10-Q

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

FORM 10-Q

     (Mark One)

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

for the quarterly period ended February 28, 2002

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)


(Former name, former address and former fiscal year if changed since last report)

    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 reports), and (2) has been subject to such filing requirements for the past 90 days.   YES [X]    NO [  ]

As of April 15, 2002, the registrant had 91,795,249 Common Shares outstanding.

COREL CORPORATION FORM 10-Q
TABLE OF CONTENTS

PART I. Financial Information

Item 1. Financial statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosure About Market Risk

PART II. Other Information

Item 1. Legal Proceedings

Item 6: Exhibits and Reports on Form 8-K

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

COREL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands of US$)

(unaudited)

	February 28,	November 30,
	2002	2001
ASSETS
Current assets:
Cash and cash equivalents	$ 72,393	$ 24,924
Restricted cash	19,360	19,367
Short-term investments	22,930	78,076
Accounts receivable
Trade	19,450	18,689
Other	493	1,272
Inventory	671	799
Prepaid expenses	2,766	1,779
Total current assets	138,063	144,906
Investments	9,664	9,886
Deferred financing charges	175	250
Capital assets	39,473	43,123
Goodwill	37,577	37,534
Other non-current assets	2,028
Total assets	$ 226,980	$ 235,699
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$ 22,630	$ 27,862
Participation rights obligation	16,338	16,338
Income taxes payable	4,680	4,749
Deferred revenue	10,145	10,160
Total current liabilities	53,793	59,109
Future income tax liability	4,648	4,967
Total liabilities	58,441	64,076
Shareholders' equity
Share capital
Issued and outstanding (000's):	$ 388,257	$ 388,193
Common shares
80,709 (80,709 on November 30, 2001)
Series A preferred shares
24,000 (24,000 on November 30, 2001)
Contributed surplus	4,990	4,990
Deficit	(224,708)	(221,560)
Total shareholders' equity	168,539	171,623
Total liabilities and shareholders' equity	$ 226,980	$ 235,699

(See accompanying notes)

COREL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

AND DEFICIT

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

(unaudited)

	Three months ended
	February 28,	February 28,
	2002	2001
Sales	$ 31,214	$ 32,537
Cost of sales	5,837	6,242
Gross profit	25,377	26,295
Expenses
Advertising	4,420	5,417
Selling, general and administrative	15,763	14,863
Research and development	7,137	5,685
Depreciation and amortization	1,377	1,462
Gain (loss) on foreign exchange	157	(111)
	28,854	27,316
Loss from operations	(3,477)	(1,021)
Loss on write down of investment	(18)
Interest income	488	1,753
Income (loss) before the undernoted	(3,007)	732
Income tax recovery (expense)	63	(198)
Share of loss of equity investments	(204)
Net income (loss)	(3,148)	534
Deficit beginning of period	(221,560)	(214,236)
Deficit end of period	$ (224,708)	$ (213,702)
Income (loss) per share:
Net income (loss)
Basic	$ (0.04)	$ 0.01
Diluted	$ (0.04)	$ 0.01
Weighted average number of common shares (000's)
Basic	80,709	73,657
Diluted	80,709	97,757

(See accompanying notes)

COREL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of US$)

(unaudited)

	Three months ended
	February 28,	February 28,
	2002	2001
Operating activities:
Net income (loss)	$ (3,148)	$ 534
Items which do not involve cash or cash equivalents:
Depreciation	1,377	1,413
Amortization	3,379	2,760
Bad debt expense	52	1,213
Gain on disposal of assets		(214)
Loss on write down of investments	18
Future income tax	(319)
Share of loss in equity investments	204
Changes in operating assets and liabilities
Restricted cash	7	224
Accounts receivable	(34)	6,059
Inventory	128	895
Prepaid Expenses	(987)	(501)
Accounts payable and accrued liabilities	(5,232)	(4,267)
Income tax payable	(69)	(240)
Deferred revenue	(15)	(1,187)
Net cash provided by (used in) operating activities	(4,639)	6,689
Financing activities:
Issuance of common shares	64	97
Reduction of Novell obligations		(5,000)
Net cash provided by (used in) financing activities	64	(4,903)
Investing activities:
Purchase of investments and other non-current assets	(2,071)	(722)
Purchase of capital assets	(1,031)	(4,763)
Redemption of short-term investments	55,146
Proceeds on disposal of assets		725
Net cash provided by (used in) investing activities	52,044	(4,760)
Increase (decrease) in cash and cash equivalents	47,469	(2,974)
Cash and cash equivalents at beginning of period	24,924	127,430
Cash and cash equivalents at end of period	$ 72,393	$ 124,456
Supplementary cash information:
Cash paid (refund received) for income taxes	$ 890	$ (428)

(See accompanying notes)

COREL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2002

(unaudited)

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 5. In management's opinion, all adjustments necessary for fair presentation are reflected in the financial statements. All adjustments made are normal and recurring in nature. Corel Corporation has followed the same accounting policies and methods of application as in the most recent audited financial statements except as stated here within.

Goodwill and Other Intangible Assets

The company is accounting for the goodwill associated with the October 30, 2001 acquisition of Micrografx, Inc. in accordance with Canadian Institute of Chartered Accountants (CICA) 3062 - "Goodwill and Other Intangible Assets" ("CICA 3062") which requires the value of goodwill and intangible assets that result from business combinations subsequent to June 30, 2001 to be valued on an annual basis. If the amount recorded for goodwill or intangible assets is less than the current value, an impairment of the asset is recorded for the difference.

2. Earnings per share

The calculation of earnings per share is based on the weighted daily average number of shares outstanding during the period. The calculation of diluted earnings per share assumes that all outstanding options, warrants and convertible preferred shares have been exercised at the later of the beginning of the fiscal period or the option, warrant, or convertible preferred share issuance date. As the impacts of the exercise of options and conversion of preferred shares are anti-dilutive in the first quarter of 2002, outstanding options, warrants and preferred shares have been excluded from the calculation of diluted earnings per share.

	Three months ended February 28,
	2002	2001
Basic:
Weighted average common shares outstanding	80,709	73,657
Net income (loss)	$ (3,148)	$ 534
Per share amount	$ (0.04)	$ 0.01
Diluted:
Weighted average common shares outstanding	80,709	73,657
Net effect of dilutive stock options		100
Net effect of convertible preferred shares		24,000
Total	80,709	97,757
Net income	$ (3,148)	$ 534
Earnings per share	$ (0.04)	$ 0.01

3. Segmented information

The Company has only one global operating segment. The Company sells its products worldwide from four geographic regions. A summary of sales by product, sales channel, region and major customer from consolidated operations is as follows:

Three months ended February 28,

	2002	2001
By product
Creative Products	$ 16,321	$ 20,812
Business Applications	11,855	11,562
Other	3,038	163
	$ 31,214	$ 32,537

By sales channel
Retail packaged products	$ 16,496	$ 17,208
OEM licenses	2,021	4,045
Corporate licenses	12,697	11,284
	$ 31,214	$ 32,537

By region
Canada	$ 1,783	$ 1,846
U.S.A.	15,280	15,963
Europe, Middle East, Africa	10,712	10,202
Other	3,439	4,526
	$ 31,214	$ 32,537

By major customer
Ingram Micro Inc.	$ 6,451	$ 10,531
All others	24,763	22,186
	$ 31,214	$ 32,537

4. Subsequent event

On March 15, 2002, the Company completed the acquisition of all the issued and outstanding stock of Softquad Software Ltd. ("Softquad"), a developer of XML-enabling technologies and commerce solutions for e-Business. At the effective time of the acquisition, each common share, or equivalent, of SoftQuad was exchanged for .519 of a Corel common share. The total consideration paid by the Company in connection with the acquisition was approximately $16,600,000 consisting of approximately 11,100,000 common shares. The $1.5 million bridge loan that Corel provided to SoftQuad will be included in the purchase price allocation. None of Softquad's operations are reflected in Corel's statement of operations for the 3 months ended February 28, 2002.

5. Significant differences between Canadian and United States GAAP

The Company's financial statements are prepared on the basis of Canadian GAAP, which differs in some respects from US GAAP. There were no differences in reported cash flows for the periods presented. Significant differences between Canadian GAAP and US GAAP are reflected in the Balance Sheets and statements of operations set forth below:

Balance Sheet in accordance with US GAAP		As at
		February 28,	November 30,
	Notes	2002	2001
Assets
Current assets		$ 138,063	$ 144,906
Investments	(B)	9,664	10,310
Other non-current assets		2,203	250
Capital assets	(A)	35,162	38,812
Goodwill	(A)	35,939	35,896
Total assets		$ 221,031	$ 230,174
Liabilities
Current liabilities		$ 49,113	$ 54,360
Income taxes payable	(B)	4,680	4,842
Future income tax liabilities	(A)	3,010	3,329
Total liabilities		56,803	62,531
Shareholders' equity	(A)	164,228	167,312
Other comprehensive income	(B)		331
Total liabilities and shareholders' equity		$ 221,031	$ 230,174

Statement of Operations information		Quarter ended February 28,
	Notes	2002	2001
Net income (loss) in accordance with Canadian GAAP		$ (3,148)	$ 534
Adjustments to reconcile to US GAAP:
Net income (loss) in accordance with US GAAP		$ (3,148)	$ 534
Comprehensive income	©)
Net income (loss) in accordance with US GAAP		$ (3,148)	$ 534
Unrealized holding gains (losses) on available for sale securities	(B)	(424)	634
Related income tax	(B)	93	(139)
Comprehensive income (loss)		$ (3,479)	$ 1,029
Income (loss) per share
Basic		$(0.04)	$0.01
Diluted		$(0.04)	$0.01

A. In-process research and development

Associated with the allocation of the purchase price of the acquisition of Micrografx is $4.3 million for in-process research and development which, for US GAAP purposes, is to be expensed in the year of acquisition if the related technology has not reached technological feasibility and does not have an alternative future use This adjustment results in a $4.3 million reduction of capital assets and increase in the reported net loss for the quarter ending November 30, 2001. This adjustment reduces the book value of the assets acquired and, in turn, the related tax difference on those assets resulting in a reduction of $1.6 million to the future tax liability and goodwill.

B. Available for sale securities

SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115") requires available-for-sale securities to be marked to market with unrealized holding gains or losses being accounted for in other comprehensive income. Accordingly, the reported carrying value of investments would not have changed at February 28, 2002 and would have decreased by $0.4 million at November 30, 2001. In addition, income taxes payable would not have changed at February 28, 2002 and decreased by $0.1 million at November 30, 2001.

