<PAGE>
Exhibit 4.05
COREL CORPORATION
STOCK OPTION PLAN
1. Purpose of the Plan
The purpose of the Stock Option Plan 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
<PAGE>
any such date, the Company receives from the Participant a completed
Stock Option Purchase Form with payment for the Option Shares being
purchased;
(j) "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;
(k) "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 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;
(l) "Officer" means a person appointed as an officer of the Company by the
-------
Board of Directors;
(m) "Option Period" means the period set forth in Section 6 during which a
-------------
Participant may purchase Option Shares;
(n) "Option Price" means the price per share at which a Participant may
------------
purchase Option Shares denominated in Canadian or United States
currency;
(o) "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 during the preceding one
year period;
(p) "Option Shares" means the Common Shares of the Company which a
-------------
Participant is entitled to purchase under the Plan;
(p) "Option Shares" means the Common Shares of the Company which a
-------------
Participant is entitled to purchase under the Plan;
<PAGE>
(q) "Participants" means Employees, Directors and Officers to whom options
------------
to purchase Option Shares are granted pursuant to the Plan and which
remain unexercised; and
(r) "Plan" means the Corel Corporation Stock Option Plan.
----
3. Eligibility
Participation in the Plan shall be limited to Participants who are
designated from time to time by the Committee and those Employees who were
granted options prior to the adoption of the Plan by the Board of
Directors. 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 13,900,614. The following restrictions shall
also apply to this Plan:
(a) the aggregate 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; and
(c) no Participant together with such Participant's Associates, shall be
issued, within any one year period, a number of Option Shares which
exceeds 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.
<PAGE>
6. Exercise
Subject to the requirements of applicable regulatory authorities and the
discretion of the Committee, each option granted under the Plan including
those options granted prior to November 1, 1993 may be exercised as
follows:
<TABLE>
<CAPTION>
Percentage of Total Number of Option Period
Option Shares which may be Purchased
----------------------------------------- ---------------------------------------
<S> <C>
100% For a period of four years from the
Date of Grant.
</TABLE>
The exercise period and vesting period of any option granted after November
1, 1993 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.
Notwithstanding the foregoing, any options to purchase Option Shares
granted on or prior to January 25, 1990, shall be deemed to have been
granted pursuant to the terms of this Plan on January 25, 1990, unless
otherwise terminated in accordance with the terms hereof.
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
<PAGE>
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 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 12
month period, for options granted prior to November 1, 1993, and
during the 30 day period, for options granted on or after November 1,
1993 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.
<PAGE>
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
Directors 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.
<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 7M5
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.
<PAGE>
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
(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.
DATED the 25th day of January, 1990, as amended the 17th day of September,
1992, the 22nd day of November, 1993, the 31st day of March, 1994, the 30th
day of March, 1995, the 12th day of March, 1996, the 18th day of April,
1997 and the 31st day of January, 2000.
COREL CORPORATION
/s/ Michael C. J. Cowpland
------------------------------------
Chairman of the Board, President and
Chief Executive Officer
/s/ Eric J. Smith
------------------------------------
Secretary
