0000950130-01-504559.txt : 20011009
0000950130-01-504559.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950130-01-504559
CONFORMED SUBMISSION TYPE: S-3/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20011002
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COREL CORP
CENTRAL INDEX KEY: 0000890640
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 101151819
STATE OF INCORPORATION: A6
FISCAL YEAR END: 1130
FILING VALUES:
FORM TYPE: S-3/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-55988
FILM NUMBER: 1750903
BUSINESS ADDRESS:
STREET 1: 1600 CARLING AVE
STREET 2: OTTAWA ONTARIO K1Z 8R7
CITY: CANADA
STATE: A6
ZIP: 00000
BUSINESS PHONE: 6137288200
MAIL ADDRESS:
STREET 1: 1600 CARLING AVENUE
STREET 2: OTTAWA ONTARIO K1Z 8R7
CITY: CANADA
STATE: A6
ZIP: 00000
S-3/A
1
ds3a.txt
AMENDMENT NO. 5 TO FORM S-3
As Filed with the Securities and Exchange Commission on October 2, 2001
Registration No. 333-55988
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
-----------------------
AMENDMENT NO. 5
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
COREL CORPORATION
(Exact name of Registrant as specified in its charter)
Canada 7372 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification code number) identification no.)
1600 Carling Avenue
Ottawa, Ontario K1Z 8R7
(613) 728-8200
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
John Blaine
Chief Financial Officer
Corel Corporation
1600 Carling Avenue
Ottawa, Ontario K1Z 8R7
(613) 728-8200
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Please address a copy of all communications to:
Arnold B. Peinado, III, Esq. Robert D. Chapman, Esq. Duncan C. McCurrach, Esq.
Milbank, Tweed, Hadley & McCloy LLP McCarthy Tetrault LLP Sullivan & Cromwell
One Chase Manhattan Plaza 1400-40 Elgin Street 125 Broad Street
New York, NY 10005 Ottawa, Ontario K1P 5K6 New York, NY 10004
(212) 530-5000 (613) 238-2000 (212) 558-4000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
-----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion, dated October 2, 2001
PROSPECTUS
Corel Corporation
24,000,000 Common Shares
This prospectus relates to offers and sales from time to time of up to
24,000,000 common shares of Corel Corporation. These common shares will be
issued upon conversion of the Series A participating convertible preferred
shares of Corel owned by Microsoft Licensing, Inc., the selling shareholder, a
wholly-owned subsidiary of Microsoft Corporation. Because these Series A
preferred shares are not convertible by Microsoft Corporation or its affiliates
or associates, Microsoft Licensing will sell the Series A preferred shares to
one or more underwriters, broker-dealers or other selling agents, who will
convert them into common shares and offer and sell those common shares in
ordinary brokers transactions at then current market prices or in other
transactions at negotiated prices.
Microsoft Licensing will receive all of the proceeds from the offers
and sales of the Series A preferred shares to the underwriters, broker-dealers
or other selling agents, less any discounts, commissions or other compensation
that it may pay to them, and the underwriters, broker-dealers or other selling
agents will receive all of the proceeds from the offer and sale of the common
shares that they receive upon conversion of the Series A preferred shares. Corel
will not receive any proceeds from such sales and will pay all the costs of
registering the common shares under this prospectus.
Our common shares are listed on The Nasdaq National Market under the
symbol "CORL" and on The Toronto Stock Exchange under the symbol "COR". The
last reported sales price for our common shares on The Nasdaq National Market
on October 1, 2001 was $1.93 per share and on The Toronto Stock Exchange on
October 1, 2001 was Cdn$3.10.
This investment involves a high degree of risk. Please carefully
consider the "Risk Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _________ __, 2001.
TABLE OF CONTENTS
Summary .................... 2 Selling Shareholder ................... 10
Risk Factors ............... 3 Income Tax Considerations ............. 11
About this Prospectus ...... 9 Plan of Distribution .................. 17
Forward-Looking Statements.. 10 Legal Matters ......................... 19
Use of Proceeds ............ 10 Experts ............................... 19
Dividend Policy ............ 10 Where You Can Find More Information ... 19
SUMMARY
Corel develops, manufactures, licenses, sells and supports two main
types of software products-creative products and business applications products.
Our flagship products are CorelDRAW10 Graphics Suite and WordPerfect Office
2002. Our products are available for users of most PCs, including International
Business Machines Corporation and IBM-compatible PCs, Apple Computer Inc.'s
Macintosh(R), UNIX(R)-based and Linux(R)-based systems. In 2001, we will
continue to expand our support of the Web, delivering the Internet's versatility
to customers through Web-based applications, content and services. We will also
be developing applications of our products for use on Microsoft Corporation's
.NET platform as part of our commitment to provide customers with a full range
of applications and services on multiple platforms.
In January 2001, we announced a new corporate strategy. The strategy
includes the following courses of action -
. Broaden the reach of CorelDRAW through targeted sales channels and
direct marketing campaigns.
. Further our commitment to the Macintosh community with product
developments that ensure professional customers have the tools to
meet all of their creative needs.
. Continue delivering the leading-edge product enhancements, service
and support that our loyal base of WordPerfect users have come
to expect.
. Support the growth of the Linux market and deliver applications
that customers demand.
. Build on our graphics heritage to develop innovative solutions
that address real customer problems.
. Expand our support of the Web, delivering the Internet's
versatility to customers through Web-based applications, content
and services.
On October 2, 2000, we entered into a purchase agreement with Microsoft
Corporation and Microsoft Licensing for the purchase by Microsoft Licensing of
24,000,000 Series A participating convertible preferred shares of Corel at a
purchase price of $5.625 per share or a total purchase price of $135,000,000.
The Series A preferred shares are non-voting. Each Series A preferred share is
convertible into one common share of Corel, but the Series A preferred shares
may not be converted into Corel common shares while held by Microsoft or any of
its affiliates or associates.
2
In connection with the purchase agreement, Corel and Microsoft also
entered into a technology support and settlement agreement dated October 2, 2000
and amended as of April 30, 2001 pursuant to which, among other things, Corel
and Microsoft agreed to work together to support the development, testing and
marketing of new products and services for the Microsoft .NET platform. This
platform consists of a set of Microsoft XML-based web services and a programming
model and tools that developers can use to build their own web services. XML is
an industry standard language for data exchange. The agreement also includes
co-marketing provisions and an option for Microsoft to call upon Corel to port
all or a portion of the .NET frameworks from the Windows operating system
platform to a platform to be designated by Microsoft, which could include the
Linux platform, the FreeBSD platform or another similar platform. On May 17,
2001, Corel received notice from Microsoft of the exercise by Microsoft of its
option to port the .NET frameworks to the FreeBSD platform. Finally, as part of
the agreement, Microsoft agreed not to pursue certain alleged patent
infringement claims against Corel and Corel agreed to release Microsoft from all
claims that Corel may have had against Microsoft arising on or prior to the date
of the agreement.
The Offering
Shares Available Up to 24,000,000 common shares
The Selling Shareholder The common shares offered by this prospectus
will be sold by the underwriters, broker-dealers or
other selling agents designated in the applicable
prospectus supplement. These underwriters,
broker-dealers or other selling agents will acquire
the common shares by purchasing Series A preferred
shares from Microsoft Licensing and converting them
into common shares.
On July 16, 2001, Corel, its wholly-owned subsidiary, Calgary I
Acquisition Corp. and Micrografx, Inc. entered into a merger agreement pursuant
to which Micrografx will merge with Calgary I Acquisition Corp., with the
surviving corporation becoming a wholly-owned subsidiary of Corel. Micrografx is
a recognized global leader in providing enterprise process and graphics
software, solutions and services. Under the terms of the merger agreement, at
the closing, Corel will pay cash or Corel will issue its common shares and Corel
participation rights for the outstanding shares of Micrografx capital stock.