C. Comprehensive income

Other comprehensive income includes items that cause changes in shareholders' equity but are not related to share capital or net earnings which, for the Company, comprises only unrealized holding gains on available-for-sale securities.

Accounting for stock-based compensation

In accordance with Financial Accounting Standards Board ("FASB") interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation", and interpretation of APB No. 25 ("FIN 44"), the repricing of options that occurred on November 16, 2000 to CDN $5.70 or US $3.63 has resulted in variable plan accounting for the re-priced options. The options were repriced to the market value of the underlying common shares at the time of repricing. At February 28, 2002, 1,544,500 options had been tendered for repricing to CDN $5.70 while 186,000 options had been tendered for repricing to US $3.63. Future periods may reflect compensation charges or credits depending on the fair market price of the underlying shares.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Overview

Corel develops, manufactures, licenses, sells and supports a wide range of software solutions for home and small business users, creative professionals and enterprise customers. Corel's software is available for use on most industry computers, including those produced by International Business Machines Corporation ("IBM"), Apple Computer, Inc., and Linux systems. The Company plans to leverage its technology assets and experience to enhance its relationships with existing customers, as well as target new customers in emerging markets created by the expansion of the Web and the increasing demand for graphics-rich visual communication. Corel also plans to develop applications for Microsoft Corporation's ("Microsoft") .NET platform as part of its commitment to offer customers flexible services and solutions.

Corel's business strategy emphasizes the development of a broad line of software solutions for business, academic and personal use, marketed through multiple channels of distribution. These software solutions are designed to provide customers with tools to create, publish and deploy content. The Company also plans to leverage and extend its technology base using partnerships and acquisitions to develop and market solutions that maximize customers' ability to exchange information.

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.

Revenue

The 4% decrease in revenues for the quarter ended February 28, 2002 from the quarter ended February 28, 2001 can be attributed to the Company's flagship product, CorelDRAW 10 , being released prior to the first quarter of 2001, whereas no new products were released in the first quarter of 2002. The $4.3 million decline in Creative Product revenue was offset by revenues from new product lines which were acquired with Micrografx Inc.

Revenues have maintained a relatively consistent level as a result of the Company's product offerings remaining consistent with previous quarters. Significant overall revenue growth is not expected before the fourth quarter of fiscal 2002 as new products are developed from technology acquired with Micrografx, Inc. and SoftQuad Software Ltd.

Revenue by Product Group

Creative Products revenue declined by 21.6% for the quarter ended February 28, 2002 from the quarter ended February 28, 2001. This can be attributed to no new product releases in the first quarter of 2002 whereas the Company's flagship product, CorelDRAW 10, was released just prior to the first quarter of 2001.

Business Applications revenue increased marginally by 2.5% for the quarter ended February 28, 2002 when compared to the quarter ended February 28, 2001 due to increased corporate licence sales of WordPerfect Office 2002.

Other revenues in the first quarter of 2002 relate primarily to revenues with products obtained from the purchase of Micrografx.

Revenue by sales channels

Corel distributes its products primarily through distributors (as retail packaged products), OEM licences and corporate licences.

Sales from retail packaged products declined marginally by 4% in the quarter ended February 28, 2002 from the quarter ended February 28, 2001 mainly due to no new products being released in the quarter.

OEM sales decreased 50% for the first quarter of 2002 from the first quarter of 2001. This decline can be attributed to the general decline in royalties that OEM customers are willing to pay for licences, and no new products being released in the quarter.

Corporate licenses increased 13% in the first quarter of 2002 from the first quarter of 2001. This is a result of the Company's growth strategy, which focuses on the corporate community.

Under this strategy, the Company expects to increase the number of direct sales made to corporate customers in fiscal 2002. Although the Company anticipates growth within the retail channel, new product lines will not be as heavily reliant on this channel as previous product lines due to exponential growth in the corporate enterprise market. Consequently, the Company's channel mix is expected to continually shift from retail to corporate/direct sales during the remainder of the year.

Revenue by region

Revenue in North America declined 4% in the first quarter of 2002 from the first quarter of 2001. This can be attributed to no new product releases during the quarter.

Revenues in Europe, Middle East, and Africa increased by 5% for the quarter ended February 28, 2002 from the quarter ended February 28, 2001. This can be attributed to the restructuring of the Company which occurred in October, 2001 to focus more attention on the European markets.

Corel's products are sold primarily in US dollars in all regions other than Europe where the Euro is the predominant currency. The relative weakness of the Euro to the U.S. Dollar in the first quarter of 2002 reduced revenues slightly.

Cost of sales and gross profit

Cost of sales declined 6% during the quarter ended February 28, 2002 as compared to the quarter ended February 28, 2001. The decline is primarily due to the increase in corporate licence sales, which requires marginal assembly or manufacturing costs. This cost savings was offset by the amortization of the additional software which was acquired with Micrografx, Inc.

As the Company continues its focus on the corporate community, it is anticipated that the costs associated with assembly and manufacturing will continue to decline, but will be offset by the increased amortization from software purchased on acquisition of both Micrografx, Inc. and Softquad Software, Ltd. The net effect is expected to be a marginal improvement to the gross margin percentage.

Advertising Expenses

Advertising expenses declined 18% for the first quarter of 2002 from the first quarter of 2001. This can be directly attributed to no new product releases during the first quarter of 2002, whereas in the first quarter of 2001, the Company was heavily promoting the new release of the flagship product in Corel Draw 10.

As the Company continues to rebrand itself and its products, advertising expenses are expected to increase significantly for the remainder of fiscal 2002.

Selling, general and administrative expenses

Selling, general and administrative expense increased by 6% during the quarter ended February 28, 2002 compared to the quarter ended February 28, 2001. This can be attributed to the additional employees retained associated with the acquisition of Micrografx Inc. on October 30, 2001, and initial integration costs associated with the acquisition of Softquad Software, Ltd. subsequent to the quarter end.

It is anticipated that following the closing of the acquisition of Softquad Software, Ltd. in March, 2002, selling, general, and administrative costs will increase marginally for the remainder of fiscal 2002 as the Company continues to reposition itself as outlined in its corporate strategy.

Research and development expenses

Research and development costs increased 26% for the quarter ended February 28, 2002 from the quarter ended February 28, 2001. This increase can be attributed to the larger research and development team resulting from the Micrografx, Inc. acquisition.

With the subsequent closing of the acquisition of Softquad Software, Ltd., the Company anticipates an additional increase in the research and development costs for the remainder of fiscal 2002.

Depreciation and amortization expenses

Depreciation and amortization declined by 6% from the first quarter of 2001 due to some assets being fully amortized by the end of the year. Due to tighter controls on spending, asset additions during the first quarter of fiscal 2002 did not increase at the same rate as assets which were fully amortized during fiscal 2001.

No significant changes in depreciation and amortization are expected for the remainder of fiscal 2002.

Interest income

Interest income declined 72% for the quarter ended February 28, 2002 from the quarter ended February 28, 2001. This can be attributed to a significant decline in interest rates from approximately 5.6% in the first quarter of 2001 to approximately 1.8% in the first quarter of 2002. In addition, there was a decline in cash invested as a result of additional costs related to the acquisition of Micrografx, Inc.

Interest income may fluctuate depending on interest rate yields achieved throughout the remainder of fiscal 2002.

Income taxes

Income tax expense declined by 132% as a result of a reduction of the future income tax liability related to the purchase of Micrografx, Inc.

Liquidity and capital resources

As of February 28, 2002, Corel's principal sources of liquidity included cash and cash equivalents and short-term investments of approximately $114.7 million, and trade accounts receivable of $19.5 million. As of February 28, 2002, $19.4 million of cash was restricted in use as it was held as security against certain corporate financial obligations, including $16.3 million held in trust as a requirement for the participation rights issued in the acquisition of Micrografx, Inc.

Cash used in operations was $4.6 million for the first quarter of fiscal 2002 compared to cash provided by operations of $6.7 million for the first quarter of 2001. The decrease was primarily due to additional spending on research and development, and additional costs associated with the acquisition of Micrografx, Inc.

Trade accounts receivable, net of provisions increased from the November 30, 2001 balance of $18.7 million to $19.5 million. The increase was partly a result of the increased corporate licence sales during the quarter.

Accounts payable and accrued liabilities decreased from $27.9 million at November 30, 2001 to $22.6 million at February 28, 2002 mainly due to payment of many previously accrued liabilities, including those that were assumed on the acquisition of Micrografx, Inc.

Financing activities provided $0.1 million in the first quarter of 2002 compared to cash used in financing activities of $4.9 million in the first quarter of 2001. The source of cash in the first quarter of fiscal 2002 through financing activities was the issuance of shares. The use of cash in the first quarter ending fiscal 2002 can be attributed to repayment of the Novell obligations of $5 million.

Cash provided from investing activities was $52.0 million in the first quarter of 2002 compared to cash used in investing activities of $4.8 million in the first quarter of 2001. The primary source of cash was the redemption of short-term investments, which provided $55.1 million. The main use of cash for investing activities during the quarter was for costs associated with the acquisition of Softquad Software, Ltd. of $2.0 million, as well as for expenditures for capital assets of $1.0 million.

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 warrants are exercised. The Company had not issued any shares under this agreement as of February 28, 2002.

The Company currently has $72.4 million of cash and cash equivalents and $22.9 million of short-term investments which are highly liquid. The Company believes this along with future cash flow from operations will provide sufficient liquidity for the near term. Cash provided from operations is expected to decrease and perhaps continue to be negative over the next two to three quarters as the Company builds its two new brands (procreate and DEEPWHITE) and develops new product lines from technology acquired from Micrografx Inc. and SoftQuad Software Ltd. The Company believes available balances of cash and cash equivalents and short-term investments are sufficient to meet its working capital requirements for the foreseeable future.

The Company will incur costs associated with the acquisition in the quarter ending May 31, 2002. Although the Company's management is still in the process of evaluating the nature, scope, and extent of the restructuring, it currently estimates that the related charges will be in the range of $2,000,000 to $3,500,000 in the aggregate.

