherwise infringing any intellectual property rights of
any third party. All Material Corel Systems that are not Year 2000 Ready as of
the date of this Agreement are set forth in Section 4.16(j) of the Corel
Disclosure Schedule.
4.17 Vote Required. The affirmative votes of the holders of record of at
least the portion of the outstanding shares of Corel Common Stock represented
at the meeting and specified in Section 4.17 of the Corel Disclosure Schedule
with respect to the approval of each of the Corel Shareholders' Proposals are
the only votes of the holders of any class or series of the capital stock of
Corel required in connection with the Merger and the other transactions
contemplated hereby.
4.18 Opinion of Financial Advisor. Corel has received the opinion of CIBC
World Markets Inc., dated the date hereof, to the effect that, as of the date
hereof, the Conversion Number is fair from a financial point of view to the
shareholders of Corel, and a true and complete copy of such opinion has been or
will be, as promptly as practicable after the execution of this Agreement,
delivered to Inprise.
4.19 Ownership of Inprise Common Stock. Except for shares of Inprise Common
Stock which Corel may be deemed to beneficially own pursuant to the Inprise
Stock Option Agreement, neither Corel nor any of its Subsidiaries or other
affiliates beneficially owns any shares of Inprise Common Stock.
4.20 Takeover Laws. Neither Corel nor any of its subsidiaries is subject to
any Takeover Law that would affect this Agreement, the Stock Option Agreements,
the Merger or the other transactions contemplated hereby or thereby.
4.21 Rights Agreement. The Board of Directors of Corel has taken all
necessary action under or with respect to the Corel Rights Agreement, such that
none of Inprise or its respective affiliates shall become an
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"Acquiring Person," and that no "Stock Acquisition Date" or " Separation Time"
(as such terms are defined in the Corel Rights Agreement) will occur as a
result of the approval, execution or delivery of this Agreement or the Corel
Stock Option Agreement, as the case may be, or the consummation of the
transactions contemplated hereby or thereby, provided that the Merger or the
Corel Option Agreement or such other transactions contemplated hereby are
consummated in accordance with the terms hereof and thereof.
ARTICLE V
COVENANTS
5.01 Covenants of Inprise and Corel. Except (i) as otherwise contemplated by
this Agreement, (ii) as required by applicable law or rule of any stock
exchange or over-the-counter market, or (iii) as set forth in such Principal
Partys Disclosure Letter, at all times from and after the date hereof until the
Effective Time, each of Inprise and Corel (each, a "Principal Party") covenants
and agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement or the Stock Option Agreements, or
to the extent that the other Principal Party shall otherwise previously consent
in writing):
(a) Ordinary Course. Each Principal Party and each of its Subsidiaries
shall conduct their respective businesses only in, and each Principal Party
and each of its Subsidiaries shall refrain from taking any action except
in, the ordinary course substantially consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this Section,
(i) each Principal Party and its Subsidiaries shall use all commercially
reasonable efforts to preserve substantially intact in all material
respects their present business organization and reputation to maintain its
existence in good standing, to keep available the services of its key
officers and employees, to maintain its assets and properties in good
working order and condition, ordinary wear and tear excepted, to maintain
insurance on its tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve its
relationships with customers and suppliers and others having significant
business dealings with it and to comply in all material respects with all
laws and orders of all Governmental or Regulatory Authorities applicable to
it, and (ii) neither Principal Party shall, nor shall it permit any of its
Subsidiaries to, except as otherwise (x) expressly contemplated in this
Agreement or the Stock Option Agreements, (y) as required by the applicable
law or rule of any stock exchange or over-the-counter market or (z)
consented to in writing by the other Principal Party:
(A) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter
documents);
(B) (i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned Subsidiary
solely to its parent corporation, (ii) split, combine, reclassify or
take similar action with respect to any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock,
(iii) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization
or (iv) directly or indirectly redeem, repurchase or otherwise acquire
any shares of its capital stock or any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any Option with
respect thereto other than (i) the issuance of Inprise Common Stock or
Corel Common Stock pursuant to options granted under the Inprise Option
Plans, in each case outstanding on the date of this Agreement and in
accordance with their present terms, (ii) the issuance of options
pursuant to the Inprise Option Plan and the Corel Option Plan, in each
case in accordance with their present terms and only after consent with
the other Principal Party (provided that no such consent shall be
required in connection with the issuance of options to purchase up to
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3,500,000 shares of Corel Common Stock under the Corel Option Plan (of
which up to 3,000,000 shares shall be the subject of the general annual
option grants to employees and up to 500,000 shares shall be the
subject of specific grants) and up to 500,000 shares of Inprise Common
Stock under the Inprise Option Plans, in each case at fair value and as
otherwise provided in the respective Plans), and the issuance of shares
of Inprise Common Stock and Corel Common Stock, as the case may be,
upon exercise of such options, (iii) the issuance by a wholly-owned
Subsidiary of its capital stock to its parent corporation, and (iv) the
issuance of Inprise Common Stock or Corel Common Stock, as the case may
be, in accordance with the terms of the applicable Stock Option
Agreement, or modify or amend any right of any holder of outstanding
shares of capital stock or Options with respect thereto; provided that
the occurrence of a separation of the rights under the Inprise Rights
Plan or the Corel Rights Plan, as the case may be, and the related
issuance of stock to such Principal Party's stockholders under such
rights plan shall not be deemed a breach of this Agreement to the
extent that (i) the occurrence of such separation occurred as a result
of an unsolicited acquisition of such Principal Party's common stock by
a third party, and (ii) such acquisition did not occur as a result of
such Principal Party breaching Sections 5.02 or 5.06 hereof;
(D) except (i) as otherwise contemplated by this Agreement, (ii) as
required by applicable law or rule of any stock exchange or over-the-
counter market, or (iii) investments made by either Principal Party,
after prior written notice to the other Principal Party, in an
aggregate amount not to exceed $15 million, acquire (by merging or
consolidating with, or by purchasing an equity interest in or a portion
of the 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
other than in the ordinary course of its business consistent with past
practice;
(E) other than in the ordinary course of its business consistent
with past practice, sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or properties;
(F) except to the extent required by applicable law,
(i) permit any material change in (A) any pricing, marketing,
purchasing, investment, accounting (except as required by applicable
law or due to changes in the accounting standards applicable to such
Principal Party), financial reporting, inventory, credit, allowance
or tax practice or policy or (B) any method of calculating any bad
debt, contingency or other reserve for accounting, financial
reporting or tax purposes or (ii) make any material tax election or
settle or compromise any material income tax liability with any
Governmental or Regulatory Authority;
(G) (i) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness or
borrowed money or guarantee any such indebtedness other than loans to
wholly-owned subsidiaries and loans in the ordinary course of its
business consistent with past practice or (ii) voluntarily purchase,
cancel, prepay or otherwise provide for a complete or partial discharge
in advance of a scheduled repayment date with respect to, or waive any
right under, any indebtedness for borrowed money other than in the
ordinary course of its business consistent with past practice;
(H) enter into, adopt, amend in any material respect (except as may
be required by applicable law, any agreement, plan or arrangement in
effect on the date hereof) or terminate any Inprise Employee Benefit
Plan or Corel Employee Benefit Plan, as the case may be, or other
agreement, arrangement, plan or policy between such Principal Party or
one of its Subsidiaries and one or more of its directors, officers or
employees, or, except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to
such Principal Party and its Subsidiaries taken as a whole, increase in
any manner the compensation or fringe benefits of any director, officer
or employee or pay any benefit not required by any plan or arrangement
in effect as of the date hereof;
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(I) enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction, outside the ordinary course
of business consistent with past practice or not on an arm's length
basis, with any affiliate of such Principal Party or any of its
Subsidiaries;
(J) make any capital expenditures or commitments for additions to
plant, property or equipment constituting capital assets except in the
ordinary course of business consistent with past practice;
(K) make any change in the lines of business in which it
participates or is engaged;
(L) pay, discharge, satisfy, waive, settle or release any material
claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction, in the ordinary course of business substantially
consistent with past practice;
(M) settle or compromise any claim brought by any present, former or
purported holder of any of its securities in connection with the
transactions contemplated by this Agreement prior to the Effective Time
without the prior written consent of the other party to this Agreement;
or
(N) enter into any Contract, commitment or arrangement to do or
engage in any of the foregoing.
(c) Advice of Changes. Each Principal Party shall confer on a regular
and frequent basis with the other with respect to its business and
operations and other matters relevant to the Merger, and shall promptly
advise the other, orally and in writing, of any change or event, including,
without limitation, any complaint, investigation or hearing by any
Governmental or Regulatory Authority (or communication indicating the same
may be contemplated) or the institution or threat of litigation, having, or
which, insofar as can be reasonably foreseen, could have, a material
adverse effect on such Principal Party and its Subsidiaries taken as a
whole or on the ability of such Principal Party, to consummate the
transactions contemplated hereby; provided that no party shall be required
to make any disclosure to the extent such disclosure would constitute a
violation of any applicable law.
(d) Notice and Cure. Each Principal Party will notify the other of, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance, as soon as practical after it
becomes known to such Principal Party, that causes or will cause any
covenant or agreement of such Principal Party under this Agreement to be
breached or that renders or will render untrue any representation or
warranty of such Principal Party contained in this Agreement. Each
Principal Party also will notify the other in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any violation
or breach, as soon as practical after it becomes known to such party, of
any representation, warranty, covenant or agreement made by such Principal
Party. No notice given pursuant to this paragraph shall have any effect on
the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein.
(e) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, each Principal Party will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to the other's obligations
contained in this Agreement and to consummate and make effective the
transactions contemplated by this Agreement, and neither Principal Party
will, nor will it permit any of its Subsidiaries, officers, directors,
employee or agents to, take or fail to take any action that could be
reasonably expected to result in the nonfulfillment of any such condition.
5.02 No Solicitations. At all times from and after the date hereof until the
Effective Time, each Principal Party covenants and agrees as to itself and its
Subsidiaries (a) that neither it nor any of its Subsidiaries or other
affiliates shall, and it shall use its best efforts to cause its
Representatives (as defined in Section 9.11) not to, initiate, solicit or
knowingly encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, consolidation
or other business combination including such Principal Party or any of its
Subsidiaries or any acquisition or similar transaction (including, without
limitation, a tender
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or exchange offer) involving the purchase of (i) all or any significant portion
of the assets of such Principal Party and its Subsidiaries taken as a whole,
(ii) 25% or more of the outstanding shares of such Principal Party's common
stock or (iii) 25% of the outstanding shares of the capital stock of any
Subsidiary of such Principal Party (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person or group relating to an Alternative
Proposal (excluding the transactions contemplated by this Agreement), or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal; (b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties with respect
to any of the foregoing, and it will take the necessary steps to inform such
parties of its obligations under this Section; and (c) that it will notify the
other Principal Party immediately if any such inquiries, proposals or offers,
written or oral, are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with, it or any of such persons; provided, however, that nothing contained in
this Section 5.02 shall prohibit the Board of Directors of either Principal
Party or its Representatives from (i) furnishing information to (but only
pursuant to a confidentiality agreement in customary form and having terms and
conditions no less favorable to such Principal Party than the Confidentiality
Agreement, a copy of which shall be provided promptly to the other Principal
Party) or entering into discussions or negotiations with any person or group
that makes an unsolicited bona fide Alternative Proposal, if, and only to the
extent that, prior to receipt of the Inprise Shareholders' Approval (if such
Principal Party is Inprise) or the Corel Shareholders' Approval (if such
Principal Party is Corel), (A) the Board of Directors of such Principal Party,
(i) based upon the advice of outside counsel, determines in good faith and in
its reasonable judgment that such action is required for the Board of Directors
to comply with its fiduciary duties to shareholders imposed by applicable law,
and (ii) based on the advice of such Principal Partys financial advisor,
determines in good faith and in its reasonable judgment that such Alternative
Proposal is likely to result in a Superior Proposal (as defined herein), (B)
three business days prior to furnishing such information to, or entering into
discussions or negotiations with, such person or group, such Principal Party
provides written notice to the other Principal Party to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or group, which notice shall identify such person or group in
reasonable detail, and (C) such Principal Party keeps the other Principal Party
informed of the status and all material information with respect to any such
discussions or negotiations; (ii) to the extent required, complying with Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act with regard to an
Alternative Proposal , or (iii) without limiting the right of the other
Principal Party pursuant to Article VIII, making any other disclosure to such
Principal Party's stockholders if such Principal Party's Board of Directors
determines in good faith, based upon advice of its outside legal counsel, that
the failure to make any such disclosure would violate the Board's fiduciary
duties under applicable law. Nothing in this Section 5.02 shall (x) permit any
party to terminate this Agreement (except as specifically provided in Article
VIII), (y) permit any party to enter into any agreement with respect to an
Alternative Proposal for so long as this Agreement remains in effect (it being
agreed that for so long as this Agreement remains in effect, no party shall
enter into any agreement with any person or group that provides for, or in any
way facilitates, an Alternative Proposal (other than a confidentiality
agreement under the circumstances described above)), or (z) affect any other
obligation of any party under this Agreement.
5.03 Conduct of Business of Sub. Prior to the Effective Time, except as may
be required by applicable law and subject to the other provisions of this
Agreement, Corel shall cause Sub to (a) perform its obligations under this
Agreement in accordance with its terms, (b) not incur directly or indirectly
any liabilities or obligations other than those incurred in connection with the
Merger, (c) not engage directly or indirectly in any business or activities of
any type or kind and not enter into any agreements or arrangements with any
person, or be subject to or bound by any obligation or undertaking, which is
not contemplated by this Agreement and (d) not create, grant or suffer to exist
any Lien upon its properties or assets which would attach to any properties or
assets of the Surviving Corporation after the Effective Time.
5.04 Third Party Standstill Agreements. Each Principal Party agrees that,
during the period from the date of this Agreement through the Effective Time,
neither it nor any of its Subsidiaries shall terminate, amend,
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modify or waive any provision of any confidentiality or standstill agreement to
which it is a party. During such period, each Principal Party shall enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreement, including, but not limited to, by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court having jurisdiction.
5.05 Purchases of Capital Stock of the Other Party. Each Principal Party
agrees that, during the period from the date hereof through the Effective Time,
neither it nor any of its Subsidiaries or other affiliates will purchase any
shares of capital stock of the other Principal Party (except pursuant to the
Stock Option Agreements).
5.06 Actions Regarding Rights. Neither Principal Party shall take any action
or fail to take any action as a result of which action or failure the stock
purchase rights under the Inprise Rights Agreement or the Corel Rights
Agreement, as the case may be, would apply to the Merger or the Stock Option
Agreements. Except as requested, or consented to, in writing by the other
Principal Party, no Principal Party shall take any action with respect to, or
make a determination under, the Corel Rights Agreement (if such Principal Party
is Corel) or the Inprise Rights Agreement (if such Principal Party is Inprise),
including a redemption of the common stock purchase rights issued thereunder,
that would render such rights inapplicable to, or cause the rights to not
separate under such rights agreement with respect to, any transaction
(including any merger) other than the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreements.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality. Each Principal Party shall, and
shall cause each of its Subsidiaries to, throughout the period from the date
hereof to the Effective Time, (i) provide the other Principal Party and its
Representatives with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of
such Principal Party and its Subsidiaries and their respective assets,
properties, books and records, but only to the extent that such access does not
unreasonably interfere with the business and operations of such Principal Party
and its Subsidiaries, and (ii) furnish promptly to such persons (i) a copy of
each report, statement, schedule and other document filed or received by such
Principal Party or any of its Subsidiaries pursuant to the requirements of
federal or state securities laws and each material report, statement, schedule
and other document filed with any other Governmental or Regulatory Authority,
and (ii) all other information and data (including, without limitation, copies
of Contracts, Inprise Employee Benefit Plans or Corel Employee Benefit Plans,
as the case may be, and other books and records) concerning the business and
operations of such Principal Party and its Subsidiaries as the other party or
any of such other persons reasonably may request. Notwithstanding anything
herein to the contrary, nothing herein shall require any Principal Party or any
of its Subsidiaries to disclose any information to the other Principal Party or
any of its Representatives if such disclosure would be in violation of (i) any
applicable law or regulation of any Governmental or Regulatory Authority, or
(ii) any agreement to which such Principal Party is a party on the date hereof.
No investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in this Agreement or any condition to the
obligations of the parties hereto. Any such information or material obtained
pursuant to this Section 6.01 that constitutes "Confidential Information" (as
such term is defined in the letter agreement dated as of January 11, 2000
between Inprise and Corel (the "Confidentiality Agreement") shall be governed
by the terms of the Confidentiality Agreement.
6.02 Preparation of Registration Statement and Proxy Statement. Inprise and
Corel shall prepare and file with the SEC, applicable Canadian securities
regulatory authorities and the TSE as soon as reasonably practicable after the
date hereof the Proxy Statement. Corel shall prepare and file with the SEC, as
soon as reasonably practicable after the date hereof, the Registration
Statement, in which the Proxy Statement will be included as the prospectus.
Corel and Inprise shall use their best efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable after such
filing. Corel shall also take any action
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(other than qualifying as a foreign corporation or taking any action which
would subject it to service of process in any jurisdiction where Corel is not
now so qualified or subject) required to be taken under applicable state blue
sky or securities laws in connection with the issuance of Corel Common Stock in
connection with the Merger. If at any time prior to the Effective Time any
event shall occur that should be set forth in an amendment of or a supplement
to the Registration Statement, Corel shall prepare and file with the SEC such
amendment or supplement as soon thereafter as is reasonably practicable. Corel,
Sub and Inprise shall cooperate with each other in the preparation of the
Registration Statement and the Proxy Statement and any amendment or supplement
thereto, and each shall notify the other of the receipt of any comments of the
SEC with respect to the Registration Statement or the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information, and shall provide to the other promptly copies of all
correspondence between Corel or Inprise, as the case may be, or any of its
Representatives and the SEC with respect to the Registration Statement or the
Proxy Statement. Corel shall give Inprise and its counsel the opportunity to
review the Registration Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed
with, or sent to, the SEC. Each of Inprise, Corel and Sub agrees to use its
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause (i) the
Registration Statement to be declared effective by the SEC at the earliest
practicable time and to be kept effective as long as is necessary to consummate
the Merger, and (ii) the Proxy Statement to be mailed to the holders of Inprise
Common Stock and Corel Common Stock entitled to vote at the meetings of the
shareholders of Inprise and Corel at the earliest practicable time.
6.03 Approval of Shareholders.
(a) Corel shall, through its Board of Directors, as promptly as practicable
after the Registration Statement is declared effective under the Securities
Act, duly call, give notice of, convene and hold a meeting of its shareholders
(the "Corel Shareholders' Meeting") for the purpose of voting on the issuance
of Corel Common Stock, and the approval of a stock option plan for the grant of
options to acquire Corel Common Stock; each as contemplated by this Agreement
(the "Corel Shareholders' Proposals"). Unless it determines based upon the
advice of outside counsel that doing so would violate the Board of Directors'
fiduciary duties to shareholders imposed by law, Corel shall, through its Board
of Directors, include in the Proxy Statement the recommendation of the Board of
Directors of Corel that the shareholders of Corel approve the Corel
Shareholders' Proposals by the requisite majorities (the "Corel Shareholders'
Approval"), and shall use its reasonable best efforts to obtain the Corel
Shareholders' Approval. At such meeting. Inprise shall, and shall cause its
Subsidiaries to, cause all shares of Corel Common Stock then owned by Inprise
or any such Subsidiary to be voted in favor of the Corel Shareholders'
Proposals.
(b) Inprise shall, through its Board of Directors as promptly as practicable
after the Registration Statement is declared effective under the Securities
Act, duly call, give notice of, convene and hold a meeting of its shareholders
(the "Inprise Shareholders' Meeting" and, together with the Corel Shareholders'
Meeting, the "Shareholders' Meetings") for the purpose of voting on the
approval of the Merger and the approval and adoption of this Agreement (the
"Inprise Shareholders' Approval"). Unless it determines, based upon the advice
of outside counsel that doing so would violate the Board of Directors'
fiduciary duties to shareholders imposed by law, Inprise shall, through its
Board of Directors; include in the Proxy Statement the recommendation of the
Board of Directors of Inprise that the shareholders of Inprise approve the
Merger and approve and adopt this Agreement, and shall use its reasonable best
efforts to obtain such adoption. At such meeting, Corel shall, and shall cause
its Subsidiaries to, cause all shares of Inprise Common Stock then owned by
Corel or any such Subsidiary to be voted in favor of the adoption of this
Agreement.
(c) Corel and Inprise shall coordinate and cooperate with respect to the
timing of the Shareholders' Meetings and shall use their reasonable best
efforts to cause both of the Shareholders' Meetings to be held on the same day
and as soon as practicable after the date hereof.
6.04 Inprise Affiliates. At least 30 days prior to the Closing Date, Inprise
shall deliver a letter to Corel identifying all persons who, at the time of the
Inprise Shareholders' Meeting, may, in Inprise's reasonable
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judgment, be deemed to be "affiliates" (as such term is used in Rule 145 under
the Securities Act) of Inprise ("Inprise Affiliates"). Inprise shall use its
reasonable best efforts to cause each Inprise Affiliate to deliver to Corel on
or prior to the Closing Date a written agreement substantially in the form and
to the effect of Exhibit A hereto (an "Affiliate Agreement").
6.05 Stock Exchange Listing. Corel shall use its reasonable best efforts to
cause the shares of Corel Common Stock to be issued in the Merger and under the
Inprise Stock Plans after the Merger in accordance with this Agreement to be
approved for listing on the TSE and on NASDAQ, subject to official notice of
issuance, prior to the Closing Date.
6.06 Certain Tax Matters. Corel and Inprise shall not take or fail to take
any action which action or failure would cause the Merger not to qualify as a
reorganization under the provisions of Section 368(a) of the Code or cause the
failure to obtain the opinion of counsel referred to in Section 7.02(c) or
7.03(d), other than any action contemplated by this Agreement. Nothing in this
section precludes either Corel or Inprise from taking any action that may cause
gain to be recognized by any stockholder obligated to sign a gain recognition
agreement under Section 367 of the Code. Notwithstanding the foregoing
sentence, Corel and Inprise shall comply with the "reporting requirements" of
Treasury Regulation Section 1.367(a)-3(c)(6).