On August 7, 2001, Corel, its wholly-owned subsidiary, Calgary II
Acquisition Corp. and SoftQuad Software, Ltd. entered into a merger agreement
pursuant to which SoftQuad will merge with Calgary II Acquisition Corp. SoftQuad
is an internationally recognized developer of XML-enabling technologies and
commerce solutions for e-business. Under the terms of the merger agreement, at
the closing, Corel will issue its common shares in exchange for the outstanding
shares of SoftQuad capital stock.
Reference is made to our current report on Form 8-K dated August 17,
2001, which is incorporated by reference into this prospectus, for additional
information concerning the Micrografx and SoftQuad acquisitions.
On September 26, 2001, the Securities and Exchange Commission declared
our Registration Statement of Form S-4 effective with respect to the Micrografx
acquisition. This Registration Statement has been mailed to the Micrografx
shareholders for the purposes of the meeting of Micrografx shareholders on
October 29, 2001.
Our Registration Statement on Form S-4 with respect to the SoftQuad
acquisition has been filed with the Securities and Exchange Commission but has
not yet been declared effective.
On September 26, 2001, we announced our results for our third quarter
ended August 31 2001. Revenues for the third quarter of fiscal year 2001 were
$34.2 million, which compares with revenues of $36.4 million for the same
quarter last year, and revenues of $36.0 million for the second quarter of
fiscal 2001.
Net income for the third quarter of fiscal 2001 was $500,000 or $0.01
per share fully diluted, compared with a net loss of $10.7 million or ($0.15)
per share for the same period last year, and $2.3 million net income or $0.02
per share in the second quarter of fiscal 2001. Cash, cash equivalents and
marketable securities at the end of this quarter stood at $123.8 million,
compared with $11.6 million at the end of this third quarter in fiscal 2000.
Corel was incorporated as Corel Systems Corporation under the Canada
Business Corporations Act by Certificate and Articles of Incorporation dated May
29, 1985. Corel's name was changed to Corel Corporation on May 4, 1992. Corel
was continued by Certificate and Articles of Amalgamation on December 1, 1998.
Our registered and head office is located at 1600 Carling Avenue, Ottawa,
Ontario, K1Z 8R7, and our telephone number there is (613)728-8200. We maintain a
web site at www.corel.com. Our website and the information it contains are not a
part of this prospectus.
RISK FACTORS
Please carefully consider the specific factors set forth below as well
as the other information contained in, or incorporated by reference into, this
prospectus before purchasing our common shares. These risk factors include the
material risks currently known to us. Investing in our common shares involves a
high degree of risk. The occurrence of any of the following could harm our
business and our prospects. In that event, the trading price of our shares might
decline and you could lose all or part of your investment.
We have had losses in the past and may have losses in future periods.
We have a history of losses. We incurred net losses of $30.4 million in
1998, net income of $16.7 million in 1999 and net losses of $55.4 million in
2000. Although we reported net income for each of the quarters ended February
28, 2001, May 31, 2001 and August 31, 2001, our revenues have declined from
prior recent quarters. The demand for our products is affected by various
factors, many of which are beyond our
3
control. For example, general economic conditions have recently deteriorated and
this may affect the overall rate of capital spending by our corporate customers.
If general economic conditions continue to deteriorate, we may suffer further
reductions in our revenues which may result in operating and net losses over the
balance of 2001. Further, although we have planned to achieve a compounded
annual revenue growth rate of 20% over the current and two subsequent fiscal
years, we may not achieve such growth or continued profitability. Even if we do
achieve profitability in future periods, we may not sustain or increase
profitability on a quarterly or annual basis in the future.
Our competitors may introduce products with which our current and new products
may not compete successfully.
The markets for our products experience and will continue to experience
rapidly changing technologies, evolving industry standards, frequent new product
introductions by our competitors and short product life cycles. These market
characteristics and the activities of our competitors, including their
introduction of new products and product upgrades, could render our technology
obsolete. In the past we have introduced new versions of our flagship CorelDRAW
and WordPerfect Office products approximately annually. Our most recent
versions, CorelDRAW 10 Graphics Suite and WordPerfect Office 2002 were
introduced approximately 20 months and 25 months, respectively, after the
introduction of the previous versions. We will have to successfully manage the
transition from older products in order to minimize disruption in customer
ordering patterns, avoid excess inventory and ensure adequate supplies of new
products. We may not successfully develop, introduce or manage the transition of
new products or do so on a timely basis in response to changing technologies and
standards and new products and product upgrades introduced by our competitors.
Failed market acceptance of new products or problems associated with new product
transitions could harm our revenues.
Should new versions of our current products or new products fail to generate
sales due to a lack of customer acceptance, we may be unable to expand our
market share. We may also lose customers who have purchased our products in the
past, which would result in a decline in market share for current products.
Our share of the markets for each of graphics products and business
applications products has declined in the past three fiscal years and may
continue to decline, notwithstanding the introduction of new versions of our
products. Users of our graphics products and business applications products may
elect not to upgrade to newer versions of those products. In addition, the
introduction of new graphics application products planned by us may fail to
achieve a market share for such products that will permit us to record profits
from such products.
We have experienced quarterly fluctuations in operating results that have
affected and may adversely affect our share price and cause it to be volatile.
We have experienced, and expect to continue to experience, significant
fluctuations in our quarterly operating results due to reduced demand for older
versions of our flagship products and lower than planned market acceptance of
new versions of these products. This has in the past adversely affected and in
the future could adversely affect our revenues as reported on a quarterly basis,
as well as our share price, and as a consequence increase the volatility of the
market prices of our common shares.
The integration of the Corel, Micrografx, Inc. and SoftQuad Software, Ltd.
businesses may be costly and the failure of Corel to successfully effect the
integration may adversely affect Corel's business, results of operations and
financial condition.
Corel's ability to realize some of the anticipated benefits of its
planned mergers with Micrografx and SoftQuad will depend in part on Corel's
ability to integrate Micrografx's operations and SoftQuad's operations into
Corel's current operations in a timely and efficient manner. The integration
process will require significant efforts from each of Corel, Micrografx and
SoftQuad. The integration process may distract Corel management's attention from
the day-to-day business of the combined company. If Corel is unable to
successfully integrate the operations of the three companies or if this
integration process is delayed or costs more than expected, Corel's business,
operating results and financial condition may be negatively impacted.
4
Holders of our shares will have their percentage ownership diluted by
approximately 45% on the sale of all of the common shares offered by this
prospectus and, if implemented, by our equity line share purchase agreement and
on the issuance of our common stock to holders of Micrografx, Inc. capital stock
and to holders of SoftQuad Software, Ltd. stock and the price of our common
shares may decline as a result.
A significant number of our common shares will be available for trading
in the public market which will result in substantial dilution to existing
shareholders. Up to 24,000,000 additional common shares will be available for
trading as a result of sales of shares pursuant to this prospectus. In addition,
over the course of the two-year term of our September 18, 2000 equity line share
purchase agreement with Albans Investments Limited, an institutional investor,
we may elect to issue up to 14,464,000 common shares (assuming the exercise of
all related warrants) which would become available for trading. If our common
shares are issued at the time of the closing of the merger with Micrografx and
if additional common shares are issued at the first anniversary of the closing
pursuant to our participation rights, up to an aggregate of approximately 11.4
million of our common shares may be issued to the holders of Micrografx stock.
At the time of the closing of the merger with SoftQuad up to approximately 11.2
million of our common shares may be issued to holders of SoftQuad stock.