Future Payments

Commitments under lease and sponsorship contract obligations as of February 28, 2002 were as follows:

Fiscal year	Operating leases	Sponsorship contracts	Total
2002	3,034	640	3,674
2003	3,361	874	4,235
2004	3,320	900	4,220
2005	3,115	927	4,042
2006	2,544	955	3,499
2007 and thereafter	27,955	10,575	38,530
	$ 43,329	$ 14,871	$ 58,200

Potential Fluctuations in Quarterly Results

The Company has experienced, and expects to continue to experience, significant fluctuations in its quarterly operating results due to the following factors: market acceptance of new and enhanced products, timing and shipment of significant orders, mix of products sold, exchange rate fluctuations, length of revenue cycles and cycles in the markets the Company serves. In addition, the Company's net revenue and operating results for a future quarter will depend on generating and shipping orders in the same quarter that the order is received. The failure to receive anticipated orders or delays in shipments near the end of a quarter, due to rescheduling, cancellations or unexpected manufacturing difficulties, may cause net revenue in a particular quarter to fall significantly below expectations. This could adversely affect the Company's operating results for such quarter.

Being first to market with new products is critical to revenue growth. As the Company and its competitors develop new products, demand for the Company's current and future products will fluctuate. If demand for the Company's products were to decline significantly, revenue would decline and cost of sales would increase as a result of obsolete inventory and accelerated amortization of capitalized licences.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in Canada. The preparation of these financial statements requires Corel to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, Corel evaluates its estimates including those related to product returns, bad debts, inventories, intangible assets, income taxes, contingencies and litigation. Corel bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Corel believes the following critical accounting policies affect its more significant judgements and estimates used in the preparation of its consolidated financial statements:

• Revenue recognition

The Company recognizes revenue in accordance with Statement of Position ("SOP") 97-2, "Software Revenue Recognition," issued by the American Institute of Certified Public Accountants ("AICPA"), SOP 98-9, "Modification of 97-2, Software Recognition with Respect to Certain Transactions" and Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial Statements", issued by the Securities and Exchange Commission ("SEC").

The Company records product revenue from packaged software and license fees to when persuasive evidence of an arrangement exists, the software product has been shipped, there are no significant uncertainties surrounding product acceptance, the fees are fixed and determinable and collection is considered probable.

Revenue is net of a provision for product returns. In computing this provision, management uses estimates and professional judgement. These estimates are based on information on channel inventory and current run rates. Consequently, actual return rates could vary materially from management's estimates. An increase in the return rate could result from changes in consumer demand. Should this variance occur, revenues could fluctuate significantly. Variances from estimated return rates and actual return rates are adjusted for quarterly.

At the time of contract signing, the Company assesses whether the fee associated with the revenue transactions is fixed and determinable based on the payment terms associated with the transaction. The Company considers the fee to be fixed and determinable if it is due within our normal payment terms, which are generally 30 to 90 days from invoice date.

The Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company does not request collateral from our customers. If it is determined that collection of a fee is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

The Company uses binding purchase orders and signed license agreements as evidence of an arrangement. The Company's arrangements do not include acceptance clauses.

The Company reviews its accounts receivable and evaluates the adequacy of its allowance for doubtful accounts. Specific items that are analyzed include historical bad debts, changes in customer payments, and current economic trends.

• Income taxes

The Company has a net future tax asset, the principal components of which are book and tax differences on assets and net operating loss carryforwards. The Company believes sufficient uncertainty exists regarding the realizability of these net future tax assets such that a valuation allowance has been taken on the entire amount. Assumptions regarding the realizability of these net future tax assets are revisited at each balance sheet date. Any changes in the Company's overall operating environment and financial performance could result in adjustments to the valuation allowance.

• Goodwill

The Company assesses the impairment of identifiable intangible assets, long-lived assets and related goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Future adverse changes in the market conditions or poor operating results of the underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment's carrying value, thereby, possibly requiring an impairment charge in the future.

.

New Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, which is the fiscal year beginning December 1, 2002 for the Company. The Company has not assessed the impact that the adoption of this standard will have on its results of operations or financial position.

In December 2001, the CICA issued AcG 13 - "Hedging Relationships" ("AcG 13"). The guideline presents the views of the Canadian Accounting Standards Board on the identification, designation, documentation and effectiveness of hedging relationships, for the purpose of applying hedge accounting. The guideline is effective for all fiscal years beginning on or after January 1, 2002, which is the fiscal year beginning December 1, 2002 for the Company. The Company has not assessed the impact that the adoption of this standard will have on its results of operations or financial position.

In January 2002, the CICA amended CICA 1650 - "Foreign Currency Translation" ("CICA 1650"). The amended standard eliminates the requirement to defer and amortize exchange gains and losses related to a foreign currency denominated monetary items with a fixed or ascertainable life extending beyond the end of the following fiscal year, and require new disclosure surrounding foreign exchange gains and losses. The standard is effective for all fiscal years beginning on or after January 1, 2002, which is the fiscal year beginning December 1, 2002 for the Company. The Company has not assessed the impact that the adoption of this standard will have on its results of operations or financial position.

In January 2002, the CICA issued CICA 3870 - "Stock-Based Compensation and Other Stock-Based Payments" ("CICA 3870"). This section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. This section sets out a fair value-based method of accounting and is required for certain, but not all, stock-based transactions. The recommendations of this section should be adopted for fiscal years beginning on or after January 1, 2002, which is the fiscal year beginning December 1, 2002 for the Company, and applied to awards granted on or after the date of adoption. The Company has not assessed the impact that the adoption of this standard will have on its results of operations or financial position.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest rate risk

Corel's exposure to market risk for changes in interest rates relates primarily to its investment portfolio of cash equivalents and short-term investments. The primary objective of the Company with respect to investments is security of principal. Investment criteria include selecting securities having an acceptable credit rating and diversifying both issuers and terms to maturity, which in no case exceed one year. Short-term investments include only those securities with active secondary or resale markets to ensure portfolio liquidity. Sustained low general interest rates, particularly in the United States, could significantly reduce Corel's interest income. Corel does not use derivative financial instruments in its investment portfolio.

At February 28, 2002, interest rates on the Company's investments ranged from 1.75% to 2.01% per annum (average rate approximately 1.85% per annum) with all investments maturing by the end of June 2002. The Company's cash, cash equivalents and short-term investments are denominated predominantly in US dollars.

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

		Weighted average	Fair value at
	Maturity balance	after-tax yield	February 28, 2002
Cash equivalents	$ 3,000	0.50%	$ 3,038
Commercial Paper	84,303	1.34%	84,484
Total investment portfolio	$ 87,303	1.31%	$ 87,522

Foreign currency risk

Corel conducts business worldwide. Revenues and expenses are generated primarily in US dollars, but the Company does operate in foreign currencies, primarily in Canada and Europe and, to a lesser extent, in Australia, Latin America, Japan and other Asian countries. As the Company's business expands, its exposure to foreign currency risk will increase. Corel continues to monitor its foreign currency exposure to minimize the impact on its business operations. Corel has mitigated, and expects to continue to mitigate, a portion of its currency exposure through decentralized sales, marketing and support operations in which most costs are local currency based. As of February 28, 2002, Corel had no foreign currency hedges outstanding.

PART II. OTHER INFORMATION

Item 1. Legal and Government Proceedings

On March 13, 2000, the Company was served with a complaint filed against it and Dr. Michael C.J. Cowpland by plaintiffs Anthony Basilio and Fred Spagnola in the United States District Court for the Eastern District of Pennsylvania. The Complaint was filed on behalf of all persons who purchased or otherwise acquired Corel common shares between December 7, 1999 and December 21, 1999 (the "Class Period"). The Complaint alleges that the defendants violated various provisions of U.S. federal securities laws, including Section 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as amended, by misrepresenting or failing to disclose material information about the Company's financial condition. The Complaint seeks an unspecified amount of money damages. Numerous other complaints were filed thereafter, each making similar allegations and referencing the same Class Period as the initial claims. The Court appointed Fred Spagnola, Michael Perron and David Chavez as Lead Plaintiffs, and the law firms of Weinstein, Kitchenoff Scarlato & Goldman Ltd., and Savett Frutkin Podell & Ryan, P.C. as Co-Lead Counsel. The Court has consolidated all pending cases in the Eastern District of Pennsylvania. An Amended Consolidated Complaint was served on or about August 14, 2000, which claims an expanded Class Period, from December 7, 1999 to March 20, 2000 (inclusive), and contains several new allegations. On or about July 6, 2001, the Company and co-defendant Cowpland filed their answers to the amended Complaint, denying all liability to Plaintiffs and asserting various affirmative defenses. By order dated February 1, 2002, the Court granted Plaintiffs' motion for class certification, but withheld judgement until a later date as to whether the Class Period could be expanded to March 20, 2000 from the initial Class Period claimed. That decision is still pending.

The Company is a party to a number of additional claims arising in the ordinary course of business relating to employment, intellectual property and other matters. Based on its review of the individual matters, the Company believes that such claims, individually, will not have a material adverse effect on its business, financial position or results of operations but, in the aggregate, may have a material adverse effect on its business, financial position or results of operations. Such possible effect cannot be reasonably estimated at this time.

Item 6. Exhibits and Reports on Form 8-K

a) The following exhibits are filed as part of this Quarterly Report on Form 10Q

3.1 Certificate and Articles of Incorporaton (1)

3.2 By-law No. 7 (2)

3.3 Certificate and Articles of Amalgamation of Corel Corporation and Corel Computer Corp. (1)

3.4 Amendment to Articles of Incorporation (2)

10.1 Corel Corporation Stock Option Plan 2000, as amended February 12, 2002 (2)

10.2 Form of Employment Agreement between the Company and each of John Blaine, Graham Brown, Steven Houck, Gary Klembara, Ian Legrow, Ed Maddock, Annette McLeave, Stephen Quesnelle, Rene Schmidt, and Bruce Sharpe (2)

(1) Previously filed as an exhibit to the Company's Registration Statement No. 33-50886 and incorporated herein by reference

(2) Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

COREL CORPORATION

(Registrant)

Date: April 15, 2002 By: /s/ John Blaine

John Blaine

Chief Financial Officer, Executive Vice President Finance and Treasurer

(Principal Financial and Accounting Officer)

EX-3.2

BY-LAW NO. 7

A by-law relating generally to
the transaction of the business
and affairs of

COREL CORPORATION

DIRECTORS

1. Calling of and notice of meetings. Meetings of the board will be held at such place and time and on such day as [the Chairman, the President or the Secretary] or any two directors may determine. Notice of meetings of the board will be given to each director not less than 48 hours before the time when the meeting is to be held. Each newly elected board may without notice hold its first meeting for the purposes of organization and the appointment of officers immediately following the meeting of shareholders at which such board was elected.