6.07 Regulatory and Other Approvals.
(a) Subject to the terms and conditions of this Agreement and without
limiting the provisions of Sections 6.02 and 6.03, each Principal Party will
proceed diligently and in good faith to, as promptly as practicable, (a) obtain
all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other public or
private third parties required of Principal Party or any of their Subsidiaries
to consummate the Merger and the other matters contemplated hereby, and (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other public or private third parties as the other
Principal Party or such Governmental or Regulatory Authorities or other public
or private third parties may reasonably request in connection therewith. In
addition to and not in limitation of the foregoing, each Principal Party will
(i) take promptly all actions necessary to make the filings required of either
of the Principal Party or their affiliates under the HSR Act and the
Competition Act (Canada), (ii) comply at the earliest practicable date with any
request for additional information received by such party or its affiliates
from (A) the Federal Trade Commission (the "FTC") or the Antitrust Division of
the Department of Justice (the "Antitrust Division") pursuant to the HSR Act
and (B) any Canadian Governmental or Regulatory Authority pursuant to the
Competition Act (Canada), (iii) cooperate with the other Principal Party in
connection with such Principal Party's filings under the HSR Act and the
Competition Act (Canada) and in connection with resolving any investigation or
other inquiry concerning the Merger or the other matters contemplated by this
Agreement commenced by any Governmental or Regulatory Authority of competent
jurisdiction, and (iv) proceed diligently and in good faith to obtain early
termination of any waiting period applicable to the Merger under the HSR Act
and Competition Act (Canada).
(b) Without limiting the generality of the foregoing, within two business
days of the date of this Agreement, Corel shall prepare and file with the TSE a
notice of the option granted by Corel to Inprise pursuant to the Corel Stock
Option Agreement and the proposed issuance of Corel Common Stock issuable upon
the exercise of such option, and Corel shall use its best efforts to cause the
TSE to accept such notice, without conditions, as soon as practicable.
6.08 Inprise Stock Plan.
(a) Subject to approval of the TSE, at the Effective Time, each outstanding
option to purchase shares of Inprise Common Stock (an "Inprise Stock Option")
under the Inprise Option Plans, whether vested or unvested, shall be exchanged
for an option to acquire, on the same terms and conditions as were applicable
under such Inprise Stock Option (taking into account any acceleration
provisions that apply to such options
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under any agreement between Inprise and an optionee), a number of shares of
Corel Common Stock equal to the product (rounded down to the nearest whole
share) of (i) the number of shares of Inprise Common Stock issuable upon
exercise of the option immediately prior to the Effective Time and (ii) the
Conversion Number; and the option exercise price per share of Corel Common
Stock at which such option is exercisable shall be the amount (rounded up to
the nearest whole cent) obtained by dividing (iii) the option exercise price
per share of Inprise Common Stock at which such option is exercisable
immediately prior to the Effective Time by (iv) the Conversion Number;
provided, however, that the adjustments provided herein with respect to any
Stock Options that are "incentive stock options" (as defined in Section 422 of
the Code) shall be effected in a manner consistent with Section 424(a) of the
Code.
(b) As soon as practicable after the Effective Time, Corel shall deliver to
the participants in the Inprise Option Plans appropriate notices setting forth
such participants' rights pursuant thereto and the grants pursuant to the
Inprise Option Plans shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section after giving effect to the
Merger). Subject to compliance with Canadian securities laws and the rules of
the TSE, Corel shall comply with the terms of the Inprise Option Plans and
ensure subject to the provisions of the Inprise Option Plans that Inprise Stock
Options which qualified as incentive stock options prior to the Effective Time
will continue to qualify as incentive stock options after the Effective Time.
(c) Corel shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Corel Common Stock for delivery under the
Inprise Option Plans as adjusted in accordance with this Section. Prior to the
Effective Time, Corel shall file a registration statement on Form S-8
promulgated by the SEC under the Securities Act (or any successor or other
appropriate form) with respect to the Corel Common Stock subject to such
options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
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, Corel shall administer the Inprise Option
Plans in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act. Both Corel and Inprise shall take such steps as may be required to cause
the transactions contemplated by this Section 6.08 and any other dispositions
of Inprise equity securities and/or acquisitions of Corel equity securities
(including, in each case derivative securities) in connection with this
Agreement or the transactions contemplated hereby by any individual who is a
director or officer of Inprise, to be exempt under Rule 16b-3 promulgated under
the Exchange Act, such steps to be taken in accordance with the interpretative
letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate,
Meagher & Flom LLP.
6.09 Employee Benefits
(a) Corel agrees that, effective as of the Effective Time and for a one-year
period following the Effective Time, Corel shall provide, or cause the
Surviving Corporation and its Subsidiaries and successors to provide, those
persons who, immediately prior to the Effective Time, were employees of Inprise
and its Subsidiaries and who continue in such employment, with benefits and
compensation no less favorable, taken as a whole, than is provided to such
employees as of the date of this Agreement; provided, that nothing herein shall
restrict Corel or the Surviving Corporation from terminating the employment of
any such employees in accordance with applicable laws and contractual rights,
if any, of such employees.
(b) Corel shall, and shall cause the Surviving Corporation to, treat service
with Inprise and any Subsidiary thereof prior to the Effective Time by each
employee of Inprise and any Subsidiary thereof in the same manner as service
with Corel or its Subsidiaries is treated for eligibility and vesting purposes
(but excluding benefit accrual purposes, including, without limitation, benefit
service under any defined benefit pension plan) under any benefit plan of Corel
or its Subsidiaries in which any such employee is eligible to participate
following the Effective Time.
(c) Corel shall, and shall cause the Surviving Corporation to, honor, in
accordance with their terms, and to make required payments when due under
Inprise Employee Benefit Plans (to extent required by Section
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6.09(a)) and, all employment, incentive and severance agreements and retention
plans or agreements maintained or contributed to by Inprise or any Subsidiary
thereof or to which Inprise or any Subsidiary is a party, that are applicable
with respect to any employee, director or stockholder of Inprise or any
Subsidiary thereof (whether current, former or retired) or their beneficiaries
in existence on the date hereof.
(d) Corel acknowledges that for purposes of all Inprise Employee Benefit
Plans the consummation of the Merger as contemplated by this Agreement will
constitute a "change in control" of Inprise (as such term or such similar term
is defined in such plans, agreements or arrangements).
(e) With respect to any welfare plans in which existing employees of Inprise
and its Subsidiaries are eligible to participate after the Effective Time in
substitution for any such existing plans, Corel shall, and shall cause the
Surviving Corporation to (i) waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to such employees and (ii) provide each such employee
with credit for any co-payments and deductibles paid prior to the Effective
Time in satisfying any applicable deductible or out-of-pocket requirements
under any such plan.
6.10 Directors and Officers Indemnification and Insurance.
(a) From and after the Effective Time and until the sixth anniversary of the
Effective Time and for so long thereafter as any claim for indemnification
asserted on or prior to such date has not been fully adjudicated, Corel and the
Surviving Corporation (each, an "Indemnifying Party") shall 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, a director or officer
of Inprise or any of its Subsidiaries (the "Indemnified Parties") against (i)
all losses, claims, damages, costs and expenses (including reasonable
attorneys' fees), liabilities, judgments and settlement amounts that are paid
or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at or after the Effective Time) that is
based in whole or in part on, or arises in whole or in part out of, the fact
that such Indemnified Party is or was a director or officer of Inprise or any
of its Subsidiaries and relates to or arises out of any action or omission
occurring at or prior to the Effective Time ("Indemnified Liabilities"), and
(ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the full extent permitted under applicable
law; provided that no Indemnifying Party shall be liable for any settlement of
any claim effected without its written consent, which consent shall not be
unreasonably withheld. Except as disclosed in Section 6.10 of the Inprise
Disclosure Letter, Inprise is not aware of any Indemnified Liabilities or of
any reasonable basis for the assertion thereof. Without limiting the foregoing,
in the event that any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising prior to or after the
Effective Time), (i) the Indemnifying Parties will pay expenses in advance of
the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law; provided that the person to whom expenses are advanced provides
any undertaking required by applicable law to repay such advance if it is
ultimately determined that such person is not entitled to indemnification; (ii)
the Indemnified Parties shall retain counsel reasonably satisfactory to the
Indemnifying Parties; (iii) the Indemnifying Parties shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties (subject to the
final sentence of this paragraph) promptly as statements therefor are received;
and (iv) the Indemnifying Parties shall use all commercially reasonable efforts
to assist in the defense of any such matter. Any Indemnified Party wishing to
claim indemnification under this Section, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Indemnifying
Parties, but the failure so to notify an Indemnifying Party shall not relieve
such Indemnifying Party from any liability which it may have under this
paragraph except to the extent such failure materially prejudices such
Indemnifying Party. 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 conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case the Indemnified Parties may to the extent
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necessary to avoid such conflict retain more than one or more additional law
firm, in which event the Indemnifying Parties shall be required to pay the
reasonable fees and expenses of only one law firm representing the Indemnified
Parties.
(b) Except to the extent required by law, until the sixth anniversary of the
Effective Time, Corel will not take any action so as to amend, modify or repeal
the provisions for indemnification and limitation of liability of directors or
officers contained in the certificates or articles of incorporation or bylaws
(or other comparable charter documents) of the Surviving Corporation and its
Subsidiaries (which at the Effective Time shall be no less favorable to such
individuals than those maintained by Inprise and its Subsidiaries on the date
hereof) in such a manner as would adversely affect the rights of any individual
who shall have served as a director or officer of Inprise or any of its
Subsidiaries prior to the Effective Time to be indemnified by such corporations
or limited in their liability in respect of their serving in such capacities
prior to the Effective Time. Following the Effective Time, Corel will honor, or
cause the Surviving Corporation to honor, the indemnification agreements
between Inprise and any officer or director of the Surviving Corporation set
forth in Section 6.10(b) of the Disclosure Schedule.
(c) Corel shall, until the sixth anniversary of the Effective Time and for
so long thereafter as any claim for insurance coverage asserted on or prior to
such date has not been fully adjudicated, cause to be maintained in effect, to
the extent available, the policies of directors' and officers' liability
insurance maintained by Inprise and its Subsidiaries as of the date hereof (or
policies with reputable and financially sound carriers of at least the same
coverage and amounts containing terms that are no less advantageous to the
insured parties) with respect to claims arising from facts or events that
occurred on or prior to the Effective Time; provided that in no event shall the
Surviving Corporation be obligated to expend in order to maintain or procure
insurance coverage pursuant to this paragraph any amount per annum in excess of
200% of the aggregate premiums payable by Inprise and its Subsidiaries in 1999
(on an annualized basis) for such purpose.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and each party entitled to
insurance coverage under paragraph (c) above, respectively, and his or her
heirs and legal representatives, and shall be in addition to any other rights
an Indemnified Party may have under the certificate or articles of
incorporation or bylaws of the Surviving Corporation or any of its
Subsidiaries, under the DL or otherwise.
(e) In the event that Corel or the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Corel or the
Surviving Corporation, as the case may be, assume the obligations set forth in
this Section 6.10.
6.11 Corel Governance. Corel's Board of Directors shall take action to cause
the full Board of Directors of Corel at the Effective Time to include two
persons nominated by Inprise, one of whom shall be Dale Fuller, and the other
of whom shall be mutually agreed to by Inprise and Corel ("Inprise Directors"),
and (if necessary) shall obtain the resignations of persons who are directors
of Corel ("Corel Directors"). Corel shall continue to nominate the Inprise
Directors for election to the Corel Board of Directors and shall recommend and
support the election of the Inprise Directors to the Corel Board of Directors
at Corels 2001 and 2002 annual meetings of shareholders. Without the consent of
the Inprise Directors, the Corel Board of Directors shall not have more than
six members prior to the election of directors at Corels 2003 annual meeting of
shareholders. At the Effective Time, Corel shall take action to cause the
following persons, so long as they are willing and able to serve, to be duly
appointed to the following offices: Dale Fuller, Chairman of the Board of
Directors; and Michael Cowpland, President and Chief Executive Officer, and Mr.
Fuller shall continue as Chairman of the Board of Directors of Corel until
Corels 2003 annual meeting of shareholders or for such longer time as may be
agreed to by Mr. Fuller and Corels Board of Directors. Following the Effective
Time,
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Corel's operational headquarters shall be in Canada and, for at least one year
from the Effective Time, the Surviving Corporations divisional headquarters
shall be in Scotts Valley, California.
6.12 Stock Option Agreements. Inprise and Corel shall perform fully their
respective obligations under the Stock Option Agreements.
6.13 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such cost or expense,
except that the filing fee in connection with the filings required under the
HSR Act and the Competition Act (Canada) and the expenses incurred in
connection with printing and mailing the Registration Statement and the Proxy
Statement, as well as any filing fees relating thereto, shall be shared equally
by Corel and Inprise.
6.14 Brokers or Finders. Each of Inprise and Corel represents, as to itself
and its affiliates, that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement except Broadview International LLC,
whose fees and expenses will be paid by Inprise in accordance with Inprise's
agreement with such firm ( a true and complete copy of which has been made
available by Inprise to Corel prior to signing this Agreement), and CIBC World
Markets Inc., whose fees and expenses will be paid by Corel in accordance with
Corels agreement with such firm (a true and complete copy of which has been
made available by Corel to Inprise prior to signing this Agreement), and each
of Inprise and Corel shall indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to any
other such fee or commission or expenses related thereto asserted by any person
on the basis of any act or statement alleged to have been made by such party or
its affiliate.
6.15 Takeover Statutes. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby or the Stock Option
Agreement, each party hereto and the members of the Board of Directors of such
Principal Party shall grant such approvals and take such actions as are
reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to eliminate or minimize the effects of such statute
or regulation on the transactions contemplated hereby and thereby.
6.16 Conveyance Taxes. Inprise and Corel shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment or waiver, at or prior to the Closing, of each of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
adopted by the requisite vote of the stockholders of Inprise under the DL
and Inprise's Certificate of Incorporation. The shareholders of Corel shall
have approved the Corel Shareholders' Proposals by the requisite majority
under the Canada Business Corporations Act and Corels Certificate and
Articles of Amalgamation and bylaws.
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(b) Registration Statement; State Securities Laws. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act and the relevant Canadian securities law, and no stop
order suspending such effectiveness shall have been issued by any
Governmental or Regulatory Authority of competent jurisdiction and remain
in effect and no proceeding seeking such an order shall be pending or
threatened. Corel shall have received all state securities or "Blue Sky"
permits and other authorizations, and all approvals, rulings and exceptions
from applicable Canadian securities regulatory authorities, necessary to
issue the Corel Common Stock pursuant to this Agreement and under Inprise
Stock Plans after the Merger.
(c) Exchange Listing. The shares of Corel Common Stock issuable to
Inprise's stockholders in the Merger and under Inprise Stock Plans
following the Effective Time in accordance with this Agreement shall have
been conditionally approved for listing on the TSE subject to the customary
requirements of such exchange and NASDAQ subject only to official notice of
issuance.
(d) HSR Act and Competition Act (Canada). Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
HSR Act and the Competition Act (Canada) shall have expired or shall have
been terminated.
(e) No Injunctions or Restraints. No competent Governmental or
Regulatory Authority shall have enacted, issued, promulgated, enforced or
entered any law or order (whether temporary, preliminary or permanent
(collectively, Restraints) which is then in effect and has the effect of
making illegal or otherwise restricting, preventing, enjoining or
prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(f) Governmental and Regulatory and Other Consents and Approvals. Other
than the filing provided for by Section 1.03, filings pursuant to the HSR
Act and the Competition Act (Canada) which are addressed in Section
7.01(d), all consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority of competent jurisdiction or
any other public or private third parties, all as listed in Schedule
7.01(f) of the Inprise Disclosure Letter and the Corel Disclosure Letter
required of Corel, Inprise or any of their Subsidiaries to consummate the
Merger and the other matters contemplated hereby.
7.02 Conditions to Obligation of Corel and Sub to Effect the Merger. The
obligation of Corel and Sub to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Corel and
Sub in their sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Inprise in this Agreement taken as a whole shall be true and
correct, except to the extent that any incorrectness would not have a
material adverse effect on Inprise, as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, except as affected by the transactions
contemplated by this Agreement, and Inprise shall have delivered to Corel a
certificate, dated the Closing Date and executed in the name and on behalf
of Inprise by its Chairman of the Board, President or any Executive Vice
President, to such effect.
(b) Performance of Obligations. Inprise shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with
by Inprise at or prior to the Closing, and Inprise shall have delivered to
Corel a certificate, dated the Closing Date and executed in the name and on
behalf of Inprise by its Chairman of the Board, President or its Chief
Financial Officer, to such effect.
(c) U.S. Federal Tax Opinion. Corel shall have received an opinion from
Milbank, Tweed, Hadley & McCloy LLP, counsel to Corel ("Corel's Counsel"),
in form and substance reasonably satisfactory to Corel, dated the Effective
Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective
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Time, the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code. In rendering its opinion, Corels Counsel may
require and rely upon representations and covenants, including those
contained in certificates of officers of Inprise, Corel, Sub and others,
reasonably satisfactory in form and substance to it.
7.03 Conditions to Obligation of Inprise to Effect the Merger. The
obligation of Inprise to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Inprise in
its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Corel and Sub in this Agreement taken as whole shall be true and
correct, except to the extent that any incorrectness would not have a
material adverse effect on Corel or Sub, as of the Closing Date as though
made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, except as affected by the transactions
contemplated by this Agreement, and Corel and Sub shall each have delivered
to Inprise a certificate, dated the Closing Date and executed in the name
and on behalf of Corel by its President or any Executive Vice President and
in the name and on behalf of Sub by its President or any Vice President, to
such effect.
(b) Performance of Obligations. Corel and Sub shall have performed and
complied with, each in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with
by Corel or Sub at or prior to the Closing, and Corel and Sub shall each
have delivered to Inprise a certificate, dated the Closing Date and
executed in the name and on behalf of Corel by its President, any Executive
Vice President or its Chief Financial Officer and in the name and on behalf
of Sub by its Chairman of the Board, President or any Vice President, to
such effect.
(c) Appointment of Directors and Officers. Corel shall have duly
appointed the Inprise directors and officers listed in Section 6.10 to the
positions set forth therein, subject to consummation of the Merger and
acceptance of such appointment.
(d) U.S. Federal Tax Opinion. Inprise shall have received an opinion
from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Inprise
("Inprise's Counsel"), in form and substance reasonably satisfactory to
Inprise, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective
Time, the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code and that, accordingly, for U.S. federal income
tax purposes, no gain or loss will be recognized by a Inprise stockholder
on the conversion of its shares of Inprise Common Stock into Corel Common
Stock (except with respect to any cash received in lieu of a fractional
share of Corel Common Stock), provided that Inprise complies with the
reporting requirements contained in U.S. Treasury Regulation Section
1.367(a)-3(c)(6) and provided further that in the case of any Inprise
stockholder who owns (directly or indirectly and taking into account
applicable attribution rules) five percent or more of the total voting
power or total value of Corel's outstanding capital stock immediately after
the Merger, no gain or loss will be recognized by such stockholder if such
stockholder in a timely manner, enters into a five-year gain recognition
agreement in accordance with U.S. Treasury Regulation Section 1.367(a)-8.
In rendering its opinion, Inprise's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Inprise, Corel, Sub and others, reasonably satisfactory in form
and substance to it. Moreover, Inprise's Counsel, in its reasonable
discretion, may determine that in order to enable it to give such opinion
at the contemplated Effective Time, Inprise should request a private letter
ruling from the United States Internal Revenue Service addressing certain
issues under Section 367(a)(1) of the Code, provided that any such request
shall be made not later than March 15, 2000, or a later date provided
further that requesting such ruling at such later date does not delay the
Effective Time.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after Inprise Shareholders' Approval or the Corel
Shareholders' Approval:
(a) By mutual written agreement of the parties hereto duly authorized by
action taken by or on behalf of their respective Boards of Directors;
(b) By either Principal Party upon notification to the non-terminating
Principal Party by the terminating Principal Party:
(i) at any time after October 31, 2000 if the Merger shall not have
been consummated on or prior to such date and such failure to
consummate the Merger is not caused by a breach of this Agreement by
the terminating Principal Party; provided, however, that this Agreement
may be extended not more than 30 days by either Principal Party by
written notice to the other party if the Merger shall not have been
consummated as a direct result of either Principal Party having failed
to receive all regulatory approvals required to be obtained with
respect to the Merger;
(ii) if the Inprise Shareholders' Approval or the Corel
Shareholders' Approval shall not be obtained by reason of the failure
to obtain the requisite vote upon a vote held at a meeting of such
shareholders, or any adjournment or postponement thereof, called
therefor;
(iii) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the non-terminating
Principal Party set forth in this Agreement, which breach is not
curable or, if curable, has not been cured within 30 days following
receipt by the non-terminating Principal Party of written notice of
such breach from the terminating Principal Party; or
(iv) if any Restraint having the effects set forth in Section
7.01(e) shall be in effect and shall have become final and
nonappealable; or
(c) By either Principal Party if (i) the Board of Directors of such
Principal Party determines in good faith, based upon the advice of outside
counsel that termination of the Agreement is required for the Board of
Directors to comply with its fiduciary duties to shareholders imposed by
applicable law by reason of an unsolicited bona fide Alternative Proposal
with respect to which the Board of Directors of such Principal Party has
determined is a Superior Proposal (as hereinafter defined), provided that
the terminating Principal Party shall have complied with the provisions of
clauses (B) and (C) of Section 5.02 and shall notify the other Principal
Party in writing promptly of its intention to terminate this Agreement or
enter into a definitive agreement with respect to such Alternative
Proposal, but in no event shall such notice be given less than three
business days prior to the public announcement of the terminating Principal
Party's termination of this Agreement, and the terminating Principal Party
must to provide the other Principal Party with a reasonable opportunity to
make an equivalent proposal to enable the terminating Principal Party to
proceed with the Merger; or (ii) the Board of Directors of the other
Principal Party shall have withdrawn or modified in a manner materially
adverse to the terminating Principal Party its approval or recommendation
of this Agreement or the Merger and, in the case of Corel, its approval or
recommendation of any of the Corel Shareholders Proposals, (it being
understood that an announcement by such other Principal Party that states
that an Alternative Proposal is under consideration by such Board of
Directors shall be deemed such a withdrawal or modification, unless the
Board of Directors publicly reaffirms its original recommendation within
ten business days after such announcement); and provided further that the
terminating Principal Party's ability to terminate this Agreement pursuant
to clause (i) of this paragraph (c) is conditioned upon the prior payment
by the terminating Principal Party of any amounts owed by it pursuant to
Section 8.02 (b). For purposes of this Agreement, a "Superior Proposal" is
an Alternative Proposal received by a Principal Party with respect to which
the Board of Directors of such Principal Party has determined, based upon
the advice of such Principal Party's financial advisor, that the
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consideration to be received by the shareholders of such Principal Party is
superior from a financial point of view to the consideration to be received
by them in the Merger and the Board of Directors has concluded in good
faith and in its reasonable judgment, that such Alternative Proposal is
superior and is reasonably likely to be consummated, and which Alternative
Proposal is not conditioned on the receipt of financing and the Board of
Directors has reasonably concluded in good faith that the person or group
making such Alternative Proposal will have adequate sources of financing to
consummate such Alternative Proposal and that such Acquisition Proposal is
more favorable to such Principal Party's shareholders than the Merger.