Together, the shares offered pursuant to this prospectus the common shares which
may be issued pursuant to the September 18, 2000 stock purchase agreement and
exercise of related warrants, the issue of common shares to Micrografx
shareholders and the issue of common shares to SoftQuad stockholders constitute
45% of our issued and outstanding common shares as of October 1, 2001 after
giving effect to the conversion of the Series A preferred shares and exercise of
the shares and warrants issued and issuable pursuant to the share purchase
agreement and the issuance of the shares pursuant to our participation rights.
In addition, we have issued and there are outstanding employee stock options for
a total of 4,876,044 common shares ranging from Cdn$3.00 to Cdn$15.25. The
additional shares in the market will dilute the percentage interest of our other
shareholders and may have a material adverse effect on the market price of the
common shares. Any such decline in the market price of our common shares could
impede our efforts to obtain additional financing through the sale of additional
equity or equity-related securities or could make such financing more costly.
Inability to protect our intellectual property may limit our ability to compete
and result in a loss of a competitive advantage and decreased revenue.
We rely principally upon copyright, trademark, patent, trade secret and
contract laws to protect our proprietary technology. We cannot be certain that
we have taken adequate steps to prevent misappropriation of our technology or
that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology.
We may be subject to intellectual property infringement claims that are costly
to defend and could limit our ability to use some technologies in the future.
Although we believe that none of the software or the trademarks we use
or any of the other elements of our business infringe on the proprietary rights
of any third parties, third parties have asserted and may assert claims against
us for infringement of their proprietary rights and these claims may be
successful. We could incur substantial costs and diversion of management
resources in the defense of any claims relating to proprietary rights, which
could materially adversely affect our business, financial condition or results
of operations. These types of claims are common in the software industry.
Parties making these claims could secure a judgement awarding substantial
damages as well as injunctive or other equitable relief that could effectively
block our ability to license our products in the United States, Canada or
elsewhere. Such a judgement could have a material adverse effect on our ability
to sell our products or on our costs of doing business. If a third party asserts
a claim relating to proprietary technology or information against us, we may
seek licenses to the intellectual property from the third party. However, we
cannot be certain that third parties will extend licenses to us on commercially
reasonable terms, or at all. Our failure to obtain the necessary licenses or
other rights or to obtain those rights at a reasonable cost could materially
adversely affect our ability to sell our products or our costs of doing
business.
5
Our stock price has been and may in the future be affected by recently
experienced extreme price and volume fluctuation in the market for technology
stocks and for manufacturers of certain types of software.
Nasdaq, where many publicly-held software companies are traded, has
recently experienced extreme price and volume fluctuations. These fluctuations
often have been unrelated or disproportionate to the operating performance of
these companies. Until recently, the trading prices of many of these companies'
stocks have been at or near historic highs and these trading prices and
multiples were substantially above historical levels. In addition, in the recent
past, the valuations of companies engaged in the business of developing and
selling software utilizing the Linux open source code have increased
dramatically in expectation of future revenues and profitability, and have
subsequently declined dramatically. These broad market and industry factors may
materially adversely affect the market price of our common shares, regardless of
our actual operating performance. In the past, following periods of volatility
in the market price of an individual company's securities, securities class
action litigation often has been instituted against that company. We have
already been the subject of several lawsuits alleging that we have violated
various provisions of federal securities laws. This litigation, and other
claims, if made, could result in substantial costs and a diversion of our
management's attention and resources.
The ability of our shareholders to effect changes in control of Corel is
limited.
Our certificate and articles of amalgamation, by-laws, and the
Investment Canada Act contain provisions that could delay or impede the removal
of incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving Corel. This could discourage a third party from
attempting to acquire control of us, even if these events would be beneficial to
the interests of the shareholders. In particular, we have a shareholder rights
plan which enables the Board of Directors to delay a change in control of Corel.
In addition, our certificate and articles of amalgamation authorize our Board of
Directors to provide for the issuance of preferred shares, in one or more
series, which our Board of Directors could issue without further shareholder
approval and with terms and conditions and rights, privileges and preferences as
it determines.
In addition, since we are a Canadian corporation, certain investments
in Corel are subject to the provisions of the Investment Canada Act. In general,
this act provides a system for the notification to the Investment Canada agency
of certain acquisitions of Canadian businesses by non-Canadian investors, and
for the review by the Investment Canada agency of certain acquisitions that meet
thresholds specified in the act. To the extent that a non-Canadian person or
company attempted to acquire 33% or more of our outstanding common shares, the
threshold for a presumption of control, the transaction could be reviewable by
the Investment Canada agency. These factors could have the effect of delaying,
deferring, or preventing a change of control of Corel.
If we are unable to hire and retain key personnel, we may be unable to develop
products or achieve sales of products.
Our success depends to a significant extent upon the performance of our
executive officers and key technical and marketing personnel. The loss of one or
more of our key employees could have a material adverse effect on our ability to
develop products or to sell products. We believe that our future success will
depend in large part upon our ability to attract and retain highly skilled
technical, managerial, and sales and marketing personnel. There can be no
assurance that we will be successful in attracting and retaining such personnel.
The implementation by us of our cost reduction plan has resulted and may
continue to result in the voluntary retirement of employees whom we wish to
retain.
6
Competition within distribution channels may adversely prevent us from achieving
levels of sales which would make us profitable.
We compete with other software vendors for access to distribution
channels, retail shelf space and the attention of customers at the retail level
and in corporate accounts. Other competitors with greater market share and
significantly greater financial resources may command the attention of the
retail accounts, the corporate market and original equipment manufacturers. In
order to compete for distribution channel space we must offer compelling reasons
to distribute our products. We attempt to achieve this through offering a
superior product at a reasonable price that offers compatibility with
competitive products. We must also use innovative marketing ideas in order to
compel the distributor to carry our products. Inability to maintain distribution
channel space could have a material adverse effect on our revenues and
profitability.
Our marketplace is intensely competitive and rapidly changing and we may not be
able to compete successfully in the future.
Our industry is highly competitive and subject to rapid technological
change. Many of our current and potential competitors have larger technical
staffs, more established and larger marketing and sales organizations, and
significantly greater financial resources. The rapid pace of technological
change constantly creates new opportunities for existing and new competitors and
can quickly render existing technologies less valuable. As the market for our
products continues to develop, additional competitors may enter the market and
competition may intensify. Inability to compete in the following factors could
have a material adverse effect on our business, product performance, product
features, ease of use, reliability, hardware and competitor compatibility, brand
name recognition, product reputation, pricing, levels of advertising,
availability and quality of customer support, and timeliness of product
upgrades. We compete in the following areas with a variety of companies,
including:
. Graphics. Our graphics software products face substantial
competition from a wide variety of companies. In the illustration
graphics segment, our competitors include, but are not limited to,
Adobe Systems Incorporated, JASC Software, Inc., Macromedia Inc.
and Microsoft. In the desktop publishing segment, our competitors
include, but are not limited to, Adobe. Our competitors also
include many independent software vendors, such as Autodesk, Inc.,
and Apple Computer Inc.
. Business Productivity. Our competitors in the productivity
software (primarily office suites) marketplace include Microsoft,
IBM (Lotus Development Corporation), Sun Microsystems, Inc.,
Redhat, Inc. and Applix Inc. According to industry sources,
Microsoft currently has the largest overall market share for
office suites. IBM has a large installed base with its spreadsheet
program. Also, IBM preinstalls some of its software products on
various models of its PCs, competing directly with our
productivity software.
Changes in distribution channels may prevent us from achieving levels of sales
which would make us profitable.