2. Votes to govern. At all meetings of the board every question will be decided by a majority of the votes cast on the question; and in case of an equality of votes the chairman of the meeting will be entitled to a second or casting vote.

3. Interest of directors and officers generally in contracts. No director or officer will be disqualified by his or her office from contracting with the Corporation nor will any contract or arrangement entered into by or on behalf of the Corporation with any director or officer or in which any director or officer is in any way interested be liable to be voided nor will any director or officer so contracting or being so interested be liable to account to the Corporation for any profit realized by any such contract or arrangement by reason of such director or officer holding that office or of the fiduciary relationship thereby established; provided that, in each case, the director or officer has complied with the provisions of the Canada Business Corporations Act.

SHAREHOLDERS' MEETINGS

4. Quorum. At any meeting of shareholders, a quorum will be persons present in person or by means of a telephone, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting and each entitled to vote at the meeting and holding or representing by proxy not less than

33 1/3% of the votes entitled to be cast at the meeting.

5. Meetings by telephonic or electronic means. A meeting of the shareholders may be held by means of telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.

INDEMNIFICATION

6. Indemnification of directors and officers. The Corporation will indemnify a director or officer of the Corporation, a former director or officer of the Corporation or another individual who acts or acted at the Corporation's request as a director or officer, or in a similar capacity, of another entity, and his or her heirs and legal representatives to the extent permitted by the Canada Business Corporations Act.

7. Indemnity of others. Except as otherwise required by the Canada Business Corporations Act and subject to paragraph 6, the Corporation may from time to time indemnify and save harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as an employee, agent of or participant in another entity against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted honestly and in good faith with a view to the best interests of the Corporation or, as the case may be, to the best interests of the other entity for which he or she served at the Corporation's request and, with respect to any criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction will not, of itself, create a presumption that the person did not act honestly and in good faith with a view to the best interests of the Corporation or other entity and, with respect to any criminal or administrative action or proceeding that is enforced by a monetary penalty, had no reasonable grounds for believing that his or her conduct was lawful.

8. Right of indemnity not exclusive. The provisions for indemnification contained in the by-laws of the Corporation will not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of shareholders or directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, and will continue as to a person who has ceased to be a director, officer, employee or agent and will inure to the benefit of that person's heirs and legal representatives.

9. No liability of directors or officers for certain matters. To the extent permitted by law, no director or officer for the time being of the Corporation will be liable for the acts, receipts, neglects or defaults of any other director or officer or employee or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation or for or on behalf of the Corporation or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Corporation will be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or body corporate with whom or which any moneys, securities or other assets belonging to the Corporation will be lodged or deposited or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Corporation or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of his or her respective office or trust or in relation thereto unless the same will happen by or through his or her failure to act honestly and in good faith with a view to the best interests of the Corporation and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If any director or officer of the Corporation is employed by or performs services for the Corporation otherwise than as a director or officer or is a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Corporation, the fact of his or her being a director or officer of the Corporation will not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services.

MISCELLANEOUS

10. Invalidity of any provisions of this by-law. The invalidity or unenforceability of any provision of this by-law will not affect the validity or enforceability of the remaining provisions of this by-law.

11. Omissions and errors. The accidental omission to give any notice to any shareholder, director, officer or auditor or the non-receipt of any notice by any shareholder, director, officer or auditor or any error in any notice not affecting its substance will not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon.

INTERPRETATION

12. Interpretation. In this by-law and all other by-laws of the Corporation words importing the singular number only include the plural and vice versa; words importing any gender include all genders; words importing persons include an individual, partnership, association, body corporate, trustee, executor, administrator or legal representative; "board" means the board of directors of the Corporation; "Canada Business Corporations Act" means Canada Business Corporations Act, R.S.C. l985, c. C-44 as amended from time to time or any Act that may be substituted therefor; and "meeting of shareholders" means and includes an annual meeting of shareholders and a special meeting of shareholders.

REPEAL

13. Repeal. By-law No. 6 of the Corporation is repealed as of the coming into force of this by-law provided that such repeal will not affect the previous operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under or the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All officers and persons acting under any by-law so repealed will continue to act as if appointed by the directors under the provisions of this by-law or the Canada Business Corporations Act until their successors are appointed.

[PASSED BY THE BOARD OF DIRECTORS OF THE CORPORATION ON FEBRUARY 12, 2002 AND CONFIRMED BY THE SHAREHOLDERS OF THE CORPORATION ON MARCH 28, 2002]

EX-3.4

Industry Canada	Industrie Canada
Corporations Directorate	Direction generale des Corporations
9th floor	9e etage
Jean Edmonds Towers South	Tour Jean Edmonds sud
365 Laurier Avenue West	365, avenue Laurier ouest
Ottawa, Ontario K1A 0C8	Ottawa (Ontario) K1A 0C8

April 3, 2002 / le 3 avril 2002	Your file - Votre référence
LIZ PERRAS	Our file - Notre référence
lperras@mccarthy.ca	355888-6

Re - Objet: COREL CORPORATION

Enclosed herewith is the document issued in the above matter. A notice of issuance of CBCA documents will be published in the Canada Corporations Bulletin .	Vous trouverez ci-inclus le document émis dans l'affaire précitée. Un avis de l'émission de documents en vertu de la LCSA sera publié dans le Bulletin des sociétés canadiennes .
IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE OBSERVED:	S'IL EST QUESTION D'UNE DÉNOMINATION SOCIALE OU D'UN CHANGEMENT DE DÉNOMINATION SOCIALE, L'AVERTISSEMENT SUIVANT DOIT ÊTRE RESPECTÉ :
This name is available for use as a corporate name subject to and conditional upon the applicants assuming full responsibility for any risk of confusion with existing business names and trade marks (including those set out in the relevant NUANS search report(s)). Acceptance of such responsibility will comprise an obligation to change the name to a dissimilar one in the event that representations are made and established that confusion is likely to occur. The use of any name granted is subject to the laws of the jurisdiction where the company carries on business.	Cette dénomination sociale est disponible en autant que les requérants assument toute responsabilité de risque de confusion avec toutes dénominations commerciales et toutes marques de commerce existantes (y compris celles qui sont citées dans le(s) rapport(s) de recherches de NUANS pertinent(s)). Cette acceptation de responsabilité comprend l'obligation de changer la dénomination de la société en une dénomination différente advenant le cas où des représentations sont faites établissant qu'il y a une probabilité de confusion. L'utilisation de tout nom octroyé est sujette à toute loi de la juridiction où la société exploite son entreprise.
We trust this is to your satisfaction.	Nous espérons le tout à votre satisfaction.

Email: corporations.efiling@ ic.gc.ca

Internet: http://strategis.ic.gc.ca/corporations

Industry Canada	Industrie Canada	ELECTRONIC TRANSACTION REPORT	RAPPORT DE LA TRANSACTION ELECTRONIQUE
Canada Business	Loi canadienne sar les
Corporations Act	societes par actions	ARTICLES OF AMENDMENT	CLAUSES MODIFICATRICES
		(SECTIONS 27 OR 177)	(ARTICLES 27 OU 177)

Processing Type - Mode de traitement: E-Commerce/Commerce-E
1. Name of Corporation - Denomination de la societe	2. Corporation No. - No de la societe
COREL CORPORATION	355888-6
3. The articles of the above-named corporation are amended as follows: Les status de la societe mentionnee ci-dessus sont modifies de la facon suivante:
1. To provide, as part of the other provisions set out in paragraph 2 of the articles, that the registered office of the Corporation be in the Province of Ontario; and 2. To provide, as part of the other provisions set out in paragraph 7 of the articles, that the actual number of directors within the minimum and maximum number set out in paragraph 5 of the articles may be determined from time to time by resolution of the directors and that any vacancy among the directors resulting from an increase in the number of directors as so determined may be filled by resolution of the directors.

Date	Name - Nom	Signature	Capacity of - en qualite
2002-04-01	ROBERT D. CHAPMAN		AUTHORIZED OFFICER

Industry Canada	Industrie Canada
Certificate of Amendment	Certificat de modification
Canada Business Corporations Act	Loi canadiennes sur les societes par actions

COREL CORPORATION		355888-6
Name of corporation-Denomination de la societe		Corporation number-numero de la societe
I hereby certify that the articles of the above-named corporation were amended:		Je certifie que les status de la societe susmentionnee ont ete modifies:
a) under section 13 of the Canada Business Corporations Act in accordance with the attached notice;		a) en vertu de l'article 13 de la Loi canadienne sur les sociétés par actions, conformément à l'avis ci-joint;
b) under section 27 of the Canada Business Corporations Act as set out in the attached articles of amendment designating a series of shares;		b) en vertu de l'article 27 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses modificatrices ci-jointes désignant une série d'actions;
c) under section 179 of the Canada Business Corporations Act as set out in the attached articles of amendment;	X	c) en vertu de l'article 179 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses modificatrices ci-jointes;
d) under section 191 of the Canada Business Corporations Act as set out in the attached articles of reorganization;		d) en vertu de l'article 191 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses de réorganisation ci-jointes;
/s/director - directeur Director - Directeur		April 2, 2002/ le 2 avril 2002 Date of Amendment - Date de modification

EX-10.1

COREL CORPORATION

STOCK OPTION PLAN 2000

1. Purpose of the Plan

The purpose of the Stock Option Plan 2000 is to develop the interest and incentive of eligible participants of Corel Corporation and its subsidiaries (the "Company") in the Company's growth and development by giving eligible participants an opportunity to purchase Common Shares on a favourable basis, thereby advancing the interests of the Company and its shareholders and increasing the ability of the Company to attract and retain skilled and motivated individuals in the service of the Company.

The Board of Directors has approved the terms of this Plan.