8.02 Effect of Termination.
(a) If this Agreement is validly terminated by either Inprise or Corel
pursuant to Section 8.01, written notice thereof shall forthwith be given to
the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement will forthwith become null and
void and there will be no liability or obligation under this Agreement on the
part of either Inprise or Corel (or any of their respective Representatives or
affiliates), except (i) that the provisions of the Confidentiality Agreement
and Sections 5.06, 6.12, 6.13 and 6.14 and this Section 8.02 will continue to
apply following any such termination, (ii) that nothing contained herein shall
relieve any party hereto from liability for willful breach of its
representations, warranties, covenants or agreements contained in this
Agreement, and (iii) as provided in paragraph (b) below.
(b) In the event that any person or group shall have made an Alternative
Proposal with respect to a Principal Party and thereafter this Agreement is
terminated by such Principal Party pursuant to Section 8.01(c)(i), then such
Principal Party shall pay the Specified Amount (as defined below) to the other
Principal Party. In the event that a Principal Party shall terminate this
Agreement pursuant to 8.01(c)(ii), then the other Principal Party shall pay the
Specified Amount to the terminating Principal Party. In the event that any
person or group shall have made an Alternative Proposal with respect to a
Principal Party and the Shareholders Approval of such Principal Party shall not
be obtained, and thereafter either Principal Party shall terminate this
Agreement pursuant to Section 8.01 (b)(ii) and a definitive agreement with
respect to such Alternative Proposal or any other Alternative Proposal is
entered into by the Principal Party with respect to whom such first Alternative
Proposal was made within nine months of the date of such termination, then such
Principal Party executing such definitive agreement shall pay the Specified
Amount to the other Principal Party. In the event that any person or group
shall have made an Alternative Proposal with respect to a Principal Party, and
thereafter the other Principal Party shall terminate this Agreement pursuant to
8.01(b)(iii) and a definitive agreement with respect to such Alternative
Proposal or any other Alternative Proposal is entered into by the Principal
Party with respect to whom such first Alternative Proposal was made within nine
months of the date of such termination, then such Principal Party executing
such definitive agreement shall pay the Specified Amount to the other Principal
Party. If any person or group shall have made an Alternative Proposal with
respect to a Principal Party and thereafter this Agreement is terminated
pursuant to Sections 8.01(b)(i) or 8.01(b)(iv) and a definitive agreement with
the party who has made such Alternative Proposal is executed by such Principal
Party within nine months after such termination, then the Principal Party
executing such definitive agreement shall pay the Specified Amount to the other
Principal Party. The Specified Amount shall be paid by wire transfer of same
day funds, either on the date contemplated in Section 8.01 (c) if applicable,
or otherwise within two business days after such amount becomes due. "Specified
Amount" means a termination fee of $29,500,000 if the party entitled to receive
such fee is Corel, and (ii) $44,500,000 if the party entitled to receive such
fee is Inprise.
(c) Each Principal Party acknowledges that the agreements contained in the
preceding paragraph are an integral part of the transactions contemplated by
this Agreement and that, without these agreements, the other Principal Party
would not enter into this Agreement; accordingly, if such Principal Party fails
promptly to pay the amount due pursuant to such paragraph, and in order to
obtain such payment, the other Principal Party commences a suit which results
in a judgment against such Principal Party for such amount, such Principal
Party shall pay to the other Principal Party, as the case may be, all costs and
expenses (including attorneys' fees
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and expenses) incurred by such other Principal Party or any of its Subsidiaries
in connection with such suit, together with interest on the amount of the fee
at a rate equal to the prime rate publicly announced from time to time by
Citibank, N.A. and in effect on the date such payment was required to be made.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Inprise Shareholders' Approval or the Corel Shareholders' Approval
shall have been obtained, but after such adoption and approval only to the
extent permitted by applicable law. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or non-
compliance. No waiver by any party of any term or condition of this Agreement,
in any one or more instances, shall be deemed to be or construed as a waiver of
the same or any other term or condition of this Agreement on any future
occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the Merger but shall terminate at the Effective Time, except
for the agreements contained in Article I and Article II, in Sections 6.08,
6.09, 6.10 and 6.11, this Article IX and the agreements of the "affiliates" of
Inprise delivered pursuant to Section 6.04, which shall survive the Effective
Time.
9.02 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given (a) on the date of
delivery if delivered personally, including by courier service, (b) upon
receipt if delivered by registered or certified mail, return receipt requested,
postage prepaid, or (c) upon receipt if sent by facsimile transmission,
provided that any notice received by telecopy or otherwise at the addressee's
location on any business day after 5:00 p.m. (addressee's local time) shall be
deemed to have been received at 9:00 a.m. (addressee's local time) on the next
business day. Any party to this Agreement may notify any other party of any
changes to the address or any of the other details specified in this paragraph,
provided that such notification shall only be effective on the date specified
in such notice or five (5) business days after the notice is given, whichever
is later. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice as of the date of such rejection, refusal or inability to
deliver. All notices hereunder shall be delivered or faxed, as the case may be,
to the addresses and/or facsimile numbers set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:
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If to Corel or Sub, to:
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7
Facsimile No.: (613) 725-2691
Attn: Corporate Secretary
with copies to:
McCarthy Tetrault
The Chambers
Suite 1400, 40 Elgin Street
Ottawa, Ontario
K1P 5K6
Facsimile No.: (613) 563-9386
Attn: Robert D. Chapman
If to Inprise, to:
Inprise Corporation
100 Enterprise Way
Scotts Valley, CA 95066-3249
Facsimile No.: (813) 431-1320
Attn: Dale Fuller
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Facsimile No.: (212) 735-2000
Attention: Daniel E. Stoller, Esq.
Richard J. Grossman, Esq.
and
Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Ave.
Palo Alto, CA 94301
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
9.03 Entire Agreement; Incorporation of Exhibits.
(a) This Agreement supersedes all prior discussions, representations,
warranties and agreements, both written and oral, among the parties hereto
with respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement
in accordance with its terms, and contains, together with the
Confidentiality Agreement and the Stock Option Agreements, the sole and
entire agreement among the parties hereto with respect to the subject
matter hereof. No prior drafts of this Agreement and no words or phrases
from any such prior drafts shall be admissible into evidence in any action,
suit or other proceeding involving this Agreement.
(b) The Inprise Disclosure Letter, the Corel Disclosure Letter and any
Schedule or Exhibit attached to this Agreement and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
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9.04 Public Announcements. Except as otherwise required by law or the rules
of any applicable securities exchange or national market system, so long as
this Agreement is in effect, Corel and Inprise will not, and will not permit
any of their respective Subsidiaries or Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Corel and
Inprise will cooperate with each other in the development and distribution of
all press releases and other public announcements with respect to this
Agreement and the transactions contemplated hereby, and will furnish the other
with drafts of any such releases and announcements as far in advance as
practicable.
9.05 No Third Party Beneficiaries. Except as provided in Sections 6.08, 6.10
and 6.11, the terms and provisions of this Agreement are intended solely for
the benefit of each party hereto and their respective successors or permitted
assigns, and except as otherwise expressly provided for herein, it is not the
intention of the parties to confer third-party beneficiary rights upon any
other person.
9.06 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto, in whole
or in part (whether by operation of law or otherwise), without the prior
written consent of the other parties hereto and any attempt to do so will be
void, except that Sub may assign any or all of its rights, interests and
obligations hereunder to another direct or indirect wholly-owned Subsidiary of
Corel, provided that any such Subsidiary agrees in writing to be bound by and
liable for all of the terms, conditions and provisions contained herein that
would otherwise be applicable to Sub. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and personal or legal
representatives, executors, administrators, heirs, distributees, devisees,
legatees and permitted assigns.
9.07 Headings. The table of contents, glossary of defined terms and the
descriptive headings used in this Agreement have been inserted for convenience
of reference only and do not define, modify or limit the provisions hereof or
in any way affect the meaning or interpretation of this Agreement.
9.08 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The words "hereof,"
"herein" and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meaning contained herein when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any agreement or instrument
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement or instrument as from time to time
amended, modified or supplemented and attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local or foreign statute or law shall be deemed to also to refer to any
amendments thereto and all rules and regulations promulgated thereunder, unless
the context requires otherwise.
9.09 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, public
policy or order, and if the rights or obligations of any party hereto under
this Agreement, and the economic or legal substance of the transactions
contemplated hereby, will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (iii) the remaining provisions of this Agreement
will remain in full force and
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effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
9.10 Governing Law. Except to the extent that the DL is mandatorily
applicable to this Agreement, the Merger, the transactions contemplated hereby,
the obligations of a Principal Partys directors, the indemnification
obligations contained herein and the rights of the shareholders of the
Constituent Corporations, this Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and fully performed in such jurisdiction, without giving effect to the
conflicts of laws principles thereof.
9.11 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specified terms or was otherwise
breached and that money damages would not be an adequate remedy for any breach
of this Agreement. It is accordingly agreed that in any proceeding seeking
specific performance each of the parties will waive the defense of adequacy of
a remedy at law. Each of the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.12 Jurisdiction. Each of the parties hereto irrevocably agrees that any
action, suit, claim or other legal proceeding with respect to this Agreement or
in respect of the transactions contemplated hereby or for recognition and
enforcement of any judgment in respect hereof brought by any other party hereto
or its successors or assigns shall be brought and determined in any federal
court located in the County of New York of the State of New York or the County
of New Castle in the State of Delaware or the courts of the State of New York
located in the County of New York or the State of Delaware located in the
County of New Castle (or any appeals courts thereof). The foregoing New York
courts are hereinafter referred to as the New York Courts and the foregoing
Delaware courts are hereinafter referred to as the Delaware Courts. Each of the
parties hereto irrevocably submits with regard to any such proceeding for
itself and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts. Each of the parties hereto
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to serve
process in accordance with Section 9.13 hereof, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment before
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise) and (c) to the fullest extent permitted by applicable law, that (i)
the proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such proceeding is improper or (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by such court. Notwithstanding the
foregoing, each of the parties hereto agrees that each of the other parties
shall have the right to bring any action or proceeding for enforcement of a
judgment entered by the New York Courts or the Delaware Courts in any other
court or jurisdiction.
9.13. Service of Process.
(a) The parties agree that the delivery of process or other papers in
connection with any such action or proceeding in the manner provided in Section
9.02, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
(b) Each of Inprise, Corel and Sub hereby designates each of the New York
City and Wilmington, Delaware offices of CT Corporation as its respective agent
for service of process in the State of New York and the State of Delaware,
respectively, solely with respect to any dispute or controversy arising out of
this
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Agreement, the Stock Option Agreements or any of the transactions contemplated
hereby or thereby and service upon Corel or Sub for such purposes shall be
deemed to be effective upon service of CT Corporation, as aforesaid or of its
successor designated in accordance with the following sentence in the
appropriate State. A party may designate another corporate agent or law firm
reasonably acceptable to each of the other parties and located in the Borough
of Manhattan, in the City of New York, or in the County of New Castle in the
State of Delaware, as applicable, as successor agent for service of process
upon 30 days prior written notice to each other party.
9.14 Waiver of Trial by Jury. Each of the parties hereto acknowledges and
agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any right such party may have to a trial by jury in respect of
any action, suit, claim or other proceeding directly or indirectly arising out
of or relating to this Agreement or the transactions contemplated by this
Agreement. Each party certifies and acknowledges that (i) no representative of
such party has been authorized by such party to represent or, to the knowledge
or such party, has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver,
(ii) each such party understands and has considered the implications of this
waiver, (iii) each such party makes this waiver voluntarily and (iv) each such
party has been induced to enter into this Agreement by, among other things, the
mutual waivers and certifications in this Section 9.14.
9.15 Remedies Cumulative. Except as otherwise herein provided, the rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by applicable law, either at law or in equity.
9.16 Obligation of Corel and Inprise. Whenever this Agreement requires Sub
or another Subsidiary of Corel to take any action, such requirement shall be
deemed to include an undertaking on the part of Corel to cause Sub or such
Subsidiary to take such action and a guarantee of the performance thereof.
Whenever this Agreement requires a Subsidiary of Inprise to take any action,
such requirement shall be deemed to include an undertaking on the part of
Inprise to cause such Subsidiary to take such action and a guarantee of the
performance thereof.
9.17 Limitations on Warranties.
(a) Except for the representations and warranties contained in Article III
of this Agreement, Inprise makes no other express or implied representation or
warranty to Corel or Sub. Each of Corel and Sub acknowledge that, in entering
into this Agreement, it has not relied on any representations or warranties of
Inprise or any other Person other than the representations and warranties of
Inprise set forth in Article III of this Agreement.
(b) Except for the representations and warranties contained in Article IV of
this Agreement, Corel and Sub make no other express or implied representation
or warranty to Inprise. Inprise acknowledges that, in entering into this
Agreement, it has not relied on any representations or warranties of Corel and
Sub or any other Person other than the representations and warranties of Corel
and Sub set forth in Article IV of this Agreement.
9.18 Certain Definitions. As used in this Agreement:
(a) except as provided in Section 6.04, the term "affiliate," as applied to
any person, shall mean any other person directly or indirectly controlling,
controlled by, or under common control with, that person; for purposes of this
definition, "control" (including, with correlative meanings, the terms
controlling, controlled by, under common control with), as applied to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or otherwise;
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(b) a person will be deemed to "beneficially" own securities if such person
would be the beneficial owner of such securities under Rule 13d-3 under the
Exchange Act, including securities which such person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time);
(c) the term "business day" means any day on which commercial banks are open
for business in New York, New York and Toronto, Ontario other than a Saturday,
a Sunday or a day observed as a holiday in Toronto, Ontario under the laws of
the Province of Ontario or the federal laws of Canada or in New York, New York
under the laws of the State of New York or the federal laws of the United
States of America.
(d) the term "knowledge" or any similar formulation of "knowledge" shall
mean, with respect to Inprise, the actual knowledge of Inprise's executive
officers, and with respect to Corel, the actual knowledge of Corel's executive
officers;
(e) any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with respect
to an entity (or group of entities taken as a whole) means such event, change
or effect is material or materially adverse, as the case may be, to the
business, financial condition or results of operations of such entity (or of
such group of entities taken as a whole) or the ability of the parties hereto
to consummate the Merger. Notwithstanding the foregoing, when used in
connection with a Principal Party or its Subsidiaries, none of the following
shall be deemed, either alone or in combination, to constitute a "material
adverse effect": (i) a change in the market price or trading volume of such
Principal Party's common stock, (ii) a change in such Principal Party's
financial performance that is temporary in nature, resulting from the public
announcement or the pendency of the Merger, (iii) conditions affecting the
industries in which such Principal Party operates, (iv) a failure by such
Principal Party to meet internal earnings or revenue projections or the
earnings or revenue projections of equity analysts, provided that this clause
(iv) shall not exclude any non-temporary underlying change, effect, event,
occurrence, state of facts or developments that resulted in such failure to
meet such projections, (v) any adverse change, event or effect that is caused
by conditions affecting the economy of the United States or Canada generally or
the economy of any nation or region in which such Principal Party or any of its
Subsidiaries conducts business that is material to the business of such entity
and its Subsidiaries, taken as a whole, (vi) any disruption of customer or
supplier relationships arising primarily out of or resulting primarily from
actions contemplated by the parties in connection with, or which is primarily
attributable to, the execution or announcement of this Agreement and the
transactions contemplated hereby, to the extent so attributable and (vii) the
loss of employees or other adverse effects resulting from the announcement and
pendency of the Merger;
(f) the term "person" shall include individuals, corporations, partnerships,
trusts, limited liability companies, associations, unincorporated
organizations, joint ventures, other entities, groups (which term shall include
a "group" as such term is defined in Section 13(d)(3) of the Exchange Act),
labor unions or Regulatory or Governmental Authorities;
(g) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives;
(h) the term "Significant Subsidiary" shall have the meaning ascribed
thereto by Rule
1-02(w) of Regulation S-X of the Securities Act of 1933, as amended.
(i) the term "Subsidiary" means, with respect to any party, any corporation
or other organization, whether incorporated or unincorporated, (i) of which
such party or any other Subsidiary of such party is a general partner, (ii)
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization, or
the means to otherwise control such corporation, organization or other person
are directly or indirectly owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of its Subsidiaries
or (iii) of which more than 50% of the equity interests in such corporation or
other organization is, directly or indirectly through Subsidiaries or
otherwise, beneficially owned by such party.
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9.19 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
9.20 Disclosure Letters. Each of the Inprise Disclosure Letter and the Corel
Disclosure Letter shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Any matter disclosed pursuant to the Inprise Disclosure Letter or the Corel
Disclosure Letter shall be treated as if it were disclosed in all applicable
locations throughout such disclosure letter to the extent that, based upon a
reasonable review of such disclosure letter by someone familiar with this
Agreement, its applicability would be readily apparent. No disclosure in either
the Inprise Disclosure Letter or the Corel Disclosure Letter shall be deemed to
be an admission or representation as to the materiality of the item so
disclosed.
9.21 Execution. This Agreement may be executed by facsimile signatures by
any party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
9.22 Personal Liability. Neither this Agreement nor any other document
delivered in connection with this Agreement (other than an Affiliate Agreement
delivered by any officer or director of Inprise) shall create or be deemed to
create or permit any personal liability or obligation on the part of any
officer or director of any party hereto.
9.23 Currency. Unless otherwise specified, all references in this Agreement
to "dollars" or "$" shall mean United States dollars.
9.24 Date for Any Action. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a business
day, such action shall be required to be taken on the next succeeding day which
is a business day.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be signed
by its officers thereunto duly authorized and its corporate seal to be affixed
as of the date first above written.
Corel Corporation
/s/ Michael C.J. Cowpland
By: _________________________________
Name: Michael C.J. Cowpland
Title: Chairman, President and
Chief Executive Officer
/s/ Eric J. Smith
By: _________________________________
Name: Eric J. Smith
Title: Secretary
Carleton Acquisition Co.
/s/ Michael C.J. Cowpland
By: _________________________________
Name: Michael C.J. Cowpland
Title: Chairman, President and
Chief Executive Officer
/s/ Eric J. Smith
By: _________________________________
Name: Eric J. Smith
Title: Secretary
Inprise Corporation
/s/ Frederick A. Ball
By: _________________________________
Name: Frederick A. Ball
Title: Chief Financial Officer
/s/ JoAnne M. Butler
By: _________________________________
Name: JoAnne M. Butler
Title: Secretary
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EXHIBIT A
[Form of Affiliate's Agreement]
[Datel
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Inprise Corporation, a Delaware corporation ("Inprise"), as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Neither my entering into this agreement, nor anything contained herein,
shall be deemed an admission on my part that I am such an "affiliate".
Pursuant to the terms of the Agreement and Plan of Merger dated as of
February 6, 2000 (the "Merger Agreement"), among Corel Corporation, a Canadian
corporation ("Corel"), Carleton Acquisition Co., a Delaware corporation wholly
owned by Corel ("Sub"), and Inprise; Sub will be merged with and into Inprise
(the "Merger"), and as a result of the Merger, I will be entitled to receive
shares of Corel's common stock (the "Corel Securities"), in exchange for the
shares of common stock, par value $.01 per share, of Inprise owned by me at the
Effective Time (as defined in the Merger Agreement) of the Merger.
I represent, warrant and covenant to Corel that in such event:
A. I shall not make any sale, transfer or other disposition of the Corel
Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Corel Securities, to the extent I
felt necessary, with my counsel or counsel for Inprise.
C. I have been advised that the issuance of Corel Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of Inprise I may have been deemed to have been an affiliate of
Inprise and a distribution by me of Corel Securities has not been
registered under the Act, the Corel Securities must be held by me
indefinitely unless (i) a distribution of Corel Securities by me has been
registered under the Act, (ii) a sale of Corel Securities by me is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act,(iii) in the opinion of counsel reasonably
acceptable to Corel, some other exemption from registration is available
with respect to a proposed sale, transfer or other disposition of the Corel
Securities by me, or (iv) pursuant to a "no-action" or interpretive letter
from the Staff of the Commission, registration is not required with respect
to a proposed sale, transfer or other disposition of Corel Securities.
D. I understand that Corel is under no obligation to register the sale,
transfer or other disposition of Corel Securities by me or on my behalf or
to take any other action necessary in order to make compliance with an
exemption from registration available.
E. I also understand that stop transfer instructions will be given to
Corel's transfer agents with respect to the Corel Securities and that there
will be placed on the certificates for the Corel Securities, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act
of 1933, as amended, applies. The shares represented by this
certificate may only be transferred in accordance with the terms of
an agreement dated , , between the registered holder hereof
and Corel (the "Corporation"), a copy of which agreement is on file
at the principal offices of the Corporation."
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F. I also understand that unless the transfer by me of my Corel
Securities has been registered under the Act or is a sale made in
conformity with the provisions of this Agreement, Corel reserves the right
to put the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated under
such Act applies. The shares have been acquired by the holder not with a
view to, or for resale in connection with, any distribution thereof within
the meaning of such Act and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the registration
requirements of such Act."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date that the undersigned acquired Corel Securities received in the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the Corel
Securities received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, (iii) Corel shall have received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to Corel, or a "no action" or "interpretive" letter obtained from the Staff of
the Commission, to the effect that the Corel Securities subject thereto may be
transferred free of the restrictions imposed by Rule 144 or 145 under the Act
or (iv) in the event of a sale of Corel Securities received by the undersigned
in the Merger which has been registered under the Act.
