EX-10.3

Exhibit 10.3

SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT (this "Agreement") is dated as of September 18, 2000 by and between Corel Corporation, a corporation continued under the laws of Canada (the "Company"), and Albans Investments Limited, a corporation incorporated under the laws of the British Virgin Islands (the "Purchaser").

The parties hereto agree as follows:

Article I

DEFINITIONS

Section 1.1. Certain Definitions.

(a) "Average Daily Price" shall be the price based on the VWAP of the Company on the Principal Market.

(b) "Common Shares" shall mean the Common Shares of the Company.

(c) "Draw Down" shall have the meaning assigned to such term in Section 6.1(a) hereof.

(d) "Draw Down Pricing Period" shall mean a period of twenty (20) consecutive Trading Days beginning on the date specified in the Draw Down Notice (as defined in Section 6.1(e) hereof); provided, however, the Draw Down Pricing Period shall not begin before the day on which such notice is tendered to the Purchaser.

(e) "Effective Date" shall mean the date the Registration Statement of the Company covering the Shares being subscribed for hereby is declared effective.

(f) "Investment Amount" shall have the meaning assigned to such term in Section 6.1(e) hereof.

(g) "Material Adverse Effect" shall mean any adverse effect on the business, operations, properties, prospects or financial condition of the Company or Purchaser, as applicable, that is material and adverse to the Company or Purchaser, as applicable, and their subsidiaries and affiliates, taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company or the Purchaser, as applicable, to perform any of their material obligations under this Agreement or the Registration Rights Agreement or to perform its obligations under any other material agreement.

(h) "Principal Market" shall mean initially the Nasdaq National Market and shall include the American Stock Exchange, Nasdaq SmallCap Market or the New York Stock Exchange if the Company is listed and trades on such market or exchange. The Principal Market shall not include the OTC Bulletin Board without the express written consent of the Purchaser.

(i) "Purchase Price" shall mean with respect to Shares purchased during each applicable Settlement Period (excluding Shares issued upon the exercise of Warrants) ninety-five percent (95%) of the Average Daily Price on the date in question.

(j) "Registration Statement" shall mean the registration statement to be filed under the Securities Act of 1933, as amended, with the Securities and Exchange Commission for the registration of the Shares pursuant to the Registration Rights Agreement attached hereto as Exhibit A (the "Registration Rights Agreement).

(k) "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the Proxy Statement for its latest fiscal year as of the time in question until such time as the Company no longer has an obligation to maintain the effectiveness of a Registration Statement pursuant to the Registration Rights Agreement.

(l) "Settlement Period" shall have the meaning assigned to such term in Section 6.1(b).

(m) "Shares" shall mean, collectively, the Common Shares of the Company being subscribed for hereunder and those Common Shares issuable to the Purchaser upon exercise of the Warrants.

(n) "Threshold Price" is the lowest Average Daily Price during any Draw Down Pricing Period, which the Company may elect to set in a Draw Down Notice, at which the Company will sell its Common Shares pursuant to this Agreement.

(o) "Trading Day" shall mean any day on which the Principal Market is open for business.

(p) "VWAP" shall mean the daily volume weighted average price of the Company's Common Shares on the Principal Market as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using the VAP function.

(q) "Warrants" shall mean all of the Initial Warrants, the Draw Down Warrants and the Purchaser Warrants as those terms are defined in Section 5.2(f) hereof.

Article II

PURCHASE AND SALE OF SHARES

Section 2.1. Purchase and Sale of Shares. Subject to the terms and conditions of this Agreement, the Company may issue and sell to the Purchaser and the Purchaser shall purchase from the Company up to 11,300,0000 of the Shares (the "Commitment Amount") and the Warrants.

Section 2.2. The Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of shareholders, a sufficient number of its authorized but unissued Common Shares to cover the Shares to be issued in connection with all Draw Downs requested under this Agreement. Anything in this Agreement to the contrary notwithstanding, at no time will the Company request a Draw Down which would result in a number of Shares and warrants issued to Whale Securities Co., Inc., in the aggregate, which exceeds 19.99% of the number of Common Shares issued and outstanding on the Initial Closing Date without obtaining shareholder approval of such excess issuance.

Section 2.3. Purchase Price and Initial Closing. The Company agrees to issue and sell to the Purchaser and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchaser agrees to purchase that number of the Shares to be issued in connection with each Draw Down. The delivery of executed documents under this Agreement and the other agreements referred to herein and the payment of the fees set forth in Article II of the Escrow Agreement, attached as Exhibit B hereto, (the "Initial Closing") shall take place at the offices of Epstein Becker & Green, P.C., 250 Park Avenue, New York, New York 10177 within fifteen (15) days from the date hereof, or (ii) such other time and place or on such date as the Purchaser and the Company may agree upon (the "Initial Closing Date"). Each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the Initial Closing.

Article III

REPRESENTATIONS AND WARRANTIES

Section 3.1. Representation and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchaser:

(a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Canada and has all requisite corporate authority to own, lease and operate its properties and assets and to carry on its business as now being conducted. The Company does not have any subsidiaries and does not own more than fifty percent (50%) of or control any other business entity except as set forth in the SEC Documents or in Schedule 3.1(a). The Company is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect.

(b) Authorization, Enforcement. (i) The Company has the requisite corporate power and corporate authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Escrow Agreement and to issue the Draw Down Shares pursuant to their respective terms, (ii) the execution, issuance and delivery of this Agreement, the Registration Rights Agreement and the Escrow Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or shareholders is required unless otherwise required by The Toronto Stock Exchange, and (iii) this Agreement, the Registration Rights Agreement and the Escrow Agreement have been duly executed and delivered by the Company and at the Initial Closing shall constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. The Company has duly and validly authorized and reserved for issuance Common Shares sufficient in number for the issuance of the Draw Down Shares.

(c) Capitalization. The authorized capital stock of the Company consists of an unlimited number of Common Shares of which 73,540,913 shares are issued and outstanding are issued and outstanding as of September 11, 2000 and an unlimited number of preferred shares issuable in series of which no shares are outstanding. All of the outstanding Common Shares have been duly and validly authorized and are fully-paid and non-assessable, except as set forth in the SEC Documents. Except as set forth in this Agreement and the Registration Rights Agreement and as set forth in the SEC Documents, or in Schedule 3.1(c) hereto, no Common Shares are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement and as set forth in the SEC Documents or on Schedule 3.1(c), there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as set forth in Schedule 3.1(c), the Company is not a party to any agreement granting registration rights to any person with respect to any of its equity or debt securities. Except as set forth in Schedule 3.1(c), the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. Except as set forth in the SEC Documents or on Schedule 3.1(c) hereto, the offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Initial Closing complied with all applicable Canadian and United States federal, state and provincial securities laws, and no shareholder has a right of rescission or damages with respect thereto which would have a Material Adverse Effect on the Company's financial condition or operating results. The Company has made available to the Purchaser true and correct copies of the Company's Articles of Amalgamation as in effect on the date hereof (the "Articles"), and the Company's Bylaws as in effect on the date hereof (the "Bylaws"). The Company has not received any notice from the Principal Market questioning or threatening the continued inclusion of the Common Shares on such market.

(d) Issuance of Shares. The Shares to be issued under this Agreement have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid and non-assessable, and the Purchaser shall be entitled to all rights accorded to a holder of Common Shares.

(e) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated herein do not and will not (i) violate any provision of the Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or other foreign statute, rule, regulation, order, judgment or decree (including any Canadian or United States federal, state or provincial securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, except, in all cases, for such conflicts, defaults, termination, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under any Canadian or United States federal, state, provincial or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement, or issue and sell the Shares in accordance with the terms hereof (other than any filings which may be required to be made by the Company with any exchange or market on which its Common Shares are listed or the Securities and Exchange Commission (the "SEC") or state securities administrators subsequent to the Initial Closing and any registration statement which may be filed pursuant hereto); provided that, for purpose of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Purchaser herein.

(f) SEC Documents, Financial Statements. The Common Shares are registered pursuant to Section 12(g) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") and, except as disclosed in the SEC Documents, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including filings incorporated by reference therein, being referred to herein as the "SEC Documents"). The Company has delivered or made available to the Purchaser true and complete copies of the SEC Documents filed with the SEC since November 30, 1998. The Company has not provided to the Purchaser any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such documents, and, as of their respective filing dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(g) Subsidiaries. The SEC Documents or Schedule 3.1(g) hereto sets forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing each person's ownership of the outstanding stock or other interests of such subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any corporation or other entity of which at least a majority of the securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. All of the outstanding shares of capital stock of each subsidiary have been duly authorized and validly issued, and are fully paid and non-assessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any subsidiary for the purchase or acquisition of any shares of capital stock of any subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the Company nor any subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence. Neither the Company nor any subsidiary is a party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any subsidiary.

(h) No Material Adverse Effect. Since May 31, 2000 no Material Adverse Effect has occurred or exists, except as disclosed in the SEC Documents or on Schedule 3.1(h) hereof or in the Company's prospectus dated June 23, 2000 as filed with provincial securities commissions in Canada, a copy of which has been delivered to the Purchaser.

(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents or on Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any subsidiary (including the notes thereto) in conformity with GAAP which are not disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company's or its subsidiaries' respective businesses since May 31, 2000 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its subsidiaries.

(j) No Undisclosed Events or Circumstances. Since May 31, 2000, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, prospects, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the SEC Documents or in the Company's prospectus dated June 23, 2000 as filed with provincial securities commissions in Canada, a copy of which has been delivered to the Purchaser.

(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has commitments. For the purposes of this Agreement, "Indebtedness" shall mean (A) any liabilities for borrowed money or amounts owed in excess of $250,000 (other than trade accounts payable incurred in the ordinary course of business), (B) all guaranties, endorsements and contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (C) the present value of any lease payments in excess of $250,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any subsidiary is in default with respect to any Indebtedness.

(l) Title to Assets. To the best knowledge of the Company, the Company has the right to use all of its tangible assets, either through ownership, lease or license from third parties and there are no material defaults by the Company under the terms of any lease or license.

(m) Actions Pending. There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the SEC Documents or on Schedule 3.1(m) hereto or such that do not cause a Material Adverse Effect, there is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets. Except as set forth on Schedule 3.1(m) hereto, there are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary.

(n) Compliance with Law. The business of the Company and the subsidiaries has been and is presently being conducted in accordance with all applicable Canadian and United States federal, state, provincial and local governmental laws, rules, regulations and ordinances, except as set forth in the SEC Documents or on Schedule 3.1(n) hereto or such that do not cause a Material Adverse Effect. The Company and each of its subsidiaries has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of their respective businesses as now being conducted by them unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(o) Taxes. The Company and each subsidiary has filed all Tax Returns which it is required to file under applicable laws; all such Tax Returns are true and accurate and has been prepared in compliance with all applicable laws; the Company has paid all Taxes due and owing by it or any subsidiary (whether or not such Taxes are required to be shown on a Tax Return) and have withheld and paid over to the appropriate taxing authorities all Taxes which it is required to withhold from amounts paid or owing to any employee, shareholder, creditor or other third parties; and since November 30, 1999, the charges, accruals and reserves for Taxes with respect to the Company (including any provisions for deferred income taxes) reflected on the books of the Company are adequate to cover any Tax liabilities of the Company if its current tax year were treated as ending on the date hereof.

No claim has been made by a taxing authority in a jurisdiction where the Company does not file tax returns that the Company or any subsidiary is or may be subject to taxation by that jurisdiction. Except as set forth in Schedule 3.1(o) hereto, there are no foreign, federal, state or local tax audits or administrative or judicial proceedings pending or being conducted with respect to the Company or any subsidiary; no information related to Tax matters has been requested by any foreign, federal, state or local taxing authority; and, except as disclosed above, no written notice indicating an intent to open an audit or other review has been received by the Company or any subsidiary from any foreign, federal, state or local taxing authority. There are no material unresolved questions or claims concerning the Company's Tax liability.

For purposes of this Section 3.1(o):

"Tax" or "Taxes" means federal, state, provincial, county, local, foreign, or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including, without limitation, deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not.

"Tax Return" means any return, information report or filing with respect to Taxes, including any schedules attached thereto and including any amendment thereof.

(p) Certain Fees. Except as set forth on Schedule 3.1(p) hereto and except for payments to the Purchaser, no brokers, finders or financial advisory fees or commissions will be payable by the Company or any subsidiary with respect to the transactions contemplated by this Agreement.

(q) Disclosure. To the best of the Company's knowledge, neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchaser by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

(r) Operation of Business. To the best of the Company's knowledge, the Company and each of the subsidiaries owns or possesses all patents, trademarks, service marks, trade names, copyrights, licenses and authorizations which are necessary for the conduct of its business as now conducted without any conflict with the rights of others.

(s) Books and Records. The records and documents of the Company and its subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company or any subsidiary.

(t) Material Agreements. Except as set forth in the SEC Documents, or on Schedule 3.1(u) hereto, neither the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the SEC as an exhibit to a registration statement on Form S-1 or other applicable form (collectively, "Material Agreements") if the Company or any subsidiary were registering securities under the Securities Act of 1933, as amended (the "Securities Act"). Except as set forth in Schedule 3.1(u), the Company and each of its subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and, to the best of the Company's knowledge are not in default under any Material Agreement now in effect, the result of which could cause a Material Adverse Effect. No written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company or of any subsidiary limits or shall limit the payment of dividends on the Company's Common Shares.

(u) Transactions with Affiliates. Except as set forth in the SEC Documents or on Schedule 3.1(v) hereto, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions exceeding $100,000 between (A) the Company, any subsidiary or any of their respective customers or suppliers on the one hand, and (B) on the other hand, any officer, employee, consultant or director of the Company, or any of its subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member of the immediate family of such officer, employee, consultant, director or shareholder or any corporation or other entity controlled by such officer, employee, consultant, director or shareholder, or a member of the immediate family of such officer, employee, consultant, director or shareholder.

(v) Securities Laws. The Company has complied and will comply with all applicable Canadian and United States federal, state and provincial securities laws in connection with the offer, issuance and sale of the Shares hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy the Shares or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person (other than the Purchaser), so as to bring the issuance and sale of the Shares and/or Warrants under the registration provisions of the Securities Act and applicable state securities laws. Neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Shares.

(w) Employees. Neither the Company nor any subsidiary has any collective bargaining arrangements or agreements covering any of its employees, except as set forth in the SEC Documents or on Schedule 3.1(w) hereto. Except as set forth in the SEC Documents or on Schedule 3.1(w) hereto, to the best of the Company's knowledge, neither the Company nor any subsidiary is in breach of any employment contract, agreement regarding proprietary information, noncompetition agreement, nonsolicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such subsidiary. Except as set forth in the SEC Documents and the Form 10-KSB, no officer, consultant or key employee of the Company or any subsidiary whose termination, either individually or in the aggregate, could have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any subsidiary.

(x) Absence of Certain Developments. Except as provided in SEC Documents or in Schedule 3.1(y) hereto, since May 31, 2000, neither the Company nor any subsidiary has:

(i) issued any shares, bonds or other corporate securities or any rights, options or warrants with respect thereto;

(ii) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company's or such subsidiary's business;

(iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;

(iv) declared or made any payment or distribution of cash or other property to shareholders with respect to its shares, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

(v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;

(vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business or to the Purchaser or its representatives;

(vii) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

(viii) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

(ix) made capital expenditures or commitments therefor that aggregate in excess of $2,000,000;

(x) entered into any other material transaction, whether or not in the ordinary course of business;

(xi) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xii) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or

(xiii) effected any two or more events of the foregoing kind which in the aggregate would be material to the Company or its subsidiaries.