2. Definitions

In this Plan:

(a) "Associate" has the meaning assigned by the Securities Act (Ontario), as amended from time to time;

(b) "Board of Directors" means the board of directors of the Company;

(c) "Committee" means the appropriate compensation committee of three or more members appointed by the Board of Directors to administer the Plan. All references in the Plan to the Committee means the Board of Directors if no Committee has been appointed;

(d) "Common Shares" means the Common Shares of the Company or in the event of an adjustment contemplated in Section 9 hereof, such other Common Shares to which a Participant may be entitled upon the exercise of an option as a result of such readjustment;

(e) "Consultant" means a person that

(i) is engaged to provide on a bona fide basis consulting, technical, management or other services to the Company under a written contract between the Company and that person or a company or partnership of which that person is an employee, shareholder or partner; and

(ii) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company;

(f) "Date of Grant" means the date a Participant is granted an option to purchase Option Shares;

(g) "Director" means a person occupying the position of director on the Board of Directors of the Company or on the board of directors of any subsidiary of the Company;

(h) "Employee" means a full time permanent employee of the Company or its subsidiaries, including any individual who has accepted an offer of employment from the Company or any of its subsidiaries;

(i) "Exchange" means The Toronto Stock Exchange;

(j) "Exercise Date" means the last Friday of any calendar month during the Option Period or such other date designated from time to time by the Chief Executive Officer with respect to any Participant provided that on any such date, the Company receives from the Participant a completed Stock Option Purchase Form with payment for the Option Shares being purchased;

(k) "Former Plan" means the Corel Corporation Stock Option Plan dated January 25, 1990 as amended on September 17, 1992, November 22, 1993, March 31, 1994, March 30, 1995, March 12, 1996 and April 18, 1997;

(l) "Insider" means:

(i) an insider of the Company as defined by the Securities Act (Ontario) as amended from time to time, other than a person who falls within such definition solely by virtue of being a director or senior officer of a subsidiary of the Company; and

(ii) an Associate of any person who is an insider by virtue of clause (a) of this definition;

(m) "Market Price" per Common Share at any date shall be the closing price of the Common Shares on the Exchange (or, if the Common Shares are not then listed or posted for trading on the Exchange, on such stock exchange in Canada on which such shares are listed and posted for trading as may be selected for such purposes by the Committee) on the trading date immediately preceding the Date of Grant. In the event that the Common Shares are not listed and posted for trading in any stock exchange in Canada, the market price shall be the last trading price of the Common Shares on National Association of Securities Dealers Quotations Systems ("NASDAQ") on the trading day immediately preceding the Date of Grant. In the event that the Common Shares are not trading on NASDAQ, the market price shall be determined by the Committee in its sole discretion;

(n) "Officer" means a person appointed as an officer of the Company by the Board of Directors or as an officer of any subsidiary of the Company by the board of directors of such subsidiary;

(o) "Option Period" means the period set forth in Section 6 during which a Participant may purchase Option Shares;

(p) "Option Price" means the price per share at which a Participant may purchase Option Shares denominated in Canadian or United States currency;

(q) "Outstanding Issue" means the number of Common Shares that are outstanding immediately prior to any issuance of options under this Plan or any issuance of Option Shares, as the case may be, excluding Option Shares issued pursuant to the Plan or the Former Plan during the preceding one year period;

(r) "Option Shares" means the Common Shares of the Company which a Participant is entitled to purchase under the Plan;

(s) "Participants" means Employees, Directors, Officers and Consultants to whom options to purchase Option Shares are granted pursuant to the Plan and which remain unexercised;

(t) "Plan" means the Corel Corporation Stock Option Plan 2000; and

(u) "Stock Option Purchase Form" shall mean such form as may from time to time be determined by the Company.

3. Eligibility

Participation in the Plan shall be limited to Participants who are designated from time to time by the Committee. Participation shall be voluntary and the extent to which any Participant shall be entitled to participate in the Plan shall be determined by the Committee.

4. Number of Option Shares and Limitations on Issuance

The aggregate number of Option Shares which may be issued hereunder shall not exceed 10,400,000. The following restrictions shall also apply to this Plan:

(a) the number of Option Shares reserved for issuance pursuant to options granted to insiders shall not exceed 10% of the Outstanding Issue;

(b) insiders shall not be issued, within any one year period, a number of Option Shares which exceeds 10% of the Outstanding Issue;

(c) no insider and such insider's Associates shall be issued, within any one year period, a number of Option Shares which exceeds 5% of the Outstanding Issue; and

(d) the aggregate number of Option Shares reserved for issuance pursuant to options granted to any one Participant shall not exceed 5% of the Outstanding Issue.

No fractional shares may be purchased or issued hereunder. Subject to the foregoing, the number of Option Shares that a Participant is entitled to purchase under the Plan will be determined by the Committee. For greater certainty, any Common Shares which are the subject of an option granted hereunder, which options are terminated or expire or are surrendered, shall be available for the further grant of options hereunder.

5. Price for Option Shares

The Committee shall advise each Participant designated to participate in the Plan of the number of Option Shares such Participant is entitled to purchase, the Option Price at which the Option Shares may be purchased and the Exercise Date(s) upon which the Option Shares may be purchased. The Option Price at which Option Shares may be purchased under the Plan shall be fixed by the Committee and confirmed by the Board of Directors and shall be not less than the Market Price of the Common Shares of the Company at the Date of Grant.

The Chief Executive Officer of the Company may grant options from time to time between meetings of the Committee in the amount of up to 100,000 Common Shares in the aggregate and upon the reporting from time to time of the grant of such Option Shares to a meeting of the Board of Directors, the amount available for such grants by the Chief Executive Officer shall be restored to the full amount of 100,000 Common Shares.

6. Exercise

Subject to the requirements of applicable regulatory authorities, the exercise period and vesting period of any option shall be determined by the Committee and shall be set forth in the notice of grant of such option. In the event that no exercise or vesting period is specified by the Committee, each option granted under the Plan shall vest and may be exercised as follows:

Percentage of Total Number of Option Shares which may be Purchased	Option Period
33 1/3%	Four years commencing on the Date of Grant
33 1/3%	Three years commencing on the first anniversary of Date of Grant
33 1/3%	Two years commencing on the second anniversary of the Date of Grant

Any Option Shares not purchased by a Participant during the Option Period shall lapse and such Participant shall have no further right to purchase such shares.

7. Payment

The Participant from time to time and at any time during the Option Period, may elect to purchase all or a portion of the Option Shares available for purchase during the Option Period by lump sum payment by delivering to the Company on the relevant Exercise Date a completed Stock Option Purchase Form. Such Form shall specify the number of Option Shares the Participant desires to purchase and shall be accompanied by payment in full of the purchase price for such Option Shares. Payment may be made by cash, certified cheque, bank draft, money order or the equivalent payable to the order of the Company.

8. Share Certificates

Upon exercise of the option and payment in full of the Option Price, the Company shall cause to be delivered to the Participant within a reasonable period of time a certificate or certificates in the name of the Participant representing the number of Option Shares the Participant has purchased.

9. Adjustments in Shares

The number of Common Shares subject to the Plan, the number of Common Shares available under options granted and the Option Price shall be adjusted automatically from time to time to reflect adjustments in the number of Common Shares arising as a result of subdivision, stock dividends, consolidations or reclassification of the Common Shares or other relevant changes in the authorized or issued capital of the Company. In the event that the Company proposes to amalgamate, merge or consolidate with any other corporation or to liquidate, dissolve or wind-up, the Company shall give written notice thereof to each Participant holding options under the Plan and such Participants shall be entitled to purchase all or a portion of the Option Shares granted to such Participants, whether or not such Option Shares have previously vested, within the 30 day period next following the giving of such notice. Upon the expiration of such 30 day period, all rights of the Participants to the Option Shares or to the exercise of same shall terminate and cease to have any further force and effect.

10. Termination of Employment for Any Reason Other Than Death

(a) Except as otherwise determined pursuant to the provisions of Section 6 and subject to the provisions of Section 10(b) hereof, in the event that:

(i) an Employee's employment with the Company or any of its subsidiaries is terminated;

(ii) a Director shall cease to hold office as a Director on the Board of Directors;

(iii) an Officer who is not also an Employee shall cease to hold office as an Officer of the Company; or

(iv) a Consultant's engagement by the Company is terminated,

in each case, during the Option Period for any reason other than death, cause or resignation, such Participant may elect to purchase all or a portion of the remaining Option Shares that such Participant is entitled to purchase at the time such employment or engagement is terminated or such Participant ceases to hold office as a Director or Officer at any time during the 30 day period commencing on the later of (i) the date of termination of employment or engagement or ceasing to hold a board or office position, and (ii) the date of expiry of any contractual restriction on the resale of the Option Shares to which the Participant is subject (and to which the Participant had consented at the request of the Company) at the date of termination of employment or engagement or ceasing to hold a board or office position, but in no event, after the expiration of the Option Period. In the case of termination of employment or engagement or ceasing to hold office for cause or resignation, the Participant shall not be entitled to purchase any Option Shares after the date of termination. The effective date of termination or ceasing to hold office shall be the date of death, the date specified in the notice from the Company or, in the case of resignation, from the Participant, and shall not be affected by the subsequent decision of any court or other body that the termination was improper, unlawful, without sufficient notice or otherwise deficient in any respect. For the purposes of this Plan, the transfer of the Employee's employment to the Company or to any subsidiary of the Company shall not be considered a termination of employment and the Employee's rights under the option shall be the same as if such transfer had not occurred.

(b) At any time before or after the relevant period set forth in Section 10(a), the Chief Executive Officer may extend such period as it applies to any former Director, Officer, Employee or Consultant, to a date which shall not be later than the expiration of the Option Period.

11. Termination by Reason of Death

In the event the Participant dies during the Option Period, the Participant's legal representative will be permitted to exercise any previously unexercised vested options granted under the Plan prior to the Participant's death and take delivery of all Option Shares previously purchased but not delivered, at any time during the 12 month period commencing on the later of (i) the date of death of the Participant and (ii) the date of expiry of any contractual restriction on the resale of the Option Shares to which the Participant was subject (and to which the Participant had consented at the request of the Company) at the date of death, but in no event after the expiration of the Option Period.

12. Transfer and Assignment

The Participant's rights under options granted under the Plan are not assignable or transferable by the Participant or subject to any other alienation, sale, pledge or encumbrance by the Participant during the Participant's lifetime and, therefore, the options are exercisable during the Participant's lifetime only by the Participant. The obligations of each Participant shall be binding on his or her heirs, executors and administrators.

13. Employment, Office and Board Position Non-Contractual

The granting of an option to a Participant under the Plan does not confer upon the Participant any right to continue in the employment of the Company or any subsidiary of the Company, to continue as an Officer of the Company or as a member of the Board of Directors, or to continue as a Consultant to the Company as the case may be, nor does it interfere in any way with the rights of the Employee or of the Company's right to terminate the Employee's employment at any time, the Board of Director's right to appoint Officers or of the shareholders' right to elect directors.

14. Rights as Shareholders

Participants shall not have any rights as a shareholder with respect to Option Shares until full payment has been made to the Company and a share certificate or share certificates have been duly issued.