By its acceptance hereof, Corel agrees, for so long as to the extent
necessary to permit the undersigned to sell the Corel Securities pursuant to
Rule 145 and, to the extent applicable, Rule 144 under the Act, that it will
(i) 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 (the "1934 Act"),
and (ii) furnish to the undersigned, upon request, a written statement as to
whether Corel has complied with such reporting requirements during the twelve
(12) months preceding any proposed sale of Corel Securities by the undersigned
under Rule 145 and Rule 144. Corel represents to the undersigned that it has
filed all reports required to be filed with the Commission under Section 13 of
the 1934 Act during the preceding twelve (12) months.
Very truly yours,
Accepted this day of ,
, by:
By:
----------------------------------
Name:
Title:
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ANNEX B
OPINION OF INPRISE'S FINANCIAL ADVISOR
[Letterhead of Broadview International LLC]
February 6, 2000
CONFIDENTIAL
Board of Directors
Inprise Corporation
100 Enterprise Way
Scotts Valley, CA 95066
Dear Members of the Board:
We understand that Inprise Corporation ("Inprise" or "Company"), Corel
Corporation ("Corel" or "Parent") and Carleton Acquisition Co., a wholly-owned
subsidiary of Parent ("Merger Sub"), propose to enter into a Merger Agreement
(the "Agreement") pursuant to which, through the merger of Merger Sub with and
into the Company (the "Merger"), each outstanding share of common stock of the
Company ("Company Common Stock") will be converted into the right to receive
0.7470 (the "Exchange Ratio") shares of common stock of the Parent ("Parent
Common Stock"). The Merger is intended to qualify as a reorganization within
the meaning of Section 368(a) of the United States Internal Revenue Code of
1986, as amended. The terms and conditions of the above described Merger are
more fully detailed in the Agreement.
You have requested our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to Inprise stockholders.
Broadview International LLC ("Broadview") focuses on providing merger and
acquisition advisory services to information technology ("IT"), communications
and media companies. In this capacity, we are continually engaged in valuing
such businesses, and we maintain an extensive database of IT, communications
and media mergers and acquisitions for comparative purposes. We are currently
acting as financial advisor to Inprise's Board of Directors and will receive a
fee from Inprise upon the successful conclusion of the Merger.
In rendering our opinion, we have, among other things:
. reviewed the terms of a draft of the Agreement dated February 5, 2000
furnished to us by the Company on February 5, 2000 (which, for the
purposes of this opinion, we have assumed, with your permission, to be
identical in all material respects to the Agreement to be executed,
except that we have assumed with your permission that the Exchange Ratio
is 0.7470);
. reviewed Inprise's quarterly report on Form 10-Q for the period ended
September 30, 1999, including the unaudited financial statements
included therein, and reviewed Inprise's financial press release dated
January 27, 2000, for the fiscal year ended December 31, 1999, including
the unaudited financial statements included therein;
. reviewed certain internal financial and operating information concerning
Inprise, including quarterly projections through December 31, 2000,
relating to Inprise, prepared and furnished to us by Inprise management;
. participated in discussions with Inprise management concerning the
operations, business strategy, current financial performance and
prospects for Inprise;
. discussed with Inprise management its view of the strategic rationale
for the Merger;
. reviewed the recent reported closing prices and trading activity for
Inprise Common Stock;
. compared certain aspects of the financial performance of Inprise with
public companies we deemed comparable;
. analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or
in part to the Merger;
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. reviewed recent equity research analyst reports covering Inprise;
. reviewed Corel's quarterly report on Form 10-Q for the period ended
August 31, 1999, including the unaudited financial statements included
therein, and reviewed Corel's financial press release dated January 18,
2000, for the fiscal year ended November 30, 1999, including the
unaudited financial statements included therein;
. participated in discussions with Corel management concerning the
operations, business strategy, financial performance and prospects for
Corel;
. reviewed the recent reported closing prices and trading activity for
Corel Common Stock;
. discussed with Corel management its view of the strategic rationale for
the Merger;
. compared certain aspects of the financial performance of Corel with
public companies we deemed comparable;
. reviewed recent equity analyst reports covering Corel;
. analyzed the anticipated effect of the Merger on the future financial
performance of the combined entity;
. participated in discussions related to the Merger with Inprise, Corel
and their respective advisors; and
. conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Inprise or
Corel. With respect to the financial projections examined by us, we have
assumed that they were reasonably prepared and reflected the best available
estimates and good faith judgments of the management of Inprise as to the
future performance of Inprise. We have neither made nor obtained an independent
appraisal or valuation of any of Inprise's assets.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair, from a financial point of view, to Inprise
stockholders.
For purposes of this opinion, we have assumed that neither Inprise nor Corel
is currently involved in any material transaction other than the Merger, other
publicly announced transactions, other preliminarily discussed transactions
confidentially disclosed to us, and those activities undertaken in the ordinary
course of conducting their respective businesses. Our opinion is necessarily
based upon market, economic, financial and other conditions as they exist and
can be evaluated as of the date of this opinion, and any change in such
conditions would require a reevaluation of this opinion. We express no opinion
as to the price at which Corel Common Stock will trade at any time.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Inprise in
connection with its consideration of the Merger and does not constitute a
recommendation to any Inprise stockholder as to how such stockholder should
vote on the Merger. This opinion may not be published or referred to, in whole
or part, without our prior written permission, which shall not be unreasonably
withheld. Broadview hereby consents to references to and the inclusion of this
opinion in its entirety in the Prospectus/Proxy Statement to be distributed to
Inprise stockholders in connection with the Merger.
Sincerely,
Broadview International LLC
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ANNEX C
[LETTERHEAD OF CIBC WORLD MARKETS INC.]
February 6, 2000
The Board of Directors
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7
To The Board of Directors:
CIBC World Markets Inc. ("CIBCWM") understands that Corel Corporation
("Corel" or the "Company") is contemplating entering into a merger agreement
(the "Merger Agreement") among the Company, Carleton Acquisition Co., a
Delaware Corporation and a wholly owned subsidiary of Corel ("Sub") and Inprise
Corporation, a Delaware corporation ("Inprise") to be dated the 6th day of
February, 2000. The Merger Agreement, includes, among other things, an
agreement by Corel and Inprise to combine their business operations by
consummating a transaction which would have Sub merge with and into Inprise,
with the result that Inprise would become a wholly-owned subsidiary of Corel.
Upon completion of the transaction, Corel's existing stockholders would own
approximately 56% of the fully diluted shares of the new company, as calculated
in accordance with U.S. GAAP, with the remaining 44% owned by Inprise's
existing shareholders. As part of this process, each issued and outstanding
share of Inprise common stock (other than stock owned by Corel and its
subsidiaries) and all associated Inprise common stock purchase rights attached
thereto would be converted into the right to receive 0.747 common shares of
Corel (the "Conversion Number"). In addition, holders of shares of Inprise
common stock or Inprise preferred stock would receive, together with each whole
common share of Corel issued to them, one associated common stock purchase
right of Corel under the Company's existing rights agreement (the foregoing is
together referred to as the "Transaction").
The Board of Directors of the Company (the "Board") has retained CIBCWM to
review the Transaction and to provide to the Board financial advice and an
opinion (the "Fairness Opinion") that the Conversion Number is fair, from a
financial point of view, to the common shareholders of the Company.
CIBCWM's Engagement
The Board initially contacted CIBCWM regarding potential transaction
opportunities in December of 1999, and CIBCWM was formally engaged by the
Company to provide strategic and financial advice under an agreement between
the Company and CIBCWM (the "Engagement Agreement") dated January 24, 2000. As
part of the Engagement Agreement, CIBCWM agreed to render a fairness opinion in
connection with a prospective transaction involving the Company.
Fees payable to CIBCWM pursuant to the Engagement Agreement will cover
services related to the Fairness Opinion, and CIBCWM will be reimbursed for all
reasonable out-of-pocket expenses in connection therewith. In addition, Corel
has agreed to indemnify CIBCWM in respect of certain liabilities that may arise
out of its engagement. CIBCWM has consented to the inclusion of the Fairness
Opinion in its entirety, together with a summary thereof, in the proxy
circulars to be sent to the Company's shareholders and Inprise's stockholders.
CIBCWM's Credentials
CIBCWM is one of Canada's largest investment banking firms, with operations
in all facets of corporate and government finance, mergers and acquisitions,
equity and fixed income sales and trading and investment research. The Fairness
Opinion expressed herein is the opinion of CIBCWM, and the form and content
have
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been approved by a committee of its directors, each of whom is experienced in
merger, acquisition, divestiture and valuation matters.
CIBCWM is not an insider, associate or affiliate of the Company or of any
other party to the Merger Agreement (each an "Interested Party"). In the
ordinary course of business, CIBC World Markets and its affiliates may actively
trade securities of the Company and Inprise for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Scope of Review
In connection with preparing and rendering the Fairness Opinion, CIBCWM has
reviewed, and where it considered appropriate, relied upon (without verifying
independently the completeness or accuracy of), or undertaken, among other
things:
(i)the draft Merger Agreement, dated February 5, 2000;
(ii)audited consolidated financial statements for Corel for the four years
ended November 30, 1998;
(iii)the unaudited financial results of Corel for the year ended November
30, 1999;
(iv) the unaudited quarterly financial statements for Corel for the
quarters ended August 31, 1998, February 28, 1999, May 31, 1999, and
August 31, 1999;
(v) the Annual Information Form dated April 19, 1999 for Corel; the
Company's Management Proxy Circular dated March 8, 1999;
(vi)the Form 10-K of Inprise for the four years ended December 31, 1998;
(vii) the Forms 10-Q of Inprise for the quarters ended March 31, 1999, June
30, 1999, and September 30, 1999;
(viii)the unaudited financial results of Inprise for the year ended
December 31, 1999;
(ix) discussions with members of the management of Corel and Inprise
concerning their current business operations, financial condition and
results and prospects;
(x)other publicly available information regarding Corel's and Inprise's
operations;
(xi) certain financial and stock market data of Corel, Inprise and other
companies in the software industry;
(xii)certain recent public and non-public transactions in the software
industry;
(xiii) a certificate dated the date hereof from senior officers of Corel as
to the accuracy and completeness of the information provided to us
in connection with the Company; and
(xvi) such other information, financial studies, analyses and
investigations and financial, economic and market criteria that we
have deemed relevant.
CIBCWM has not, to the best of its knowledge, been denied access by the
Company to any information requested by CIBCWM.
Assumptions and Limitations
With the Board's approval and as provided for in the Engagement Agreement,
CIBCWM has relied upon, and has assumed, the completeness, accuracy and fair
presentation of all the financial and other information, data, advice, opinions
and representations obtained by it from public sources, the Company, senior
management of the Company and Inprise and agents and advisors to the Company
and Inprise (collectively, the "Information"). Subject to the exercise of
professional judgement and except as expressly described herein, we
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have not attempted to verify independently the completeness, accuracy or fair
presentation of any of the Information.
Senior officers of the Company have represented to CIBCWM in a certificate
delivered as of the date hereof, among other things, that (i) the Information
provided by the Company, any of its subsidiaries or any of its representatives
or agents to CIBCWM relating to the Company, or any of its subsidiaries or the
Transaction was, at the date the Information was provided to CIBCWM, and is,
except as has been disclosed in writing to CIBCWM, complete, true and correct
in all material respects, and did not, and does not, contain any untrue
statement of a material fact in respect of the Company, any of its subsidiaries
or the Transaction, and did not, and does not, omit to state a material fact in
respect of the Company, any of its subsidiaries or the Transaction necessary to
make the Information not misleading in light of the circumstances under which
the Information was made or provided; and (ii) since the dates on which the
Information was provided to CIBCWM, except as disclosed in writing to CIBCWM,
or as publicly disclosed by the Company, there has been no material change,
financial or otherwise, in the financial condition, assets, liabilities
(contingent or otherwise), business, operations or prospects of the Company,
any of its subsidiaries and no material change has occurred in the Information
or any part thereof which would have, or which would reasonably be expected to
have, a material effect on the Fairness Opinion.
In preparing the Fairness Opinion, CIBCWM has made several assumptions,
including that all of the conditions required to implement the Transaction will
be met and that the representations and warranties in the Merger Agreement with
respect to the Company, its subsidiaries and affiliates, the Transaction and
Inprise and its subsidiaries and affiliates are accurate in all material
respects.
The Fairness Opinion is rendered on the basis of securities markets and
economic, financial and general business conditions prevailing as at the date
hereof. In its analyses and in preparing the Fairness Opinion, CIBCWM made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
CIBCWM or any party involved in the Transaction. We are not expressing any
opinion as to what the value of Corel's common shares will be when issued to
Inprise stockholders pursuant to the Merger Agreement or as to the prices at
which Corel's common shares will actually trade at any time.
The Fairness Opinion has been provided for the use of the Board and may not
be used by any other person or relied upon by any other person other than the
Board without the express prior written consent of CIBCWM. The Fairness Opinion
is given as of the date hereof and CIBCWM disclaims any undertaking or
obligation to advise the Board of any change in any fact or matter affecting
the Fairness Opinion which may come or be brought to CIBCWM's attention after
the date hereof. Notwithstanding and without limiting the foregoing, in the
event that there is any material change in any fact or matter affecting the
Fairness Opinion after the date hereof, CIBCWM reserves the right to change,
modify or withdraw the Fairness Opinion.
CIBCWM believes that its analyses must be considered as a whole and that
selecting portions of the analyses or the facts considered by it, without
considering all factors and analyses together, could create a misleading view
of the process underlying the Fairness Opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. Any attempt to do so could lead to undue
emphasis on any particular factor or analysis. The Fairness Opinion is not and
should not be construed as a recommendation to any holder of the Company's
common shares as to whether to vote in favour of the Transaction.
We understand that the Transaction is not subject to the formal valuation
requirements under Ontario Securities Commission Policy Statement No. 9.1 and
Quebec Securities Commission Policy Statement No. Q-27. Accordingly, we were
not engaged to prepare and have not prepared a formal valuation or appraisal of
the common shares, assets or liabilities (contingent or otherwise) of the
Company and the Fairness Opinion should not be construed as such.
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Conclusion
Based upon and subject to the foregoing, it is our opinion that the
Conversion Number is fair, from a financial point of view, to holders of the
common shares of the Company.
Yours very truly,
/s/ CIBC World Markets Inc.
CIBC WORLD MARKETS INC.
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ANNEX D
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated February 6, 2000, by and
between INPRISE CORPORATION, a Delaware corporation ("Inprise") and COREL
CORPORATION, a corporation continued under the laws of Canada ("Corel").
WHEREAS, Inprise, Corel and Carleton Acquisition Co., a Delaware corporation
and a wholly-owned subsidiary of Corel ("Merger Sub") are entering into a
Merger Agreement of even date herewith (the "Merger Agreement", terms defined
therein and not otherwise defined herein having the same meanings when used
herein), which provides, among other things, that upon the terms and subject to
the conditions contained therein, Merger Sub will be merged (the "Merger") with
and into Inprise; and
WHEREAS, Inprise has agreed, to induce Corel and Merger Sub to enter into
the Merger Agreement, to grant the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Grant of Option. Inprise hereby grants Corel an irrevocable option (the
"Option") to purchase, subject to the terms and conditions set forth herein, up
to 12,000,000 shares (the "Inprise Shares") of common stock of Inprise (the
"Inprise Common Stock"), together with the associated common stock purchase
rights (the "Inprise Rights") attached thereto issued pursuant to the Rights
Agreement, dated as of December 20, 1991, as amended, between the predecessor
to Inprise and Manufacturers Hanover Trust Company of California, as Rights
Agent (the "Inprise Rights Agreement"), in the manner set forth below at a
price of $14.94 per share (the "Exercise Price"); provided, however, that in no
event shall the number of shares of Inprise Common Stock for which the Option
is exercisable exceed 19.9% of Inprise's issued and outstanding shares of
Inprise Common Stock. References herein to Inprise Shares shall also be deemed
to include the associated Inprise Rights.
2. Exercise of Option. The Option may be exercised by Corel, in whole or in
part, at any time or from time to time after the Merger Agreement becomes
terminable by Corel under circumstances which could entitle Corel to payment of
the Specified Amount under Article VIII of the Merger Agreement; provided that
if the Specified Amount is not payable at the time that the Merger Agreement is
terminated, the Option shall not be exercisable until such time as the
Specified Amount becomes payable pursuant to the Merger Agreement. In the event
Corel wishes to exercise the Option, Corel shall deliver to Inprise a written
notice (an "Exercise Notice") specifying the total number of the Inprise Shares
it wishes to purchase and a date and time for the closing of such purchase (a
"Closing"), which date shall not be less than two nor more than 30 days after
the later of (i) the date such Exercise Notice is given and (ii) the expiration
or termination of any applicable waiting period under the HSR Act. The Option
shall terminate upon the earlier of: (i) the Effective Time; (ii) the
termination of the Merger Agreement pursuant to Section 8.01 thereof (other
than a termination in connection with which Corel is or may be entitled to the
payment specified in Section 8.02 thereof); and (iii) 5:00 p.m., California
time, on the date that is the one year anniversary of the termination of the
Merger Agreement in connection with which Corel is or may be entitled to the
payment specified in Section 8.02 thereof (or if, at the expiration of such one
year period, the Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, ten business days after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal.
3. Conditions to Closing. The obligation of Inprise to issue the Inprise
Shares to Corel hereunder is subject to the conditions that (i) all waiting
periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (HSR
Act) and
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the Competition Act (Canada) applicable to the issuance of the Inprise Shares
hereunder shall have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any United States, Canadian, state, provincial or local
administrative agency or commission or other United States, Canadian, state,
provincial or local governmental authority or instrumentality or securities
exchange, if any, required in connection with the issuance of the Inprise
Shares hereunder shall have been obtained or made, as the case may be; and
(iii) no statute, rule or regulation shall be in effect, and no order, decree
or injunction entered by any court of competent jurisdiction or governmental
entity in the United States or Canada shall be in effect, that prohibits or
restrains the exercise of the Option or the acquisition or issuance of Inprise
Shares pursuant to the terms of this Agreement.
4. Closing. At any Closing, (a) upon receipt of the payment provided for by
this Section 4, Inprise will deliver to Corel a single certificate in
definitive form representing the number of the Inprise Shares designated by
Corel in its Exercise Notice, such certificate to be registered in the name of
Corel and to bear the legend set forth in Section 11 of this Agreement, and (b)
Corel will deliver to Inprise the aggregate price for the Inprise Shares so
designated and being purchased by wire transfer of immediately available funds
. At any Closing at which Corel is exercising the Option in part, Corel shall
present and surrender this Agreement to Inprise, and Inprise shall deliver to
Corel an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of the Inprise
Common Stock purchasable hereunder.
5. Representations and Warranties of Inprise. Inprise represents and
warrants to Corel that (a) Inprise is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Inprise and the consummation by Inprise of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Inprise and no other corporate proceedings on the part of Inprise are necessary
to authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Inprise, constitutes a
valid and binding obligation of Inprise and, assuming this Agreement
constitutes a valid and binding obligation of Corel, is enforceable against
Inprise in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, the availability of
injunctive relief and other equitable remedies, and limitations imposed by law
on indemnification for liability under applicable securities laws, (d) Inprise
has taken all necessary corporate action to authorize and reserve for issuance
and to permit it to issue, upon exercise of the Option, and at all times from
the date hereof through the expiration of the Option will have reserved,
12,000,000 unissued Inprise Shares and such other shares of the Inprise Common
Stock or other securities which may be issued pursuant to Section 10 of this
Agreement, all of which, upon their issuance, payment and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable, and free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever (other than those
(i) created by or through Corel, or any of its respective affiliates,
(ii) which arise under this Agreement, or (iii) which arise under the
Securities Act of 1933, as amended (the Securities Act), the Securities Act
(Ontario) (the "Ontario Act") or any applicable state securities laws, (e) the
execution and delivery of this Agreement by Inprise does not, and the
performance of this Agreement by Inprise will not, materially conflict with, or
result in any material violation of, or material 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 the loss of a
material benefit under, or the creation of a lien, pledge, security interest or
other encumbrance on assets pursuant to (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation"), (A) any provision of the Certificate of Incorporation or By-laws
of Inprise or (B) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license of or applicable to Inprise,
or (C) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Inprise or its properties or assets, which Violation, in the case
of each of clauses (B) and (C), individually or in the aggregate would prevent
or materially delay the exercise by Corel of the Option or any other right of
Corel under this Agreement, (f) the Board of Directors of Inprise has approved
amendments
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to the Inprise Rights Plan to provide that Corel will not become an Acquiring
Person and that no Distribution Date or Triggering Event under the Inprise
Rights Agreement will occur as a result of the execution and delivery of this
Agreement or the Merger Agreement or the consummation of the transactions
contemplated hereby and thereby, including the acquisition of the shares of
Inprise Common Stock pursuant to this Agreement, assuming such transactions are
consummated in accordance with the terms of the applicable agreement, (g) the
Board of Directors of Inprise having approved this Agreement and the
consummation of the transactions contemplated hereby, the restrictions on
business combinations contained in Section 203 of the DL will not apply to this
Agreement or the purchase of shares of Inprise Common Stock pursuant to this
Agreement, and (h) except as described in Section 3.04 of the Merger Agreement
or this Agreement, and other than the HSR Act and the Competition Act (Canada)
and, with respect to Section 9 hereof, compliance with the provisions of the
Securities Act , the Ontario Act and any applicable state securities laws, the
execution and delivery of this Agreement by Inprise does not, and the
performance of this Agreement by Inprise will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority.