Our products are distributed primarily through distributors, certain of
which are material to our competitive position. The distribution channels
through which software products for desktop computers are sold have been
characterized by rapid change, including consolidations and financial
difficulties of certain distributors and resellers, the emergence of new
retailers such as general mass merchandisers and superstores, and the desire of
large customers such as retail chains and corporate users to purchase directly
from software developers. The loss of, or a significant reduction in sales
volume attributable to, any of our principal distributors or the insolvency or
business failure of any such distributor could have a material adverse effect on
our revenues and profitability.
7
Prices of our products could decrease, which would reduce our profits.
Pricing pressures continually intensify in the personal computer
software applications market and we believe that price competition, with its
attendant reduced profit margins, may become a more significant factor in the
future. Corporate licensing, discount pricing for large volume distributors and
retailers, product bundling promotions and competitive upgrade programs are
forms of price competition that may become more prevalent. In addition,
enterprise-wide versions of products are generally priced lower per user than
individual copies of the same products. We also compete with companies that
produce standalone graphics and desktop publishing applications that might serve
a specific need of a user or class of users at a price below that of our
products. Reductions in the prices of our products could reduce our profits.
We face regulatory risks in doing business in foreign countries that could
adversely affect our revenues and profitability and we rely to a large degree
upon sales in the United States.
Currently, we market our products in more than 60 countries. We
anticipate that sales outside of North America will continue to account for a
significant portion of total sales. These sales are subject to risks including
imposition of government controls, export license requirements, restrictions on
the export of technology, political instability, trade restrictions, changes in
tariffs, differences in copyright protection and difficulties in managing
accounts receivables. More than 50% of our sales for the past two fiscal years
were made in the United States. As a result, adverse developments in the foreign
markets or in the United States market for our products could have a material
adverse effect on revenues and profitability.
Because our revenues are earned in different currencies, our revenues are
subject to exchange rate fluctuations.
A substantial portion of our revenues are earned in Europe and
collected in euros. As a result, we are at risk from exchange rate fluctuations
between the euro and the United States dollar. The fluctuation of the euro
against the United States dollar since 1999 has had, and may continue to have, a
negative effect on our revenues as reported in our financial statements, and may
significantly affect the comparability of our results between financial periods.
We do not conduct any foreign exchange hedging activities to protect against
exchange rate fluctuations. Given the volatility in currency exchange rates,
there can be no assurance we will be able to effectively manage our currency
translation risks or that such exchange rate volatility will not have a material
adverse effect on our profits.
Our research and development costs are significant and may not result in
increased sales or revenue.
Developing software is expensive. We plan to continue significant
investments in product research in the near future. We cannot assure that
significant sales or revenue from the products we are developing will be
achieved.
Our products are currently used principally on personal computers and any
slowing of growth of personal computer unit sales may adversely affect our
revenue growth.
The growth rate of sales of personal computers may decrease in the
future and have a negative effect on the growth of our revenues.
It is possible that we may become a passive foreign investment company (PFIC)
for United States federal income tax purposes, which could result in negative
tax consequences to you.
8
We would become a passive foreign investment company, or PFIC, for
United States federal income tax purposes if 75% or more of our gross income in
any year is considered passive income (defined for this purpose as interest,
dividends and certain rents and royalties, as well as gains from the sale of
assets that produce these types of income) or on average for any year, 50% or
more of our assets produce passive income or are held to produce passive income.
Cash, cash equivalents and marketable securities, among other types of
assets, are considered to produce, or to be held for the production of, passive
income for purposes of applying the second of the two tests set forth above. As
of August 31, 2001, we had $124.3 million of cash (including restricted cash of
approximately $0.5 million), cash equivalents and marketable securities on hand.
These balances may either increase or decrease from the amount on hand as of
August 31, 2001. Accordingly, we may be or may subsequently become a PFIC if the
average quarterly value of all our assets that produce, or are held for the
production of, passive income (including cash) equals or exceeds 50% of our
gross assets. Because the PFIC determination is made annually on the basis of
facts and circumstances that may be beyond our control (including fluctuations
in the market value of our stock), and because this registration is being made
prior to the close of our taxable year in which you may acquire our stock from
the selling shareholder, we cannot assure you that we will not be a PFIC for
this year or future years.
If we become a PFIC, U.S. holders of our shares will be subject to
certain U.S. federal income tax rules that will have negative consequences for
U.S. holders. Under the PFIC rules, unless a qualified electing fund or
mark-to-market election is made, a U.S. holder would, upon receipt of
distributions, or upon disposition of our shares at a gain, be liable to pay tax
at the then highest rates on ordinary income plus an interest charge. The
interest charge would generally be calculated as if the distribution or gain had
been recognized ratably over the U.S. holder's holding period (for PFIC
purposes) for the shares. A U.S. holder also would be required to make an annual
return on IRS Form 8621 that describes any distributions received with respect
to their shares and any gain realized on the sale or other disposition of its
shares. We can provide no assurances we will complete the actions necessary for
U.S. holders to make a qualifying electing fund election in the event that we
were to be considered a PFIC for any taxable year. See "Income Tax
Considerations--Certain U.S. Federal Income Tax Consequences--Passive Foreign
Investment Company."
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus.
Neither we nor the selling shareholder has authorized anyone to provide you with
information different from that contained in this prospectus. Underwriters,
broker-dealers or other selling agents selected by the selling shareholder will
offer to sell, and seek offers to buy, common shares only in jurisdictions where
offers and sales are permitted. The information in this prospectus is accurate
only as of the date of this prospectus regardless of the time of delivery of
this prospectus or of any sale of our common shares.
Unless the context otherwise requires, in this prospectus, "we," "us,"
"our" and "Corel" refer to Corel Corporation and its wholly owned subsidiaries.
The "selling shareholder" and "Microsoft Licensing" refer to Microsoft
Licensing, Inc., a Nevada corporation and a wholly owned subsidiary of Microsoft
Corporation, a Washington corporation, and "Microsoft" refers to Microsoft
Corporation and its subsidiaries.
All dollar amounts indicated by "$" are in United States dollars and
all dollar amounts indicated by "Cdn$" are in Canadian dollars.
All of Corel's directors and most of its officers, and certain experts
named herein are residents in Canada. Consequently, it may be difficult for
United States investors to effect service within the United
9
States upon Corel's directors, officers or certain experts named herein, or to
realize in the United States upon judgements of courts in the United States
predicated upon civil liabilities under the Securities Act of 1933. A judgement
of a court in the United States predicated solely upon such civil liabilities
would probably be enforceable in Canada by the Canadian court if the United
States court in which the judgement was obtained had jurisdiction, as determined
by the Canadian court, in the matter. There is substantial doubt whether the
original action could be brought successfully in Canada against any of such
persons or Corel predicated solely upon such civil liabilities.
FORWARD-LOOKING STATEMENTS
This prospectus and the reports incorporated herein contain
forward-looking statements, including statements concerning conditions in the
computer software industry, and concerning our business, financial condition,
operating strategies, and our operational and legal risks. We use words like
"believe," "expect," "anticipate," "intend," "future," "plan", "forecast" and
other similar expressions to identify forward-looking statements. Purchasers of
our common shares should not place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. These
forward-looking statements are based on our current expectations and are subject
to a number of risks and uncertainties, including shifts in customer demand,
product shipment schedules, product mix, products and pricing, technological
shifts and factors identified under "Risk Factors" and elsewhere in this
prospectus. Our actual results could differ materially from those expressed in
these forward-looking statements, and any events anticipated in the
forward-looking statements may not actually occur. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by law, we undertake no duty to update any
forward-looking statements after the date of this prospectus to conform those
statements to actual results or to reflect the occurrence of unanticipated
events.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of common shares
pursuant to this prospectus.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common shares.