(aa) Use of Proceeds. The proceeds from the sale of the Shares will be used by the Company and its subsidiaries for general corporate purposes.

(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. Company acknowledges and agrees that Purchaser is acting solely in the capacity of arm's length purchaser with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Purchaser's purchase of the Shares. The Company further represents to the Purchaser that the Company's decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its own representatives and counsel.

Section 3.2. Representations and Warranties of the Purchaser. The Purchaser hereby makes the following representations and warranties to the Company:

(a) Organization and Standing of the Purchaser. The Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of British Virgin Islands. The Purchaser certifies that it is not a resident of Canada.

(b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Shares being sold to it hereunder. The execution, delivery and performance of this Agreement by Purchaser and the consummation by it of the transactions contemplated hereby, including without limitation, consenting to being named as an underwriter in the Registration Statement, have been duly authorized by all necessary corporate action.

(c) No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument to which the Purchaser is a party, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to the Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser). The Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the Shares in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, the Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

(d) Financial Risks. The Purchaser acknowledges that it is able to bear the financial risks associated with an investment in the Shares and that it has been given full access to such records of the Company and the subsidiaries and to the officers of the Company and the subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation. The Purchaser is capable of evaluating the risks and merits of an investment in the Shares by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and the Purchaser is capable of bearing the entire loss of its investment in the Shares. Purchaser acknowledges that no securities commission in Canada has reviewed or passed on the merits of the Shares or the Warrants, and no protections, rights or remedies provided by securities laws in Canada, including statutory rights of recission or damages, will be available to the Purchaser.

(e) Accredited Investor. The Purchaser is an "accredited investor" as defined in Regulation D promulgated under the Securities Act.

(f) Compliance With Law. The Purchaser's trading and distribution activities with respect to the Shares will be in compliance with all applicable United States, Canadian, provincial, state and federal securities laws, rules and regulations and the rules and regulations of the Principal Market.

(g) General. The Purchaser understands that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the suitability of the Purchaser to acquire the Shares.

(h) Disclosure. To the best of the Purchaser's knowledge, neither this Agreement nor any other documents, certificates or instruments furnished to the Company by or on behalf of the Purchaser in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

Article IV

COVENANTS

The Company covenants with the Purchaser as follows:

Section 4.1. Securities Compliance. If applicable, the Company shall notify the National Association of Securities Dealers ("NASD"), in accordance with its rules and regulations, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares and the Warrants to the Purchaser or subsequent holders.

Section 4.2. Registration and Listing. The Company will cause its Common Shares to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with its reporting and filing obligations under the Exchange Act, will comply with all requirements related to any registration statement filed pursuant to this Agreement, and will not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein. The Company will take all action necessary to continue the listing or trading of its Common Shares on the Principal Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the NASD and the Principal Market and shall provide the Purchasers with copies of any correspondence to or from such Principal Market which questions or threatens delisting of the Common Shares, within three (3) Trading Days of the Company's receipt thereof, until the Purchasers have disposed of all of their Registrable Securities.

Section 4.3. Registration Statement. The Company shall cause to be filed the Registration Statement, which Registration Statement shall provide for the resale of the Shares by the Purchaser to the public in the United States in accordance with this Agreement. The Company shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the SEC as expeditiously as practicable. Before the Purchaser shall be obligated to accept a Draw Down request from the Company, the Company shall have caused a sufficient number of Common Shares to be registered to cover the Shares to be issued in connection with such Draw Down.

Section 4.4. Escrow Arrangement. The Company and the Purchaser shall enter into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow Agent") in the Form of Exhibit B hereto respecting payment against delivery of the Shares.

Section 4.5. Registration Rights Agreement. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of Exhibit A hereto.

Section 4.6. Compliance with Laws. The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could have a Material Adverse Effect.

Section 4.7. Keeping of Records and Books of Account. The Company shall keep and cause each subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

Section 4.8. Amendments. The Company shall not amend or waive any provision the Articles or Bylaws of the Company in any way that would adversely affect the dividend rights or voting rights of the holders of the Shares.

Section 4.9. Other Agreements. The Company shall not enter into any agreement the terms of which such agreement would restrict or impair the ability to perform of the Company or any subsidiary under this Agreement.

Section 4.10. Notice of Certain Events Affecting Registration; Suspension of Right to Request a Draw Down. The Company will immediately notify the Purchaser upon the occurrence of any of the following events in respect of the Registration Statement or related prospectus in respect of the Shares: (i) receipt of any request for additional information from the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement the response to which would require any amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Purchaser any such supplement or amendment to the related prospectus. The Company shall not deliver to the Purchaser any Draw Down Notice during the continuation of any of the foregoing events.

Section 4.11. Consolidation; Merger. The Company shall not, at any time after the date hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all of the assets of the Company to, another entity (a "Consolidation Event") unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument or by operation of law the obligation to deliver to the Purchaser such shares of stock and/or securities as the Purchaser is entitled to receive pursuant to this Agreement.

Section 4.12. Limitation on Future Financing. Unless the Purchaser gives its prior written consent, the Company agrees that it will not enter into (i) any sale of its securities pursuant to an equity line type arrangement or (ii) any sale of its securities at a discount to market pursuant to a Form S-3 Shelf Registration Statement (unless in connection with a strategic partnership or other business transaction, the principal purpose of which is not simply to raise money) until the earlier of (i) twenty-four (24) months from the effective date of the Registration Statement or (ii) sixty (60) days after the Commitment Amount has been purchased by Purchaser. In the event the Purchaser does give its consent, the Purchaser shall have a right of first refusal, to elect to participate, in such subsequent transaction in the case of (i) and (ii) above. Such right of first refusal must be exercised in writing within seven (7) Trading Days of the Purchaser's receipt of notice of the proposed terms of such financing.

The Purchaser covenants with the Company as follows:

Section 4.13. The Purchaser shall not sell the Shares or the Warrants to any person or company in the Province of Ontario for a period of four months from the date of each purchase of the Shares.

Section 4.14. The Purchaser shall not engage in hedging transactions for the Shares for a period of four months from the date of each purchase of Shares.

Section 4.15. The Purchaser shall not take any action for the purpose of, or that could reasonably be expected to have the effect of, preparing the market in the Province of Ontario, or creating a demand in the Province of Ontario for the Shares for a period of four months from the date of each purchase of the Shares.

Article V

CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS

Section 5.1. Conditions Precedent to the Obligation of the Company to Sell the Shares. The obligation hereunder of the Company to issue and sell the Shares to the Purchaser is subject to the satisfaction or waiver, at or before the Initial Closing, and as of each Settlement Date of each of the conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion.

(a) Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Initial Closing and as of each Settlement Date as though made at that time, except for representations and warranties that speak as of a particular date.

(b) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all material covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Initial Closing and as of each Settlement Date.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) Guaranty. The Company shall have received a guaranty, substantially in the form of Exhibit F hereto, from Creon Management, S.A. guaranteeing the obligations of the Purchaser under this Agreement (the "Guaranty").

Section 5.2. Conditions Precedent to the Obligation of the Purchaser to Close. The obligation hereunder of the Purchaser to perform its obligations under this Agreement and to purchase the Shares is subject to the satisfaction or waiver, at or before the Initial Closing, of each of the conditions set forth below. These conditions are for the Purchaser's sole benefit and may be waived by the Purchaser at any time in its sole discretion.

(a) Accuracy of the Company's Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Initial Closing as though made at that time (except for representations and warranties that speak as of a particular date).

(b) Performance by the Company. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Initial Closing.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Purchaser or the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(e) Opinion of Counsel, Etc. At the Initial Closing, the Purchaser shall have received opinions of counsel to the Company, dated the date of the Initial Closing, in the forms of Exhibit C-1, Exhibit C-2 hereto, and such other certificates as the Purchaser reasonably requires incident to the Initial Closing.

(f) Warrants. The Purchaser shall receive (i) at the Initial Closing, a warrant certificate to purchase up to 169,500 Common Shares (the "Initial Warrant") (ii) at each Settlement Date, a warrant certificate to purchase up to a number of shares equal to 1.5% of the Shares purchased on such Settlement Date (the "Draw Down Warrants"), and (iii) at each Settlement Date, a warrant certificate to purchase up to a number of Common Shares equal to 25% of the number of Shares purchased on such Settlement Date (each a "Purchaser Warrant")(the Initial Warrant, the Draw Down Warrants and the Purchaser Warrants hereinafter collectively referred to as the "Warrants"). The Initial Warrant and the Draw Down Warrants shall have a term from their dates of issuance of three (3) years. The Purchaser Warrants shall have a term of 35 calendar days from their date of issuance. The exercise price of the Initial Warrants shall be 105% of the average closing bid prices of the Common Shares on the fifteen Trading Days immediately prior to the Initial Closing Date. The exercise price of the Draw Down Warrants shall be 105% of the weighted average of the Purchase Prices of the Common Shares during the applicable Settlement Period. The exercise price of the Purchaser Warrants shall be the weighted average of the Purchase Prices of the Common Shares during the applicable Settlement Period. The Common Shares underlying the Warrants will be registered in the Registration Statement referred to in Section 4.3 hereof. The Warrants shall be in the form of Exhibit E hereto.

Section 5.3. Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down and Purchase the Shares. The obligation hereunder of the Purchaser to accept a Draw Down request and to acquire and pay for the Shares is subject to the satisfaction, at or before each Settlement Date, of each of the conditions set forth below.

(a) Satisfaction of Conditions to Initial Closing. The Company shall have satisfied, or the Purchaser shall have waived at the Initial Closing, the conditions set forth in Section 5.2 hereof.

(b) Effective Registration Statement. The Registration Statement registering the Shares shall have been declared effective by the SEC and shall remain effective on each Settlement Date and on each Settlement Date the Company shall deliver to the Purchaser a prospectus supplement on Form 424(b) regarding the sale of the Shares prior to funding.

(c) No Suspension. Trading in the Company's Common Shares shall not have been suspended by the SEC or the Principal Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the delivery of each Draw Down Notice), and, at any time prior to such Draw Down Notice, trading in securities generally as reported on the Principal Market shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported on the Principal Market unless the general suspension or limitation shall have been terminated prior to the delivery of such Draw Down Notice.

(d) Material Adverse Effect. No Material Adverse Effect and no Consolidation Event where the successor entity has not agreed to perform the Company's obligations shall have occurred.

(e) Opinion of Counsel. The Purchaser shall have received a "down-to-date" letter from the Company's counsel, dated the date of the Settlement Date, confirming that there are no material changes from the counsels' previously delivered opinions, or else specifying with particularity the reason for any change, and, additionally, an opinion in the form of Exhibit C-3 hereto.

(f) Future Financing. The Company shall have not completed any financing prohibited by Section 4.12 unless, prior to the Company delivering the first Draw Down Notice after any such financing, the Company pays the Purchaser the sum of $100,000 as liquidated damages.

Article VI

DRAW DOWN TERMS

Section 6.1. Draw Down Terms. Subject to the satisfaction of the conditions set forth in this Agreement, the parties agree as follows:

(a) The Company, may, in its sole discretion, issue and exercise a draw down (a "Draw Down") during each Draw Down Pricing Period, which Draw Down the Purchaser will be obligated to accept for a period of twenty-four (24) months commencing immediately after the Effective Date (the "Commitment Period").

(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period. There shall be at least seven (7) Trading Days between Draw Down Pricing Periods. The number of Common Shares purchased by the Purchaser with respect to each Draw Down shall be determined as set forth in Section 6.1(d) herein and settled on, (i) as to the 1^st through the 10^th Trading Days after a Draw Down Pricing Period commences (the "First Settlement Period"), on the 12^th Trading Day after a Draw Down Pricing Period commences and (ii) as to the 11^th through the 20^th Trading Days after a Draw Down Pricing Period commences (the "Second Settlement Period"), the 22nd Trading Day after a Draw Down Pricing Period (each, a "Settlement Date" and the First and Second Settlement Periods collectively referred to as "Settlement Periods"). In connection with each Draw Down Pricing Period, the Company may set the Threshold Price. If the Average Daily Price on any day within the Draw Down Pricing Period is less than the Threshold Price, the Company shall not sell and the Purchaser shall not be obligated to purchase the Shares otherwise to be purchased for such day.

(c) The minimum Investment Amount shall be $250,000 and the maximum Investment Amount shall be calculated pursuant to the following formula: 4.5% of the weighted average price for the Common Shares for the three (3) month period immediately prior to the Commencement Date (defined below) multiplied by the total trading volume in respect of the Common Shares for the three (3) month period immediately prior to the Commencement Date.

(d) The number of Common Shares to be issued on each Settlement Date shall be a number of shares equal to the sum of the quotients (for each Trading Day within the Settlement Period) of (x) 1/20^th of the Investment Amount and (y) the Purchase Price on the applicable Trading Day within the Settlement Period, subject to the following adjustments:

(i) if the Average Daily Price on a given Trading Day is less than the Threshold Price, then the Investment Amount will be reduced by 1/20^th and that day shall be withdrawn from the Settlement Period; and

(ii) if trading of the Common Shares on the Principal Market is suspended for more than three (3) hours, in the aggregate, on any Trading Day during the Settlement Period, the Investment Amount shall be reduced by 1/20^th and that day shall be withdrawn from the applicable Settlement Period.

(e) The Company must inform the Purchaser by delivering a draw down notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via facsimile transmission in accordance with Section 9.4 as to the amount of the Draw Down (the "Investment Amount") the Company wishes to exercise before the first day of the Draw Down Pricing Period (the "Commencement Date"). If the Commencement Date is to be the date of the Draw Down Notice, the Draw Down Notice must be delivered to and receipt confirmed by the Purchaser at least one hour before trading commences on such date. At no time shall the Purchaser be required to purchase more than the maximum Draw Down amount for a given Draw Down Pricing Period so that if the Company chooses not to exercise the maximum permitted Draw Down in a given Draw Down Pricing Period, the Purchaser is not obligated to and shall not purchase more than the scheduled maximum amount in a subsequent Draw Down Pricing Period.

(f) On or before each Settlement Date, the Shares purchased by the Purchaser shall be delivered to The Depository Trust Company ("DTC") on the Purchaser's behalf. Upon the Company delivering whole Common Shares to the Purchaser or its designees via DWAC by 1:00 pm EST, the Purchaser shall wire transfer immediately available funds to the Company's designated account on such day. Upon the Company delivering whole Common Shares to the Purchaser or its designees via DWAC after 1:00 pm EST, the Purchaser shall wire transfer next day available funds to the Company's designated account on such day. In the event the Purchaser elects to use the Escrow Agent, the Shares shall be credited by the Company to the DTC account designated by the Purchaser upon receipt by the Escrow Agent of payment for the Draw Down into the Escrow Agent's trust account as provided in the Escrow Agreement. The Escrow Agent shall be directed to pay the purchase price to the Company, net of One Thousand Five Hundred Dollars ($1,500) as escrow expenses per Draw Down to the Escrow Agent and any brokerage or placement agent fees as set forth in the Escrow Agreement. The delivery of the Shares into the Purchaser's DTC account in exchange for payment therefor shall be referred to herein as "Settlement".

Article VII

TERMINATION

Section 7.1. Termination. The term of this Agreement shall be twenty-four (24) months from the Effective Date.