6. Representations and Warranties of Corel. Corel represents and warrants to
Inprise that (a) Corel is a corporation duly organized, validly existing and in
good standing under the laws of Canada and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by Corel and the
consummation by Corel of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Corel and no other
corporate proceedings on the part of Corel are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this Agreement
has been duly executed and delivered by Corel, constitutes a valid and binding
obligation of Corel and, assuming this Agreement constitutes a valid and
binding obligation of Inprise, is enforceable against Corel in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and, the availability of injunctive relief and
other equitable remedies and limitations imposed by law on indemnification for
liability under applicable securities laws, (d) the execution and delivery of
this Agreement by Corel does not, and the performance of this Agreement by
Corel will not, result in any Violation pursuant to, (A) any provision of the
charter documents of Corel, (B) any provisions of any loan or credit agreement,
note, mortgage, indenture, lease, or other agreement, obligation, instrument,
permit, concession, franchise, license of or applicable to it or (C) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Corel or its properties or assets, which Violation, in the case of each of
clauses (B) and (C), would, individually or in the aggregate have a material
adverse effect on Corel's ability to consummate the transactions contemplated
by this Agreement, (e) except as described in Section 4.04 of the Merger
Agreement, the execution and delivery of this Agreement by Corel does not, and
the performance of this Agreement by Corel will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority and (f) any Inprise Shares acquired upon
exercise of the Option will not be, and the Option is not being, acquired by
Corel with a view to public distribution or resale in any manner which would be
in violation of United States, Canadian, state or provincial securities laws.
7. Put Right.
(a) Exercise of Put. At any time during which the Option is exercisable
pursuant to Section 2 or would be exercisable but for the circumstances
referred to in the parenthetical in Section 2(iii) of this Agreement (the
Repurchase Period), upon demand by Corel, Corel shall have the right to sell to
Inprise (or any successor entity thereof) and Inprise (or such successor
entity) shall be obligated to repurchase from Corel (the "Put"), all or any
portion of the Option, at the price set forth in clause (i) below, or all or
any portion of the Inprise Shares purchased by Corel pursuant hereto, at a
price set forth in clause (ii) below:
(i) the difference between the Market/Tender Offer Price for shares of
the Inprise Common Stock as of the date (the "Notice Date") notice of
exercise of the Put is given to Inprise (defined as the higher of (A) the
price per share offered as of the Notice Date pursuant to any tender or
exchange offer or other
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Alternative Proposal which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") and (B)
the average of the closing prices of shares of the Inprise Common Stock on
the Nasdaq Stock Market for the five trading days immediately preceding the
Notice Date (the "Market Price") and the Exercise Price, multiplied by the
number of Inprise Shares purchasable pursuant to the Option (or portion
thereof with respect to which Corel is exercising its rights under this
Section 7),
(ii) the Exercise Price paid by Corel for the Inprise Shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer
Price and the Exercise Price, multiplied by the number of Inprise Shares so
purchased. For purposes of this clause (ii), the Tender Price shall be the
highest price per share offered pursuant to a tender or exchange offer or
other Alternative Proposal made during the Repurchase Period and not
withdrawn or terminated.
In determining the Market-Tender Offer Price, the value of consideration
other than cash or stock as provided above shall be determined by a nationally
recognized investment banking firm selected by Corel and reasonably acceptable
to Inprise.
(b) Payment and Redelivery of Option or Shares. In the event Corel exercises
its rights under this Section 7, Inprise shall, within ten business days of the
Notice Date, pay the required amount to Corel by wire transfer in immediately
available funds to an account specified by Corel two business days prior to the
date that payment is due and Corel shall surrender to Inprise the Option or the
certificates evidencing the Inprise Shares purchased by Corel pursuant hereto,
and Corel shall warrant that it owns such shares and that such shares are then
free and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever.
8. Restrictions on Certain Actions. Inprise shall not adopt any Rights
Agreement or shareholder rights plan or any amendment thereto in any manner
which would cause Corel, if Corel has complied with its obligations under this
Agreement, to become an Acquiring Person under such Rights Agreement or
shareholder rights plan solely by reason of the beneficial ownership of the
Inprise Shares acquired pursuant to this Agreement.
9. Registration Rights.
(a) Inprise will, if requested in writing (a "Registration Notice") by Corel
at any time and from time to time within two years of the exercise of the
Option, as expeditiously as possible prepare and file up to two registration
statements under the Securities Act or prospectuses under the Ontario Act if
such registration or the obtaining of a receipt for a prospectus is necessary
in order to permit the sale or other disposition of any or all shares or other
securities that have been acquired by or are issuable to Corel upon exercise of
the Option (Registrable Securities) in accordance with the intended method of
sale or other disposition stated by Corel. Any such Registration Notice must
relate to a number of Registrable Securities equal to at least twenty percent
(20%) of Inprise Shares, unless the remaining number of Registrable Securities
is less than such amount, in which case Corel shall be entitled to exercise its
rights hereunder but only for all of the remaining Registrable Securities.
Corel's rights hereunder shall terminate at such time as Corel shall be
entitled to sell all of the remaining Registrable Securities pursuant to Rule
144(k) under the Act. Inprise will use its reasonable best efforts to qualify
such shares or other securities under any applicable state or other provincial
securities laws; provided, however, that Inprise shall not be required to
qualify to do business, consent to general service of process or submit to
taxation in any jurisdiction by reason of this provision. Inprise will use
reasonable efforts to cause each such registration statement to become
effective and to obtain a ("final") receipt for each such prospectus, to obtain
all consents or waivers of other parties which are required therefor, and to
keep such registration statement or prospectus effective for such period not in
excess of 120 calendar days from the day such registration statement first
becomes effective or the date of the ("final") receipt for such prospectus as
may be reasonably necessary to effect such sale or other disposition. The
obligations of Inprise hereunder to file a registration statement or prospectus
and to maintain its effectiveness may be suspended for up to 90
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calendar days in the aggregate if the Board of Directors of Inprise shall have
determined that the filing of such registration statement or prospectus or the
maintenance of its effectiveness would require premature disclosure of
nonpublic information that would materially and adversely affect Inprise or
otherwise interfere with or adversely affect any pending or proposed offering
of securities of Inprise or any other material transaction involving Inprise,
or Inprise would be required under the Securities Act to include audited
financial statements for any period in such registration statement or
prospectus and such financial statements are not yet available for inclusion in
such registration statement or prospectus. Subject to applicable law, the
expenses associated with the preparation and filing of any registration
statement or prospectus prepared and filed under this Section 9, and any sale
covered thereby ("Registration Expenses"), will be paid by Inprise except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Corel's counsel related thereto; provided, however, that
Inprise will not be required to pay for any Registration Expenses with respect
to such registration if the registration request is subsequently withdrawn at
the request of Corel unless Corel agrees to forfeit its right to request one
registration. In connection with any registration statement or prospectus
pursuant to this Section 9, Corel shall furnish, or cause any holder of the
Option or Inprise Shares (a "Holder") to furnish, Inprise with such information
concerning itself and the proposed sale or distribution as shall reasonably be
required in order to ensure compliance with the requirements of the Securities
Act or the Ontario Act and to provide representations and warranties customary
for selling stockholders who are unaffiliated with Inprise. In addition, Corel
shall, and Corel shall cause each Holder to contractually agree to, indemnify
and hold Inprise, its underwriters and each of their respective affiliates
harmless against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, investigation expenses and fees and
disbursement of counsel and accountants), joint or several, to which Inprise,
its underwriters and each of their respective affiliates may become subject
under the Securities Act or the Ontario Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in written information furnished by any
Holder to Inprise expressly for use in such registration statement. If, during
the time periods referred to in the first sentence of this Section 9, Inprise
effects a registration under the Securities Act of, or qualifies a prospectus
under the Ontario Act in respect of, the Inprise Common Stock for its own
account or for any other stockholders of Inprise pursuant to a firm commitment
underwriting (other than on Form S-4 or Form S-8, or any successor form), it
will allow Corel the right to participate in such registration or qualification
as long as Corel participates in such underwriting on terms reasonably
satisfactory to the managing underwriters of such offering, and such
participation will not affect the obligation of Inprise to effect demand
registration statements or prospectuses for Corel under this Section 9,
provided that, if the managing underwriters of such offering advise Inprise in
writing that in their opinion the number of shares of the Inprise Common Stock
requested to be included in such registration or qualification exceeds the
number that it would be in the best interests of Inprise to sell in such
offering. Inprise will , after fully including therein all shares of Inprise
Common Stock to be sold by Inprise, include the shares of Inprise Common Stock
requested to be included therein by Corel pro rata (based on the number of
shares of Inprise Common Stock requested to be included therein) with the
shares of Inprise Common Stock requested to be included therein by persons
other than Inprise and persons to whom Inprise owes a contractual obligation
(other than any director, officer or employee of Inprise to the extent any such
person is not currently owed such contractual obligation). In connection with
any registration or qualification pursuant to this Section 9, Inprise and Corel
will provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution in
connection with such registration or qualification. Inprise shall provide to
any underwriters such documentation including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require.
(b) If Inprise's securities of the same type as the Inprise Common Stock
beneficially owned by Corel are then authorized for quotation or trading or
listing on the NYSE, Nasdaq National Market System or any other securities
exchange or automated quotations system, Inprise, upon the request of Corel,
shall promptly file an application, if required, to authorize for quotation,
trading or listing such shares of the Inprise Common Stock on such exchange or
system and will use its reasonable efforts to obtain approval, if required, of
such quotation, trading or listing as soon as practicable.
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10. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in the Inprise Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations, exchange
of shares or the like, the type and number of shares or securities subject to
the Option, and the purchase price per share provided in Section 1 of this
Agreement, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Corel shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Corel would have received in respect of the Inprise Common Stock
if the Option had been exercised immediately prior to such event or the record
date therefor, as applicable. In the event that any additional shares of
Inprise Common Stock otherwise become outstanding after the date of this
Agreement (other than pursuant hereto), the number of shares of Inprise Common
Stock subject to the Option shall be increased to equal 19.9% of the number of
shares of Inprise Common Stock then issued and outstanding.
(b) In the event that Inprise shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Corel or another direct
or indirect wholly-owned subsidiary of Corel, and shall not be the continuing
or surviving corporation of such consolidation or merger; (ii) to permit any
person, other than Corel or another direct or indirect wholly-owned subsidiary
of Corel, to merge into Inprise and Inprise shall be the continuing or
surviving corporation, but, in connection with such merger, the then-
outstanding shares of the Inprise Common Stock shall be changed into or
exchanged for stock or other securities of Inprise or any other person or cash
or any other property or the outstanding shares of the Inprise Common Stock
immediately prior to such merger shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company; or
(iii) to sell or otherwise transfer all or substantially all of its assets to
any person, other than Corel or another direct or indirect wholly-owned
subsidiary of Corel, then, and in each such case, Inprise shall immediately so
notify Corel, and the agreement governing such transaction shall make proper
provisions so that upon the consummation of any such transaction and upon the
terms and conditions set forth herein, Corel shall, upon exercise of the
Option, receive for each Inprise Share with respect to which the Option has not
been exercised an amount of consideration in the form of and equal to the per
share amount of consideration that would be received by the holder of one share
of the Inprise Common Stock less the Exercise Price (and, in the event of an
election or similar arrangement with respect to the type of consideration to be
received by the holders of the Inprise Common Stock, subject to the foregoing,
proper provision shall be made so that the holder of the Option would have the
same election or similar rights as would the holder of the number of shares of
the Inprise Common Stock for which the Option is then exercisable.
11. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Total Profit (as hereinafter defined) received by Corel and its affiliates
exceed $30 million and, if it otherwise would exceed such amount, Corel, at its
sole election, shall either (i) reduce the number of shares of Inprise Common
Stock subject to the Option, (ii) deliver to Inprise for cancellation Inprise
Shares previously purchased by Corel (valued, for the purposes of this Section
11(a) at the average closing sales price per share of Inprise Common Stock (or
if there is no sale on such date then the average between the closing bid and
ask prices on any such day) as reported by the Nasdaq Stock Market for the
twenty consecutive trading days preceding the day on which the Total Profit
exceeds $30 million, (iii) pay cash to Inprise, or (iv) any combination
thereof, so that the actually realized Total Profit shall not exceed $30
million after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the amount (before
taxes) of the following: (a) the aggregate amount of (i)(x) the net cash
amounts received by Corel and its affiliates pursuant to the sale of Inprise
Shares (or any securities into which such Inprise Shares are converted or
exchanged) to any unaffiliated party or to Inprise pursuant to this Agreement,
less (y) Corel's purchase price of such Inprise Shares, (ii) any amounts
received by Corel and its affiliates on the transfer of the Option (or any
portion thereof) to any unaffiliated party, if permitted hereunder or to
Inprise pursuant to this Agreement, and (iii) the amount received by Corel
pursuant to Section 8.02(b) of the Merger Agreement; minus (b) the amount of
cash theretofore paid to Inprise pursuant to this Section 11 plus the value of
the Inprise Shares theretofore delivered to Inprise for cancellation pursuant
to this Section 11.
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(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Corel to receive nor relieve Inprise's
obligation to pay a fee pursuant to Section 8.02(b) of the Merger Agreement;
provided that if the Total Profit received by Corel would exceed $30 million
following the receipt of such fee, Corel shall be obligated to comply with
terms of Section 11(a) within 5 days of the later of (i) the date of receipt of
such fee and (ii) the date of receipt of the net cash by Corel pursuant to the
sale of Inprise Shares (or, any other securities into which such Inprise Shares
are converted or exchanged) to any unaffiliated party or to Inprise pursuant to
this Agreement.
(d) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Inprise Shares that would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than $30
million . "Notional Total Profit" shall mean, with respect to any number of
Inprise Shares as to which Corel may propose to exercise the Option, the Total
Profit determined as of the Notice Date assuming that the Option was exercised
on such date for such number of Inprise Shares and assuming such Inprise
Shares, together with all other Inprise Shares held by Corel and its affiliates
as of such date, were sold for cash at the closing sales price for Inprise
Common Stock as of the close of business on the preceding trading day.
12. Restrictive Legends. Each certificate representing shares of the Inprise
Common Stock issued to Corel hereunder shall include a legend in substantially
the following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND THE COMPANY AND TO RESALE RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN
REQUEST THEREFOR."
Inprise shall, upon written request of the holder thereof, issue such holder a
new certificate evidencing such Inprise Shares without such legend in the event
(i) the sale of such Inprise Shares has been registered pursuant to the
Securities Act, or (ii) such holder shall have delivered to Inprise an opinion
of counsel, which opinion shall, in Inprise's reasonable judgment, be
satisfactory in form and substance to Inprise, to the effect that subsequent
transfers of such Inprise Shares may be effected without registration under the
Securities Act.
13. Listing and HSR Filing. Inprise, upon request of Corel, shall as
promptly as practicable file an application to list Inprise Shares to be
acquired upon exercise of the Option for listing or quotation on the Nasdaq
Stock Market and shall use its reasonable efforts to obtain approval for such
quotation as promptly as practicable. Promptly after the date hereof, each of
the parties hereto shall promptly file all required pre-merger notification and
report forms and other documents and exhibits required to be filed under the
HSR Act or the Competition Act (Canada) to permit the acquisition of Inprise
Shares subject to the Option at the earliest practicable date.
14. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement and
except for any assignment by Corel in whole or in part, to a wholly-owned,
direct or indirect, subsidiary of Corel (provided that any such subsidiary
agrees in writing to be bound by and liable for all of the terms, conditions
and provisions contained herein that would otherwise be applicable to Corel,
and provided further that Corel shall remain liable for all of its duties and
obligations hereunder in the event such subsidiary shall fail to perform
hereunder), neither this Agreement nor the rights or the obligations of either
party hereto are assignable in whole or in part (whether by operation of law or
otherwise), without the written consent of the other party and any attempt to
do so in contravention of this Section 14 will be void. Nothing contained in
this Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
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15. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction or injunctions restraining any
violation or threatened violation of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in the Courts of the State
of New York located in the County of New York or of the State of Delaware
located in the County of New Castle (or, if such court lacks subject matter
jurisdiction, any appropriate federal court in the State of New York or the
State of Delaware) (collectively, the Courts) or any of the appeals courts
thereof. In the event that any action should be brought in equity to enforce
the provisions of this Agreement, neither party will allege, and each party
hereby waives the defense that there is adequate remedy at law.
16. Entire Agreement. This Agreement and the Merger Agreement (including the
Exhibits and Schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other prior
discussions, representations and warranties, agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof. No prior drafts of this Agreement and no words or
phrases from any such prior drafts shall be admissible into evidence in any
action, suit or other proceeding involving this Agreement.
17. Further Assurances. Subject to the terms and conditions hereof, if Corel
exercises the Option, or any portion thereof, in accordance with the terms of
this Agreement, each party will execute and deliver all such further documents
and instruments and take all such further action including obtaining necessary
regulatory approvals and making necessary filings (including, without
limitation, filings under the HSR Act and the Competition Act (Canada)) as may
be necessary in order to consummate the transactions contemplated hereby
(including the issuance, registration and listing of the Inprise Shares). To
the extent that the Option becomes exercisable, Inprise will not take any
actions which would frustrate the exercise of the Option.
18. Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of to this Agreement unless otherwise
indicated. Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without limitation.
The words hereof, herein and herewith and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meaning contained herein when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the gender and neuter genders of such term. Any agreement or instrument
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement or instrument as from time to time
amended, modified or supplemented and attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local or foreign statute or law shall be deemed to also to refer to any
amendments thereto and all rules and regulations promulgated thereunder, unless
the context requires otherwise.
19. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, under any present or future law,
public policy or order, and if the rights or obligations of any party hereto
under this Agreement or the Merger Agreement, and the economic or legal
substance of the
D-8
<PAGE>
transactions contemplated hereby and thereby, will not be materially and
adversely affected thereby, (i) such provision will be fully severable and (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Agreement in order to the
maximum extent possible to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
20. Notices. Any notice, request, claim, demand or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received (a) on the date of
delivery if delivered personally, including by courier, (b) upon receipt if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (c) upon receipt if sent by facsimile transmission, provided that
any notice received by telecopy or otherwise at the addressee's location on any
business day after 5:00 p.m. (addressee's local time) shall be deemed to have
been received at 9:00 a.m. (addressee's local time) on the next business day.
Any party to this Agreement may notify any other party of any changes to the
address or any of the other details specified in this paragraph, provided that
such notification shall only be effective on the date specified in such notice
or five business days after the notice is given, whichever is later. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the
notice as of the date of such rejection, refusal or inability to deliver. All
notices hereunder shall be delivered to the parties to the addresses or
facsimile numbers set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
If to Inprise:
Inprise Corporation
100 Enterprise Way
Scotts Valley, CA 95066-3249
Facsimile No.: (813) 431-1320
Attention: Dale Fuller
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Facsimile No.: (212) 735-2000
Attention: Daniel E. Stoller, Esq.
Richard J. Grossman, Esq.
If to Corel to:
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7
Facsimile No.: (613) 725-2691
Attention: Corporate Secretary
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<PAGE>
with a copy to (which shall not constitute notice):
McCarthy Tetrault
The Chambers
Suite 1400, 40 Elgin Street
Ottawa, Ontario
K1P 5K6
Facsimile No: (613) 563-9386
Attention: Robert D. Chapman
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed and to be performed entirely within such State without giving effect
to the principles of conflicts or choice of law thereof or of any other
jurisdiction (except to the extent that mandatory provisions of United States
federal law applies to indemnification provisions).
22. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or, in any
way, to affect the meaning or interpretation of this Agreement.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same instrument and shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
24. Expenses. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred by a party in connection with the
transactions contemplated by this Agreement, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel, shall
be paid by the party incurring such expenses.
25. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument in writing signed on behalf of the party waiving
compliance.
26. Jurisdiction. Each of the parties hereto irrevocably agrees that any
action, suit, claim or other legal proceeding with respect to this Agreement or
in respect of the transactions contemplated hereby brought by any other party
hereto or its successors or assigns shall be brought and determined in any
federal court located in the County of New York in the State of New York or the
County of New Castle in the State of Delaware or the courts of the State of New
York located in the County of New York or of the State of Delaware located in
the County of New Castle (or any appeals courts thereof). The foregoing New
York courts are hereinafter referred to as the New York Courts and the
foregoing Delaware Courts are hereinafter referred to as the Delaware Courts.
Each of the parties hereto irrevocably submits with regard to any such
proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of
the parties hereto irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason, (b) that it or
its property is exempt or immune from jurisdiction of any such court or from
any legal process commenced in such courts (whether through service of notice,
attachment before judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise) and (c) to the fullest extent permitted by
applicable law, that (i) the proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
court. Notwithstanding the foregoing, each of the parties hereto agrees that
each of the other parties shall have the right to bring any action or
proceeding for enforcement of a judgment entered by the aforesaid New York
Courts or Delaware Courts in any other court or jurisdiction.
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<PAGE>
27. Waiver of Trial by Jury. Each of the parties hereto acknowledges and
agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any right such party may have to a trial by jury in respect of
any action, suit, claim or other proceeding directly or indirectly arising out
of or relating to this Agreement or the transactions contemplated by this
Agreement. Each party certifies and acknowledges that (i) no representative of
such party has been authorized by such party to represent or, to the knowledge
or such party, has represented, expressly or otherwise, that such other Party
would not, in the event of litigation, seek to enforce the foregoing waiver,
(ii) each such party understands and has considered the implications of this
waiver, (iii) each such party makes this waiver voluntarily and (iv) each such
party has been induced to enter into this Agreement by, among other things, the
mutual waivers and certifications in this Section 27.
28. Service of Process.
(a) The parties agree that the delivery of process or other papers in
connection with any such action or proceeding in the manner provided in Section
20 hereof, or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
(b) Each of Corel and Inprise hereby designates each of the New York City,
N.Y. and Wilmington, Delaware offices of CT Corporation as its respective agent
for service of process in the State of New York and the State of Delaware,
solely with respect to any dispute or controversy arising out of this
Agreement, and service upon Corel or Inprise for such purposes shall be deemed
to be effective upon service of CT Corporation, as aforesaid or of its
successor designated in accordance with the following sentence in the
appropriate State. Any party may designate another corporate agent or law firm
reasonably acceptable to the other party and located in the State of New York
or the State of Delaware, as applicable, as successor agent for service of
process upon 30 days prior written notice to such party. Each party further
covenants and agrees to execute, upon the request of the other party, such
documents and agreements as are reasonably necessary to confirm such
designations.
29. Remedies Cumulative. Except as otherwise herein provided, the rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by applicable law.
30. No Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and except as otherwise expressly provided for
herein, it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
31. Limitations on Warranties.
(a) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, Inprise makes no other express or implied
representation or warranty to Corel. Corel acknowledges that, in entering into
this Agreement, it has not relied on any representations or warranties of
Inprise or any other person other than the representations and warranties of
Inprise set forth in this Agreement or the Merger Agreement.