We anticipate that any earnings will be retained for development and expansion
of our business and we do not anticipate paying any cash dividends in the near
future. Our board of directors has sole discretion to pay cash dividends based
on our financial condition, results of operation, capital requirements,
contractual obligations and other relevant factors.
SELLING SHAREHOLDER
On October 2, 2000, we sold 24 million of our Series A preferred shares
to Microsoft Licensing at $5.625 per share for a total purchase price of $135
million. The Series A preferred shares are non-voting, have a liquidation
preference of $5.625 per share and are entitled to receive the same dividends as
our board of directors, in its discretion, may decide to pay on our common
shares. Each Series A preferred share is currently convertible into one of our
common shares at any time at the option of the holder thereof (although the
conversion ratio is subject to future adjustment in certain circumstances).
However, by their terms the preferred shares may not be converted by Microsoft
or any of its affiliates or associates, including Microsoft Licensing.
10
Under our Shareholder Rights Plan Agreement, as amended and restated as
of March 31, 1999, the holders of our common shares have rights which become
exercisable if any person or group acquires common shares and/or securities
convertible into or exchangeable for our common shares or other voting shares
that represent, or upon conversion or exchange would represent, more than 20% of
our outstanding voting shares, in which case each holder of our common shares
other than such person or group would be entitled to purchase additional common
shares at a discount to their current market price. In light of these rights,
the Series A preferred shares were structured to be non-voting and not
convertible by Microsoft Licensing, such that their issuance to Microsoft
Licensing did not cause the rights to become exercisable.
Because Microsoft Licensing may sell some or all of its Series A
preferred shares, we cannot estimate the number of Series A preferred shares it
will hold after the offering covered by this prospectus.
We granted registration rights to Microsoft Licensing and any
subsequent holder of the Series A preferred shares or the common shares issuable
upon conversion of the Series A preferred shares to enable the holder of the
common shares to sell them to the public market. The registration rights
agreement permits us to restrict the resale of the common shares issued upon
conversion of the Series A preferred shares if the registration of the common
shares with the Securities and Exchange Commission would interfere with a
financing, acquisition, reorganization or other corporate transaction involving
Corel or any of our subsidiaries. We cannot so restrict sales of common shares
by the selling shareholder more than once in any 12-month period or for more
than 90 days in the aggregate during any such restriction.
We agreed that in the event that a sale of common shares issued upon
conversion of the Series A preferred shares would require registration of the
shares under Canadian securities laws, the holder of such shares will have
registration rights under Canadian law equivalent to those we have granted to
holders selling their shares in the United States.
Except as described above, neither Microsoft Licensing nor any of its
affiliates have had any position, office or other material relationship with us
or any of our affiliates during the past three years.
11
INCOME TAX CONSIDERATIONS
The following summary is of a general nature and is not intended to be,
nor should it be construed to be, legal or tax advice to any particular
prospective purchaser. This discussion does not purport to deal with all aspects
of Canadian and United States federal income taxation that may be relevant to
prospective purchasers of common shares and does not take into account Canadian
provincial or territorial tax laws, United States state or local tax laws, or
tax laws of jurisdictions outside of Canada and the United States. Accordingly,
prospective purchasers should consult with their tax advisors for advice with
respect to their particular circumstances, including any consequences of an
investment in common shares arising under provincial, territorial, state or
local tax laws or tax laws of jurisdictions outside Canada and the United
States.
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax
considerations relating to an investment in the common shares generally
applicable to a person (a "U.S. holder") who acquires common shares pursuant to
this prospectus, who for purposes of the Income Tax Act (Canada) and at all
relevant times, (i) is not resident or deemed to be resident in Canada, (ii)
holds the common shares as capital property, (iii) deals at arm's length and is
not affiliated with us, (iv) does not use or hold, and is not deemed to use or
hold, the common shares in, or in the course of, carrying on a business or
providing independent personal services in Canada, and (v) does not carry on an
insurance business in Canada and elsewhere, and who, for purposes of the
Canada-United States Income Tax Convention, 1980 (the "Convention") and at all
relevant times, (i) is resident in the United States, and (ii) does not own (or
is not treated as owning) 10% or more of our outstanding voting shares.
Our common shares will generally be considered to be capital property
to a holder for purposes of the Income Tax Act (Canada) unless the holder holds
such shares in the course of carrying on a business of trading or dealing in
securities or the holder acquired such shares as part of a transaction
considered to be an adventure or concern in the nature of trade.
This discussion is based on the current provisions of the Income Tax
Act (Canada) and the regulations thereunder, all specific proposals to amend the
Income Tax Act (Canada) and the regulations publicly announced by or on behalf
of the Minister of Finance (Canada) prior to the date hereof and counsel's
understanding of the current published administrative practices of the Canada
Customs and Revenue Agency. The summary also takes into account all specific
proposals to amend the Income Tax Act (Canada) and the regulations thereunder
publicly announced prior to the date hereof, and, while there is no assurance
the proposed amendment will be enacted as announced, or at all, this summary
assumes that the proposed amendments will be enacted substantially as proposed.
This discussion is not exhaustive of all possible Canadian federal income tax
consequences and, except for the publicly announced proposals, does not take
into account or anticipate any changes in law, whether by legislative,
governmental or judicial action, nor does it take into account provincial,
territorial or foreign tax consequences which may differ significantly from
those discussed herein.
Canadian Federal Taxation of Dividends on Common Shares
Dividends, including deemed dividends and stock dividends, paid or
credited on common shares owned by a U.S. holder will be subject to Canadian
withholding tax under the Income Tax Act (Canada) at a rate of 25% on the gross
amount of the dividends. The rate of withholding tax generally is reduced under
the Convention to 15% where the U.S. holder is the beneficial owner of the
dividends. Under the Convention, dividends, or deemed dividends or stock
dividends, paid or credited to a U.S. holder that is a
12
United States tax-exempt organization as described in Article XXI of the
Convention, other than such dividends that constitute income from carrying on a
trade or business, will generally not be subject to Canadian withholding tax
although such entities may be subject to administrative procedures to confirm
their eligibility for such exemption.
It should be noted that under Canadian tax law dividends may be deemed
to be paid in certain circumstances. For example, when a corporation redeems or
purchases for cancellation shares of its capital stock, a dividend will be
deemed to be paid in an amount equal to the amount by which the amount paid
exceeds the "paid-up capital" (as defined in the Income Tax Act (Canada)) of the
shares so redeemed or purchased for cancellation. The "paid-up capital" of the
common shares issued to a U.S. holder may be less than the holder's cost of such
shares by reason of, for example, the averaging of the paid-up capital with that
of shares of such class already issued and outstanding. The paid-up capital
attributable to each common share will be relevant to the holders thereof in
connection with any purchase for cancellation of such shares or upon the
winding-up of Corel.
Canadian Taxation on Sale or Other Disposition
A gain realized by a U.S. holder on a disposition or deemed disposition
of common shares generally will not be subject to tax under the Income Tax Act
(Canada) unless such common shares constitute taxable Canadian property within
the meaning of the Income Tax Act (Canada). Common shares generally will not be
taxable Canadian property to a U.S. holder if the common shares are listed on a
prescribed stock exchange at the time of disposition unless, at any time within
the 60 month period immediately preceding the disposition, the U.S. holder,
persons with whom the U.S. holder did not deal at arm's length or the U.S.
holder together with such persons owned or had an interest in or option to
acquire 25% or more of the issued shares of any class or series of Corel's
shares. The common shares will constitute taxable Canadian property to a U.S.
holder if at the time of their disposition the common shares are not listed on a
prescribed stock exchange.