Section 7.2. Other Termination. The Purchaser may terminate this Agreement upon one (1) Trading Day's notice if (i) an event resulting in a Material Adverse Effect has occurred, (ii) the Common Shares is de-listed from the Principal Market unless such de-listing is in connection with the listing of the Common Shares on the Nasdaq National Market, Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange or (iii) the Company files for protection from creditors under any applicable law.

(a) The Company may terminate this Agreement upon one (1) Trading Day's notice if the Purchaser shall fail to fund more than one properly noticed Draw Down within three (3) Trading Days of a Settlement Date.

Section 7.3. Effect of Termination. In the event of termination by the Company or the Purchaser, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become void and of no further force and effect, except for Sections 9.1 and 9.2, and Article VIII herein. Nothing in this Section 7.3 shall be deemed to release the Company or the Purchaser from any liability for any breach under this Agreement, or to impair the rights of the Company and the Purchaser to compel specific performance by the other party of its obligations under this Agreement.

Article VIII

INDEMNIFICATION

Section 8.1. General Indemnity. The Company agrees to indemnify and hold harmless the Purchaser (and its directors, officers, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorney's fees, charges and disbursements) incurred by the Purchaser as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. The Purchaser agrees to indemnify and hold harmless the Company and its directors, officers, affiliates, agents, successors and assigns from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys fees, charges and disbursements) incurred by the Company as result of any inaccuracy in or breach of the representations, warranties or covenants made by the Purchaser herein. Notwithstanding anything to the contrary herein, the Purchaser shall be liable under this Section 8.1 for only that amount as does not exceed the net proceeds to such Purchaser as a result of the sale of Shares pursuant to the Registration Statement.

Section 8.2. Indemnification Procedure. Any party entitled to indemnification under this Article VIII (an "Indemnified Party") will give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VIII except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any action, proceeding or claim is brought against an Indemnified Party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of counsel to the Indemnified Party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. In the event that the indemnifying party advises an Indemnified Party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the Indemnified Party's costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The Indemnified Party shall cooperate fully with the indemnifying party in connection with any settlement negotiations or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party which relates to such action or claim. The indemnifying party shall keep the Indemnified Party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent. Notwithstanding anything in this Article VIII to the contrary, the indemnifying party shall not, without the Indemnified Party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the Indemnified Party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim. The indemnification required by this Article VIII shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, within ten (10) Trading Days of written notice thereof to the indemnifying party so long as the Indemnified Party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the Indemnified Party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to.

Article IX

MISCELLANEOUS

Section 9.1. Fees and Expenses. The Company shall pay all of its own fees and expenses related to the transactions contemplated by this Agreement; provided, that the Company shall also pay, at the Initial Closing, all attorneys and escrow fees and expenses inclusive of disbursements and out-of-pocket expenses) incurred by the Purchaser of $25,000 in connection with the preparation, negotiation, execution and delivery of this Agreement and the transactions contemplated hereunder. In addition, the Company shall pay all reasonable fees and expenses incurred by the Purchaser in connection with any subsequent amendments, modifications or waivers of this Agreement, the Escrow Agreement or the Registration Rights Agreement or incurred in connection with the enforcement of this Agreement, the Escrow Agreement and the Registration Rights Agreement, including, without limitation, all reasonable attorneys fees and expenses. The Company shall pay all stamp or other similar taxes and duties levied in connection with issuance of the Shares pursuant hereto.

Section 9.2. Specific Enforcement. The Company and the Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

Section 9.3. Entire Agreement; Amendment. This Agreement, together with the Registration Rights Agreement and the Escrow Agreement contains the entire understanding of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither the Company nor the Purchaser makes any representations, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought and no condition to closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.

Section 9.4. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company: 1600 Carling Avenue

Ottawa, Ontario

K1Z 8R7, Canada

Tel: (613) 728-8200

Fax: (613) 761-9350

Attn: Chief Financial Officer

With copies to: McCarthy Tetrault

notice): 40 Elgin Street, Suite 1400

Ottawa, Ontario KIP SK6

Telephone: (613) 238-2111

Facsimile: (613) 563-9386

Attn: Robert D. Chapman, Esq.

If to Purchaser: c/o UltraFinanz AG

Grossmuensterplatz 6

Zurich CH-8022 Switzerland

Attn: H.U. Bachofen

Fax: 011-411-262-5515

with copies to: Epstein Becker & Green P.C.
250 Park Avenue
New York, New York 10177-1211
Telephone: (212) 351-3771

Fax: (212) 661-0989
Attention: Robert F. Charron

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto in accordance herewith.

Section 9.5. Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

Section 9.6. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

Section 9.7. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The parties hereto may not amend this Agreement or any rights or obligations hereunder without the prior written consent of the Company and each Purchaser to be affected by the amendment. After Initial Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement.

Section 9.8. No Third Party Beneficiaries.This Agreement is intended for the benefit of the parties hereto, their respective permitted successors and assigns and the indemnified parties and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

Section 9.9. Governing Law/Consent to Jurisdiction. (a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, as applied to agreements among New York residents entered into and to be performed entirely within New York without giving effect to the choice of law provisions. The prevailing party shall be awarded its costs, including attorneys' fees, from the non-prevailing party as part of an award. Any party shall have the right to seek injunctive relief from any court of competent jurisdiction in any case where such relief is available. The prevailing party in such injunctive action shall be awarded its costs, including attorney's fees, from the non-prevailing party.

(b) The parties hereby submit to the exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City in any legal action or proceeding for injunctive or other equitable relief and in any action or proceeding seeking enforcement of any decision or award rendered pursuant to Section 9.9(a) above. The parties further consents that any such action or proceeding may be brought in such court and irrevocably and unconditionally waives any objection it may now or hereafter have to the venue of any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient court or that such court does not have any jurisdiction over it, and agrees not to plead or claim the same. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

Section 9.10. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Execution may be made by delivery by facsimile.

Section 9.11. Publicity. Except as may be required by applicable securities laws or any exchange or market on which the Common Shares are listed, prior to the Initial Closing, neither the Company nor the Purchaser shall issue any press release or otherwise make any public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement. After the Initial Closing, the Company may issue a press release or otherwise make a public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement; provided, however, that prior to issuing any such press release, making any such public statement or announcement, the Company obtains the prior consent of the Purchaser, which consent shall not be unreasonably withheld or delayed.

Section 9.12. Severability. The provisions of this Agreement are severable and, in the event that any court or officials of any regulatory agency of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible, so long as such construction does not materially adversely effect the economic rights of either party hereto.

Section 9.13. Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, each of the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

Confidentiality.

Purchaser agrees to maintain in confidence and not disclose to any other person (other than Purchaser's employees, attorneys and accountants on a need-to-know basis) during the term hereof and for a period of at least one (1) year following termination of this Agreement any non-public and proprietary information disclosed by the Company to Purchaser at any time prior to the execution of this Agreement or during the term hereof. Non-public information shall include all information which is (i) not actually and demonstrably known by Purchaser before being obtained from Company and (ii) not generally available to the public at any time before acquired by the Purchaser. If Purchaser discloses such information to its employees, attorneys and accountants on a need-to-know basis, it shall take reasonable steps to insure that they will similarly maintain such information in confidence. Equitable remedies, including injunctive relief, will be available to the Company to protect its proprietary information from disclosure.

Section 9.15. Effectiveness of Agreement. This Agreement shall become effective only upon satisfaction of the conditions precedent to the Initial Closing set forth in Article I of the Escrow Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of this __ day of September, 2000.

Corel Corporation

By:

Name:

Title:

Albans Investments Limited

By:

Name:

Title:

EX-10.4

Exhibit 10.4

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 18, 2000 between Albans Investments Limited ("Purchaser") and Corel Corporation (the "Company").

WHEREAS, simultaneously with the execution and delivery of this Agreement, pursuant to a Share Purchase Agreement dated the date hereof (the "Purchase Agreement") the Purchaser has committed to purchase up to 11,300,000 Common Shares (terms not defined herein shall have the meanings ascribed to them in the Purchase Agreement) and Warrants; and

WHEREAS, the Company desires to grant to the Purchaser the registration rights set forth herein with respect to the Shares and the Shares issuable upon exercise of the Warrants from time to time (collectively, the "Securities").

NOW, THEREFORE, the parties hereto mutually agree as follows:

Section 1. Registrable Securities. As used herein the term "Registrable Security" means the Securities until (i) all Securities have been disposed of pursuant to the Registration Statement, (ii) all Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act ("Rule 144") are met, (iii) all Securities have been otherwise transferred to persons who may trade such Securities without restriction under the Securities Act (the "Securities Act"), and the Company has delivered a new certificate or other evidence of ownership for such Securities not bearing a restrictive legend or (iv) such time as, in the opinion of counsel to the Company, all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act. The term "Registrable Securities" means any and/or all of the securities falling within the foregoing definition of a "Registrable Security." In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Shares, such adjustment shall be deemed to be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement.

Section 2. Restrictions on Transfer. The Purchaser acknowledges and understands that in the absence of an effective Registration Statement authorizing the resale of the Securities as provided herein, the Securities are "restricted securities" as defined in Rule 144. The Purchaser understands that no disposition or transfer of the Securities may be made by Purchaser in the absence of (i) an opinion of counsel to the Purchaser, in form and substance reasonably satisfactory to the Company, that such transfer may be made without registration under the Securities Act or (ii) such registration.

With a view to making available to the Purchaser the benefits of Rule 144, the Company agrees to:

(a) comply with the provisions of paragraph (c)(1) of Rule 144; and

(b) file with the Commission in a timely manner all reports and other documents required to be filed by the Company pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934 (the "Exchange Act"); and, if at any time it is not required to file such reports but in the past had been required to or did file such reports, it will, upon the request of the Purchaser, make available other information as required by, and so long as necessary to permit sales of, its Registrable Securities pursuant to Rule 144.

Section 3. Registration Rights With Respect to the Securities.

(a) The Company agrees that it will prepare and file with the Securities and Exchange Commission ("Commission"), within forty-five (45) days after the date hereof, a registration statement (on Form S-3 and/or S-1, or other appropriate form of registration statement) under the Securities Act (the "Registration Statement"), at the sole expense of the Company (except as provided in Section 3(c) hereof), in respect of Purchaser, so as to permit a public offering and resale of the Securities under the Securities Act by Purchaser in the United States.

The Company shall use its reasonable best efforts to cause the Registration Statement to become effective within ninety (90) days of the date hereof or five (5) days of SEC clearance and will within said five (5) days request acceleration of effectiveness. The Company will notify Purchaser of the effectiveness of the Registration Statement within one Trading Day of such event.

(b) The Company shall use its reasonable best efforts to maintain the Registration Statement or post-effective amendment filed under this Section 3 hereof effective under the Securities Act for a period of three years from the date of effectiveness or shorter period as shall terminate upon the earliest of (i) the date that all the Securities have been disposed of pursuant to the Registration Statement, (ii) the date that all of the Securities have been sold pursuant to the Registration Statement, (iii) the date the holders thereof receive an opinion of counsel to the Company, which opinion shall be reasonably acceptable to the Purchaser, that the Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) all Securities have been otherwise transferred to persons who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend, or (v) all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) or any similar provision then in effect under the Securities Act in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Purchaser (the "Effectiveness Period").

(c) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under subparagraph 3(a) and in complying with applicable securities and Blue Sky laws (including, without limitation, all attorneys' fees of the Company) shall be borne by the Company. The Purchaser shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Securities being registered and the fees and expenses of its counsel. The Purchaser and its counsel shall have a reasonable period, not to exceed ten (10) Trading Days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the Commission, and the Company shall provide the Purchaser with copies of any comment letters received from the Commission with respect thereto within two (2) Trading Days of receipt thereof. The Company shall make reasonably available for inspection by Purchaser and any attorney, accountant or other agent retained by the Purchaser all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the Company's officers, directors and employees to supply all information reasonably requested by the Purchaser or any such attorney, accountant or agent in connection with the Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that all records, information and documents that are designated in writing by the Company, in good faith, as confidential, proprietary or containing any material non-public information shall be kept confidential by the Purchaser and any such attorney, accountant or agent (pursuant to an appropriate confidentiality agreement in the case of the Purchaser, attorney, accountant or agent), unless such disclosure is made pursuant to judicial process in a court proceeding (after first giving the Company an opportunity promptly to seek a protective order or otherwise limit the scope of the information sought to be disclosed) or is required by law, or such records, information or documents become available to the public generally or through a third party not in violation of an accompanying obligation of confidentiality; and provided further that, if the foregoing inspection and information gathering would otherwise disrupt the Company's conduct of its business, such inspection and information gathering shall, to the maximum extent possible, be coordinated on behalf of the Purchaser and the other parties entitled thereto by one firm of counsel designated by and on behalf of the majority in interest of Purchaser and other parties. The Company shall qualify any of the securities for sale in such states as the Purchaser reasonably designates and shall furnish indemnification in the manner provided in Section 6 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the sellers, or which will require the Company to qualify to do business in such state or require the Company to file therein any general consent to service of process. The Company at its expense will supply the Purchaser with copies of the Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by the Purchaser.

(d) The Company shall not be required by this Section 3 to include Purchaser's Securities in any Registration Statement which is to be filed if, in the opinion of counsel for both the Purchaser and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Purchaser and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable United States federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not "restricted securities", as defined in Rule 144 under the Securities Act.

(e) If at any time or from time to time after the effective date of the Registration Statement, the Company notifies the Purchaser in writing of the existence of a Potential Material Event (as defined in Section 3(f) below), the Purchaser shall not offer or sell any Securities or engage in any other transaction involving or relating to Securities, from the time of the giving of notice with respect to a Potential Material Event until the Purchaser receives written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event (the "Suspension Period"); provided, however, that if the Company so suspends the right to such holders of Securities for more than twenty (20) Trading Days in the aggregate during any twelve month period, during the periods the Registration Statement is required to be in effect then the Company must compensate the Purchaser for any net decline in market value of the Securities held by Purchaser at the beginning of such Suspension Period through the end of such Suspension Period; provided, however, that such securities are sold by the Purchaser within five (5) Trading Days from the end of the Suspension Period. If a Potential Material Event shall occur prior to the date the Registration Statement is filed, then the Company's obligation to file the Registration Statement shall be delayed without penalty for not more than thirty (30) calendar days. The Company must give Purchaser notice in writing at least two (2) Trading Days prior to the first day of the Suspension Period, if lawful to do so.

(f) "Potential Material Event" means any of the following: (a) the possession by the Company of material information that is not ripe for disclosure in a registration statement, as determined in good faith by the Chief Executive Officer or the Board of Directors of the Company or that disclosure of such information in the Registration Statement would be detrimental to the business and affairs of the Company; or (b) any material engagement or activity by the Company which would, in the good faith determination of the Chief Executive Officer or the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time, which determination shall be accompanied by a good faith determination by the Chief Executive Officer or the Board of Directors of the Company that the Registration Statement would be materially misleading absent the inclusion of such information.

Section 4. Cooperation with Company. Purchaser will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information reasonably requested by the Company (which shall include all information regarding the Purchaser and proposed manner of sale of the Registrable Securities required to be disclosed in the Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities. The Purchaser consents to be named as an underwriter in the Registration Statement. Purchaser acknowledges that in accordance with current Commission policy, the Purchaser will be named as the underwriter of the Securities in the Registration Statement.