(b) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, Corel makes no other express or implied
representation or warranty to Inprise. Inprise acknowledges that, in entering
into this Agreement, it has not relied on any representations or warranties of
Corel any other person other than the representations and warranties of Corel
set forth in this Agreement and the Merger Agreement.
32. Execution. This Agreement may be executed by facsimile signatures by any
party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
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33. Currency. Unless otherwise specified, all references in this Agreement
to dollars or $ shall mean United States dollars.
34. Date for Any Action. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a business
day, such action shall be required to be taken on the next succeeding day which
is a business day.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
Inprise Corporation
/s/ Frederick A. Ball
-------------------------------------
By: Frederick A. Ball
Title: Chief Financial Officer
Corel Corporation
/s/ Michael C.J. Cowpland
-------------------------------------
By: Michael C.J. Cowpland
Title: Chairman, President and
Chief Executive Officer
/s/ Eric J. Smith
-------------------------------------
By: Eric J. Smith
Title: Secretary
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<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated February 6, 2000, by and
between Corel Corporation, a corporation continued under the laws of Canada
("Corel") and Inprise Corporation, a Delaware corporation ("Inprise").
WHEREAS, Corel, Inprise and Carleton Acquisition Co., a Delaware corporation
and a wholly-owned subsidiary of Corel ("Merger Sub") are entering into a
Merger Agreement of even date herewith (the "Merger Agreement", terms defined
therein and not otherwise defined herein having the same meanings when used
herein), which provides, among other things, that upon the terms and subject to
the conditions contained therein, Merger Sub will be merged (the "Merger") with
and into Inprise; and
WHEREAS, Corel has agreed, to induce Inprise to enter into the Merger
Agreement, to grant the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the premises and the representations,
warranties, mutual covenants and agreements set forth herein and in the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Grant of Option. Corel hereby grants Inprise an irrevocable option (the
"Option") to purchase, subject to the terms and conditions set forth herein, up
to 13,000,000 shares (the "Corel Shares") of common stock of Corel (the "Corel
Common Stock"), together with the associated common share purchase rights (the
"Corel Rights") attached thereto issued pursuant to the Shareholder Rights Plan
Agreement, dated as of February 11, 1999, as amended and restated as of March
31, 1999 between Corel and Montreal Trust Company of Canada, as Rights Agent
(the "Corel Rights Agreement") in the manner set forth below at a price of
$20.00 per share (the "Exercise Price"); provided, however, that in no event
shall the number of shares of Corel Common Stock for which the Option is
exercisable exceed 19.9% of Corel's issued and outstanding shares of Corel
Common Stock. References herein to Corel Shares shall also be deemed to include
the associated Corel Rights.
2. Exercise of Option. The Option may be exercised by Inprise, in whole or
in part, at any time or from time to time after the Merger Agreement becomes
terminable by Inprise under circumstances which could entitle Inprise to
payment of the Specified Amount under Article VIII of the Merger Agreement;
provided that if the Specified Amount is not payable at the time that the
Merger Agreement is terminated, the Option shall not be exercisable until such
time as the Specified Amount becomes payable pursuant to the Merger Agreement.
In the event Inprise wishes to exercise the Option, Inprise shall deliver to
Corel a written notice (an "Exercise Notice") specifying the total number of
the Corel Shares it wishes to purchase and a date and time for the closing of
such purchase (a "Closing"), which date shall not be less than two nor more
than 30 days after the later of (i) the date such Exercise Notice is given, and
(ii) the expiration or termination of any applicable waiting period under the
HSR Act. The Option shall terminate upon the earlier of: (i) the Effective
Time; (ii) the termination of the Merger Agreement pursuant to Section 8.01
thereof (other than a termination in connection with which Inprise is or may be
entitled to the payment specified in Section 8.02 thereof); and (iii) 5:00
p.m., Ottawa time, on the date that is the one year anniversary of the
termination of the Merger Agreement in connection with which Inprise is or may
be entitled to the payment specified in Section 8.02 thereof (or if, at the
expiration of such one year period, the Option cannot be exercised by reason of
any applicable judgment, decree, order, law or regulation, ten business days
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal.
3. Conditions to Closing. The obligation of Corel to issue the Corel Shares
to Inprise hereunder is subject to the conditions that (i) all waiting periods,
if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder ("HSR Act") and
the Competition Act (Canada) applicable to the issuance of the Corel Shares
hereunder shall have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or registrations, declarations or
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filings with, any United States, Canadian, provincial, state or local
administrative agency or commission or other United States, Canadian,
provincial, state or local governmental authority or instrumentality or
securities exchange, if any, required in connection with the issuance of the
Corel Shares hereunder shall have been obtained or made, as the case may be;
and (iii) no statute, rule or regulation shall be in effect, and no order,
decree or injunction entered by any court of competent jurisdiction or
governmental entity in the United States or Canada shall be in effect, that
prohibits or restrains the exercise of the Option or the acquisition or
issuance of Inprise Shares pursuant to the terms of this Agreement.
4. Closing. At any Closing, (a) upon receipt of the payment provided for by
this Section 4, Corel will deliver to Inprise a single certificate in
definitive form representing the number of the Corel Shares designated by
Inprise in its Exercise Notice, such certificate to be registered in the name
of Inprise and to bear the legend set forth in Section 11 of this Agreement,
and (b) Inprise will deliver to Corel the aggregate price for the Corel Shares
so designated and being purchased by wire transfer of immediately available
funds. At any Closing at which Inprise is exercising the Option in part,
Inprise shall present and surrender this Agreement to Corel, and Corel shall
deliver to Inprise an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of the
Corel Common Stock purchasable hereunder.
5. Representations and Warranties of Corel. Corel represents and warrants to
Inprise that (a) Corel is a corporation duly continued, validly existing and in
good standing under the laws of Canada and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by Corel and the
consummation by Corel of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Corel and no other
corporate proceedings on the part of Corel are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this Agreement
has been duly executed and delivered by Corel, constitutes a valid and binding
obligation of Corel and, assuming this Agreement constitutes a valid and
binding obligation of Inprise, is enforceable against Corel in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, the availability of injunctive relief and other
equitable remedies, and limitations imposed by law on indemnification for
liability under securities laws, (d) Corel has taken all necessary corporate
action to authorize and reserve for issuance and to permit it to issue, upon
exercise of the Option, and at all times from the date hereof through the
expiration of the Option will have reserved, 13,000,000 unissued Corel Shares
and such other shares of the Corel Common Stock or other securities which may
be issued pursuant to Section 10 of this Agreement, all of which, upon their
issuance, payment and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, and free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever (other than those (i) created by or through Inprise, or any of its
affiliates, (ii) which arise under this Agreement, or (iii) which arise under
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Act (Ontario) (the "Ontario Act") or any applicable state securities laws), (e)
the execution and delivery of this Agreement by Corel does not, and the
performance of this Agreement by Corel will not, materially conflict with, or
result in any material violation of, or material 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 the loss of a
material benefit under, or the creation of a lien, pledge, security interest or
other encumbrance on assets pursuant to (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation"), (A) any provision of the Certificate and Articles of Amalgamation
or By-laws of Corel or (B) any provisions of any loan or credit agreement,
note, mortgage, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license of or applicable to Corel,
or (C) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Corel or its properties or assets, which Violation, in the case
of each of clauses (B) and (C), individually or in the aggregate would prevent
or materially delay the exercise by Inprise of the Option or any other right of
Inprise under this Agreement, or (f) result in a "Separation Time" or "Flip-In
Event" under the Corel Rights Plan, and (g) except as described in Section 4.04
of the Merger Agreement or this Agreement, and other than the HSR Act and the
Competition Act (Canada) and, with respect to Section 9 hereof, compliance with
the provisions of the
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Securities Act, the Ontario Act and any applicable state securities laws, the
execution and delivery of this Agreement by Corel does not, and the performance
of this Agreement by Corel will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority.
6. Representations and Warranties of Inprise. Inprise represents and
warrants to Corel that (a) Inprise is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Inprise and the consummation by Inprise of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Inprise and no other corporate proceedings on the part of Inprise are necessary
to authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Inprise and constitutes
a valid and binding obligation of Inprise, and, assuming this Agreement
constitutes a valid and binding obligation of Corel, is enforceable against
Inprise in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and the availability
of injunctive relief and other equitable remedies and limitations imposed by
law on indemnification for liability under applicable securities laws, (d) the
execution and delivery of this Agreement by Inprise does not, and the
performance of this Agreement by Inprise will not, result in any Violation
pursuant to, (A) any provision of the charter documents of Inprise, (B) any
provisions of any loan or credit agreement, note, mortgage, indenture, lease,
or other agreement, obligation, instrument, permit, concession, franchise,
license of or applicable to it or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Inprise or its properties or
assets, which Violation, in the case of each of clauses (B) and (C), would,
individually or in the aggregate have a material adverse effect on Inprise's
ability to consummate the transactions contemplated by this Agreement, (e)
except as described in Section 3.04 of the Merger Agreement, the execution and
delivery of this Agreement by Inprise does not, and the performance of this
Agreement by Inprise will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority and (f) any Corel Shares acquired upon exercise of the Option will
not be, and the Option is not being, acquired by Inprise with a view to public
distribution or resale in any manner which would be in violation of Canadian,
United States, provincial or state securities laws.
7. Put Right.
(a) Exercise of Put. At any time during which the Option is exercisable
pursuant to Section 2 or would be exercisable but for the circumstances
referred to in the parenthetical in Section 2(iii) of this Agreement (the
"Repurchase Period"), upon demand by Inprise, Inprise shall have the right to
sell to Corel (or any successor entity thereof) and Corel (or such successor
entity) shall be obligated to repurchase from Inprise (the "Put"), all or any
portion of the Option, at the price set forth in clause (i) below, or all or
any portion of the Corel Shares purchased by Inprise pursuant hereto, at a
price set forth in clause (ii) below:
(i) the difference between the "Market/Tender Offer Price" for shares of
Corel Common Stock as of the date (the "Notice Date") notice of exercise of
the Put is given to Corel (defined as the higher of (A) the price per share
offered as of the Notice Date pursuant to any tender or exchange offer or
other Alternative Proposal which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") and (B)
the average of the closing prices of shares of the Corel Common Stock on
the Nasdaq Stock Market for the five trading days immediately preceding the
Notice Date (the "Market Price"), and the Exercise Price, multiplied by the
number of Corel Shares purchasable pursuant to the Option (or portion
thereof with respect to which Inprise is exercising its rights under this
Section 7),
(ii) the Exercise Price paid by Inprise for the Corel Shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer
Price and the Exercise Price, multiplied by the number of Corel Shares so
purchased. For purposes of this clause (ii), the Tender Price shall be the
highest price per share offered pursuant to a tender or exchange offer or
other Alternative Proposal made during the Repurchase Period and not
withdrawn or terminated.
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In determining the Market-Tender Offer Price, the value of consideration
other than cash or stock as provided above shall be determined by a nationally
recognized investment banking firm selected by Inprise and reasonably
acceptable to Corel acquired pursuant to this Agreement.
(b) Payment and Redelivery of Option or Shares. In the event Inprise
exercises its rights under this Section 7, Corel shall, within ten business
days of the Notice Date, pay the required amount to Inprise by wire transfer in
immediately available funds to an account specified by Inprise two business
days prior to the date that payment is due and Inprise shall surrender to Corel
the Option or the certificates evidencing the Corel Shares purchased by Inprise
pursuant hereto, and Inprise shall warrant that it owns such shares and that
such shares are then free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever.
8. Restrictions on Certain Actions. Corel shall not adopt any Rights
Agreement or shareholder rights plan or any amendment thereto in any manner
which would cause Inprise, if Inprise has complied with its obligations under
this Agreement, to become an "Acquiring Person" under such Rights Agreement or
shareholder rights plan solely by reason of the beneficial ownership of the
Corel Shares acquired pursuant to this Agreement.
9. Registration Rights.
(a) Corel will, if requested in writing (a "Registration Notice") by Inprise
at any time and from time to time within two years of the exercise of the
Option, as expeditiously as possible prepare and file up to two registration
statements under the Securities Act or prospectuses under the Ontario Act if
such registration or the obtaining of a receipt for a prospectus is necessary
in order to permit the sale or other disposition of any or all shares or other
securities that have been acquired by or are issuable to Inprise upon exercise
of the Option ("Registrable Securities") in accordance with the intended method
of sale or other disposition stated by Inprise. Any such Registration Notice
must relate to a number of Registrable Securities equal to at least twenty
percent (20%) of Corel Shares, unless the remaining number of Registrable
Securities is less than such amount, in which case Inprise shall be entitled to
exercise its rights hereunder but only for all of the remaining Registrable
Securities (a "Permitted Offering"). Inprises rights hereunder shall terminate
at such time as Inprise shall be entitled to sell all of the remaining
Registrable Securities pursuant to Rule 144(k) under the Act. Corel will use
its reasonable best efforts to qualify such shares or other securities under
any applicable state or other provincial securities laws; provided, however,
that Corel shall not be required to qualify to do business, consent to general
service of process or submit to taxation in any jurisdiction by reason of this
provision. Corel will use reasonable efforts to cause each such registration
statement to become effective and to obtain a (final) receipt for each such
prospectus, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement or prospectus
effective for such period not in excess of 120 calendar days from the day such
registration statement first becomes effective or the date of the (final)
receipt for such prospectus as may be reasonably necessary to effect such sale
or other disposition. The obligations of Corel hereunder to file a registration
statement or prospectus and to maintain its effectiveness may be suspended for
up to 90 calendar days in the aggregate if the Board of Directors of Corel
shall have determined that the filing of such registration statement or
prospectus or the maintenance of its effectiveness would require premature
disclosure of nonpublic information that would materially and adversely affect
Corel or otherwise interfere with or adversely affect any pending or proposed
offering of securities of Corel or any other material transaction involving
Corel, or Corel would be required under the Securities Act to include audited
financial statements for any period in such registration statement or
prospectus and such financial statements are not yet available for inclusion in
such registration statement or prospectus. Subject to applicable law, the
expenses associated with the preparation and filing any registration statement
or prospectus prepared and filed under this Section 9, and any sale covered
thereby ("Registration Expenses"), will be paid by Corel except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Inprise's counsel related thereto; provided, however, that
Corel will not be required to pay for any Registration Expenses with respect to
such registration if the registration request is subsequently withdrawn at the
request of Inprise unless Inprise agrees to forfeit its right to request one
registration. In connection with any registration statement or prospectus
pursuant to this
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Section 9, Inprise shall furnish, or cause any holder of the Option or Corel
Shares (a "Holder") to furnish, Corel with such information concerning itself
and the proposed sale or distribution as shall reasonably be required in order
to ensure compliance with the requirements of the Securities Act or the Ontario
Act and to provide representations and warranties customary for selling
stockholders who are unaffiliated with Corel. In addition, Inprise shall, and
Inprise shall cause each Holder to contractually agree to, indemnify and hold
Corel, its underwriters and each of their respective affiliates harmless
against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, investigation expenses and fees and
disbursement of counsel and accountants), joint or several, to which Corel, its
underwriters and each of their respective affiliates may become subject under
the Securities Act or the Ontario Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in written information furnished by any Holder to Corel
expressly for use in such registration statement. If, during the time periods
referred to in the first sentence of this Section 9, Corel effects a
registration under the Securities Act of, or qualifies a prospectus under the
Ontario Act in respect of, the Corel Common Stock for its own account or for
any other stockholders of Corel pursuant to a firm commitment underwriting
(other than on Form S-4 or Form S-8, or any successor form), it will allow
Inprise the right to participate in such registration or qualification as long
as Inprise participates in such underwriting on terms reasonably satisfactory
to the managing underwriters of such offering, and such participation will not
affect the obligation of Corel to effect demand registration statements or
prospectuses for Inprise under this Section 9; provided that, if the managing
underwriters of such offering advise Corel in writing that in their opinion the
number of shares of the Corel Common Stock requested to be included in such
registration or qualification exceeds the number that it would be in the best
interests of Corel to sell in such offering, Corel will, after fully including
therein all shares of Corel Common Stock to be sold by Inprise, include the
shares of Corel Common Stock requested to be included therein by Inprise pro
rata (based on the number of shares of Corel Common Stock requested to be
included therein) with the shares of Corel Common Stock requested to be
included therein by persons other than Corel and persons to whom Corel owes a
contractual obligation (other than any director, officer or employee of Corel
to the extent any such person is not currently owed such contractual
obligation). In connection with any registration or qualification pursuant to
this Section 9, Corel and Inprise will provide each other and any underwriter
of the offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration or
qualification. Corel shall provide to any underwriters such documentation
(including certificates, opinions of counsel and "comfort" letters from
auditors) as are customary in connection with underwritten public offerings as
such underwriters may reasonably require.
(b) If Corel's securities of the same type as the Corel Common Stock
beneficially owned by Inprise are then authorized for quotation or trading or
listing on The Toronto Stock Exchange (the "TSE"), Nasdaq National Market
System, or any other securities exchange or automated quotations system, Corel,
upon the request of Inprise, shall promptly file an application, if required,
to authorize for quotation, trading or listing such shares of the Corel Common
Stock on such exchange or system and will use its reasonable efforts to obtain
approval, if required, of such quotation, trading or listing as soon as
practicable.
10. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in the Corel Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchange of
shares or the like, the type and number of shares or securities subject to the
Option, and the purchase price per share provided in Section 1 of this
Agreement, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Inprise shall receive,
upon exercise of the Option, the number and class of shares or other securities
or property that Inprise would have received in respect of the Corel Common
Stock if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable. In the event that any additional shares of
Corel Common Stock otherwise become outstanding after the date of this
Agreement (other than pursuant hereto), the number of shares of Corel Common
Stock subject to the Option shall be increased to equal 19.9% of the number of
shares of Corel Common Stock then issued and outstanding.
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<PAGE>
(b) In the event that Corel shall enter in an agreement: (i) to consolidate
with or merge into any person, other than Inprise or another direct or indirect
wholly-owned subsidiary of Inprise, and shall not be the continuing or
surviving corporation of such consolidation or merger; (ii) to permit any
person, other than Inprise or another direct or indirect wholly-owned
subsidiary of Inprise, to merge into Corel and Corel shall be the continuing or
surviving corporation, but, in connection with such merger, the then-
outstanding shares of the Corel Common Stock shall be changed into or exchanged
for stock or other securities of Corel or any other person or cash or any other
property or the outstanding shares of the Corel Common Stock immediately prior
to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Inprise or another direct or indirect wholly-owned
subsidiary of Inprise, then, and in each such case, Corel shall immediately so
notify Inprise, and the agreement governing such transaction shall make proper
provisions so that upon the consummation of any such transaction and upon the
terms and conditions set forth herein. Inprise shall, upon exercise of the
Option, receive for each Corel Share with respect to which the Option has not
been exercised an amount of consideration in the form of and equal to the per
share amount of consideration that would be received by the holder of one share
of the Corel Common Stock less the Exercise Price (and, in the event of an
election or similar arrangement with respect to the type of consideration to be
received by the holders of the Corel Common Stock, subject to the foregoing,
proper provision shall be made so that the holder of the Option would have the
same election or similar rights as would the holder of the number of shares of
the Corel Common Stock for which the Option is then exercisable.
11. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Total Profit (as hereinafter defined) received by Inprise and its
affiliates exceed $45 million and, if it otherwise would exceed such amount,
Inprise, at its sole election, shall either (i) reduce the number of shares of
Corel Common Stock subject to the Option, (ii) deliver to Inprise for
cancellation Inprise Shares previously purchased by Inprise (valued, for the
purposes of this Section 11(a) at the average closing sales price per share of
Corel Common Stock (or if there is no sale on such date then the average
between the closing bid and ask prices on any such date) as reported by the
Nasdaq Stock Market for the twenty consecutive trading days preceding the day
on which the Total Profit exceeds $45 million, (iii) pay cash to Corel, or (iv)
any combination thereof, so that the actually realized Total Profit shall not
exceed $45 million after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the amount (before
taxes) of the following: (a) the aggregate amount of (i)(x) the net cash
amounts received by Inprise and its affiliates pursuant to the sale of Corel
Shares (or any securities into which such Corel Shares are converted or
exchanged) to any unaffiliated party or to Corel pursuant to this Agreement,
less (y) Inprises purchase price of such Corel Shares, (ii) any amounts
received by Inprise and its affiliates on the transfer of the Option (or any
portion thereof) to any unaffiliated party, if permitted hereunder or to Corel
pursuant to this Agreement, and (iii) the amount received by Inprise pursuant
to Section 8.02(b) of the Merger Agreement; minus (b) the amount of cash
theretofore paid to Corel pursuant to this Section 11 plus the value of the
Corel Shares theretofore delivered to Corel for cancellation pursuant to this
Section 11.
(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Inprise to receive nor relieve Corels
obligation to pay a fee pursuant to Section 8.02(b) of the Merger Agreement;
provided that if the Total Profit received by Inprise would exceed $45 million
following the receipt of such fee, Inprise shall be obligated to comply with
terms of Section 11(a) within 5 days of the later of (i) the date of receipt of
such fee and (ii) the date of receipt of the net cash by Inprise pursuant to
the sale of Corel Shares (or, any other securities into which such Corel Shares
are converted or exchanged) to any unaffiliated party or to Corel pursuant to
this Agreement.
(d) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Corel Shares that would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than $45
million. "Notional Total Profit" shall mean, with respect to any number of
Corel Shares as to which
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Inprise may propose to exercise the Option, the Total Profit determined as of
the Notice Date assuming that the Option was exercised on such date for such
number of Corel Shares and assuming such Corel Shares, together with all other
Corel Shares held by Inprise and its affiliates as of such date, were sold for
cash at the closing sales price for Corel Common Stock as of the close of
business on the preceding trading day.
12. Restrictive Legends. Each certificate representing shares of the Corel
Common Stock issued to Inprise hereunder shall include a legend in
substantially the following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND THE COMPANY AND TO RESALE RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN
REQUEST THEREFOR; "
and any further legend as may be required by the TSE. Corel shall, upon written
request of the holder thereof, issue such holder a new certificate evidencing
such Corel Shares without such legend in the event (i) the sale of such Corel
Shares has been registered pursuant to the Securities Act, or (ii) such holder
shall have delivered to Corel an opinion of counsel, which opinion shall, in
Corel's reasonable judgment, be satisfactory in form and substance to Corel, to
the effect that subsequent transfers of such Corel Shares may be effected
without registration under the Securities Act.