15. Participant Loan

The Committee may authorize the Company to lend or cause to be lent to Participants such portion of the purchase price of the Option Shares under the Plan as a Participant may request and the Committee administering the Plan may approve. The terms and conditions of such loan which may be interest bearing or interest free shall be determined by the Committee in its discretion and need not be the same in respect of all Participants.

16. Administration of the Plan

The Plan shall be administered by the Board of Directors or the Committee. The Board of Directors or the Committee shall have the power to interpret and construe the terms and conditions of the Plan and the options. Any determination by the Board of Directors shall be final and conclusive on all persons affected thereby. Any determination by the Committee shall be final and conclusive on all persons affected thereby unless otherwise determined by the Board of Directors. The day-to-day administration of the Plan may be delegated to such officers and employees of the Company or any subsidiary of the Company as the Board of Directors or the Committee shall determine.

17. Notices

All written notices to be given by the Participant to the Company may be delivered personally or by registered mail, postage prepaid, addressed as follows:

Corel Corporation
1600 Carling Avenue
Ottawa, Ontario
KIZ 7M5
Attention: Secretary.

Any notice given by the Participant pursuant to the terms of the option shall not be

effective until actually received by the Company at the above address. Any notice to be given to the Participant shall be sufficiently given if delivered personally or by postage prepaid mail to the last address of the Participant on the records of the Company and shall be effective seven days after mailing.

18. Corporate Action

Nothing contained in the Plan or in any option shall be construed so as to prevent the Company or any subsidiary of the Company from taking corporate action which is deemed by the Company or the subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan.

19. Amendment

The Board of Directors of the Company shall have the right, in its sole discretion, to alter or amend the Plan from time to time and at any time. No such amendment, however, may, without the consent of the Participant, alter or impair his or her rights or increase his or her obligations under the Plan.

20. Governing Law

The Plan is established under the laws of the Province of Ontario and the rights of all parties and the construction and effect of each provision of the Plan shall be according to the laws of the Province of Ontario.

21. Government Regulation

The Company's obligation to issue and deliver Common Shares under any option is subject to:

(a) satisfaction of all requirements under applicable securities law in respect thereof and obtaining all regulatory approvals as the Company shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;

(b) the admission of such Common Shares to listing on any stock exchange on which the Common Shares may then be listed; and

(c) the receipt from the Participant of such representations, agreements and undertakings as to future dealings in the Common Shares as the Company determines to be necessary or advisable in order to safeguard against the violation of the securities law of any jurisdiction.

In this connection the Company shall take all reasonable steps to obtain such approvals and registrations as may be necessary for the issuance of such Common Shares in compliance with applicable securities law and for the listing of such Common Shares on any stock exchange on which the Common Shares are then listed.

22. Approval

The Plan shall be subject to acceptance by the Exchange in compliance with all conditions imposed by the Exchange. Any options granted prior to such acceptance shall be conditional upon such acceptance being given and any condition complied with. No such options may be exercised unless such acceptance is given and such conditions are complied with.

As amended and restated the 12^th day of February, 2002.

COREL CORPORATION


"Derek J. Burney"

President and
Chief Executive Officer

"Robert D. Chapman"

Secretary

EX-10.2

EMPLOYMENT AGREEMENT

BETWEEN

[EVP Name]

AND

COREL CORPORATION

MADE AS OF [Month, day] 2002

EMPLOYMENT AGREEMENT

THIS AGREEMENT made as of [Month, day] 2002;

B E T W E E N:

COREL CORPORATION

(the "Corporation")

OF THE FIRST PART,

- and -

[EVP Name]

(the "Executive")

OF THE SECOND PART.

WHEREAS the Executive has been employed with the Corporation since [month, day, year] in a variety of capacities, having been appointed as [Job Title] on [hire date of month, day, year];

AND Whereas the Executive and the Corporation wish to formalize the terms and conditions of the Executive's employment as Current Title with the Corporation;

THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements contained in this Agreement, the parties agree as follows:

ARTICLE 1 - DEFINITIONS

1.1 Change of Control

"Change of Control" means the occurrence of any of the following events:

(a) the Corporation is merged, or consolidated or reorganized into or with another corporation or other legal person in any transaction or series of related transactions (other than a transaction to which only the Corporation and one or more of its subsidiaries are parties) and as a result of such merger, consolidation or reorganization, less than 51% of the combined voting power of the outstanding voting securities of the surviving entity or person immediately after such transaction or series of related transactions, are held in the aggregate by persons or entities who were holders of voting securities of the Corporation immediately prior to such transaction;

(b) the Corporation sells all or substantially all of its assets to any other corporation or other legal person in any sale or series of related sales (other than a transaction to which only the Corporation and one or more of its subsidiaries are parties);

(c) the Corporation's Board of Directors approves the distribution to the Corporation's shareholders of all or substantially all of the Corporation's net assets, or the Corporation's Board of Directors, shareholders or a court of competent jurisdiction approves the dissolution or liquidation of the Corporation; or

(d) any other transactions or series of related transactions occur which have substantially the same effect as the transactions specified in any of the preceding clauses (other than transactions to which only the Corporation and one or more of its subsidiaries are parties).

1.2 Confidential Information

"Confidential Information" means confidential information of the Corporation, including trade secrets, customer lists and other confidential information concerning the business and affairs of the Corporation.

1.3 Date of Termination

"Date of Termination" means the date on which a proper Notice of Termination is given to or by the Executive.

1.4 Good Reason

"Good Reason" means:

(a) the Corporation and its subsidiaries, taken as a whole, cease to operate as a going concern;

(b) any action by the Corporation without the Executive's consent that constitutes constructive termination of the Executive's employment with the Corporation, including (i) any material reduction in the Executive's titles, reporting relationships, powers, authority, duties or responsibilities; (ii) any reduction in the Executive's base salary; or (iii) any material reduction in the value of the Executive's employee group insurance or health benefit plans and programmes;

(c) the Corporation fails to pay, when due, any amount payable by it to the Executive pursuant to this Agreement;

(d) any term of the Executive's employment with the Corporation is changed without the Executive's consent in any proceedings under any bankruptcy, reorganization, arrangement, dissolution, winding-up or liquidation statute or law of any jurisdiction, including the Companies' Creditors Arrangement Act (Canada).

1.5 Permanent Disability

"Permanent Disability" means the Executive's absence from his duties with the Corporation on a full time basis for more than six (6) consecutive months as a result of the Executive's incapacity due to physical or mental illness.

1.6 Severance Period

"Severance Period" means a period of 12 months from the Date of Termination.

1.7 Subsidiary

"Subsidiary" has the meaning ascribed to it in the Business Corporations Act.

ARTICLE 2 - EMPLOYMENT

2.1 Employment

Subject to the terms and conditions of this Agreement, the Corporation will employ the Executive in the office of [Current Job Title] reporting to the Chief Executive Officer. Without limiting the Executive's right to terminate this Agreement for Good Reason, the Corporation shall have the unilateral right to change the Executive's offices, titles, reporting relationships, powers, authority, duties or responsibilities.

2.2 Review

The Executive and Corporation agree that they will review the terms and conditions of the Executive's employment every three (3) years and recommend changes, if any, to this Agreement, subject to Section 7.9.

2.3 Place of Employment

The Executive will perform his work and services for the Corporation primarily at its office in [City]. The Executive acknowledges that the Board of Directors has the discretion to change the location of the head office of the Corporation, in which case the Executive will be required to relocate. In the event that the Executive agrees to relocate, expenses incurred by the Executive and his family will be reimbursed in accordance with the Corporation's relocation policy in effect at that time . The Executive acknowledges that the performance of Executive's duties and functions will necessitate frequent travel to other places.

ARTICLE 3 - REMUNERATION AND BENEFITS

3.1 Base Salary

The Corporation will pay the Executive an annual base salary of [ $X dollars]. The Executive's base salary will be reviewed annually following completion of the Corporation's financial year ending November 30 at the time of the review of compensation for the other members of the Executive Management Team or other senior management employees of the Corporation.

3.2 Benefits

The Executive will be entitled to participate in all health, disability, death, pension and other employee benefit plans and programmes of the Corporation in effect from time to time in accordance with their terms.

3.3 Incentive Plans

The Corporation may pay the Executive an annual bonus if the Corporation achieves certain revenue, pre-tax operating income and/or development or other targets to be established each year in advance by the Chief Executive Officer and the Board of Directors. If one hundred percent (100%) of the Corporate objectives and personal objectives set for a given year are attained, the Executive shall be entitled to one hundred percent (100%) of the agreed upon bonus. The amount of bonus, if any, to which the Executive will be entitled for attaining a lesser percentage of objectives will be determined by the Chief Executive Officer and the Board of Directors.

3.4 Stock Option Plans

The Executive will be eligible for a grant of options, at the discretion of the Board of Directors, in accordance with the policy and practice in place for other senior executives of the Corporation and in accordance with the terms and conditions of such grant and the stock option plan in place for senior executives of the Corporation.

3.5 Vacation

The Executive will be entitled to paid vacation each year in accordance with the policy and practice in place for other senior executives of the Corporation. The Executive will take vacation at a time or times reasonable for each of the Corporation and the Executive in the circumstances.

3.6 Expenses

The Corporation will reimburse the Executive for all reasonable out-of-pocket expenses properly incurred by Executive in the course of employment with the Corporation. The Executive will provide the Corporation with appropriate statements and receipts verifying such expenses.

3.7 Parking

The Corporation will provide a parking space for the Executive at his or her primary place of business.

3.8 Supplementary Pension Benefit

The Executive will be eligible for enrolment in the pension plan, if any, available to other senior executives of the Corporation and on the same terms and conditions applicable to other senior executives of the Corporation, subject to the condition that the Executive's compensation, as set out in Section 3.1, was determined on the assumption that any pension contributions made on behalf of the Executive will not result in contribution in excess of current RRSP contribution limits. The Executive acknowledges that the Corporation is currently reviewing the feasibility of a corporate pension plan and no decision has been made, as of this date, on the availability of a plan for company employees and executives.

ARTICLE 4 - EXECUTIVE'S COVENANTS

4.1 Full Time Service

The Executive will devote all of Executive's working time, attention and effort to the business and affairs of the Corporation and its subsidiaries and will well and faithfully serve the Corporation and its subsidiaries and will use best efforts to promote the interests of the Corporation and its subsidiaries.