Section 5. Registration Procedures. If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible, subject to the Purchaser's assistance and cooperation as reasonably required:

(a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the Purchaser of such Registrable Securities shall desire to sell or otherwise dispose of the same (including prospectus supplements with respect to the sales of securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Securities Act) and (ii) take all lawful action such that each of (A) the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading and (B) the Prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Registration Period include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) (i) prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements thereto), provide draft copies thereof to the Purchaser and use its reasonable best efforts to reflect in such documents all such comments as the Purchaser (and its counsel) reasonably may propose and (ii) furnish to the Purchaser such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the Securities Act, and such other documents, as the Purchaser may reasonably request in order to facilitate the public sale or other disposition of the securities owned by the Purchaser;

(c) unless covered by an applicable exemption, register and qualify the Registrable Securities covered by the Registration Statement under New York blue sky laws (subject to the limitations set forth in Section 3(d) above), and do any and all other acts and things which may be reasonably necessary or advisable to enable the Purchaser to consummate the public sale or other disposition in such jurisdiction of the securities owned by the Purchaser, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process;

(d) list such Registrable Securities on the Principal Market, and any other exchange on which the Common Shares of the Company are then listed, if the listing of such Registrable Securities is then permitted under the rules of such exchange or the Nasdaq Stock Market;

(e) notify the Purchaser at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall prepare and file a curative amendment under Section 5(a) as quickly as commercially possible;

(f) as promptly as practicable after becoming aware of such event, notify the Purchaser who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission or any state authority of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, recession or removal of such stop order or other suspension;

(g) cooperate with the Purchaser to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts, as the case may be, as the Purchaser reasonably may request and registered in such names as the Purchaser may request; and, within three (3) Trading Days after a Registration Statement which includes Registrable Securities is declared effective by the Commission, deliver and cause legal counsel selected by the Company to deliver to the transfer agent for the Registrable Securities (with copies to the Purchaser whose Registrable Securities are included in such Registration Statement) an appropriate instruction and, to the extent necessary, an opinion of such counsel;

(h) take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Purchaser of its Registrable Securities in accordance with the intended methods therefor provided in the prospectus which are customary for issuers to perform under the circumstances;

(i) in the event of an underwritten offering, promptly include or incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the managing underwriters reasonably agree should be included therein and to which the Company does not reasonably object and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment; and

(j) maintain a transfer agent for its Common Shares.

Section 6. Indemnification.

(a) The Company agrees to indemnify and hold harmless the Purchaser and each person, if any, who controls the Purchaser within the meaning of the Securities Act ("Distributing Purchaser") against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees), to which the Distributing Purchaser may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, or any related preliminary prospectus, final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Purchaser, specifically for use in the preparation thereof. This Section 6(a) shall not inure to the benefit of any Distributing Purchaser with respect to any person asserting such loss, claim, damage or liability who purchased the Registrable Securities which are the subject thereof if the Distributing Purchaser failed to send or give (in violation of the Securities Act or the rules and regulations promulgated thereunder) a copy of the prospectus contained in such Registration Statement to such person at or prior to the written confirmation to such person of the sale of such Registrable Securities, where the Distributing Purchaser was obligated to do so under the Securities Act or the rules and regulations promulgated thereunder. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) Each Distributing Purchaser agrees that it will indemnify and hold harmless the Company, and each officer, director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, or any related preliminary prospectus, final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Purchaser, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Distributing Purchaser may otherwise have. Notwithstanding anything to the contrary herein, the Distributing Purchaser shall not be liable under this Section 6(b) for any amount in excess of the net proceeds to such Distributing Purchaser as a result of the sale of Registrable Securities pursuant to the Registration Statement.

(c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent of actual prejudice demonstrated by the indemnifying party. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that if the indemnified party is the Distributing Purchaser, the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the Distributing Purchaser and the indemnifying party, and the Distributing Purchaser shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the Distributing Purchaser (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the Distributing Purchaser, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the Distributing Purchaser, which firm shall be designated in writing by the Distributing Purchaser and be approved by the indemnifying party). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld.

All fees and expenses of the indemnified party (including reasonable costs of defense and investigation in a manner not inconsistent with this Section and all reasonable attorneys' fees and expenses) shall be paid to the indemnified party, as incurred, within ten (10) Trading Days of written notice thereof to the indemnifying party; provided, however, that the indemnifying party may require such indemnified party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder.

Section 7. Contribution. In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 6 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 6 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party, then the Company and the applicable Distributing Purchaser shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Purchaser on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 7. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Notwithstanding any other provision of this Section 7, in no event shall any (i) Purchaser be required to undertake liability to any person under this Section 7 for any amounts in excess of the dollar amount of the net proceeds to be received by the Purchaser from the sale of the Purchaser's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement under which such Registrable Securities are to be registered under the Securities Act and (ii) underwriter be required to undertake liability to any person hereunder for any amounts in excess of the aggregate discount, commission or other compensation payable to such underwriter with respect to the Registrable Securities underwritten by it and distributed pursuant to the Registration Statement.

Section 8. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be delivered as set forth in the Purchase Agreement.

Section 9. Assignment. Neither this Agreement nor any rights of the Purchaser or the Company hereunder may be assigned by either party to any other person. Notwithstanding the foregoing, upon the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed in the case of an assignment to an affiliate of the Purchaser, the Purchaser's interest in this Agreement may be assigned at any time, in whole or in part, to any other single person or entity (including any affiliate of the Purchaser) who agrees to be bound hereby.

Section 10. Counterparts/Facsimile. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when together shall constitute but one and the same instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. In lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original.

Section 11. Remedies. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

Section 12. Conflicting Agreements. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise prevents the Company from complying with all of its obligations hereunder.

Section 13. Headings. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

EX-10.5

Exhibit 10.5

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this "Agreement") is made as of September 18, 2000, by and among Corel Corporation, a corporation continued under the laws of Canada (the "Company"), Albans Investments Limited ("Purchaser"), a corporation incorporated under the laws of the British Virgin Islands, and Epstein Becker & Green, P.C., having an address at 250 Park Avenue, New York, NY 10177 (the "Escrow Agent"). Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement referred to in the first recital.

WHEREAS, the Purchaser will from time to time as requested by the Company, purchase Common Shares from the Company as set forth in that certain Share Purchase Agreement (the "Purchase Agreement") dated the date hereof between the Purchaser and the Company, which will be issued as per the terms and conditions contained herein and in the Purchase Agreement; and

WHEREAS, the Company and the Purchaser have requested that the Escrow Agent hold in escrow and then distribute the initial documents and certain funds which are conditions precedent to the effectiveness of the Purchase Agreement, and have further requested that upon each exercise of a Draw Down, the Escrow Agent hold the relevant documents and the applicable purchase price pending receipt by Purchaser of certificates representing the securities issuable upon such Draw Down;

NOW, THEREFORE, in consideration of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:

Article I

TERMS OF THE ESCROW FOR THE INITIAL CLOSING

1.1. The parties hereby agree to establish an escrow account with the Escrow Agent whereby the Escrow Agent shall hold the funds and documents which are referenced in Section 5.2 of the Purchase Agreement.

1.2. At the Initial Closing, the Company shall deliver to the Escrow Agent:

(i) the original executed Registration Rights Agreement in the form of Exhibit A to the Purchase Agreement;

(ii) the original executed opinions of McCarthy Tetrault and Milbank, Tweed, Hadley & McCloy in the forms of Exhibit C-1, and Exhibit C-2 to the Purchase Agreement;

(iii) the sum of $25,000 for the fees and expenses of the Purchaser's counsel and the Escrow Agent;

(iv) the original executed Company counterpart of this Escrow Agreement;

(v) the original executed Company counterpart of the Purchase Agreement;

(vi) the original executed Initial Warrant in the form of Exhibit E to the Purchase Agreement; and

(vii) a warrant certificate issued to Whale Securities Co., L.P. ("Whale Securities") to purchase up to 56,500 Common Shares with an exercise price equal to 115% of the average closing bid prices of the Common Shares on the fifteen Trading Days immediately prior to the Initial Closing Date otherwise identical to that of the Initial Warrant (the "Whale Warrant").

(viii) a warrant certificate issued to Richard Geyser identical to that of the Whale Warrant (the "Geyser Warrant").

1.3. Upon receipt of the foregoing, and receipt of executed counterparts from Purchaser of the Purchase Agreement, the Registration Rights Agreement and this Escrow Agreement and an executed Guaranty from the Purchaser, the Escrow Agent shall calculate and enter the exercise price, the issuance date and termination date on the face of the Initial Warrant and the Whale Warrant and immediately transfer the sum of Twenty-Five Thousand Dollars ($25,000) to Epstein Becker & Green, P.C. ("EB&G"), 250 Park Avenue, New York, New York 10177 for the Purchaser's legal, administrative and escrow costs and the Escrow Agent shall then arrange to have the Purchase Agreement, this Escrow Agreement, the Registration Rights Agreement, the Initial Warrant, the Whale Warrant, the Geyser Warrant, the Guaranty and the opinions of counsel delivered to the appropriate parties.

0.4 Wire transfers to the Escrow Agent shall be made as follows:

Epstein Becker Green, P.C.

Master Escrow Account

Chase Manhattan Bank

1411 Broadway - Fifth Floor

New York, New York 10018

ABA No. 021000021

Account No. 035 1 346036

Attention: L. Borneo

Article I

TERMS OF THE ESCROW FOR EACH DRAW DOWN

1.1. Each time the Company shall send a Draw Down Notice to the Purchaser as provided in the Purchase Agreement, it shall send a copy, by facsimile, to the Escrow Agent.

1.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down, the Purchaser shall send the applicable purchase price of the Draw Down Shares to the Escrow Agent, which shall advise the Company in writing that it has received the purchase price for such Draw Down Shares. The Company shall promptly, but no later than three (3) Trading Days after receipt of such funding notice from the Escrow Agent, cause its transfer agent to issue the Draw Down Shares to the Purchaser via the Depository Trust Company deposit to the account specified by the Purchaser from time to time, deliver the Draw Down Warrants, deliver the Purchaser Warrants, deliver the original executed opinions of McCarthy Tetrault and Milbank, Tweed, Hadley & McCloy LLP in the form of Exhibit C-3, deliver a supplemental prospectus on form 424(b) to the Purchaser and deliver a warrant certificate to purchase up to a number of shares equal to 1% of the shares purchased on the applicable Settlement Date and an exercise price equal to 115% of the weighted average of the Purchase Prices of the Common Shares during the applicable Settlement Period otherwise identical to that of the Draw Down Warrant issued to Whale Securities Co., L.P. (the "Whale Draw Down Warrant"). Upon receipt of written confirmation from the transfer agent or from the Purchaser that such Draw Down Shares have been so deposited and the Draw Down Warrants, the Purchaser Warrants and the Whale Draw Down Warrants and the opinion and the supplemental prospectus have been so delivered, the Escrow Agent shall, within one (1) Trading Day, calculate and enter the number, the exercise price, the initial issuance date and the termination date on the face of the Draw Down Warrants, the Purchaser Warrants and the Whale Draw Down Warrants and wire 99% of the Purchase Price of the Draw Down per the written instructions of the Company, net of $1,500 as escrow expenses to the Escrow Agent and the remaining 1% of the Purchase Price as directed by Whale Securities and deliver the Draw Down Warrants, the Purchaser Warrants, the opinion and the supplemental prospectus to the Purchaser and deliver the Whale Draw Down Warrant to Whale Securities Co., L.P.

Article II

MISCELLANEOUS

2.1. No waiver or any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

2.2. All notices or other communications required or permitted hereunder shall be in writing, and shall be sent by fax, overnight courier, registered or certified mail, postage prepaid, return receipt requested, and shall be deemed received upon receipt thereof, as set forth in the Purchase Agreement.

2.3. This Escrow Agreement shall be binding upon and shall inure to the benefit of the permitted successors and permitted assigns of the parties hereto.

2.4. This Escrow Agreement is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto. This Escrow Agreement may not be modified, changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the parties to be charged or by their respective agents duly authorized in writing or as otherwise expressly permitted herein.

2.5. Whenever required by the context of this Escrow Agreement, the singular shall include the plural and masculine shall include the feminine. This Escrow Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. Unless otherwise indicated, all references to Articles are to this Escrow Agreement.

2.6. The parties hereto expressly agree that this Escrow Agreement shall be governed by, interpreted under and construed and enforced in accordance with the laws of the State of New York. Except as expressly set forth herein, any action to enforce, arising out of, or relating in any way to, any provisions of this Escrow Agreement shall brought in the federal or state courts of New York, New York as is more fully set forth in the Purchase Agreement.

2.7. The Escrow Agent's duties hereunder may be altered, amended, modified or revoked only by a writing signed by the Company, Purchaser and the Escrow Agent.

2.8. The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by the Escrow Agent to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall not be personally liable for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while acting in good faith, excepting only its own gross negligence or willful misconduct, and any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow Agent's attorneys-at-law (other than Escrow Agent itself) shall be conclusive evidence of such good faith.

2.9. The Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent obeys or complies with any such order, judgment or decree, the Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

2.10. The Escrow Agent shall not be liable in any respect on account of the identity, authorization or rights of the parties executing or delivering or purporting to execute or deliver the Purchase Agreement or any documents or papers deposited or called for thereunder or hereunder.

2.11. In the event of any dispute arising hereunder, the Escrow Agent shall be entitled to employ such legal counsel and other experts as the Escrow Agent may deem necessary properly to advise the Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. The Escrow Agent has acted as legal counsel for the Purchaser, and may continue to act as legal counsel for the Purchaser, from time to time, notwithstanding its duties as the Escrow Agent hereunder. The Company consents to the Escrow Agent's acting in such capacity as legal counsel for the Purchaser and waives any claim that such representation represents a conflict of interest on the part of the Escrow Agent. The Company understands that the Purchaser and the Escrow Agent are relying explicitly on the foregoing provision in entering into this Escrow Agreement.

2.12. The Escrow Agent's responsibilities as escrow agent hereunder shall terminate if the Escrow Agent shall resign by written notice to the Company and the Purchaser. In the event of any such resignation, the Purchaser and the Company shall appoint a successor Escrow Agent.

2.13. If the Escrow Agent reasonably requires other or further instruments in connection with this Escrow Agreement or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

2.14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the documents or the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed in the Escrow Agent's sole discretion (1) to retain in the Escrow Agent's possession without liability to anyone all or any part of said documents or the escrow funds until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings or (2) to deliver the escrow funds and any other property and documents held by the Escrow Agent hereunder to a state or federal court having competent subject matter jurisdiction and located in New York, New York in accordance with the applicable procedure therefor.

2.15. The Company and the Purchaser agree jointly and severally to indemnify and hold harmless the Escrow Agent and its partners, employees, agents and representatives from any and all claims, liabilities, costs or expenses in any way arising from or relating to the duties or performance of the Escrow Agent hereunder or the transactions contemplated hereby or by the Purchase Agreement other than any such claim, liability, cost or expense to the extent the same shall have been determined by final, unappealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Escrow Agent.

IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of this __ day of September, 2000.

Corel Corporation

By:

Name:

Title:

Albans Investments Limited

By:

Name:

Title:

ESCROW AGENT:

EPSTEIN BECKER & GREEN, P.C.

By:

Robert F. Charron, Authorized Signatory

EX-10.6

Exhibit 10.6

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO REGULATION D AND SUCH OTHER SECURITIES LAWS OR UNDER ANY CANADIAN SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER ANY APPLIABLE CANADIAN LAWS. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A UNITED STATES PERSON UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, AS REQUIRED BY REGULATION D.