13. Listing and HSR Filing. Corel, upon request of Inprise, shall as
promptly as practicable file an application to list Corel Shares to be acquired
upon exercise of the Option for listing or quotation on the TSE and the Nasdaq
Stock Market and shall use its reasonable efforts to obtain approval for such
quotation as promptly as practicable. Promptly after the date hereof, each of
the parties hereto shall promptly file all required pre-merger notification and
report forms and other documents and exhibits required to be filed under the
HSR Act or the Competition Act (Canada) to permit the acquisition of Inprise
Shares subject to the Option at the earliest practicable date.
14. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement and
except for any assignment by Inprise, in whole or in part, to a wholly-owned,
direct or indirect, subsidiary of Inprise (provided that any such subsidiary
agrees in writing to be bound by and liable for all of the terms, conditions
and provisions contained herein that would otherwise be applicable to Inprise
and provided further that Inprise shall remain liable for all of its duties and
obligations hereunder in the event such subsidiary shall fail to perform
hereunder), neither this Agreement nor the rights or the obligations of either
party hereto are assignable in whole or in part (whether by operation of law or
otherwise), without the written consent of the other party and any attempt to
do so in contravention of this Section 14 will be void. Nothing contained in
this Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
15. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction or injunctions restraining any
violation or threatened violation of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in the Courts of the State
of New York located in the County of New York or the State of Delaware located
in the County of New Castle (or, if such court lacks subject matter
jurisdiction, any appropriate federal court in the State of New York or the
State of Delaware (collectively, the "Courts") any of the appeals courts
thereof. In the event that any action should be brought in equity to enforce
the provisions of this Agreement, neither party will allege, and each party
hereby waives the defense that there is adequate remedy at law.
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<PAGE>
16. Entire Agreement. This Agreement and the Merger Agreement (including the
Exhibits and Schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other prior
discussions, representations and warranties, agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof. No prior drafts of this Agreement and no words or
phrases from any such prior drafts shall be admissible into evidence in any
action, suit or other proceeding involving this Agreement.
17. Further Assurances. Subject to the terms and conditions hereof, if
Inprise exercises the Option, or any portion thereof, in accordance with the
terms of this Agreement, each party will execute and deliver all such further
documents and instruments and take all such further action including obtaining
necessary regulatory approvals and making necessary filings (including, without
limitation, filings under the HSR Act and the Competition Act (Canada) and
filings with the TSE) as may be necessary in order to consummate the
transactions contemplated hereby (including the issuance, registration and
listing of the Corel Shares). To the extent that the Option becomes
exercisable, Corel will not take any actions which would frustrate the exercise
of the Option.
18. Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms
defined in this Agreement shall have the defined meaning contained herein when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the gender and neuter genders of such term. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as
from time to time amended, modified or supplemented and attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local or foreign statute or law shall be deemed to also to refer to any
amendments thereto and all rules and regulations promulgated thereunder, unless
the context requires otherwise.
19. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, under any present or future law,
public policy or order, and if the rights or obligations of any party hereto
under this Agreement or the Merger Agreement, and the economic or legal
substance of the transactions contemplated hereby and thereby, will not be
materially and adversely affected thereby, (i) such provision will be fully
severable and (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order to the
maximum extent possible to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
D-21
<PAGE>
20. Notices. Any notice, request, claim, demand or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received (a) on the date of
delivery if delivered personally, including by courier, (b) upon receipt if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (c) upon receipt if sent by facsimile transmission, provided that
any notice received by telecopy or otherwise at the addressee's location on any
business day after 5:00 p.m. (addressee's local time) shall be deemed to have
been received at 9:00 a.m. (addressee's local time) on the next business day.
Any party to this Agreement may notify any other party of any changes to the
address or any of the other details specified in this paragraph, provided that
such notification shall only be effective on the date specified in such notice
or five business days after the notice is given, whichever is later. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the
notice as of the date of such rejection, refusal or inability to deliver. All
notices hereunder shall be delivered to the parties to the addresses or
facsimile numbers set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
If to Corel to:
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
K1Z 8R7
Facsimile No.: (613) 725-2691
Attention: Corporate Secretary
with a copy to (which shall not constitute notice):
McCarthy Tetrault
Suite 1400, 40 Elgin Street
Ottawa, Ontario
K1P 5K6
Facsimile No.: (613) 563-9386
Attention: Robert D. Chapman
If to Inprise:
Inprise Corporation
100 Enterprise Way
Scotts Valley, CA 95066-3249
Facsimile No.: (831) 431-1320
Attention: Dale Fuller
with copies to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Facsimile No.: (212) 735-2000
Attention: Daniel E. Stoller, Esq.
Richard J. Grossman, Esq.
and
Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Ave.
Palo Alto, CA 94301
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
D-22
<PAGE>
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed and to be performed entirely within such State without giving effect
to the principles of conflicts or choice of law thereof or of any other
jurisdiction (except to the extent that mandatory provisions of United States
federal law applies to indemnification provisions).
22. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or, in any
way, to affect the meaning or interpretation of this Agreement.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same instrument and shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
24. Expenses. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred by a party in connection with the
transactions contemplated by this Agreement, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel, shall
be paid by the party incurring such expenses.
25. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument in writing signed on behalf of the party waiving
compliance.
26. Jurisdiction. Each of the parties hereto irrevocably agrees that any
action, suit, claim or other legal proceeding with respect to this Agreement or
in respect of the transactions contemplated hereby brought by any other party
hereto or its successors or assigns shall be brought and determined in any
federal court located in the County of New York in the State of New York or the
County of New Castle in the State of Delaware of the courts of the State of New
York located in the County of New York or of the State of Delaware located in
the County of New Castle (or any appeals courts thereof). The foregoing New
York courts are hereinafter referred to as the "New York Courts" and the
foregoing Delaware Courts are hereinafter referred to as the "Delaware Courts".
Each of the parties hereto irrevocably submits with regard to any such
proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of
the parties hereto irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason, (b) that it or
its property is exempt or immune from jurisdiction of any such court or from
any legal process commenced in such courts (whether through service of notice,
attachment before judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise) and (c) to the fullest extent permitted by
applicable law, that (i) the proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
court. Notwithstanding the foregoing, each of the parties hereto agrees that
each of the other parties shall have the right to bring any action or
proceeding for enforcement of a judgment entered by the aforesaid New York
Courts or Delaware Courts in any other court or jurisdiction.
27. Waiver of Trial by Jury. Each of the parties hereto acknowledges and
agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any right such party may have to a trial by jury in respect of
any action, suit, claim or other proceeding directly or indirectly arising out
of or relating to this Agreement or the transactions contemplated by this
Agreement. Each party certifies and acknowledges that (i) no representative of
such party has been authorized by such party to represent or, to the knowledge
or such party, has represented, expressly or otherwise, that such other Party
would not, in the event of litigation, seek to enforce the foregoing waiver,
(ii) each such party understands and
D-23
<PAGE>
has considered the implications of this waiver, (iii) each such party makes
this waiver voluntarily and (iv) each such party has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 27.
28. Service of Process.
(a) The parties agree that the delivery of process or other papers in
connection with any such action or proceeding in the manner provided in Section
20 hereof, or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
(b) Each of Inprise and Corel hereby designates each of the New York City,
N.Y. and the Wilmington, Delaware offices of CT Corporation as its respective
agent for service of process in the State of New York and the State of
Delaware, solely with respect to any dispute or controversy arising out of this
Agreement, and service upon Inprise or Corel for such purposes shall be deemed
to be effective upon service of CT Corporation, as aforesaid or of its
successor designated in accordance with the following sentence in the
appropriate State. Each party may designate another corporate agent or law firm
reasonably acceptable to the other party and located in the State of New York
or the State of Delaware, as applicable, as successor agent for service of
process upon 30 days prior written notice to such party. Each party further
covenants and agrees to execute, upon the request of the other party, such
documents and agreements as are reasonably necessary to confirm such
designations.
29. Remedies Cumulative. Except as otherwise herein provided, the rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by applicable law.
30. No Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and except as otherwise expressly provided for
herein, it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
31. Limitations on Warranties. (a) Except for the representations and
warranties contained in this Agreement and the Merger Agreement, Corel make no
other express or implied representation or warranty to Inprise. Inprise
acknowledges that, in entering into this Agreement, it has not relied on any
representations or warranties of Corel or any other person other than the
representations and warranties of Corel set forth in this Agreement or the
Merger Agreement.
(b) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, Inprise makes no other express or implied
representation or warranty to Corel. Corel acknowledges that, in entering into
this Agreement, it has not relied on any representations or warranties of
Inprise or any other person other than the representations and warranties of
Inprise set forth in this Agreement and the Merger Agreement.
32. Execution. This Agreement may be executed by facsimile signatures by any
party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
33. Currency. Unless otherwise specified, all references in this Agreement
to "dollars" or "$" shall mean United States dollars.
34. Date for Any Action. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a business
day, such action shall be required to be taken on the next succeeding day which
is a business day.
D-24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
Corel Corporation.
/s/ Michael C.J. Cowpland
-------------------------------------
By: Michael C.J. Cowpland
Title: Chairman, President and Chief
Executive Officer
/s/ Eric J. Smith
-------------------------------------
By: Eric J. Smith
Title: Secretary
Inprise Corporation
/s/ Frederick A. Ball
-------------------------------------
By: Frederick A. Ball
Title: Chief Financial Officer
D-25
<PAGE>
ANNEX E
COREL SHAREHOLDERS' RESOLUTIONS
A. RESOLUTION
BE IT RESOLVED THAT the issuance by Corel Corporation ("Corel") of its
common shares ("Corel Shares") upon the conversion of the shares of Common
Stock of Inprise Corporation ("Inprise") ("Inprise Shares") pursuant to the
terms and subject to the conditions of the Merger Agreement, dated as of
February 6, 2000, among Corel, Carleton Acquisition Co., a Delaware corporation
and a wholly-owned subsidiary of Corel, and Inprise (the "Merger Agreement"),
be and the same is hereby authorized and approved.
B. RESOLUTION
BE IT RESOLVED THAT the Corel Corporation Transition Stock Option Plan is
approved.
C. RESOLUTION
BE IT RESOLVED THAT the amendment to the Corel Corporation Stock Option Plan
2000 ("2000 Plan") to fix the number of common shares reserved for issuance
under the 2000 Plan at . is approved.
E-1
<PAGE>
ANNEX F
COREL CORPORATION
TRANSITION STOCK OPTION PLAN
[To be filed by amendment]
.
F-1
<PAGE>
ANNEX G
COREL CORPORATION
STOCK OPTION PLAN 2000
1. Purpose of the Plan
The purpose of the Stock Option Plan 2000 is to develop the interest and
incentive of eligible participants of Corel Corporation and its subsidiaries
(the "Company") in the Company's growth and development by giving eligible
participants an opportunity to purchase Common Shares on a favourable basis,
thereby advancing the interests of the Company and its shareholders and
increasing the ability of the Company to attract and retain skilled and
motivated individuals in the service of the Company.
The Board of Directors has approved the terms of this Plan.
2. Definitions
In this Plan:
(a) "Associate" has the meaning assigned by the Securities Act (Ontario),
as amended from time to time;
(b) "Board of Directors" means the board of directors of the Company;
(c) "Committee" means the appropriate compensation committee of three or
more members appointed by the Board of Directors to administer the
Plan. All references in the Plan to the Committee means the Board of
Directors if no Committee has been appointed;
(d) "Common Shares" means the Common Shares of the Company or in the event
of an adjustment contemplated in Section 9 hereof, such other Common
Shares to which a Participant may be entitled upon the exercise of an
option as a result of such readjustment;
(e) "Date of Grant" means the date a Participant is granted an option to
purchase Option Shares;
(f) "Director" means a person occupying the position of director on the
Board of Directors;
(g) "Employee" means a full time permanent employee of the Company or its
subsidiaries;
(h) "Exchange" means The Toronto Stock Exchange;
(i) "Exercise Date" means the last Friday of any calendar month during the
Option Period or such other date designated from time to time by the
Chief Executive Officer with respect to any Participant provided that
on any such date, the Company receives from the Participant a completed
Stock Option Purchase Form with payment for the Option Shares being
purchased;
(j) "Former Plan" means the Corel Corporation Stock Option Plan dated
January 25, 1990 as amended on September 17, 1992, November 22, 1993,
March 31, 1994, March 30, 1995, March 12, 1996 and April 18, 1997;
(k) "Insider" means:
(i) an insider of the Company as defined by the Securities Act
(Ontario) as amended from time to time, other than a person who
falls within such definition solely by virtue of being a director
or senior officer of a subsidiary of the Company; and
(ii) an Associate of any person who is an insider by virtue of clause
(a) of this definition;
(l) "Market Price" per Common Share at any date shall be the closing price
of the Common Shares on the Exchange (or, if the Common Shares are not
then listed or posted for trading on the Exchange, on such stock
exchange in Canada on which such shares are listed and posted for
trading as may be selected for such purposes by the Committee) on the
trading date immediately preceding the Date of
G-1
<PAGE>
Grant. In the event that the Common Shares are not listed and posted for
trading in any stock exchange in Canada, the market price shall be the
last trading price of the Common Shares on National Association of
Securities Dealers Quotations Systems ("Nasdaq") on the trading day
immediately preceding the Date of Grant. In the event that the Common
Shares are not trading on Nasdaq, the market price shall be determined
by the Committee in its sole discretion;
(m) "Officer" means a person appointed as an officer of the Company by the
Board of Directors;
(n) "Option Period" means the period set forth in Section 6 during which a
Participant may purchase Option Shares;
(o) "Option Price" means the price per share at which a Participant may
purchase Option Shares denominated in Canadian or United States
currency;
(p) "Outstanding Issue" means the number of Common Shares that are
outstanding immediately prior to any issuance of options under this
Plan or any issuance of Option Shares, as the case may be, excluding
Option Shares issued pursuant to the Plan or the Former Plan during the
preceding one year period;
(q) "Option Shares" means the Common Shares of the Company which a
Participant is entitled to purchase under the Plan;
(r) "Participants" means Employees, Directors and Officers to whom options
to purchase Option Shares are granted pursuant to the Plan and which
remain unexercised; and
(s) "Plan" means the Corel Corporation Stock Option Plan 2000.
3. Eligibility
Participation in the Plan shall be limited to Participants who are
designated from time to time by the Committee. Participation shall be voluntary
and the extent to which any Participant shall be entitled to participate in the
Plan shall be determined by the Committee.
4. Number of Option Shares and Limitations on Issuance
The aggregate number of Option Shares which may be reserved for issuance
hereunder shall not exceed 4,000,000. The following restrictions shall also
apply to this Plan:
(a) the number of Option Shares reserved for issuance pursuant to options
granted to insiders shall not exceed 10% of the Outstanding Issue;
(b) insiders shall not be issued, within any one year period, a number of
Option Shares which exceeds 10% of the Outstanding Issue;
(c) no insider and such insider's Associates shall be issued, within any
one year period, a number of Option Shares which exceeds 5% of the
Outstanding Issue; and
(d) the aggregate number of Option Shares reserved for issuance pursuant to
options granted to any one Participant shall not exceed 5% of the
Outstanding Issue.
No fractional shares may be purchased or issued hereunder. Subject to the
foregoing, the number of Option Shares that a Participant is entitled to
purchase under the Plan will be determined by the Committee.
5. Price for Option Shares
The Committee shall advise each Participant designated to participate in the
Plan of the number of Option Shares such Participant is entitled to purchase,
the Option Price at which the Option Shares may be purchased and the Exercise
Date(s) upon which the Option Shares may be purchased. The Option Price at
which Option Shares may be purchased under the Plan shall be fixed by the
Committee and confirmed by the Board of Directors based upon the Market Price
of the Common Shares of the Company at the Date of Grant.
G-2
<PAGE>
6. Exercise
Subject to the requirements of applicable regulatory authorities and the
discretion of the Committee, each option granted under the Plan may be
exercised as follows:
<TABLE>
<CAPTION>
Percentage of Total
Number of Option
Shares which may
be Purchased Option Period
------------------- -------------
<S> <C>
100% For a period of four years from the Date of Grant.
</TABLE>
The exercise period and vesting period of any option shall be determined by
the Committee and set forth in the notice of grant of such option. In the event
that no exercise or vesting period is specified, the current practice of
immediate vesting and four year limitation shall govern. Any Option Shares not
purchased by a Participant during the Option Period shall lapse and such
Participant shall have no further right to purchase such shares.
7. Payment
The Participant from time to time and at any time during the Option Period,
may elect to purchase all or a portion of the Option Shares available for
purchase during the Option Period by lump sum payment by delivering to the
Company on the relevant Exercise Date a completed Participant Stock Option
Purchase Form. Such Form shall specify the number of Option Shares the
Participant desires to purchase and shall be accompanied by payment in full of
the purchase price for such Option Shares. Payment may be made by cash,
certified cheque, bank draft, money order or the equivalent payable to the
order of the Company.
8. Share Certificates
Upon exercise of the option and payment in full of the Option Price, the
Company shall cause to be delivered to the Participant within a reasonable
period of time a certificate or certificates in the name of the Participant
representing the number of Option Shares the Participant has purchased.
9. Adjustments in Shares
The number of Common Shares subject to the Plan, the number of Common Shares
available under options granted and the Option Price shall be adjusted
automatically from time to time to reflect adjustments in the number of Common
Shares arising as a result of subdivision, stock dividends, consolidations or
reclassification of the Common Shares or other relevant changes in the
authorized or issued capital of the Company. In the event that the Company
proposes to amalgamate, merge or consolidate with any other corporation or to
liquidate, dissolve or wind-up, the Company shall give written notice thereof
to each Participant holding options under the Plan and such Participants shall
be entitled to purchase all or a portion of the Option Shares granted to such
Participants, whether or not such Option Shares have previously vested, within
the 30 day period next following the giving of such notice. Upon the expiration
of such 30 day period, all rights of the Participants to the Option Shares or
to the exercise of same shall terminate and cease to have any further force and
effect.
10. Termination of Employment for Any Reason Other Than Death
(a) Subject to the provisions of Section 10(b) hereof, in the event that:
(i) an Employee's employment with the Company or any of its
subsidiaries is terminated;
(ii) a Director shall cease to hold office as a Director on the Board
of Directors; or
(iii) an Officer who is not also an Employee shall cease to hold office
as an Officer of the Company, in each case, during the Option
Period for any reason other than death, such Participant may
elect to purchase all or a portion of the remaining Option Shares
that such Participant is entitled
G-3
<PAGE>
to purchase at the time such employment is terminated or such
Participant ceases to hold office as a Director or Officer at any
time during the 30 day period commencing on the later of (i) the date
of termination of employment or ceasing to hold a board or office
position, and (ii) the date of expiry of any contractual restriction
on the resale of the Option Shares to which the Participant is
subject (and to which the Participant had consented at the request of
the Company) at the date of termination of employment or ceasing to
hold a board or office position, but in no event, after the
expiration of the Option Period. For the purposes of this Plan, the
transfer of the Employee's employment to the Company or to any
subsidiary of the Company shall not be considered a termination of
employment and the Employee's rights under the option shall be the
same as if such transfer had not occurred.
(b) At any time before or after the relevant period set forth in Section
10(a), the Chief Executive Officer may extend such period as it applies
to any former Director, Officer or Employee, to a date which shall not
be later than the expiration of the Option Period.
11. Termination by Reason of Death
In the event the Participant dies during the Option Period, the
Participant's legal representative will be permitted to exercise any
previously unexercised vested options granted under the Plan prior to the
Participant's death and take delivery of all Option Shares previously
purchased but not delivered, at any time during the 12 month period commencing
on the later of (i) the date of death of the Participant and (ii) the date of
expiry of any contractual restriction on the resale of the Option Shares to
which the Participant was subject (and to which the Participant had consented
at the request of the Company) at the date of death, but in no event after the
expiration of the Option Period.
12. Transfer and Assignment
The Participant's rights under options granted under the Plan are not
assignable or transferable by the Participant or subject to any other
alienation, sale, pledge or encumbrance by the Participant during the
Participant's lifetime and, therefore, the options are exercisable during the
Participant's lifetime only by the Participant. The obligations of each
Participant shall be binding on his or her heirs, executors and
administrators.
13. Employment, Office and Board Position Non-Contractual
The granting of an option to a Participant under the Plan does not confer
upon the Participant any right to continue in the employment of the Company or
any subsidiary of the Company, to continue as an Officer of the Company or as
a member of the Board of Directors, as the case may be, nor does it interfere
in any way with the rights of the Employee or of the Company's right to
terminate the Employee's employment at any time, the Board of Director's right
to appoint Officers or of the shareholders' right to elect directors.
14. Rights as Shareholders
Participants shall not have any rights as a shareholder with respect to
Option Shares until full payment has been made to the Company and a share
certificate or share certificates have been duly issued.
15. Participant Loan
The Committee may authorize the Company to lend or cause to be lent to
Participants such portion of the purchase price of the Option Shares under the
Plan as a Participant may request and the Committee administering the Plan may
approve. The terms and conditions of such loan which may be interest bearing
or interest free shall be determined by the Committee in its discretion and
need not be the same in respect of all Participants.
G-4
<PAGE>
16. Administration of the Plan
The Plan shall be administered by the Board of Directors or the Committee.
The Board of Directors or the Committee shall have the power to interpret and
construe the terms and conditions of the Plan and the options. Any
determination by the Board of Directors shall be final and conclusive on all
persons affected thereby. Any determination by the Committee shall be final and
conclusive on all persons affected thereby unless otherwise determined by the
Board of Directors. The day-to-day administration of the Plan may be delegated
to such officers and employees of the Company or any subsidiary of the Company
as the Board of Directors or the Committee shall determine.
17. Notices
All written notices to be given by the Participant to the Company may be
delivered personally or by registered mail, postage prepaid, addressed as
follows:
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
KIZ 8R7
Attention: Secretary.
Any notice given by the Participant pursuant to the terms of the option
shall not be effective until actually received by the Company at the above
address. Any notice to be given to the Participant shall be sufficiently given
if delivered personally or by postage prepaid mail to the last address of the
Participant on the records of the Company and shall be effective seven days
after mailing.