4.2 Duties and Responsibilities

The Executive will duly and diligently perform all the duties assigned to Executive and commensurate with Executive's position while in the employ of the Corporation, and will truly and faithfully account for and deliver to the Corporation all money, securities and things of value belonging to the Corporation which the Executive may from time to time receive for, from or on account of the Corporation.

4.3 Rules and Regulations

The Executive will be bound by and will faithfully observe and abide by all the rules and regulations of the Corporation from time to time in force which are brought to Executive's notice or of which Executive should reasonably be aware.

4.4 Confidential Information

(a) The Executive acknowledges that, by reason of his employment with the Corporation, Executive will have access to Confidential Information. The Executive agrees that, during and after Executive's employment with the Corporation, Executive will not disclose to any person, except in the proper course of Executive's employment with the Corporation, or use for Executive's own purposes or for any purposes other than those of the Corporation, any Confidential Information acquired by Executive.

(b) Any breach of Section 4.4(a) by the Executive will result in material and irreparable harm to the Corporation although it may be difficult for the Corporation to establish the monetary value flowing from such harm. The Executive therefore agrees that the Corporation, in addition to being entitled to the monetary damages which flow from the breach, will be entitled to injunctive relief in a court of appropriate jurisdiction in the event of any breach by the Executive of Section 4.4(a). In addition, the Corporation will be relieved of any further obligation to make any payments to the Executive or provide Executive with any benefits as outlined in Section 5.3 and Executive shall be obligated to repay such amounts already received under said section, except those in Sections 5.3(a)(i) and 5.3(a)(ii), in the event of a breach by the Executive of Section 4.4(a).

ARTICLE 5 - TERMINATION

5.1 Termination by the Corporation

The Corporation may terminate the Executive's employment with the Corporation at any time by giving a Notice of Termination to the Executive.

5.2 Termination by the Executive

The Executive may terminate Executive's employment with the Corporation at any time by giving 30 days' written Notice of Termination to the Corporation.

5.3 Payments on Termination Without Cause or for Good Reason

(a) If the Executive's employment with the Corporation is terminated by the Corporation pursuant to Section 5.1 for any reason other than cause or Permanent Disability, or is terminated by the Executive pursuant to Section 5.2 for Good Reason, and subject to and conditional upon the Executive complying with the provisions of Article 6, the Corporation will:

(i) pay to the Executive an amount equal to the salary earned by Executive up to the Date of Termination and any outstanding vacation pay calculated as of such Date;

(ii) reimburse the Executive in accordance with Section 3.6 for any expenses incurred by Executive up to and including the Date of Termination;

(iii) subject to Sections 5.3(b) and (c), pay to the Executive an amount equivalent to the base salary that would have been payable to Executive, on the basis of Section 3.1, for the Severance Period, such payment to be made as a lump sum payment equivalent to six (6) months' base salary immediately upon termination of employment, with the remaining amount to be paid within twelve (12 ) months of the Date of Termination at such times as the Board of Directors shall determine in its discretion, but in such amounts and at such times as shall be not less than equal monthly installments and not more than twelve (12 ) such installments commencing thirty (30) days following the Date of Termination;

(iv) maintain the Executive's benefits referred to in Section 3.2 for the Severance Period or, if that is not possible, pay to the Executive an amount equal to the cost of such benefits, grossed up so that the after tax value of the payments is equal to the cost of the benefits to the corporation;

(v) give the Executive credit under the Corporation's pension plan for an additional period of service with the Corporation equal to the Severance Period or, if that is not possible, pay to the Executive an amount equal to the then present value of the benefits under the Corporation's pension plan attributable to such service, grossed up so that the after tax value of the payments is equal to then present value of the benefits; and

(vi) permit the Executive to exercise at any time within six (6) months from the Date of Termination all options granted to the Executive on or after January 28, 2002 that would otherwise vest during the Severance Period and permit the Executive to exercise all other options vested on the Date of Termination within 30 days of the Date of Termination. Notwithstanding the foregoing, in no event may Executive exercise any option after the expiration of the Option Period (as defined under the Stock Option Plan in effect from time to time).

(b) Notwithstanding the foregoing, the payments contemplated by Section 5.3(a)(iii), excluding the lump sum payment described therein, will be reduced by fifty per cent (50%) during any period when the Executive has obtained alternate employment or has otherwise mitigated any damages arising from the termination of his employment. The Executive has a duty to mitigate Executive's damages and will promptly notify the Corporation of such employment or mitigation.

(c) In addition to receiving the payments referred to in Section 5.3(a)(iii), in the event there is a Change of Control and the Executive's employment is terminated by the Corporation pursuant to Section 5.1 for any reason other than cause or Permanent Disability, or is terminated by the Executive pursuant to Section 5.2 for Good Reason, during the period beginning one (1) month prior to the Change of Control and ending six (6) months following the Change in Control, and subject to and conditional upon the Executive complying with the provisions of Article 6, the Corporation will pay to the Executive an amount equivalent to six (6) months' base salary, on the basis of Section 3.1, such payment to be made immediately as a lump sum payment.

Immediately upon the occurrence of Change of Control, all options granted to the Executive on or after February 1, 2002 which have not previously expired, shall immediately vest and become exercisable. Notwithstanding the foregoing or any other term of this agreement, in no event may any option be exercised after the expiration of the option period as defined under the stock option plan in effect from time to time.

(d) The parties agree that the provisions of Section 5.3 are fair and reasonable and that the amounts payable by the Corporation to the Executive or for Executive's benefit pursuant to Section 5.3 are reasonable estimates of the damages which will be suffered by the Executive in the event of the termination of employment with the Corporation in the circumstances set out in this Section 5.3 and will not be construed as a penalty.

(e) The parties agree that the payments under Section 5.3(a)(iii) and, if applicable, 5.3(c) will be deemed to include: (i) all termination pay and severance pay owing to the Executive pursuant to the Employment Standards Act (Ontario); (ii) any other or further amount of notice or pay in lieu thereof at common law or under any statute, in respect of the termination of Executive's employment.

5.4 Payments on Termination by Corporation for Cause or by Reason of Permanent Disability or on Termination by the Executive Without Good Reason

(a) If the Executive's employment with the Corporation is terminated by the Corporation pursuant to Section 5.1 for cause or by reason of Permanent Disability, or if such employment is terminated by the Executive pursuant to Section 5.2 without Good Reason, the Corporation will:

(i) pay to the Executive an amount equal to the salary earned by Executive up to the Date of Termination and any outstanding vacation pay calculated as of such date;

(ii) reimburse the Executive in accordance with Section 3.6 for any expenses incurred by Executive up to and including the Date of Termination;

(iii) pay to the Executive any amounts owing to Executive under the incentive plans in accordance with the terms of such Plans and based on service up to the Date of Termination but not after the Date of Termination; and

(iv) arrange for the Executive to receive any pension benefits to which Executive is entitled pursuant to the Corporation's pension plan.

(b) If the Executive's employment with the Corporation is terminated by the Corporation pursuant to Section 5.1 by reason of Permanent Disability, the Corporation will:

(i) continue to pay to the Executive an amount equal to Executive's base salary at the rate in effect immediately prior to such termination for the balance, if any, of the applicable waiting period for long term disability benefits stipulated in the Corporation's long term disability plan (the "Waiting Period");

(ii) maintain during the Waiting Period and during any period in which the Executive is receiving long term disability benefits pursuant to the Corporation's long term disability plan (the "Long Term Disability Period") those of the Executive's benefits referred to in Section 3.2 which are normally continued for the Corporation's employees who are in receipt of either short term disability benefits or long term disability benefits;

(iii) give the Executive credit under the Corporation's pension plan for an additional period of service with the Corporation equal to the Waiting Period and the Long Term Disability Period; and

(iv) permit the Executive or his legal representative to exercise at any time within six (6) months from the Date of Disability all options granted to the Executive on or after January 28, 2002 and held by the Executive at the Date of Termination that have vested on the Date of Termination or would otherwise vest during the twelve (12) months period following the Date of Termination and permit the Executive or his legal representative to exercise all other options vested on the Date of Disability within such six (6) months period. Notwithstanding the foregoing, in no event may any option be exercised after the expiration of the Option Period (as defined under the Stock Option Plan in effect from time to time).

(c) The Executive and the Corporation agree that the termination of the Executive's employment by the Corporation by reason of Permanent Disability is not contrary to the Ontario Human Rights Code and that further accommodation would be undue hardship on the Corporation.

5.5 Payments on Death of the Executive

(a) if the Executive's employment with the Corporation is terminated by death, the Corporation will:

(i) pay to the Executive an amount equal to the salary earned by Executive up to the Date of Death and any outstanding vacation pay calculated as of such date;

(ii) reimburse in accordance with Section 3.6 for any expenses incurred by Executive up to and including the Date of Death;

(iii) pay to the Executive any amounts owing to Executive under the incentive plans in accordance with the terms of such Plans and based on service up to the Date of Death but not after the Date of Death;

(iv) arrange for the Executive to receive any pension benefits to which Executive is entitled pursuant to the Corporation's pension plan; and

(v) permit the legal representative of the Executive to exercise at any time within six (6) months from the Date of Death all options granted to the Executive on or after January 28, 2002 and held by the Executive at the Date of Death that have vested on the Date of Death or would otherwise vest during the six (6) months period following the Date of Death and permit the legal representative of the Executive to exercise all other options vested on the Date of Death within twelve (12) months of the Date of Death. Notwithstanding the foregoing, in no event may any option be exercised after the expiration of the Option Period (as defined under the Stock Option Plan in effect from time to time). 5.6 Return of Property

Upon any termination of his employment with the Corporation, the Executive will deliver or cause to be delivered to the Corporation promptly all equipment, books, documents, money, securities or other properties of the Corporation that are in the possession, charge, control or custody of the Executive.

5.7 No Termination Claims

Upon any termination of the Executive's employment by the Corporation in compliance with this Agreement or upon any termination of the Executive's employment by the Executive, the Executive will have no action, cause of action, claim or demand against the Corporation, any related or associated corporations or any other person as a consequence of such termination.

5.8 Resignation as Director and Officer

Upon any termination of the Executive's employment under this Agreement, the Executive will sign forms of resignation indicating his resignation as a director and officer of the Corporation and its subsidiaries, if applicable.