SHARE PURCHASE WARRANT

To Purchase __________ Common Shares of

COREL CORPORATION

THIS CERTIFIES that, for value received, ____________________________ (the "Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the "Initial Exercise Date") and on or prior to the close of business on _______ __, 200_ (the "Termination Date") but not thereafter, to subscribe for and purchase from Corel Corporation, a corporation continued under the laws of Canada (the "Company"), up to ___________ common shares (the "Warrant Shares") of the Company (the "Common Shares"). The purchase price of one Common Share (the "Exercise Price") under this Warrant shall be $____. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. In the event of any conflict between the terms of this Warrant and the Share Purchase Agreement dated as of September 18, 2000 pursuant to which this Warrant has been issued (the "Purchase Agreement"), the Purchase Agreement shall control. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.

2. Authorization of Shares. The Company covenants that all Common Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

3. Exercise of Warrant.

(a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date, and before the close of business on the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank, the holder of this Warrant shall be entitled to receive a certificate for the number of Common Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within four (4) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid.

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Common Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(c) If no registration statement is effective permitting the resale of the Common Shares issued upon exercise of this Warrant at any time commencing one year after the issuance date hereof, then this Warrant shall also be exercisable by means of a "cashless exercise" in which the holder shall be entitled to receive a certificate for the number of shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the average of the high and low trading prices per Common Share on the Trading Day preceding the date of such election on the Nasdaq Stock Market, or if the Common Shares are not traded on the Nasdaq Stock Market, then the Principal Market in terms of volume, and converted into US Dollars;

(B) = the Exercise Price of the Warrants; and

(X) = the number of shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant.

4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the Exercise Price.

5. Charges, Taxes and Expenses. Issuance of certificates for Common Shares upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for Common Shares are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6. Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant.

7. Transfer, Division and Combination. (a) Subject to compliance with any applicable securities laws, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Common Shares without having a new Warrant issued.

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

8. No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant certificate or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.

10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

11. Adjustments of Exercise Price and Number of Warrant Shares.

(a) Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in Common Shares or make a distribution in Common Shares to holders of its outstanding Common Shares, (ii) subdivide its outstanding Common Shares into a greater number of Common Shares, (iii) combine its outstanding Common Shares into a smaller number of Common Shares or (iv) issue any shares of its capital stock in a reclassification of the Common Shares, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the holder of this Warrant shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

(b) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Shares of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Shares of the Company, then Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of Common Shares for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Common Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 11. For purposes of this Section 11, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

12. Voluntary Adjustment by the Company. The Company may, at any time during the term of this Warrant, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

13. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment.

14. Notice of Corporate Action. If at any time:

(a) the Company shall take a record of the holders of its Common Shares for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 20 business days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 business days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Shares shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Shares shall be entitled to exchange their Common Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with the notice provisions of the Purchase Agreement.

15. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Shares may be listed.

The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Common Shares upon the exercise of this Warrant, and (b) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Common Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

16. Miscellaneous.

(a) Jurisdiction. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of New York, without regard to its conflict of law, principles or rules, and be subject to arbitration pursuant to the terms set forth in the Purchase Agreement.

(b) Restrictions. The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by the United States and Canadian state, provincial and federal securities laws.

(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully fails to comply with any provision of this Warrant, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

(d) Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

(e) Limitation of Liability. No provision hereof, in the absence of affirmative action by Holder to purchase Common Shares, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of Holder for the purchase price of any Common Shares or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: September __, 2000

COREL CORPORATION

By:

Name:

Title:

NOTICE OF EXERCISE

To: Corel Corporation

(1) The undersigned hereby elects to purchase ________ Common Shares (the "Common Shares"), of Corel Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Please issue a certificate or certificates representing said Common Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

(Name)

_______________________________

(Address)

_______________________________

Dated:

______________________________

Signature

ASSIGNMENT FORM

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated: ______________, _______

Holder's Signature: _____________________________

Holder's Address: _____________________________

_____________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-13.1

Exhibit 13.1

Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

For the purposes of this discussion, unless the context otherwise requires, "Corel" refers to the consolidated operations of Corel Corporation and its wholly owned subsidiaries, Corel Corporation Limited, Corel International Corporation, Corel, Inc., and Corel Corporation (U.S.A.), while "the Company" refers to the parent, Corel Corporation. All dollar amounts included herein are expressed in thousands of US$ unless otherwise noted.

Corel develops, manufactures, licenses, sells and supports two main types of software products, creative products and business applications. These products are available on the Windows, MacIntosh and Linux environments.

On March 24, 2000, Corel entered into an agreement to purchase all of the assets relating to the Painter, Bryce and KPT family of graphic software products from MetaCreations Corporation of Santa Barbara California. The cash purchase price for the assets was $10.0 million of which $2.0 million was paid on each of March 24, June 30 and September 30, 2000, with the balance being payable in two further instalments of $2.0 million each on December 31, 2000 and January 31, 2001.

On June 28, 2000, the Company issued 7,299,270 common shares and 3,649,635 common share purchase warrants at CDN $4.11 per unit for total gross proceeds of CDN $30.0 million.The values assigned to each of the components of the unit were based on their relative fair values at the date of the transaction. The warrants are exercisable until June 27, 2001 at a price of CDN $4.56 per common share. In the event that all of the warrants are exercised, the Company will issue an additional 3,649,635 common shares resulting in gross proceeds of CDN $16.6 million. As at November 30, 2000, 11,659 warrants have been exercised for gross proceeds of CDN $53,165.

On July 17, 2000, Corel purchased, and currently maintains a 23% interest in Hemera Technologies, Inc., a privately held company. As consideration for these shares, Corel transferred its GraphicCorp division and related assets to Hemera Technologies, Inc. As of the effective date of the transaction, the fair value of the GraphicCorp division and its related assets was estimated at $9.7 million and the shares were valued at this amount. No gain or loss was recognized on the transfer. In fiscal 2000, Corel's share of Hemera Technologies, Inc.'s operating results was nominal.

On August 15, 2000, Mr. James Baillie, counsel to the law firm of Torys, and Mr. Larry O'Brien, Chair of Calian Technology Ltd., were appointed to the Board of Directors following the Board of Directors' acceptance of the resignation of Mr. William G. Davis for personal reasons. Michael Cowpland resigned as President, Chief Executive Officer and Chair of the Board of Directors of the Company. He continued to serve as a director and as a technology advisor until his resignation as a director on January 25, 2001. Also on August 15, 2000, Derek J. Burney, formerly executive vice-president, engineering and chief technology officer of the Company was appointed interim President and CEO and Mr. Baillie has been appointed as Chair of the Board of Directors. On October 2, 2000, Mr. Burney was appointed President and CEO and appointed to the Board of Directors.

On October 2, 2000, Corel announced a strategic alliance with Microsoft Corporation ("Microsoft"). The Company issued 24,000,000 Series A, participating convertible, non-voting, non-redeemable preferred shares to Microsoft for total gross proceeds of $135.0 million ($5.625 per share). Each preferred share is convertible into one common share but not in the hands of Microsoft or its affiliates. As part of the share purchase agreement the Company is obligated to file, with the United States Securities and Exchange Commission ("SEC") a resale registration statement for 24,000,000 common shares underlying these preferred shares. Under the terms of a technology and services agreement the companies will work together to support the development, testing and marketing of new products related to the .NET platform and, upon request from Microsoft at any time prior to October 2, 2003, Corel is obligated to provide 30 full time equivalents (20 developers and 10 testers) for a 12-month period to port the .NET platform from the Windows platform to the Linux platform. The Company has deducted from equity $3.0 million of the total money received from Microsoft for this future possible obligation.

Forward Looking Statements

The following information contains forward-looking statements, as defined by the United States Private Securities Litigation Reform Act of 1995, involving Corel's expectations about future financial results and other matters. These statements reflect management's current forecast of certain aspects of Corel's future business. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results of operations to differ materially from historical results or current expectations. The words "plan", "expect", "believe", "intend", "anticipate", "forecast", "target", "estimate" and similar expressions identify forward-looking statements. Risk factors include shifts in customer demand, product shipment schedules, product mix, competitive products and pricing, technological shifts and other variables. Readers are referred to Corel's most recent reports filed with the Securities and Exchange Commission for a more complete discussion of the other risks and uncertainties. The factors underlying forecasts are dynamic and subject to change. As a result, forecasts speak only as of the date they are given and do not necessarily reflect Corel's outlook at any other point in time. Corel does not undertake to update or review these forward-looking statements.

RESULTS OF OPERATIONS

Sales

Sales decreased 35% to $157.5 million in fiscal 2000 from $243.1 million in fiscal 1999. This decrease was due primarily to new versions of Corel's flagship products ,WordPerfect Office 2000 and CorelDRAW 9 Graphics Suite, nearing the end of their life cycles in fiscal 2000. Sales were also negatively impacted in fiscal 2000 by lower product prices, which were implemented in an attempt to gain market share.

Financial performance in fiscal 2000 as compared to the prior year was negatively impacted primarily by the decline in revenues. Corel has been impacted, as has the entire industry in Corel's belief, by the reduction in the amount of product inventory traditionally held within the retail distribution channel. Corel released CorelDRAW 10 Graphics Suite in early November 2000. Corel generally experiences an increase in revenues upon release of a major upgrade of its flagship products. Corel also believes its results in fiscal 2000 were negatively impacted by concerns as to its viability due to potential cash shortfalls during much of fiscal 2000. There was no significant change in overall revenues from fiscal 1998 to fiscal 1999.

Sales by product groups

The table below shows sales consisting of creative products, business application products and other revenues consisting primarily of Linux operating system products. The comparative numbers have been reclassified to conform with current presentation.

	Year ended November 30
	2000	1999	1998
Creative products	$ 75,919	$ 106,592	$ 133,841
Business applications products	78,917	132,948	111,990
Other	2,651	3,511	996
Total sales	$157,487	$243,051	$246,827

Creative products revenues decreased 29% from $106.6 million in fiscal 1999 to $75.9 million in fiscal 2000. This decrease is primarily due to the release of CorelDRAW 10 Graphics Suite in the final month of the fiscal year. CorelDRAW 9 Graphics Suite was released in May 1999, resulting in the inclusion of approximately eight months of revenue in fiscal 1999 as opposed to one month of revenues of CorelDraw 10 Graphics Suite in fiscal 2000. In fiscal 1999, creative products revenues declined 20% from $133.8 million to $106.6 million due to CorelDRAW 8 being available for sale for the entire year in fiscal 1998. Creative products revenues are expected to increase approximately 20% in fiscal 2001 due primarily to increased demand for CorelDRAW 10 Graphics Suite, planned releases of updates to the products acquired from Metacreations Corporation and the release of CorelDraw 10 Graphics Suite for the MacIntosh operating system. Included in creative products revenues are consumer applications products which were relatively consistent from fiscal 1998 ($27.6 million) to fiscal 1999 ($24.0 million). In fiscal 2000, as Corel realigned itself and moved away from promoting these products, these revenues declined significantly and are no longer managed or accounted for as a separate segment.

Business application products revenues declined 41% from $132.9 million in fiscal 1999 to $78.9 million in fiscal 2000. This is due primarily to the lack of any major product launches in fiscal 2000. Sales for business applications products increased from $112.0 million in fiscal 1998 to $132.9 million in fiscal 1999 due to the release of the then latest version of the WordPerfect suite in May 1999. The prior version, Corel WordPerfect Suite 8, was released in fiscal 1997, therefore a 24 month period existed between releases resulting in a full year of revenue in 1998. With the planned release of WordPerfect Office 2002 in early spring 2001, localized only in International English and Canadian French, revenues for business applications products in fiscal 2001 are expected to remain at their fiscal 2000 levels.

Other revenues, related primarily to Corel LINUX OS, decreased 24% to $2.7 million in fiscal 2000 from $3.5 million in fiscal 1999 due to the Company's focus on its core products. Other revenues are expected to increase marginally in the future with the introduction of professional services and other revenue sources.

Sales by sales channels

Corel distributes its products primarily through distributors (as retail packaged products), OEM licences and corporate licences. The table below shows sales by sales channels:

	Year ended November 30
	2000	1999	1998
	(in thousands)
Retail packaged products	$80,069	$140,200	$153,623
OEM licenses	17,640	26,972	23,340
Corporate licenses	59,778	75,879	69,864
Total sales	$157,487	$243,051	$246,827

Retail packaged products and corporate licences are sold primarily through distributors. Sales from retail packaged products declined 43% from $140.2 million in fiscal 1999 to $80.1 million in fiscal 2000. The decline in retail packaged product sales is primarily due the decline in PC sales and the aforementioned change in the buying practices of retail distributors. In addition, for much of fiscal 2000, the core products were available only in releases nearing the end of their life cycle. Packaged product revenues decreased from $153.6 million in fiscal 1998 to $140.2 million in fiscal 1999 due to a shift in focus from retail packaged products to corporate licenses and Year 2000 pressure.

OEM channel sales are licence fees from original equipment manufacturers. These sales decreased 35% from $27.0 million in fiscal 1999 to $17.6 million in fiscal 2000. The decrease was due primarily to declining PC sales and products reaching the end of their life cycles. The increase to $27.0 million in fiscal 1999 from $23.3 million in fiscal 1998 was due primarily to increased OEM agreements for business applications products.

Corporate licenses declined 21% from $75.9 million in fiscal 1999 to $59.8 million in fiscal 2000. This decrease is primarily due to not having released new versions of WordPerfect during the year. The 9% increase from $69.9 million in 1998 to $75.9 million in fiscal 1999 was due to Corel's enhanced focus on corporate customers.

The channel mix is not expected to materially change in the coming year.

Sales by region

The table below shows sales by region:

	Year ended November 30
	2000	1999	1998
	(in thousands)
Canada	$13,181	$13,833	$14,942
U.S.A.	83,355	141,972	137,938
Europe	42,453	64,123	73,089
Other	18,498	23,123	20,858
Total sales	$157,487	$243,051	$246,827

Sales in North America declined 38% from $155.8 million in fiscal 1999 to $96.5 million in fiscal 2000. This is primarily due to products reaching the end of their life cycle and the aforementioned change in distributors' buying patterns. A general decline in the retail market in North America also contributed to slower sales. Revenues in North America are expected to increase marginally in 2001 as Corel increases its focus on the North American market.

Declining sales in Germany, the Netherlands and the United Kingdom resulted in European revenues declining 34% from $64.1 million in fiscal 1999 to $42.5 million in fiscal 2000. The decrease in sales in Europe from $73.1 million in fiscal 1998 to $64.1 million in fiscal 1999 reflects large declines in revenues from Germany and France. Revenues in Europe are expected to decline modestly in the coming year since WordPerfect Office 2002 will not be localized in many local languages as was done historically.

Corel's products are sold primarily in US dollars in all regions other than Europe. In fiscal 2000, Corel began selling in Euros for many of its European customers. The relative weakness of the Euro to the U.S. dollar in fiscal 2000 impacted sales slightly.

Cost of sales and gross profit

In cost of sales, Corel includes all costs associated with the acquisition of components, the assembly of finished products, product royalties, the amortization of software acquisition costs and shipping. Costs associated with warehousing are included in selling, general and administrative expenses. Software acquired for integration and sale with Corel products has been capitalized and is currently being amortized over the greater of : a) the ratio that current gross revenues bear to the total of current and anticipated future gross revenues or, b) the straight line method over the remaining economic life generally estimated to be three to five years.