Even if the common shares constitute or are deemed to constitute
taxable Canadian property to a particular U.S. holder, an exemption from tax
under the Income Tax Act (Canada) may be available under the Convention.
Certain U.S. Federal Income Tax Consequences
The following describes certain United States federal income tax
consequences of an investment in the common shares. This discussion is based
upon United States federal income tax laws presently in force. The discussion is
not a full description of all tax considerations that may be relevant to a
decision to purchase common shares. In particular, the discussion is directed
only to U.S. holders that will hold common shares as capital assets and that
have the United States dollar as their functional currency. It does not address
the tax treatment of U.S. holders that are subject to special tax rules, such as
banks, life insurance companies, tax-exempt entities, dealers, traders who elect
to mark their common shares to market, persons that will hold the common shares
as part of a straddle, hedge, conversion or constructive sale transaction for
tax purposes and holders of 10% or more of our voting shares.
The following discussion applies to the following U.S. holders:
(i) United States citizens or residents, (ii) United States corporations or
partnerships, (iii) trusts subject to the control of a U.S. person and the
primary supervision of a U.S. court, or (iv) estates the income of which is
subject to United States federal income taxation regardless of its source.
13
Dividends and Other Distributions
Cash dividends (including the amount of any Canadian taxes withheld)
paid with respect to the common shares generally will be includible in the gross
income of a U.S. holder as ordinary income when the dividends are actually or
constructively received to the extent of our current and accumulated earnings
and profits as determined for United States federal income tax purposes.
Dividends paid in Canadian dollars will be includible in a United States dollar
amount based on the exchange rate in effect on the day of receipt by holder (or
the holder's agent). Any gain or loss recognized upon a subsequent sale or
conversion of the Canadian dollars for a different amount will be United States
source ordinary income or loss. Dividends generally will be foreign source
income. The Canadian withholding tax paid by or for the account of any U.S.
holder will be eligible, subject to generally applicable limitations and
conditions, for credit against the U.S. holder's federal income tax liability,
but generally will be "passive income" or "financial services income" which is
treated separately from other types of income for foreign tax credit limitation
purposes. Dividends will not be eligible for the dividends-received deduction
allowed to corporations with respect to dividends paid by United States
corporations.
If distributions made by us were to exceed our current and accumulated
earnings and profits as determined for United States federal income tax
purposes, the excess would be treated as a non-taxable return of capital to the
extent of the U.S. holder's adjusted basis in the common shares, and thereafter
as capital gain.
A beneficial owner that is not a U.S. holder generally will not be
subject to United States federal income or withholding tax on dividends paid
with respect to common shares, unless such income is effectively connected with
the conduct by such person of a trade or business within the United States, and
the dividends are attributable to a permanent establishment that such person
maintains in the United States if that is required by an applicable treaty. In
such cases a non-U.S. holder will be taxed in the same manner as a U.S. holder.
A corporate non-U.S. holder may, under certain circumstances, be subject to an
additional "branch profits tax" on effectively connected dividends.
Capital Gains with Respect to Common Shares
Subject to the PFIC rules discussed below, U.S. holders will recognize
capital gain or loss on the sale or other disposition of common shares held by
the U.S. holder. Generally, such gain or loss will be long-term capital gain or
loss if the U.S. holder's holding period for such common shares exceeds one
year. Long-term capital gain of a non-corporate U.S. holder is generally subject
to a maximum tax rate of 20 percent. Any gain or loss recognized by a U.S.
holder generally will be treated as from United States sources. Consequently, in
the case of a disposition of common shares, the U.S. holder may not be able to
claim the foreign tax credit for Canadian tax, if any, imposed on that gain
unless it appropriately can apply the credit against tax due on other income
from foreign sources.
A beneficial owner that is not a U.S. holder of common shares will not
be subject to United States income or withholding tax on gain from the sale or
other disposition of common shares unless (i) that gain is effectively connected
with the conduct of a trade or business within the United States and the gain is
attributable to a permanent establishment that such person maintains in the
United States if that is required by an applicable treaty, or (ii) the non-U.S.
holder is an individual who is present in the United States for at least 183
days during the taxable year of the disposition and certain other conditions are
met. A corporate non-U.S. holder may, under certain circumstances, be subject to
an additional "branch profits tax" on effectively connected capital gains.
14
Passive Foreign Investment Company
In general, a foreign corporation is a passive foreign investment
company (a "PFIC") for any taxable year in which a U.S. holder owns stock in the
corporation and:
. 75% or more of its gross income consists of passive income (such as
dividends, interest, rents and royalties) or
. 50% or more of the average quarterly value of its assets consists
of assets that produce, or are held for the production of, passive
income.
Cash, cash equivalents and marketable securities, among other types of
assets, are considered to produce, or to be held for the production of, passive
income for purposes of applying the second of the two tests set forth above. As
of August 31, 2001 we had $124.3 million of cash, (including restricted cash of
approximately $0.5 million) cash equivalents and marketable securities on hand.
Our cash balances may either increase or decrease from the amount on hand as of
August 31, 2001. Accordingly, we may be or may subsequently become a PFIC if the
average quarterly value of all our assets that produce, or are held for the
production of, passive income (including cash) equals or exceeds 50% of our
gross assets. Because the PFIC determination is made annually on the basis of
facts and circumstances that may be beyond our control (including fluctuations
in the market value of our stock), and because this discussion is being provided
prior to the close of our taxable year in which you may acquire our stock from
the selling shareholder, we cannot assure you that we will not be a PFIC for
this year or future years.
If we were a PFIC for any taxable year, a U.S. holder that held common
shares in that taxable year would be required to file an IRS form 8621 and would
generally be subject to special rules with respect to certain distributions made
by us on the common shares and with respect to gains from dispositions of common
shares. In general, such a U.S. holder would be required to allocate the
distributions or gains, as the case may be, ratably over its holding period for
the common shares. That portion of any distributions or gains allocated to a
prior taxable year, other than a year prior to the first year in which we were a
PFIC, would effectively be taxed at the highest United States federal income tax
rate in effect for that year with respect to ordinary income. In addition, the
U.S. holder would be subject to an interest charge on the resulting tax
liability determined as if that tax liability had been due with respect to the
particular taxable year. The portion, if any, of distributions or gains not so
allocated to a prior taxable year of the U.S. holder in which we were a PFIC
would be included in the U.S. holder's income for the taxable year of the
particular distribution or disposition and taxed as ordinary income.
The foregoing rules with respect to distributions and dispositions may
be avoided if a U.S. holder is eligible for and timely makes either a valid
"qualifying electing fund" election, in which case the U.S. holder generally
would be required to include in income on a current basis its pro rata share of
our ordinary income and net capital gains, or a valid "mark-to-market" election.
We can provide no assurances we will complete the actions necessary for U.S.
holders to make a qualifying electing fund election in the event that we were to
be considered a PFIC for any taxable year. If a mark-to-market election is made,
the U.S. holder will include in ordinary income each year the excess, if any, of
the fair market value over the adjusted tax basis of its common shares. The U.S.
holder also will be allowed an ordinary loss each year of the excess, if any, of
the adjusted tax basis over the fair market value of its common shares, but only
to the extent of the net amount of previously included income as a result of the
mark-to-market election. The U.S. holder's tax basis in the common shares will
be adjusted to reflect any such income or loss amounts. Assuming the common
shares are treated as marketable stock for purposes of the PFIC rules, the
mark-to-market election would be available with respect to the common shares.
Prospective purchasers are urged to consult their tax advisors regarding the
consequences of an investment in a PFIC.