5.9 Comments About the Corporation

Executive agrees that Executive will not say, publish or do any act or thing that disparages or casts the Corporation, its officers, directors, employees, agents and/or representatives in any unfavorable light, or which could result in injury to any such person's reputation. Executive shall make no public statements or announcements regarding Executive's past employment by the Corporation or any of the matters set forth herein without first consulting with the Corporation and obtaining its prior written approval as to the timing and content of the proposed statements and/or announcements, except that Executive may disclose Executive's dates of employment, title, job description and final base annual salary with the Corporation. The Corporation agrees that it shall make no public announcement regarding Executive's past employment with the Corporation which disparages or casts Executive in a false light. The parties agree that neither shall make any press release or other public announcement concerning this Agreement except to the extent required by applicable law.

5.10 Provisions which Operate Following Termination

Notwithstanding any termination of the Executive's employment under this Agreement for any reason whatsoever and with or without cause, the provisions of Sections 4.4, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 6.1, 6.2, 6.3 and 6.4 of this Agreement and any other provisions of this Agreement necessary to give efficacy thereto will continue in full force and effect following such termination.

ARTICLE 6 - NON-COMPETITION AND NON-SOLICITATION

6.1 Non-Competition

(a) Without limiting the Executive's Covenant's contained in Article 4, the Executive will not, without the prior written consent of the Corporation, during the term of employment, either individually or in partnership or jointly or in conjunction with any person as principal, agent, employee, shareholder (other than a holding of shares listed on a Canadian or United States stock exchange that does not exceed 5% of the outstanding shares so listed) or in any other manner whatsoever carry on or be engaged in or be concerned with or interested in or advise, lend money to, guarantee the debts or obligations of or permit his name or any part of his name to be used or employed by any person engaged in or concerned with or interested in a business which is competitive with the business carried on by the Corporation at any time during the term of employment.

(b) The Executive will not, without the prior written consent of the Corporation, following the term of employment,

(i) until the end of the Severance Period if the Executive's employment is terminated by the Corporation without cause or by the Executive for Good Reason,

(ii) until six (6) months following the end of the Waiting Period if the Executive's employment is terminated by Reason of Permanent Disability, or

(iii) until six (6) months following the last day actually worked by the Executive if the Executive's employment is terminated in any other manner or for any other reason,

either individually or in partnership or jointly or in conjunction with any person as principal, agent, employee, shareholder (other than a holding of shares listed on a Canadian or United States stock exchange that does not exceed 5% of the outstanding shares so listed) or in any other manner whatsoever carry on or be engaged in or be concerned with or interested in or advise, lend money to, guarantee the debts or obligations of or permit his name or any part of his name to be used or employed by any person engaged in or concerned with or interested in within North America,

i) a business which is competitive with any business carried on by the Corporation during the term of employment or during any Severance Period if the Executive's employment is terminated by the Corporation without cause or by the Executive for Good Reason, or

(ii) a business which is competitive with any business carried on by the Corporation during the term of employment through the Date of Termination, in all other cases.

(c) The Executive confirms that all restrictions in Section 6.1(a) and (b) are reasonable and valid and that the Executive waives all defences to the strict enforcement of such restrictions by the Corporation.

6.2 Non-Solicitation

(a) The Executive will not, without the prior consent of the Corporation, during the term of Executive's employment or at any time for a period of twelve (12) months following the termination of the Executive's employment under the Agreement for whatever reason and with or without cause, either individually, or in partnership, or jointly, or in conjunction with any person as principal, agent, employee or shareholder (other than a holding of shares listed on a Canadian or United States stock exchange that does not exceed 5% of the outstanding shares so listed) or in any other manner whatsoever on Executive's own behalf or on behalf of anyone competing or endeavouring to compete with the Corporation, directly or indirectly solicit, or gain the custom of, interfere with or endeavour to entice away from the Corporation any person who:

(i) is a client of the Corporation at the Date of Termination and with whom the Executive dealt during the Executive's employment;

(ii) was a client of the Corporation at any time during the Executive's employment at the Corporation and with whom the Executive dealt during the Executive's employment;

For the purposes of 6.2(a)(i) and (ii) above, "client" shall mean customers (including distributors, resellers and licensees), joint venture partners, strategic partners, OEM partners and any other individual or entity in a like relationship with the Corporation or its affiliates.

(b) The Executive confirms that all restrictions in Section 6.2(a) are reasonable and valid and that the Executive waives all defences to the strict enforcement of such restrictions in Section 6.2(a) by the Corporation.

(c) Sections 6.2(a)(i),(ii) and (iii) are each separate and distinct covenants, severable one from the other and if any such covenant or covenants are determined to be invalid or unenforceable, such invalidity or unenforceability will attach only to the covenant or covenants as determined and all other such covenants will continue in full force and effect.

(d) The Executive, for a period of twelve (12) months following the termination of the Executive's employment under the Agreement for whatever reason and with or without cause, will not interfere with or entice away any person who is an employee or independent contractor of the Corporation at the Date of Termination.

6.3 Industrial and Intellectual Property

• Executive acknowledges that all improvements, inventions, know-how and discoveries, technology, patents, copyrightable materials, computer programs, designs, documentation, processes, techniques or procedures in any way related to the Corporation's business which are developed, invented, or written by Executive alone or together with others, including all derivative works, during the course of Executive's employment with Corporation, or at any time using Confidential Information ("Developments") are the exclusive property the Corporation:
• Executive will fully disclose all Developments to the Corporation and hereby waives all moral rights in all Developments as of the moment they are created and transfers all interest in all Developments, including all derivative works, exclusively to the Corporation on a world-wide, royalty-free basis as of the moment they are created and, as required by the Corporation, will protect the Corporation's interest in such Developments. Executive agrees to execute any documents which the Corporation feels are necessary to enable the Corporation to apply for or enforce its patent, copyright, industrial design, trademark right, or any other industrial or intellectual property rights in the Developments.

(c) Executive acknowledges that Executive is not a party to any prior agreements which have created, or which could create in any third party rights which are or could become inconsistent with Executive's obligations herein, and agrees that Executive will fully disclose to the Corporation at Executive's earliest opportunity any such prior agreements as well as any claims made or notices provided by a third party which allege any such agreement or interest.

(d) Executive acknowledges that, from time to time, the Corporation uses the image, likeness, voice or other representation of its employees in connection with the production of corporate reports, advertising and promotional materials, and training videos. Executive agrees that if, during the course of employment, Executive participates in such productions, the Corporation may use Executive's image, likeness, voice or other representation in perpetuity, in all media and in all territories for the purposes described above without further compensation to Executive.

6.4 Breach

Any breach of the provisions of Sections 6.1(a), 6.1(b), 6.2(a), 6.2(d) or 6.3 by the Executive will result in material and irreparable harm to the Corporation although it may be difficult for the Corporation to establish the monetary value flowing from such harm. The Executive therefore agrees that the Corporation, in addition to being entitled to the monetary damages which flow from the breach, will be entitled to injunctive relief in a court of appropriate jurisdiction in the event of any breach or threatened breach by the Executive of any of the provisions of Sections 6.1(a), 6.1(b), 6.2(a), 6.2(d) or 6.3 . In addition, the Corporation will be relieved of any further obligations to make any payments to the Executive or provide him with any benefits as outlined in Section 5.3 and Executive shall be obligated to repay such amounts already received under said section, except those in Section 5.3(a)(i) and 5.3(a)(ii), in the event of a breach by the Executive of any of the provisions of Sections 6.1(a), 6.1(b), 6.2(a), 6.2(d) or 6.3.

GENERAL

7.1 Notices

Any demand, notice or other communication ("Communication") to be given in connection with this Agreement will be given in writing by personal delivery, by registered mail or by electronic means of communication addressed to the recipient as follows:

To the Corporation:

1600 Carling Avenue
Ottawa, ON K1Z 8R7

Attention: Vice President of Human Resources

To the Executive:

[Name]

[Address]

or such other address, individual or electronic communication number as may be designated by notice given by either party to the other. Any Communication given by personal delivery will be conclusively deemed to have been given on the day of actual delivery of the Communication and, if given by registered mail, on the third day, other than a Saturday, Sunday or statutory holiday in Ontario, following the deposit of the Communication in the mail and, if given by electronic communication, on the day of transmittal of the Communication if given during the normal business hours of the recipient and on the business day during which such normal business hours next occur if not given during such hours on any day. If the party giving any Communication knows or ought reasonably to know of any difficulties with the postal system which might affect the delivery of mail, any such Communication may not be mailed but must be given by personal delivery or by electronic communication.

7.2 Time of Essence

Time will be of the essence of this Agreement.

7.3 Deductions

The Corporation will deduct all statutory deductions from any amounts to be paid to the Executive under this Agreement.

7.4 Sections and Headings

The division of this Agreement into Articles and Sections and the insertion of headings are for the convenience of reference only and will not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

7.5 Number

In this Agreement words importing the singular number only will include the plural and vice versa and words importing the masculine gender will include the feminine and neuter genders and vice versa and words importing persons will include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.

7.6 Benefit of Agreement

This Agreement will enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Executive and the successors and permitted assigns of the Corporation respectively.

7.7 Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and cancels and supersedes any prior understandings and agreements between the parties to this Agreement with respect to the subject matter of this Agreement. There are no representations, warranties, forms, conditions, undertakings or collateral agreements, express, implied or statutory between the parties other than as expressly set forth in this Agreement.

7.8 Pre-Contractual Representations

The Executive hereby waives any right to assert a claim based on any pre-contractual representations, negligent or otherwise, made by the Corporation.

7.9 Amendments and Waivers

No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by both of the parties to this Agreement. No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, will be limited to the specific breach waived.

7.10 Severability

If any provision of this Agreement is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability will attach only to such provision or part of such provision and the remaining part of such provision and all other provisions of this Agreement will continue in full force and effect.

7.11 Governing Law

This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in Ontario.

7.12 Attornment

For the purpose of all legal proceedings this Agreement will be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario will have jurisdiction to entertain any action arising under this Agreement. The Corporation and the Executive each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing in this Agreement contained will prevent the Corporation from proceeding at its election against the Executive in the courts of any other province or country.

In the event that the Executive, in good faith, initiates litigation to enforce payments under Article 5.3 or 5.4 following a Change of Control, the Corporation will pay, and be solely financially responsible for, any and all attorneys' and related fees and expenses incurred by the Executive, without regard to whether the Executive prevails in such litigation.

7.13 Copy of Agreement

The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

IN WITNESS WHEREOF the parties have executed this Agreement.

Corel Corporation

By: _______________________________

Name: [Name]

Title: Vice President Human Resources

By:	_____________________________
Name:
Title:

Witness Signature [EVP signature and date]

Witness Name (Please print)