As products reached the end of their life cycle, inventory considered obsolete and prepayments of royalties on certain products were written off. In fiscal 2000, a significant amount of inventory was deemed obsolete and $1.6 million of prepaid royalties were written off. This, combined with decreases in product prices, resulted in a decrease in gross margin from 76% in fiscal 1999 to 70% in fiscal 2000. The decrease in gross margin from 79% in fiscal 1998 to 76% in fiscal 1999 is attributable to lower sales, increased inventory obsolescence and valuation adjustments. On a go-forward basis, Corel anticipates gross margin in the high 70 to low 80 percent range.

Advertising Expenses

Advertising expenses include all marketing, advertising and trade show expenses. In fiscal 2000, advertising expenses decreased 31% from $48.0 million in fiscal 1999 to $33.3 million in fiscal 2000. This was due primarily to Corel's cost reduction plan that was implemented in May 2000. In fiscal 1999, these expenses increased 15% from $41.8 million in 1998 primarily as a result of print advertising and trade shows to promote the latest versions of Corel's products over the fourth fiscal quarter of that year. In fiscal 2001, Corel plans to release several new products, including WordPerfect Office 2002 and CorelDRAW 10 Graphics Suite for Macintosh. However, advertising expenditures are expected to remain consistent with the cost reduction plan, allowing for a better focus of the monies spent.

Selling, general and administrative expenses

All selling expenses (except for advertising expenses) are included in this category along with general and administrative expenses, including expenses associated with warehousing inventory. Selling, general and administrative expenses increased 4% from $82.2 million in fiscal 1999 to $85.7 million in fiscal 2000. While a cost reduction plan was implemented during the year, the benefits were not realized until the fourth quarter. There were a number of non-recurring charges such as severance, consulting fees and asset write-downs that resulted from the cost reduction plan implemented during the year.

The increase in selling, general and administration expenses to $82.2 million in fiscal 1999 from $77.7 million in fiscal 1998 resulted from new releases of Corel's two flagship products - CorelDRAW 9 Graphics Suite and WordPerfect Office 2000. Further expenses were incurred relating to Corel LINUX OS, which was also released during the year.

Selling, general and administrative expenses are expected to be reduced significantly in the future due to Corel's cost restructuring plan.

Research and development expenses

Research costs are expensed as incurred. Development costs related to software products developed for sale are expensed as incurred unless they meet the criteria for deferral under generally accepted accounting principles.

Research and development expenses are reported net of Canadian investment tax credits

In fiscal 2000, gross research and development expenses were reduced by $4.5 million (9%) to $44.4 million from $48.9 million primarily as a result of the cost reduction plan implemented in June 2000. Netted against gross research and development expenses is $0.5 million and $8.9 million of Canadian investment tax credits in fiscal 2000 and fiscal 1999 respectively.

In fiscal 1999, investment tax credits of $8.9 million related to the 1997 through 1999 taxation years were recognized for accounting purposes as a result of an audit by the Canada Customs and Revenue Agency being completed during the year. Gross research and development expenses decreased over 1998 levels primarily due to employees that were terminated as part of the restructuring in 1998 not being replaced.

Research and development expenses are expected to decline significantly in the future. This is due primarily to the cost reduction plan that resulted in the consolidation of the Irish localization facilities. Corel will not be localizing as many products on a go forward basis. Also, with Corel shifting its focus to two main business lines, fewer resources will be used to develop Corel LINUX OS.

Depreciation and amortization expenses

Depreciation and amortization expenses, which do not include the amortization of purchased software, increased $1.0 million in fiscal 2000 to $7.4 million from $6.4 million in fiscal 1999 as result of significant purchases of computer equipment made in the fourth quarter of fiscal 1999 having a full year of amortization. The decrease to $6.4 million in fiscal 1999 from $12.4 million in fiscal 1998 is a result of an aging asset base. In fiscal 1998, a number of assets were written off as a result of the restructuring that took place.

Restructuring charge

Corel incurred a restructuring charge of $15.9 million in the third quarter of fiscal 1998. The charge relates to the costs associated with moving the research and development activity in Orem, Utah to the Ottawa, Ontario location. Further discussion of the charge and its components may be found in Note 14 of the 2000 Consolidated Financial Statements.

Interest expenses

Interest expenses relates to Novell obligations for the acquisition of the WordPerfect technology from Novell, Inc. and is netted with interest income from term deposits. In fiscal 2000, $3.0 million was accrued for interest charges relating to proposed reassessments of prior year Canadian tax returns. The decrease from $1.1 million in fiscal 1998 to $0.2 million in fiscal 1999 is a result of the decrease in the outstanding Novell obligation.

Income taxes

Corel's effective tax rates for fiscal 2000, 1999 and 1998 were 9.8%, 29.8% and 14.9%; respectively. These effective tax rates vary from Corel's statutory tax rate of 44.3% primarily due to foreign tax rate differences associated with Corel's international operations. In fiscal 1999, Corel recorded a tax benefit of accounting losses in the 1996 and 1997 taxation years.

Cost reduction plan

Cost reduction actions commenced in late April 2000 when Corel began to curtail discretionary spending, particularly in the area of direct marketing and travel. In early May 2000, Corel proceeded to identify broader areas of spending cuts, namely in the areas of future hirings, capital purchases and other discretionary purchases. In mid-May 2000, Corel began to consider employee terminations and commenced a formal process of planning for spending cuts that would reduce its quarterly expenses to a level commensurate with expected achievable revenues. Consideration was also given to the amount of spending that had occurred in the first quarter and spending estimates for the second quarter, with a normalization factor for what was considered non-recurring. In summary, this called for a quarterly cost structure of $45.0 million or a $10.0 million quarterly reduction from normalized spending rates.

On May 16, 2000, Corel announced that it had undertaken a cost reduction plan with the intention of eliminating $40 million in costs on an annualized basis. The cost reduction plan has been implemented in a series of steps.

On June 8, 2000, Corel announced a reduction in its workforce of approximately 320 positions from a combination of employee terminations, termination of contract positions, elimination of vacant positions, attrition and termination of the services of independent contractors. The costs of severance and other termination payments, estimated at $1.6 million, were recorded in Corel's third fiscal quarter ended August 31, 2000. The estimated annualized cost saving from the workforce reduction, without taking into account one time implementation charges, is expected to be approximately $11.0 million.

On September 6, 2000, Corel announced that it had identified the remaining components of the previously targeted $40.0 million in expenditure cuts, designed to realign its costs with its expected achievable revenues. As part of this plan, Corel announced the proposed consolidation of its engineering operations based in Dublin, Ireland, to its corporate headquarters in Ottawa, Canada. A total of 139 positions at the Dublin facility were eliminated as a result of the move with the estimated costs of severance and other termination payment, being approximately $0.85 million recorded in the third quarter of fiscal 2000 and approximately $1.4 million in additional costs recorded in the fourth quarter of fiscal 2000.

Liquidity and capital resources

As of November 30, 2000, Corel's principal sources of liquidity included cash and cash equivalents of approximately $127.4 million, and trade accounts receivable of $28.6 million. Cash equivalents consist of overnight call loans to a major Canadian bank totalling $14.0 million and a loan of $110.0 million to a major Canadian corporation, guaranteed by a major Canadian bank. At November 30, 2000, $1.1 million of cash was restricted for corporate credit cards and severance payments related to the closing of the Irish localization facilities.

Cash used in operations was $28.0 million for fiscal 2000 compared to cash provided by operations of $9.9 million for fiscal 1999. The decrease of $37.9 million was primarily due to the net loss of $55.3 million in fiscal 2000 as compared to the net income of $16.7 million in fiscal 1999.

Trade accounts receivable, net of provisions, decreased from the November 30,1999 balance of $54.8 million to $28.6 million as a result of a decrease in gross accounts receivable. This was a result of lower sales volume that was achieved during the year. This reduction in gross accounts receivable was off-set by a reduction in the provision for sales returns to reflect the reduced level of products in the distribution channel.

Accounts payable and accrued liabilities decreased from $50.3 million on November 30, 1999 to $28.4 million at November 30, 2000 mainly due to decreases in volume related to the cost reduction plan as well as payment of many of the previously accrued liabilities.

Financing activities provided $144.4 million in fiscal 2000 compared to $3.5 million in fiscal 1999. The source of cash in fiscal 2000 through financing activities was the issuance of common and preferred shares. During the year, the issuance of common shares through employee stock options and a public offering of common shares and common share purchase warrants resulted in net proceeds of $22.3 million. In fiscal 1999, $12.8 million of common shares were issued to employees. In fiscal 2000, the issuance of preferred shares to Microsoft Corporation provided $130.7 million. The use of cash in fiscal 2000 and fiscal 1999 was the repayment of the Novell obligations. Repayment of Novell obligations decreased in fiscal 2000 as a result of Corel reaching an agreement with Novell whereby the balance due was fixed and will be repaid in three equal payments of $5.0 million. One of these payments was made prior to November 30, 2000.

Investing activities used $7.0 million in fiscal 2000 compared to $17.7 million in fiscal 1999. The source of cash from investing activities was primarily proceeds from sales of shares of GraphOn Corporation ("GraphOn") of $14.6 million. Uses of cash for investing activities includes expenditures for capital assets of $19.5 million in the fiscal 2000 compared to $19.2 million in fiscal 1999.

On September 19, 2000, the Company announced it had entered into a share purchase agreement with an institutional investor. Subject to the terms and conditions of this agreement, the Company may issue and sell to the investor up to 14,690,000 shares in periodic draw down periods over 24 months, if all associated warrants are exercised. Corel has not issued any shares related to this agreement as of November 30, 2000.

At November 30, 2000, Corel's capital resource commitments consisted primarily of lease arrangements for office space. No significant commitments exist for future capital expenditures. Corel believes available balances of cash and cash equivalents combined with the proceeds of the shares issued and issuable as described above are sufficient to meet its working capital requirements for the foreseeable future.

Other Matters

New accounting pronouncements

In fiscal 1998, the Financial Accounting Standards Board ("FASB") issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", ("SFAS 133") which establishes standards for derivative instruments and hedging activities. It requires that all derivatives be recognized as either assets or liabilities on the Balance Sheet and be measured at fair value. SFAS 133 is effective for fiscal years beginning after June 15, 1999, which is the fiscal year beginning December 1, 1999 for the Company. Prior periods should not be restated. In June 1999, the FASB issued SFAS No. 137, which delays the effective date of SFAS 133 until fiscal years beginning after June 15, 2000, which is the fiscal year beginning December 1, 2000 for the Company. The Company believes the adoption of this pronouncement will not have a material impact on its results from operations or financial position.

In fiscal 2000, the United States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements and its related interpretations. The SAB summarizes certain of the SEC staff views in applying generally accepted accounting principles to revenue recognition in financial statements. This SAB is effective beginning the Company's first quarter of fiscal 2001.The Company does not expect the adoption of this SAB to have a material impact on its results of operations or financial position.

Year 2000

The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using Year 2000 dates are processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the entity, including those related to customers, suppliers or other third parties, have been fully resolved.

Financial Instruments

Interest rate risk

Corel's exposure to market risk for changes in interest rates relates primarily to its investment portfolio of cash equivalents and marketable securities. Corel does not use derivative financial instruments in its investment portfolio. The stated objectives of Corel's investment guidelines are safety of principal, liquidity, maximization of yield, and diversification of risk. The Company places its investments with high credit quality issuers, principally term deposits with a major Canadian financial institution. The marketable securities portfolio includes only those securities with active secondary or resale markets to ensure portfolio liquidity. A substantial reduction in overall interest rates could significantly reduce Corel's interest income.

The table below presents principal amounts and related weighted average interest related by date of maturity for Corel's interest bearing investment portfolio. Weighted average interest rates include the after-tax yield on a debt security of a major Canadian corporation. At November 30, 2000, the total investment portfolio had maturity dates prior to December 31, 2000.

		Weighted average	Fair value at
	Maturity balance	after-tax yield	November 30, 2000
Cash equivalents	$14,002	4.16%	$14,002
Debt securities	110,596	4.29%	110,040
Total investment portfolio	$124,598	4.28%	$124,042

Foreign currency risk

Corel conducts business in various foreign currencies, primarily in Canada and Europe and to a lesser extent Australia, Latin America, Japan and other Asian countries. Corel monitors its foreign currency exposure. As of November 30, 2000, Corel had no foreign currency hedges outstanding. Corel has mitigated, and expects to continue to mitigate, a portion of its currency exposure through decentralized sales, marketing and support operations in which all costs are local currency based.

EX-13.2

Exhibit 13.2

Management's Report

Management is responsible for the preparation of the Company's consolidated financial statements. Management believes that the consolidated financial statements fairly reflect the form and substance of transactions and that the consolidated financial statements reasonably present the Company's financial condition and results of operations. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). These principles are also generally accepted in the United States ("US GAAP") in all material respects except as disclosed in Note 16. Management has included in the Company's consolidated financial statements amounts based on estimates and judgements that it believes are reasonable under the circumstances.

PricewaterhouseCoopers LLP, the independent auditors of the Company, have audited the Company's consolidated financial statements in accordance with generally accepted auditing standards, and they provide an objective, independent review of the fairness of reported operating results and financial position.

The Board of Directors of the Company has an Audit Committee which meets with financial management and the independent auditors to review accounting, auditing, internal accounting controls, and financial reporting matters.

Derek J. Burney	John Blaine
President and CEO	Executive Vice-President Finance,
	CFO and Treasurer

Auditors' Report to the Shareholders

We have audited the consolidated balance sheets of Corel Corporation as at November 30, 2000 and November 30, 1999 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years ended November 30, 2000, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at November 30, 2000 and November 30, 1999, and the results of its operations and its cash flows for the years ended November 30, 2000, 1999 and 1998 in accordance with generally accepted accounting principles in Canada.