18. Corporate Action
Nothing contained in the Plan or in any option shall be construed so as to
prevent the Company or any subsidiary of the Company from taking corporate
action which is deemed by the Company or the subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan.
19. Amendment
The Board of Directors of the Company shall have the right, in its sole
discretion, to alter or amend the Plan from time to time and at any time. No
such amendment, however, may, without the consent of the Participant, alter or
impair his or her rights or increase his or her obligations under the Plan.
20. Governing Law
The Plan is established under the laws of the Province of Ontario and the
rights of all parties and the construction and effect of each provision of the
Plan shall be according to the laws of the Province of Ontario.
21. Government Regulation
The Company's obligation to issue and deliver Common Shares under any option
is subject to:
(a) satisfaction of all requirements under applicable securities law in
respect thereof and obtaining all regulatory approvals as the Company
shall determine to be necessary or advisable in connection with the
authorization, issuance or sale thereof;
(b) the admission of such Common Shares to listing on any stock exchange on
which the Common Shares may then be listed; and
G-5
<PAGE>
(c) the receipt from the Participant of such representations, agreements
and undertakings as to future dealings in the Common Shares as the
Company determines to be necessary or advisable in order to safeguard
against the violation of the securities law of any jurisdiction.
In this connection the Company shall take all reasonable steps to obtain such
approvals and registrations as may be necessary for the issuance of such Common
Shares in compliance with applicable securities law and for the listing of such
Common Shares on any stock exchange on which the Common Shares are then listed.
22. Approval
The Plan shall be subject to acceptance by the Exchange in compliance with
all conditions imposed by the Exchange. Any options granted prior to such
acceptance shall be conditional upon such acceptance being given and any
condition complied with. No such options may be exercised unless such
acceptance is given and such conditions are complied with.
As amended and restated the 2nd day of February, 2000.
COREL CORPORATION
/s/ Michael C.J. Cowpland
-------------------------------
Chairman of the Board, President and
Chief Executive Officer
/s/ Eric J. Smith
-------------------------------
Secretary
G-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Canadian law generally permits a corporation to indemnify its directors and
officers for all costs, charges and expenses incurred by the person in respect
of any action or proceeding to which that person is made a party by reason of
being a director or officer if the person (1) acted in good faith with a view
to the best interests of the corporation and (2) in the case of a criminal or
administrative proceeding that is enforced by a monetary penalty, the person
had reasonable grounds for believing his conduct was lawful. Canadian law
generally requires a corporation to indemnify its directors and officers if the
person is substantially successful on the merits of his defence of the action,
the person fulfills (1) and (2) above, and is otherwise fairly and reasonably
entitled to indemnity.
The Registrant's By-Law generally provides that the corporation is required
to indemnify a director or officer against liability incurred in such capacity
to the extent permitted or required by Canadian law.
A policy of directors' and officers' liability insurance is maintained by
the Registrant which insures directors and officers of the Registrant and its
subsidiaries for losses a result of claims based upon the acts or omissions as
directors and officers of the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
2.1 Merger Agreement, dated as of February 6, 2000, by and among the
Registrant, Carleton Acquisition Co., and Inprise Corporation
(included in ANNEX A to the joint proxy statement/prospectus forming a
part of this Registration Statement). Pursuant to Item 601(b)(2) of
Regulation S-K, the Schedules referred to in the Merger Agreement are
omitted. The Registrant hereby undertakes to furnish a supplemental
copy of any omitted Schedules to the Commission upon request.*
3.1 Certificate and Articles of Incorporation of the Registrant
(incorporated by reference to the Registration Statement on Form F-1
File No. 33-50886 filed by the Registrant on August 14, 1992).
3.2 Certificate and Articles of Amalgamation of the Registrant and Corel
Computer Corp. (incorporated by reference to the Annual Report on Form
10-K filed by the Registrant on February 28, 2000 for its fiscal year
ended November 30, 1999).
3.3 By-law No. 6 of the Registrant (incorporated by reference to the
Registration Statement on Form F-1 File No. 33-50886 filed by the
Registrant on August 14, 1992).
4.1 Specimen Certificate of common share of the Registrant (incorporated
by reference to the Registration Statement on Form F-1 File No. 33-
50886 filed by the Registrant on August 14, 1992).
4.2 Rights Agreement, dated as of February 11, 1999, as amended and
restated as of March 31, 1999, between the Registrant and The Montreal
Trust Company of Canada, as Rights Agent (incorporated by reference to
the Registrant's Registration Statement on Form 8-A filed by the
Registrant on March 25, 1999).
Pursuant to Regulation S-K, Item 601(b)(4), certain instruments
defining the rights of holders of long-term debt securities of the
Registrant and its consolidated subsidiaries are not being filed
herewith because the total amount of securities authorized under any
such instrument does not exceed 10 percent of the total assets of the
Registration and its subsidiaries an a consolidated basis. A copy of
such instrument will be furnished to the Commission upon request.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
5.1 Opinion of McCarthy Tetrault as to legality of the Registrant's
securities being offered pursuant to this Registration Statement.+
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Inprise, regarding certain tax matters.+
8.2 Opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel to Corel,
regarding certain tax matters.+
8.3 Opinion of McCarthy Tetrault regarding certain tax matters.+
10.1 Stock Option Agreement, dated as of February 6, 2000, by and between
Inprise, as grantor, and the Registrant, as grantee, (included in
ANNEX B to the joint proxy statement/prospectus forming part of this
Registration Statement).*
10.2 Stock Option Agreement, dated as of February 6, 2000, by and between
Inprise, as grantee, and the Registrant, as grantor, (included in
ANNEX B to the joint proxy statement/prospectus forming a part of this
Registration Statement).*
10.3 Corel Corporation Transition Stock Option Plan (included in ANNEX F to
the joint proxy statement/ prospectus forming a part of the
Registration Statement).+
10.4 Corel Corporation Stock Option Plan 2000 (included in ANNEX G to the
joint proxy statement/ prospectus forming a part of this Registration
Statement).*
23.1 Consent of McCarthy Tetrault (included in the opinion filed as Exhibit
5.1 to this Registration Statement).+
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP ( included in the
opinion filed as Exhibit 8.1 to this Registration Statement).+
23.3 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in the
opinion filed as Exhibit 8.2 to this Registration Statement).+
23.4 Consent of McCarthy Tetrault (included in the opinion filed as Exhibit
8.3 to the Registration Statement).+
23.5 Consent of PricewaterhouseCoopers LLP (with respect to its report on
the financial statements of the Registrant).*
23.6 Consent of KPMG LLP (with respect to its report on the financial
statements of the Registrant).*
23.7 Consent of PricewaterhouseCoopers LLP (with respect to its report on
the financial statements of Inprise Corporation).*
23.8 Consent of Arthur Andersen LLP (with respect to its report on the
financial statements of Visigenic Software, Inc.).*
23.9 Consent of Dale Fuller pursuant to Rule 438 of the Securities Act.*
24.1 Power of Attorney for directors and certain officers of the
Registrant, authorizing the signing of this Registration Statement on
their behalf (included on the signature page of this Registration
Statement).*
99.1 Form of Proxy of Inprise Corporation (relating to the special meeting
of stockholders of Inprise Corporation described in the joint proxy
statement/prospectus forming a part of this Registration Statement).*
99.2 Form of Proxy of Corel Corporation (relating to the special meeting of
stockholders of Corel Corporation described in the joint proxy
statement/prospectus forming a part of this Registration Statement).*
</TABLE>
- --------
* Filed herewith.
+ To be filed by amendment.
II-2
<PAGE>
(b) Financial Statement Schedules
Not applicable.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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
in the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13 (a) or 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.
(5) 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 issuer 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 other items of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to the immediately
preceding paragraph, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the 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 of 1933, 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 the time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
(7) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, 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 this registration statement through the date of responding to
the request.
(8) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under
Item 20 above, 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 Registrants in successful defence 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 Act and will be
governed by the final adjudication of such issue.
(9) 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ottawa, Province of
Ontario, Canada on April 4, 2000.
COREL CORPORATION
/s/ Michael C. J. Cowpland
By: _________________________________
Michael C. J. Cowpland
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of COREL CORPORATION, do hereby
constitute and appoint Michael C.J. Cowpland, Mitch Desrochers and Eric J.
Smith and each of them, our true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution in each of them, to do any and
all acts and things in our respective names and on our respective behalves in
the capacities indicated below that Michael C.J. Cowpland, Mitch Desrochers and
Eric J. Smith, or any one of them, may deem necessary or advisable to enable
COREL CORPORATION to comply with the Securities Act, and any rules, regulations
and requirements of the Commission, in connection with this Registration
Statement and any new registration statement which registers additional
securities of the same classes and for the same offering as this Registration
Statement in accordance with Rule 462(b) under the Securities Act (each, a
"462(b) Registration Statement"), including specifically, but not limited to,
power and authority to sign for us or any of us in our respective names in the
capacities indicated below any and all amendments (including post-effective
amendments) to this Registration Statement and any such 462(b) Registration
Statement and to file the same, with all exhibits thereto and other documents
therewith, with the Commission; and we do hereby ratify and confirm all that
Michael C.J. Cowpland, Mitch Desrochers, and Eric J. Smith, or any one of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael C. J. Cowpland Chairman of the Board, April 4, 2000
____________________________________ President and Chief
Michael C. J. Cowpland Executive Officer
(principal executive
officer)
/s/ Mitch Desrochers Vice President, Finance and April 4, 2000
____________________________________ Controller (principal
Mitch Desrochers accounting officer and
principal financial
officer)
/s/ Lyle Blair Director April 4, 2000
____________________________________
Lyle Blair
/s/ William G. Davis Director April 4, 2000
____________________________________
William G. Davis
/s/ Jean-Louis Maloquin Director April 4, 2000
____________________________________
Jean-Louis Maloquin
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Hunter S. Grant Director April 4, 2000
____________________________________
Hunter S. Grant
/s/ Barbara McDougall Director April 4, 2000
____________________________________
Barbara McDougall
/s/ Steven Houck Authorized U.S. April 4, 2000
____________________________________ Representative
Steven Houck
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
2.1 Merger Agreement, dated as of February 6, 2000, by and among the
Registrant, Carleton Acquisition Co., and Inprise Corporation
(included in ANNEX A to the joint proxy statement/prospectus forming a
part of this Registration Statement). Pursuant to Item 601(b)(2) of
Regulation S-K, the Schedules referred to in the Merger Agreement are
omitted. The Registrant hereby undertakes to furnish a supplemental
copy of any omitted Schedules to the Commission upon request.*
3.1 Certificate and Articles of Incorporation of the Registrant
(incorporated by reference to the Registration Statement on Form F-1
File No. 33-50886 filed by the Registrant on August 14, 1992).
3.2 Certificate and Articles of Amalgamation of the Registrant and Corel
Computer Corp. (incorporated by reference to the Annual Report on Form
10-K filed by the Registrant on February 28, 2000 for its fiscal year
ended November 30, 1999).
3.3 By-law No. 6 of the Registrant (incorporated by reference to the
Registration Statement on Form F-1 File No. 33-50886 filed by the
Registrant on August 14, 1992).
4.1 Specimen Certificate of common share of the Registrant (incorporated
by reference to the Registration Statement on Form F-1 File No. 33-
50886 filed by the Registrant on August 14, 1992).
4.2 Rights Agreement, dated as of February 11, 1999, as amended and
restated as of March 31, 1999, between the Registrant and The Montreal
Trust Company of Canada, as Rights Agent (incorporated by reference to
the Registrant's Registration Statement on Form 8-A filed by the
Registrant on March 25, 1999).
Pursuant to Regulation S-K, Item 601(b)(4), certain instruments
defining the rights of holders of long-term debt securities of the
Registrant and its consolidated subsidiaries are not being filed
herewith because the total amount of securities authorized under any
such instrument does not exceed 10 percent of the total assets of the
Registration and its subsidiaries an a consolidated basis. A copy of
such instrument will be furnished to the Commission upon request.
5.1 Opinion of McCarthy Tetrault as to legality of the Registrant's
securities being offered pursuant to this Registration Statement.+
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Inprise, regarding certain tax matters.+
8.2 Opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel to Corel,
regarding certain tax matters.+
8.3 Opinion of McCarthy Tetrault regarding certain tax matters.+
10.1 Stock Option Agreement, dated as of February 6, 2000, by and between
Inprise, as grantor, and the Registrant, as grantee, (included in
ANNEX B to the joint proxy statement/prospectus forming part of this
Registration Statement).*
10.2 Stock Option Agreement, dated as of February 6, 2000, by and between
Inprise, as grantee, and the Registrant, as grantor, (included in
ANNEX B to the joint proxy statement/prospectus forming a part of this
Registration Statement).*
10.3 Corel Corporation Transition Stock Option Plan (included in ANNEX F to
the joint proxy statement/ prospectus forming a part of the
Registration Statement).+
10.4 Corel Corporation Stock Option Plan 2000 (included in ANNEX G to the
joint proxy statement/ prospectus forming a part of this Registration
Statement).*
23.1 Consent of McCarthy Tetrault (included in the opinion filed as Exhibit
5.1 to this Registration Statement).+
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP ( included in the
opinion filed as Exhibit 8.1 to this Registration Statement).+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
23.3 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in the
opinion filed as Exhibit 8.2 to this Registration Statement).+
23.4 Consent of McCarthy Tetrault (included in the opinion filed as Exhibit
8.3 to the Registration Statement).+
23.5 Consent of PricewaterhouseCoopers LLP (with respect to its report on
the financial statements of the Registrant).*
23.6 Consent of KPMG LLP (with respect to its report on the financial
statements of the Registrant).*
23.7 Consent of PricewaterhouseCoopers LLP (with respect to its report on
the financial statements of Inprise Corporation).*
23.8 Consent of Arthur Andersen LLP (with respect to its report on the
financial statements of Visigenic Software, Inc.).*
23.9 Consent of Dale Fuller pursuant to Rule 438 of the Securities Act.*
24.1 Power of Attorney for directors and certain officers of the
Registrant, authorizing the signing of this Registration Statement on
their behalf (included on the signature page of this Registration
Statement).*
99.1 Form of Proxy of Inprise Corporation (relating to the special meeting
of stockholders of Inprise Corporation described in the joint proxy
statement/prospectus forming a part of this Registration Statement).*
99.2 Form of Proxy of Corel Corporation (relating to the special meeting of
stockholders of Corel Corporation described in the joint proxy
statement/prospectus forming a part of this Registration Statement).*
</TABLE>
- --------
* Filed herewith.
+ To be filed by amendment.
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Corel Corporation of our report dated January 18, 2000
relating to the financial statements, which appears in the issuer's 1999 Annual
Report to Shareholders, which is incorporated by reference in its Annual Report
on Form 10-K for the year ended November 30, 1999. We also consent to the
incorporation by reference of our report dated January 18, 2000 relating to the
financial statement schedule, which appears on such Form 10-K. We further
consent to the references to us under the headings "Experts" and "Business of
Corel--Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Ottawa, Canada
April 3, 2000
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the use of our report dated January 16, 1998, except as to
Note 12, which is at February 23, 1998, with respect to the Corel Corporation
consolidated statements of operations and retained earnings (deficit) and cash
flows for the year ended November 30, 1997 which is incorporated by reference
in its Annual Report on Form 10-K for the year ended November 30, 1999, to the
Registration Statement on Form S-4 and related Prospectus of Corel Corporation
dated April 3, 2000, and to the reference to our Firm under the caption
Experts.
/s/ KPMG LLP
Chartered Accountants
Ottawa, Canada
April 3, 2000
<PAGE>
Exhibit 23.7
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Corel Corporation of our report dated January 27,
2000, except for Note 1, which is dated as of March 17, 2000, appearing in the
Annual Report on Form 10-K for the year ended December 31, 1999. We also
consent to the references to us under the headings "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 3, 2000
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
FOR VISIGENIC SOFTWARE, INC.
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated April
1, 1998 on the December 31, 1997 financial statements of Visigenic Software,
Inc. included in Inprise Corporation's Form 10-K filed with the Securities and
Exchange Commission on April 4, 2000.
/s/ Arthur Andersen LLP
San Jose, California
April 3, 2000
<PAGE>
Exhibit 23.9
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
(PURSUANT TO RULE 438 UNDER THE SECURITIES ACT OF 1933, AS AMENDED)
In connection with a Registration Statement on Form S-4 filed by Corel
Corporation with the Securities and Exchange Commission (the "Registration
Statement"), I, Dale Fuller, expect to be elected to the Board of Directors of
Corel Corporation, as described therein. As of the effective time of the
Registration Statement, I will not be a member of the Board of Directors of
Corel Corporation, and I am not required to sign the Registration Statement.
I hereby consent to being named in the Registration Statement as a future
member of Corel Corporation's Board of Directors, and to the filing of the
Registration Statement as contemplated by Corel Corporation.
/s/ Dale Fuller
-------------------------------------
Dale Fuller
Scotts Valley, California
March 31, 2000
<PAGE>
EXHIBIT 99.1
P
R
O PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
X
Y INPRISE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF INPRISE CORPORATION FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON ___________, 2000
The undersigned stockholder of Inprise Corporation ("Inprise") hereby
appoints JoAnne M. Butler and Frederick A. Ball, and each or any of
them, attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of Common Stock of Inprise held
of record by the undersigned on ________, 2000, at the Special Meeting
of the Stockholders of Inprise to be held on ___________, 2000, at
_______, local time, at ___________________________, and at any
adjournments or postponements thereof (the "Special Meeting"), with
all the powers the undersigned would possess if personally present at
the Special Meeting.
================================================================================
(Continued and to be signed on reverse side)
[SEE REVERSE]
[ SIDE ]
<PAGE>
[X]Please mark your THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
vote as this IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS
example MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL (1)
BELOW.
(1) Proposal to approve and adopt The undersigned hereby
the Merger Agreement, dated as acknowledges receipt of the Notice
of February 6, 2000, by and among of Special Meeting of Stockholders
Inprise Corporation, Corel and the accompanying Joint Proxy
Corporation and Carleton Statement/Prospectus relating to
Acquisition Co., a Delaware the Special Meeting. This proxy
corporation and a wholly-owned revokes all prior proxies given
subsidiary of Corel Corporation. by the undersigned with respect
to the matters covered hereby.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The proxies are hereby authorized
to vote in their discretion upon
such other matters as may
properly come before the Special
Meeting.
================================================================================
SIGNATURE(S)_______________________________________________DATED________,2000
Please sign your name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee or guardian please give your full title.
If a corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign the partnership name by
authorized person(s).
<PAGE>
PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
Instructions for Voting Your Proxy
Inprise Corporation is now offering stockholders of record three alternative
ways of voting their proxies:
. By Telephone (using your touch-tone telephone)
. Through the Internet (using a browser)
. By Mail (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy. We encourage you to use
these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
- ----------------
TELEPHONE VOTING Available only until 5:00 p.m., Pacific time [date which is
- ---------------- 1 day prior to the meeting], 2000
. This method of voting is available for residents of the U.S. and Canada
. On a touch tone telephone, call TOLL FREE [insert telephone number], 24 hours
a day, 7 days a week
. You will be asked to enter ONLY the Control Number shown below
. Have your proxy card ready, then follow these instructions:
================================================================================
OPTION 1: To vote as the Board of Directors recommends, press 1
OPTION 2: To vote against, press 2
OPTION 3: To abstain, press 3
. Your vote will be confirmed and cast as you direct
<PAGE>
- ---------------
INTERNET VOTING Available only until 5:00 p.m. Pacific time on [date which is
- --------------- 1 day prior to the meeting], 2000.
. Visit our Internet voting website at [insert website]
. Enter the Company Number AND Control Number shown below and follow the
instructions on your screen
. You will incur only your usual Internet charges.
- --------------
VOTING BY MAIL
- --------------
. Simply sign and date your proxy and return it in the postage-paid envelope.
No additional postage is necessary if such envelope is mailed in the United
States.
---------------- -----------------
COMPANY NUMBER CONTROL NUMBER
---------------- -----------------
- --------------------------------------------------------------------------------
TO VOTE BY MAIL, PLEASE DETACH PROXY HERE
<PAGE>
EXHIBIT 99.2
[COREL LOGO] Corel Corporation
1800 Carling Avenue
Ottawa, Ontario, Canada K1Z 8R7
PROXY - SPECIAL MEETING OF SHAREHOLDERS . 2000
This proxy is solicited on behalf of management of Corel Corporation. The
undersigned hereby appoints Michael C.J. Cowpland, or failing him, Mitch P.
Desrochers, both officers of Corel Corporation (the "Company") or, instead of
them ----------------------- as nominee for the undersigned, with the power to
appoint his substitute and hereby authorizes them to represent and to vote as
designated below all the Common Shares of the Company held of record by the
undersigned at the Special Meeting of Shareholders to be held on ,
2000, or any adjournment or adjournments thereof in the same manner, to the same
extent and with the same powers as if the undersigned was personally present at
the said meeting or any adjournment thereof.
Shareholders have the right to appoint a person (who need not be a shareholder)
to attend and act for them and on their behalf other than the nominees
designated above and may exercise such right by inserting the name of their
nominee in the blank space provided for that purpose.
<TABLE>
<CAPTION>
<S> <C> <C>
1. FOR [ ] or AGAINST [ ] the approval of Resolution No. 1 - Issuance of Common Shares of the Corporation under the
merger agreement dated February 8, 2000
2. FOR [ ] or AGAINST [ ] the approval of Resolution No. 2 - Approval of Corel Corporation Transition Stock Option Plan
3. FOR [ ] or AGAINST [ ] the approval of Resolution No. 3 - Approval ofamendments to Corel Corporation Stock Option Plan 2000
4. In their discretion, the proxy holders are authorized to vote upon any amendments or variations to the above matters and such
other matters as may properly come before the meeting.
</TABLE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no choice is indicated in respect of any matter
in this space provided above, the Common Shares represented by this proxy will
be voted for such matter.
This proxy form should be read in conjunction with the accompanying notice of
meeting and management proxy circular.
Please date and sign below exactly as your name appears on this form. When
shares are held by joint tenants, both must sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a partnership, please sign in partnership name by an authorized person.
Dated this ---- day of -------------- 2000.
- --------------------------------------------
Signature
- --------------------------------------------
Signature (if held jointly)
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS FORM OF PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE. If not dated, this proxy
is deemed to bear the date on which it was
- --------------------------------------------------------------------------------