15
Information Reporting and Backup Withholding
Dividends paid on common shares and the proceeds from the sale, exchange
or redemption of the common shares may be reported to the United States Internal
Revenue Service and up to a 30.5 percent backup withholding tax may apply to
such amounts unless the holder is an exempt recipient such as a corporation,
provides necessary certifications (including in the case of a non-U.S. holder,
certification that such person is not a United States person within the meaning
of Section 7701(a(30) of the Internal Revenue Code) or otherwise establishes a
basis for exemption. The amount of any backup withholding from a payment to a
holder will be allowed as a credit against the holder's United States federal
income tax liability.
16
PLAN OF DISTRIBUTION
We are registering the offer and sale of the common shares issuable
upon conversion of our Series A preferred shares which are owned by Microsoft
Licensing, the selling shareholder. Because the Series A preferred shares are
not convertible by Microsoft Licensing, Microsoft or any of its other affiliates
or associates, Microsoft Licensing will sell the preferred shares to one or more
underwriters, broker-dealers or other selling agents, who will convert them into
common shares and offer and sell those common shares in ordinary brokers
transactions at then current market prices or in other transactions at
negotiated prices.
Registration of the common shares covered by this prospectus does not
mean, however, that those shares will be offered or sold. Microsoft Licensing
and the underwriters, broker-dealers or other selling agents selected by
Microsoft Licensing will act independently of us in making decisions with
respect to the timing, manner and size of each sale.
Microsoft has advised us that the underwriters, broker-dealers and/or
other selling agents to which Microsoft Licensing will sell the Series A
preferred shares will offer and sell the common shares they receive upon
conversion of the Series A preferred shares in one or more of the following
ways:
. on the Nasdaq National Market, The Toronto Stock Exchange or in
the over-the-counter market,
. directly to one or more purchasers in privately negotiated
transactions,
. in ordinary brokerage transactions or transactions in which a
broker or dealer solicits purchases,
. in block trades,
. in an underwritten offering on a firm commitment or best-efforts
basis,
. through option transactions, forward contracts, equity swaps or
other derivative transactions relating to the securities,
. through short sales, or
. any combination of the above,
at prices and at terms then prevailing or at prices related to the then current
market price or at negotiated prices. Any of these underwriters, broker-dealers
or selling agents may involve other underwriters, broker-dealers and/or selling
agents and all of them may receive compensation in the form of discounts,
concessions or commissions from Microsoft Licensing, the others participating in
the offers and sales and/or from the purchasers of common shares. Compensation
as to a particular underwriter, broker-dealer or selling agent may exceed
customary commissions.
In effecting sales, the underwriters, broker-dealers and/or other
selling agents selected by Microsoft Licensing may:
. enter into hedging transactions with other broker-dealers, and in
connection with those transactions, the other broker-dealers may
engage in short sales of the common shares,
17
. sell common shares short and deliver the common shares to close
out such short positions,
. enter into option or other transactions with other broker-dealers
that require the delivery to the other broker-dealer of the
shares, which the other broker-dealer may resell pursuant to this
prospectus,
. pledge the shares to another broker-dealer, and upon a default,
the other broker-dealer may effect sales of the pledged shares
pursuant to this prospectus, and
. engage in any combination of the above.
The common shares covered by this prospectus may also be offered and
sold in transactions in reliance upon Rule 144 under the Securities Act of 1933
if such offer and sale meet the criteria and satisfy the requirements of Rule
144.
At any time a particular offer of common shares covered by this
prospectus is made, a revised prospectus or prospectus supplement, if required,
will be distributed which will set forth:
. the aggregate amount of common shares being offered,
. the name or names of any underwriters, broker-dealers or other
selling agents participating in the offers and sales,
. the price or prices at which the common shares were sold,
. any discounts, commissions, concessions and other items
constituting compensation paid by the selling shareholder and/or
any participating underwriters, broker-dealers and selling agents,
including any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and
. any other material facts of the transactions.
Such prospectus supplement, and, if necessary, a post-effective
amendment to the registration statement of which this prospectus is a part, will
be filed with the Commission to reflect the disclosure of additional information
with respect to the distribution of the common shares covered by this
prospectus.
Microsoft Licensing may, and any underwriter, broker-dealer or selling
agent participating in any distribution of the common shares covered hereby
will, be deemed to be an "underwriter" within the meaning of Section 2(a)(11) of
the Securities Act of 1933, and any compensation or commission paid or any
discounts allowed to any of those underwriters, broker-dealers or other selling
agents, and any profit they realize on the sale of the common shares, would be
deemed to be an underwriting discount or commission under the Securities Act of
1933.
Microsoft may indemnify any underwriter, broker-dealer or selling agent
that participates in transactions involving the sale of the common shares
against certain liabilities, including liabilities arising under the Securities
Act of 1933. In addition, we have agreed in the registration rights agreement to
indemnify the selling shareholder and each underwriter, broker-dealer or other
selling agent facilitating the sale of the common share offered hereby against
certain liabilities arising under the Securities Act of 1933. Each person so
indemnified by us has agreed to indemnify us for liabilities arising under the
Securities Act of 1933 with respect to written information furnished to us by
it.
18
The registration rights agreement between us, Microsoft and Microsoft
Licensing permits us to restrict the resale of the common shares issued upon
conversion of the Series A preferred shares if the registration of the common
shares with the Securities and Exchange Commission would interfere with a
financing, acquisition, reorganization or other corporate transaction involving
Corel or any of our subsidiaries. We cannot so restrict sales of such common
shares more than once in any 12-month period or for more than 90 days in the
aggregate during any such restriction.
In order to comply with the securities laws of certain states, if
applicable, our common stock will be sold in those jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
common shares may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Microsoft Licensing and/or any person selling common shares covered by
this prospectus will pay all compensation, commissions and the underwriting
discounts and its own legal expenses, if any, associated with the sale of the
common shares. We will pay all costs, expenses and fees in connection with the
registration of the common shares covered by this prospectus, including, among
others, the fees of our counsel and accountants, all registration and filing
fees, all stock exchange listing fees, blue sky fees and expenses, all printing
and related expenses and any fees or disbursements of underwriters customarily
paid by issuers.
We have agreed to maintain the effectiveness of the registration
statement of which this prospectus is a part with respect to the common shares
offered hereunder by until the earlier of the date that is two years from the
effective date of the registration statement, or the date that all the shares
registered hereunder have been sold.
LEGAL MATTERS
The validity of the issuance of our common shares will be passed upon
for Corel by McCarthy Tetrault LLP, 40 Elgin Street, Suite 1400, Ottawa,
Ontario, K1P 5K6.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus of Corel as of November 30, 2000 and 1999 and for each of the three
years in the period ended November 30, 2000 have been included in reliance on
the report of PricewaterhouseCoopers LLP, independent auditors, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form S-3 to register with the
Securities and Exchange Commission the common shares offered hereby. This
document is a part of that registration statement and constitutes a prospectus
of Corel. As allowed by the rules of the Securities and Exchange Commission,
this prospectus does not, however, contain all the information you can find in
the registration statement or the exhibits to the registration statement.
We file annual, quarterly and current reports and other information
with the Securities and Exchange Commission. You may read and copy any reports,
statements or other information filed by us at the Securities and Exchange
Commission's public reference rooms at the following locations:
19
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, Illinois
60661-2511
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms. You may also obtain
copies of documents filed with the Securities and Exchange Commission from
commercial document retrieval services (some of which also provide on-line
delivery) and at the world wide web site maintained by the Securities and
Exchange Commission at www.sec.gov.