PricewaterhouseCoopers LLP

Chartered Accountants

Ottawa, Canada

January 26, 2001

Consolidated Balance Sheets

(in thousands of US$)

	As at November 30
	2000	1999
Assets
Current assets:
Cash and cash equivalents	$ 127,430	$ 18,021
Restricted cash	1,136
Accounts receivable
Trade	28,620	54,770
Other	773	3,954
Inventory	3,117	13,567
Income taxes recoverable		5,135
Future tax asset	479	1,642
Prepaid expenses	1,050	2,042
Total current assets	162,605	99,131
Investments	11,996	2,873
Future tax asset	965
Deferred financing charges	550
Capital assets	42,471	49,697
Total assets	$ 218,587	$ 151,701
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities	$ 28,441	$ 50,284
Current portion of Novell obligations	10,000	10,594
Income taxes payable	6,595
Deferred revenue	10,907	18,472
Total current liabilities	55,943	79,350
Novell obligations		7,985
Commitments and contingencies
Shareholders' equity
Share Capital
Preferred shares (000's), no par value, unlimited authorized; 24,000 and nil
Series A issued and outstanding at November 30, 2000 and 1999, respectively
Common shares (000's), no par value, unlimited authorized; 73,641 and
65,532 issued and outstanding at November 30, 2000 and 1999, respectively	371,890	222,155
Contributed surplus	4,990	1,099
Deficit	(214,236)	(158,888)
Total shareholders' equity	162,644	64,366
Total liabilities and shareholders' equity	$ 218,587	$ 151,701

On behalf of the Board

James Baillie	Lawrence O'Brien
Director	Director

(See accompanying Notes to Consolidated Financial Statements)

Consolidated Statements of Operations

(in thousands of US$, except share and per share data)

	Year ended November 30
	2000	1999	1998
Sales	$ 157,487	$ 243,051	$ 246,827
Cost of sales	47,025	59,516	51,561
Gross profit	110,462	183,535	195,266
Expenses:
Advertising	33,258	47,964	41,826
Selling, general and administrative	85,662	82,229	77,736
Research and development	43,867	40,049	71,935
Depreciation and amortization	7,354	6,443	12,368
Restructuring charge			15,880
Settlement proceeds		(6,342)
Loss (gain) on foreign exchange	1,371	(246)	911
	171,512	170,097	220,656
Income (loss) from operations	(61,050)	13,438	(25,390)
Gain on sale of investment	14,585
Interest expense	(1,305)	(190)	(1,112)
Income (loss) before the undernoted	(47,770)	13,248	(26,502)
Income taxes (expense) recovery:
Current	(4,507)	4,799	(4,088)
Future	(198)	(853)	142
	(4,705)	3,946	(3,946)
Share of loss of equity investments	(2,873)	(478)
Net income (loss)	$ (55,348)	$ 16,716	$ (30,448)
Income (loss) per share:
Basic	$ (0.80)	$ 0.27	$ (0.51)
Diluted	$ (0.80)	$ 0.27	$ (0.51)
Weighted average number of common shares
outstanding (000's) :
Basic	69,498	62,194	59,433
Diluted	69,498	63,042	59,433

(See accompanying Notes to Consolidated Financial Statements)

Consolidated Statements of Shareholders' Equity

(in thousands of US$ except share data)

	Number of Shares (000's)		Share capital	Contributed surplus	Deficit	Total shareholders' equity
	Common	Preferred
Balance at November 30, 1997	59,740		$ 204,235	$ 730	$ (145,156)	$ 59,809
Issuance of common shares
pursuant to stock options	132		209			209
Cancellation of common shares	(394)		(987)			(987)
Discount on shares repurchased			(369)	369
Net loss					(30,448)	(30,448)
Balance at November 30, 1998	59,478		203,088	1,099	(175,604)	28,583
Issuance of common shares
pursuant to stock options	5,054		12,767			12,767
Issuance of common shares
for acquisitions	1,000		6,300			6,300
Net Income					16,716	16,716
Balance at November 30, 1999	65,532		222,155	1,099	(158,888)	64,366
Issuance of common shares
pursuant to stock options	798		3,390			3,390
Issuance of common shares and
warrants for cash	7,299		15,630	3,291		18,921
Issuance of common shares pursuant
to warrants	12		36			36
Issuance of preferred shares for cash		24,000	130,679			130,679
Issuance of warrants for services				600		600
Net loss					(55,348)	(55,348)
Balance at November 30, 2000	73,641	24,000	$ 371,890	$ 4,990	$ (214,236)	$ 162,644

(See accompanying Notes to Consolidated Financial Statements)

Consolidated Statements of Cash Flows

(in thousands of US$)

	Year ended November 30
	2000	1999	1998
Operating activities:
Net Income (loss)	$ (55,348)	$ 16,716	$ (30,448)
Items which do not involve cash or cash equivalents:
Depreciation and amortization	19,889	19,117	25,689
Bad debt expense	2,357	31
Write down of assets	984
Future income taxes	198	853	(142)
Gain on sale of investment	(14,585)
Gain on disposal of assets		(809)
Share of loss in equity investments	2,873	478
Write down of assets included in restructuring charge			3,086
Write down of short-term investment			1,908
Changes in operating assets and liabilities:
Restricted cash	(1,136)
Accounts receivable	26,974	(12,157)	6,595
Inventory	10,450	3,150	(5,686)
Income taxes recoverable	5,135	(5,135)
Prepaid expenses	992	2,576	(2,027)
Accounts payable and accrued liabilities	(25,843)	(7,925)	10,146
Income taxes payable	6,595	(7,549)	3,346
Deferred revenue	(7,565)	539	3,809
Net cash provided by (used in) operating activities	(28,030)	9,885	16,276
Financing activities:
Issuance of common shares	19,056	12,767	209
Issuance of preferred shares	130,679
Issuance of warrants	3,291
Shares repurchased for cancellation			(987)
Reduction of Novell obligations	(8,579)	(9,306)	(9,659)
Net cash provided by (used in) financing activities	144,447	3,461	(10,437)
Investing activities:
Proceeds on sale of investments	14,585	2,922	1,624
Purchase of investments	(2,356)	(1,561)
Purchase of capital assets	(19,511)	(19,198)	(10,359)
Proceeds on disposal of assets	274	119	305
Net cash used in investing activities	(7,008)	(17,718)	(8,430)
Increase (decrease) in cash and cash equivalents	109,409	(4,372)	(2,591)
Cash and cash equivalents at beginning of year	18,021	22,393	24,984
Cash and cash equivalents at end of year	$ 127,430	$ 18,021	$ 22,393
Supplemental non-cash information:
Non-monetary investment in Hemera Technologies Inc.	$ 9,727

(See accompanying Notes to Consolidated Financial Statements)

Notes to Consolidated Financial Statements

1. Summary of significant accounting policies

All dollar amounts included herein are expressed in thousands of US$ unless otherwise noted. Certain per share information is expressed in units of US$ unless otherwise noted.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). These principles are also generally accepted in the United States ("US GAAP") in all material respects except as disclosed in Note 16.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Corel Corporation Limited, Corel International Corporation, Corel Inc. and Corel Corporation (U.S.A.). All material intercompany transactions and balances have been eliminated. The Company follows the equity method of accounting for investments in other companies where it holds 20% or more of the outstanding voting shares and has the ability to exert significant influence. Under the equity method the Company records its initial investment at cost and records its pro rata share of earnings or losses of equity investments in its results of operations. Certain amounts for periods ended prior to November 30, 2000 have been reclassified to conform to the current year presentation.

Estimates and assumptions

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Examples include the provisions for returns and bad debts, the length of product cycles and capital asset lives. Actual results may differ from these estimates.

Software revenue recognition

The Company recognizes revenue in accordance with Statement of Position 97-2, "Software Revenue Recognition", ("SOP 97-2") issued by the American Institute of Certified Public Accountants in October 1997. During the year ended November 30, 2000 the Company adopted the Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions"(SOP 98-9) issued in December 1998. The adoption of SOP 98-9 has not had a material impact on the Company's financial results.

The Company recognizes revenue from packaged software and license fees when the software is delivered, there is persuasive evidence that an arrangement exists, the fee is fixed and determinable and collection is probable. If software products transactions include the right to receive future products, a portion of the revenue is deferred and recognized as such products are delivered. Revenue from services is recognized as the services are performed.

Research and development costs

Research costs are expensed as incurred. Development costs related to software products developed for sale are expensed as incurred unless they meet the criteria for deferral under generally accepted accounting principles.

Cash and cash equivalents

Cash includes cash equivalents, which are investments that are highly liquid and have terms to maturity of three months or less at the time of acquisition.

Restricted cash

The Company maintains restricted cash in term deposits with major financial institutions as security for corporate credit cards

issued by such financial institutions.

Inventory

Inventory of product components is valued at the lower of average cost and replacement cost, and finished goods are valued at the lower of average cost and net realizable value.

Capital assets

Capital assets are recorded at cost. Amortization of licences commences with the market release of each new software product and version. Depreciation and amortization are calculated using the following rates and bases:

Furniture and equipment	20 - 33.3% declining balance
Computer equipment	33.3% straight line
Research and development equipment	20 - 50% declining balance
Leasehold improvements	Straight line over the term of the lease
Licences, purchased software, deferred royalties, clipart libraries and photo CD libraries	The greater of: a) the ratio that current gross revenues bear to the total of current gross revenues and anticipated future gross revenues or, b) the straight line method over the remaining economic life, generally estimated to be three to five years

The Company regularly reviews the carrying value of its capital assets. If the carrying value of its capital assets exceeds the amount recoverable, a write-down is charged to the consolidated statement of operations.

Income taxes

On December 1, 1999, the Company adopted the asset and liability method for determining income taxes as prescribed by the Canadian Institute of Chartered Accountants ("CICA") 3465 - "Income Taxes" ("CICA 3465"). Under this method, future tax assets and liabilities are recognized for the estimated tax recoverable or payable which would arise if assets were recovered and liabilities settled at the financial statement carrying amounts. Future tax assets and liabilities are measured using substantially enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Changes to these balances are recognized in income in the period in which they occur.

Foreign currency

Translation of the financial statements of the Company and its subsidiaries, who are accounted for as integrated foreign operations, are translated in accordance with CICA 1650 - "Foreign Currency Translation". Monetary assets and liabilities denominated in foreign currencies are translated at the closing year-end rates of exchange. Non-monetary items and any related amortization of such items are translated at the rates of exchange in effect when the assets were acquired or obligations incurred. All other income and expense items have been translated at the average rates prevailing during the respective years. The gains or losses resulting from the translation of these amounts have been reflected in earnings.

Investment tax credits

Investments tax credits ("ITCs"), which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made and their realization is reasonably assured, and are applied to reduce research and development expense in the year.

Stock options

The Company has stock option plans as described in Note 9. No compensation expense is recognized when shares or stock options are issued to employees. Any consideration paid by employees on the exercise of stock options is credited to share capital.

2. Financial Instruments

The carrying amounts for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and Novell obligations approximate fair value due to the short maturity of these instruments unless otherwise noted.

Cash equivalents include a $14.0 million term deposit issued by a major North American bank and a loan of $110.0 million to a major Canadian corporation, which is guaranteed by a major North American bank, with maturity on December 27, 2000. Subsequent to year end, the loan, including accrued interest, was repaid in full.

Concentration of credit risk, with respect to accounts receivable, is limited due to the diversity of the Company's channel arrangements. The Company has credit evaluation, approval and monitoring processes intended to mitigate potential credit risks. Ingram Micro Inc. accounted for $10.4 million (36.5%) and $27.1 million (49.5%) of accounts receivable at November 30, 2000 and November 30,1999, respectively.

3. Inventory

	As at November 30
	2000	1999
Product components	$ 1,424	$ 8,582
Finished goods	1,693	4,985
	$ 3,117	$ 13,567

4. Investments

	As at November 30
	2000	1999
Equity investments
Hemera Technologies Inc.	$ 9,727
LinuxForce, Inc.	243
Rebel.com Inc.		$ 2,873
Alchemy Software Development Limited
	9,970	2,873
Investments recorded at cost, including GraphOn Corporation	2,026
	$ 11,996	$ 2,873

Hemera Technologies Inc.

On July 17, 2000, the Company purchased and currently maintains a 23% interest in Hemera Technologies Inc., a privately held company. As consideration for these shares, the Company transferred its GraphicCorp division and related assets to Hemera Technologies Inc. As of the effective date of the transaction, the fair value of the GraphicCorp division and its related assets was estimated at $9.7 million and the shares were valued at this amount. No gain or loss was recognized on the transfer. In fiscal 2000, the Company's share of Hemera Technologies Inc.'s operating results was nominal.

LinuxForce, Inc.

In December 1999, the Company purchased and currently maintains, a 33% interest in LinuxForce, Inc., a privately held company, for cash. The Company also holds a three year option to purchase another 33% of LinuxForce, Inc. In 2000, the Company's share of LinuxForce, Inc.'s operating results was nominal.

Rebel.com Inc.

On February 17, 1999, the Company purchased and currently maintains, a 25% interest in Rebel.com Inc., a privately held company for $3.4 million. The Company's share of the net book value of the underlying assets was $1.3 million. The remaining balance of the purchase price of $2.1 million had been allocated to goodwill and was being amortized on a straight-line basis over three years. The fair value of the assets given up to purchase the Company's share of Rebel.com Inc. was as follows:

Cash	$ 1,561
Capital assets	1,341
Inventory	381
Accounts receivable	68
Total purchase price	$ 3,351

In 2000, the Company's share of Rebel.com Inc.'s net loss was $1.2 million which has been deducted from the carrying value of the investment, reducing the investment in Rebel.com Inc. to nil. Due to the magnitude of the losses, the remaining goodwill on the investment has been written down to nil.

Alchemy Software Development Limited

On November 28, 2000, the Company purchased and currently maintains, a 25% interest in Alchemy Software Development Limited, a privately held company. At the same time, the Company sold its CATALYST software and related assets to Alchemy Software Development Limited. The transaction was accounted for as a non-monetary transaction and the net book value of the assets sold was nil, resulting in the shares being fair valued at nil with no gain or loss recognized. In 2000, the Company's share of Alchemy Software Development Limited's operating results was nominal.

Investments recorded at cost, including GraphOn Corporation ("GraphOn")

On December 31, 1998, the Company sold its jBridge technology to GraphOn. In consideration for the transfer of technology, GraphOn issued to the Company 3,886,503 shares of common stock of GraphOn and a warrant to purchase up to 388,650 shares of additional common stock. The assets transferred had a nominal value in the Company's financial statements.

On July 12, 1999, GraphOn completed a merger with Unity First Acquisition Corp. ("Unity"), a publicly traded acquisition corporation. As part of the merger, Unity changed its name to GraphOn. Under the terms of the merger agreement, GraphOn shareholders received a fixed exchange ratio of 0.5576 share of Unity common stock for each share of GraphOn common stock. As result of the merger, the Company held 2,167,114 shares of common stock, representing 19.5% of the merged company and, during the year, exercised warrants to purchase 216,711 shares of common stock at an exercise price of $1.79 per share.

During fiscal 2000, the Company sold a total of 1,190,001 shares of GraphOn for a realized gain of approximately $14.6 million. The Company still owns 1,193,824 shares of common stock (including warrants exercised above), recorded at $0.4 million representing 8.1 % of total shares outstanding which, as of November 30, 2000, had a market value of $1.50 per share for an aggregate fair value of $1.8 million. The Company has accounted for the cost of this investment under the first-in, first-out method.

Other investments, at cost, totaled $1.6 million.

5. Capital assets

	November 30, 2000		November 30, 1999
	Cost	Accumulated amortization	Cost	Accumulated amortization
Furniture and equipment	$14,463	$10,877	$14,673	$9,580
Computer equipment	74,462	65,866	71,954	62,202
Research and development equipment	12,400	9,947	12,664	8,649
Leasehold improvements	3,707	3,426	3,329	2,650
Licenses, purchased software and deferred royalties	109,926	82,371	95,476	75,860
Clipart libraries and photo CD libraries			19,257	8,715
	214,958	$ 172,487	217,353	$ 167,656
Less: Accumulated amortization	172,487		167,656
Net book value	$42,471		$49,697

EX-21.1

Exhibit 21.1

Subsidiary Information

Corel Corporation Limited

Europa House

3^rd Floor

Harcourt Street

Dublin 2, Ireland

Corel, Inc.

567 Timpanogos Parkway

Orem, Utah

USA 84507

Corel Corporation (U.S.A.)

567 Timpanogos Parkway

Orem, Utah

USA 84507

Corel International Corp.

c/o Peat Marwick Associates Limited

Hastings, Christ Church

Barbados

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement #333-42790 on Form S-8 of Corel Corporation, dated August 1, 2001, of our report dated January 26, 2001 relating to the consolidated financial statements of Corel Corporation which is incorporated by reference in the Annual Report on Form 10-K of Corel Corporation for the year ended November 30, 2000.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP Ottawa Canada

Chartered Accountants February 28, 2001

EX-99.1

Exhibit 99.1

Corel Corporation

Valuation and Qualifying Accounts

Years Ended November 30, 2000, 1999 and 1998

Included in accounts receivable are the following reserves and related activity:

Year Ended	Description	Opening Balance	Additions	Deductions	Ending Balance
			(In thousands of US$)
November 30, 2000	Promotional rebates	$3,277	$17,433	$18,093	$2,617
	Sales reserve	40,929	8,210	30,351	18,788
	Allowance for doubtful accounts	6,720	3,696	2,210	8,206
November 30, 1999	Promotional rebates	6,197	8,208	11,128	3,277
	Sales reserve	21,882	55,309	36,262	40,929
	Allowance for doubtful accounts	6,804	28	112	6,720
November 30, 1998	Promotional rebates	11,396	25,959	31,158	6,197
	Sales reserve	54,413	58,367	90,898	21,882
	Allowance for doubtful accounts	5,466	1,704	366	6,804

EX-99.2

Exhibit 99.2

Auditors' Report to the Board of Directors on Financial Statement Schedules

Our audits of the consolidated financial statements referred to in our report to the shareholders dated January 26, 2001 appearing in the 2000 Annual Report to Shareholders of Corel Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule II listed in Item 14(a)2 of this Form 10-K. In our opinion, this financial statement schedule represents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP Ottawa, Canada

Chartered Accountants January 26, 2001

EX-3.4

Exhibit 3.4

The Articles of the Corporation are amended to create a first series of 24,000,000 participating convertible preferred shares which shall be designated the Series A Participating Convertible Preferred Shares (the "Series A Shares") and shall have attached thereto, in addition to the rights, privileges, conditions and restrictions attaching to the Preferred Shares as a class, the following rights, privileges, conditions and restrictions as set forth below:

1. Rank of Shares Within Class. Each Series A Share shall rank equally and be identical in all respects.

2. Dividends. The holders of full or fractional Series A Shares shall be entitled to receive, when and as declared by the Board of Directors of the Company (the "Board"), but only out of funds or assets of the Company legally available therefor, dividends on each date (each, a "Payment Date") that any dividend or other distribution is payable or made (whether in the form of cash, securities, rights, warrants or other property) on or in respect of the Common Shares (as defined below) other than dividends or other distributions to the extent payable in form of Common Shares (each, a "Participating Dividend") in an amount per whole Series A Share equal to the aggregate amount of the Participating Dividends that would be payable on the Payment Date to a holder of the Reference Package (as defined below) entitled to receive such Participating Dividend. Each such dividend shall be paid to the holders of record of the Series A Shares on the date, not more than 60 days before the Payment Date, fixed by the Board before the Payment Date to determine the holders of the Series A Shares entitled to receive such dividend. Dividends on each full and each fractional Series A Share shall be cumulative from September 29, 2000 (the "Original Issue Date").

"Common Shares" means the common shares in the capital of the Company constituted as of the Original Issue Date and any other shares or securities into which such shares are exchanged, consolidated or reclassified as a result of any merger, consolidation, reclassification or other transaction.

A "holder", with respect to any Preferred Share, means the person or entity in whose name such Preferred Share is registered on the Preferred Share register maintained by the Company or its agent.

"Reference Package" initially means one fully paid and nonassessable Common Share, but is subject to adjustment as provided in Section 6 hereof.

3. Certain Restrictions. So long as any Series A Share is outstanding, no dividends (except to the extent they are payable in the form of Common Shares) shall be declared, paid or set aside for payment, and no other distribution shall be declared, made or set aside for making, on or in respect of any Common Shares or any Junior Shares (as defined below), nor shall any Common Shares, Junior Shares or Parity Shares (as defined below) be redeemed, purchased or otherwise acquired for any consideration (or any consideration be paid to or made available for a sinking fund for the redemption of any such shares), by the Company, directly or indirectly (including without limitation by any of its subsidiaries), unless, in each case, all of the cumulative dividends on all of the outstanding Series A Shares payable prior thereto or contemporaneously therewith shall have been, or shall contemporaneously be, paid in full.

"Junior Shares" means any class or series of shares of the Company (other than the Common Shares) hereafter authorized over which the Series A Shares have preference or priority in the distribution of assets on any liquidation, dissolution or winding up of the Company or other distribution of assets of the Company for the purposes of winding up its affairs.

"Parity Shares" means any class or series of shares of the Company (other than the Series A Shares) that ranks on a parity with the Series A Shares in the distribution of assets on any liquidation, dissolution or winding up of the Company or other distribution of assets of the Company for the purposes of winding up its affairs.

4. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company or other distribution of assets of the Company for the purposes of winding up its affairs (collectively, a "Liquidation"), the holders of full and fractional Series A Shares shall be entitled, before any distribution or payment is made on any date to the holders of the Common Shares or any Junior Shares in connection with such Liquidation, to be paid in full out of the assets of the Company available for distribution to its shareholders an amount per whole Series A Share equal to the greater of (A) US$5.625 and (B) the aggregate amount that would be distributed on such date in connection with such Liquidation to a holder of the Reference Package assuming it was outstanding and that the Series A Shares did not exist, together in each case with all accrued and unpaid dividends to such distribution or payment date, whether or not earned or declared (the "Liquidation Preference"). If such payment shall have been made in full to all holders of Series A Shares, the holders of Series A Shares as such shall have no rights or claims to any remaining assets of the Company. In the event the assets of the Company available for distribution to the holders of Series A Shares in connection with any Liquidation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this Section 4 and all liquidation preferences to which all Parity Shares are entitled in connection with such Liquidation, the holders of Series A Shares and such Parity Shares shall be paid pro rata in accordance with their respective aggregate liquidation preferences. For the purposes of this Section 4, the consolidation or merger of, or binding share exchange by, the Company with any other entity shall not be deemed to constitute a Liquidation.

5. Voting Power. The holders of Series A Shares shall have no voting rights except as required by law; provided, however, that the Company

shall not amend its Articles of Incorporation or by-laws in any manner which would alter or change the powers, preferences or special rights of the holders of the Series A Shares so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding Series A Shares, voting separately as a class on the basis of one vote per share and provided further, however, that with respect to any vote to approve an amalgamation or an arrangement that would result in an exchange, reclassification or cancellation of the Series A Shares and the Common Shares on substantially the same basis, which vote is held within six months of the completion of a "Permitted Bid" or "Competing Permitted Bid", each as defined in the Shareholders Rights Plan Agreement described in Section 6(a) below, pursuant to which an offeror has offered to purchase all of the outstanding Series A Shares and all of the outstanding Common Shares at a price for the Series A Shares which is the greater of (i) the offer price for the Common Shares multiplied by the number of Common Shares as then constitutes the Reference Package, and (ii) an amount equal to the Liquidation Preference, the holders of the Series A Shares shall be entitled to vote, on an as converted basis, together with the holders of the Common Shares and of any other series of Preferred Shares but not separately as a class or series.

6. Conversion Rights.

(a) General. Each Series A Share shall be convertible at the option of the holder thereof, at any time, into the Reference Package. Notwithstanding anything herein to the contrary, if the holder of a Series A Share is Microsoft Corporation, a Washington corporation, or any of its Affiliates or Associates (as each such term is defined in the Shareholder Rights Plan Agreement, dated as of February 11, 1999 and as amended and restated as of March 31, 1999, between the Company and Montreal Trust Company of Canada, as Rights Agent), such holder shall have no rights to convert such Series A Share but any transferee holder thereof which is not Microsoft Corporation or one of its Affiliates or Associates shall have such conversion rights from and after such transfer.

(b) Extraordinary Common Stock Event. If the Company shall (i) issue any additional Common Shares as all or part of a dividend or other distribution on or in respect of outstanding Common Shares, (ii) subdivide the outstanding Common Shares into a greater number of Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of Common Shares, then and in each such case the number of Common Shares in the Reference Package shall be changed effective immediately upon the consummation of such event into the number of Common Shares that a holder of the Reference Package immediately prior to such change and consummation would hold immediately after such event as a result thereof.

(c) Changes in the Common Shares. If the Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property as a result of any merger, consolidation, reclassification or other transaction, then and in any such case each Series A Share shall at the same time be similarly exchanged or changed into an amount per whole Series A Share equal to the aggregate amount per whole Series A Share equal to the aggregate amount of stock, securities, cash and/or other property (payable in kind), as the case may be, (the "Substitute Consideration") that a holder of the Reference Package immediately prior to the consummation of such transaction would have received as a result of such transaction if it was entitled to participate therein; provided, however, that if the Substitute Consideration consists in whole or in part of securities of the entity surviving or resulting from such transaction (which may be the Company) entitled to vote generally in the election of directors of such entity then, at the option of each holder of the Series A Shares, such holder may elect, in lieu of the exchange or change provided above, either (i) if the Company is the surviving or resulting entity, to have the Series A Shares remain outstanding and to have the Reference Package changed effective immediately upon the consummation of such transaction into the Substitute Consideration that a holder of the Reference Package immediately prior to such consummation and change would have received as a result of such transaction if it was entitled to participate therein or (ii) if the Company is not the surviving or resulting entity (the "Successor"), to receive in exchange for its Series A Shares the same number of preferred shares of the Successor with terms identical to the terms of the Series A Shares except that the references to (A) the Company shall be to the Successor, (b) the Board shall be to the board of directors of the Successor, (C) the Common Shares shall be to the voting securities of the Successor issued in such transaction and (B) the Reference Package shall be the Substitute Consideration that a holder of the Reference Package immediately prior to the consummation of the transaction would have received as a result of such transaction if it was entitled to participate therein.

(d) Exercise of Conversion Privilege and Procedure for Conversion. To

exercise its conversion privilege, a holder of Series A Shares shall surrender the certificate or certificates representing the shares being converted to the Company at its principal office (which certificate or certificates shall, if required by the Company, be duly endorsed to the Company or in blank or be accompanied by proper instruments of transfer to the Company or in blank), accompanied by a written notice to the Company to the effect that such holder elects so to convert such shares and specifying the name or names (with address or addresses) in which a certificate or certificates or other appropriate instruments evidencing the shares or other property to which such holder is entitled upon such conversion. All accrued and unpaid dividends or other distributions payable on any Series A Shares surrendered for conversion, whether or not earned or declared, shall be paid forthwith upon such conversion. Any dividend payable on Series A Shares surrendered for conversion during the period from the close of business on any record date for the payment of such dividend on such shares to the opening of business on the date of payment of such dividend shall be payable to the holder of record of such shares as of such record date notwithstanding such conversion. As promptly as practicable after the surrender by a holder of Series A Shares of certificates evidencing the Series A Shares being converted at the office referred to above and compliance by such holder with the other conditions specified above, the Company shall issue and shall deliver to the person or persons entitled thereto (as specified in the applicable written notice of conversion) a certificate or certificates evidencing the number of whole Common Shares, other securities and/or property to which such person or persons shall be entitled as provided herein, together (if applicable) with cash in lieu of fractional Common Shares as provided below. Such conversion shall be deemed to have been made as of the close of business on the date of such surrender and compliance and at such time such person or persons shall be treated for all purposes as the record holder or holders (or, in the case of securities or property not in registered form, the owner or owners) of such Common Shares, other securities and/or property on such date and the rights of the converting holder as holder of the converted Series A Shares shall cease.

(e) Cash in Lieu of Fractional Shares. No fractional Common Shares shall be issued upon conversion of Series A Shares. If a number of Series A Shares (evidenced by one or more certificates) shall be surrendered for conversion at one time by the same holder, the number of whole Common Shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of Series A Shares being converted at such time by such holder. Instead of any fractional Common Shares that would otherwise be issuable to a holder upon conversion of Series A Shares, the Company shall pay to such holder a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the Closing Price (as defined below) on the day of conversion.

"Closing Price" of the Common Shares on any day means the last reported per share sale price, regular way, of the Common Shares on such day or, if no sale takes place on such day, the average of the reported closing per share bid and asked prices, regular way, of the Common Shares on such day, in each case on the Nasdaq National Market or, if the Common Shares are not quoted on the Nasdaq National Market on such day, on the principal national securities exchange or quotation system in the United States or Canada on which the Common Shares are listed or admitted to trading or quoted on such day, or, if the Common Shares are not so listed or admitted to trading or quoted on such day, the average of the closing per share bid and asked prices of the Common Shares on such day in the over-the-counter market as reported by a generally acceptable national quotation service or, if not so available in such manner, as furnished by any member firm of The Toronto Stock Exchange selected from time to time by the Board for that purpose on such day or, if not so available in such manner, as otherwise determined as of such day in good faith by the Board (whose good faith determination shall be conclusive and described in a resolution of the Board).

(f) Partial Conversion. In the event some but not all of the Series A Shares represented by a certificate or certificates surrendered by a holder are converted, the Company shall execute and deliver to the holder a new

certificate representing the number of Series A Shares which were not

converted.

(g) Reservation of Common Shares. The Company shall at all times reserve and keep available out of its authorized but unissued Common

Shares, solely for the purpose of effecting the conversion of the Series A Shares, the full number of its Common Shares then deliverable upon conversion of all the then outstanding Series A Shares, and if at any time the number of authorized but unissued Common Shares shall not be sufficient to effect the conversion of all the then outstanding Series A Shares, the Company shall take such corporate

action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose. If any Common Shares required to be reserved for issuance upon conversion of Series A Shares require registration with or approval of any governmental authority before such shares may be issued or freely transferred upon conversion, the Company will in good faith and as expeditiously as is commercially reasonable endeavor to cause such shares to be duly registered or approved, as the case may be; provided, however, that the foregoing shall apply in any jurisdiction only when the Series A Shares shall have become freely transferable under applicable securities laws of such jurisdiction. If the Common Shares are then listed or admitted for trading or quoted on any national securities exchange or quotation system, the Company will, if permitted by the rules of such exchange or quotation system, cause all Common Shares issuable upon conversion of the Series A Shares to be so listed, admitted for trading or quoted, as the case may be.

7. Issuer Tender or Exchange Offers. If the Company, directly or indirectly (including without limitation through any of its subsidiaries), shall consummate a tender or exchange offer (including an issuer bid in Canada) for all or any portion of the Common Shares, it shall contemporaneously therewith consummate a tender or exchange offer (or issuer bid in Canada) for the same portion of the outstanding Series A Shares for consideration per whole Series A Share equal to the product of (A) the consideration paid per Common Share in such tender or exchange offer for the Common Shares and (B) the Reference Package.

8. Notices. The Company shall distribute to the holders of Series A Shares copies of all notices, materials, annual and quarterly reports, proxy statements, information statements and any other documents that it distributes

generally to the holders of Common Shares, at such times and by such method as such documents are distributed to such holders of Common Shares.

9. No Reissuance. No shares of Series A Stock acquired by the Company by reason of purchase, conversion or otherwise shall be reissued and shall be cancelled.

10. Redemption. The Series A Shares shall not be redeemable.

10-K405

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2000

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO _____________

Commission file number 0-20562

COREL CORPORATION
(Exact name of Registrant as Specified in its Charter)

 

Canada	Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

1600 Carling Avenue
Ottawa, Ontario, Canada    KIZ 8R7
(Address of Principal Executive Offices including Zip Code)

(613) 728-8200
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

Common shares, no par value

Common share purchase rights

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    [X]     No [   ]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.4054 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

     As of February 21, 2001, the aggregate market value of Common Shares held by non-affiliates of the registrant, based on the closing sales price of $2.19 of the Registrant's Common Shares as reported on the NASDAQ National Market, was $161,112,814. As of that date 73,651,572 Common Shares were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     None