Our common shares are traded on Nasdaq and on The Toronto Stock
Exchange and we are required to file reports, proxy statements and other
information with Nasdaq and The Toronto Stock Exchange. Reports, proxy
statements and other information concerning us may be inspected at the offices
of The Nasdaq Stock Market, Inc. which is located at 1735 K Street, N.W.,
Washington, D.C. 20006 and at the offices of The Toronto Stock Exchange at 2
First Canadian Place, Toronto, Ontario, Canada M5X 1J2.
We also file annual, quarterly and special reports, proxy statements
and other information with the Canadian securities regulatory authorities in
such provinces where such filings are required to be made. Copies of such
filings are available to the public over the Internet at www.sedar.com, the web
site maintained on behalf of the Canadian securities administrators for
accessing filings made through SEDAR (System for Electronic Document Analysis
and Retrieval). SEDAR is the system used for electronically filing most
securities related information with the Canadian securities regulatory
authorities.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus. This means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below
that have previously been filed with the Securities and Exchange Commission.
These documents contain important information about us and our financial
condition.
The financial statements incorporated by reference in this prospectus
are prepared on the basis of Canadian Generally Accepted Accounting Principles
(Canadian GAAP), which differ in some respects from US GAAP. Differences
between Canadian GAAP and US GAAP do not result in any material differences in
the financial statements. For further information, please refer to the note to
the respective financial statements entitled "Significant Differences Between
Canadian and United States GAAP."
The following documents that we have filed with the Securities and
Exchange Commission are incorporated by reference into this prospectus:
(a) our annual report on Form 10-K/A for the fiscal year ended
November 30, 2000;
(b) our quarterly report on Form 10-Q for the fiscal quarter ended
February 28, 2001;
(c) our quarterly report on Form 10-Q for the fiscal quarter ended
May 31, 2001;
(d) our current report on Form 8-K filed on August 17, 2001, relating
to our acquisition of Micrografx, Inc. and SoftQuad Software,
Ltd.;
(e) the description of our common shares contained in our
Registration Statement on Form 20-F filed with the Securities and
Exchange Commission on August 25, 1992 under Section 12(g) of the
Exchange Act, including any amendment or report filed for the
purpose of updating such description;
(f) the description of the rights issued to the holders of our common
shares contained in our Registration Statement on Form 8-A filed
with the Securities and Exchange Commission on March 25, 1999
under Section 12(g) of the Exchange Act, including the amendment
filed on July 20, 2000 and any subsequent amendment or report
filed for the purpose of updating such description; and
(g) all other information that we file with the Securities and
Exchange Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of this offering.
20
We will furnish without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon such person's
written or oral request, a copy of any and all of the information that has been
incorporated by reference into this prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
herein as well). Requests for such copies should be directed to John Hladkowicz
at (613) 728-8200, or by mail at 1600 Carling Avenue, Ottawa, Ontario, Canada,
K1Z 8R7.
Any statement incorporated herein will be deemed to be modified or
superseded for the purposes of this prospectus and the Registration Statement to
the extent that a statement contained herein or in any other subsequently filed
document that is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus and the Registration Statement.
21
================================================================================
COREL CORPORATION
24,000,000 Common Shares
--------------------
PROSPECTUS
--------------------
================================================================================
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
The following is a list of the estimated costs and expenses payable by
the Registrant in connection with the preparation and filing of this
registration statement.
S.E.C. Registration Fee............. $ 15,735
Printing Expenses................... 100,000
Accountants' Fees and Expenses...... 50,000
Legal Fees and Expenses............. 150,000
Other Miscellaneous Expenses........ 7,625
--------
Total $325,000
========
Item 15. Indemnification of Directors and Officers
Canadian law generally permits a corporation to indemnify its directors
and officers for all costs, charges and expenses incurred by the person in
respect of any action or proceedings to which that person is made a party by
reason of being a director or officer (1) if the person acted in good faith with
a view to the best interests of the corporation and (2) in the case of a
criminal or administrative proceeding that is enforced by a monetary penalty,
the person had reasonable grounds for believing his conduct was lawful. Canadian
law generally requires a corporation to indemnify its directors and officers if
the person is substantially successful on the merits of his defense of the
action, the person fulfills (1) and (2) above, and is otherwise fairly and
reasonably entitled to indemnity.
The Registrant's By-Laws generally provide that the Registrant is
required to indemnify the director or officer against liability incurred in such
capacity to the extent permitted or required by Canadian law.
A policy of directors' and officers' liability insurance is maintained
by the Registrant which insures directors and officers of the Registrant and its
subsidiaries for losses as result of claims based upon the acts or omissions as
directors and officers of the Registrant and its subsidiaries.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
II-1
EXHIBIT INDEX
Exhibit No. Exhibit
---------- -------
* 3.1 Certificate and Articles of Amalgamation of Corel Corporation and
Corel Computer Corp. (incorporated by reference to Exhibit 3.3 of
Form 10-K of the Registrant for the fiscal year ended November 30,
1999).
* 3.2 Amendment of Articles of Incorporation of Corel Corporation
(incorporated by reference to Exhibit 3.4 of Form 10-K of the
Registrant for the fiscal year ended November 30, 2000).
* 3.3 By-law No. 6 of Corel Corporation (incorporated by reference to
Exhibit 3.2 of the Registrant's Registration Statement on
Form F-1, No. 33-50886).
* 4.1 Shareholder Rights Plan Agreement dated February 11, 1999, as
amended and restated as of March 31, 1999, by and between Corel
Corporation and Montreal Trust Company of Canada, as rights agent
(incorporated by reference to Exhibit 4.3 of Form 8-A/A of the
Registrant, filed on July 20, 2000).
* 5.1 Opinion of McCarthy Tetrault LLP with respect to the validity of
the shares being offered
* 8.1 Tax Opinion of McCarthy Tetrault LLP (included in the opinion
filed as Exhibit 5.1 to this Registration Statement)
* 8.2 Tax Opinion of Milbank, Tweed, Hadley & McCloy LLP
* 23.1 Consent of McCarthy Tetrault LLP (included in the opinion filed as
Exhibit 5.1 to this Registration Statement)
* 23.2 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in the
opinion filed as Exhibit 8.2 to this Registration Statement)
+ 23.3 Consent of PricewaterhouseCoopers LLP
* 24.1 Power of Attorney for directors and certain officers of the
Registrant, authorizing the signing of this Registration
Statement on their behalf (included on the signature page of this
Registration Statement).
-------------------
* Previously filed.
+ Filed herewith
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Ottawa, Province of
Ontario, Canada on October 2, 2001.
COREL CORPORATION
By: /s/ John Blaine
--------------------------------------
John Blaine
Executive Vice-President Finance,
and Chief Financial Officer
and Treasurer
Pursuant to the requirement of the Securities Act, this Registration
Statement Amendment has been signed by the following persons in the capacities
and on the dates indicated:
Signature Title Date
--------- ----- ----
*
------------------------------------------
Derek J. Burney President, Chief Executive Officer October 2, 2001
and Director
/s/ John Blaine
------------------------------------------
John Blaine Executive Vice-President Finance, October 2, 2001
Chief Financial Officer and
Treasurer
(principal accounting officer and
principal financial officer)
*
------------------------------------------
James Baillie, Q.C. Chairman and Director October 2, 2001
*
------------------------------------------
Hunter S. Grant Director October 2, 2001
*
------------------------------------------
Barbara McDougall Director October 2, 2001
------------------------------------------
Lyle Blair Director October , 2001
II-3
*
------------------------------------------
Steven Houck Authorized U.S. Representative October 2, 2001
*By: /s/ John Blaine
-----------------------------------
John Blaine
Attorney-in-Fact
EX-23.3
3
dex233.txt
CONSENT OF PRICEWATERHOUSECOOPERS LLP
Exhibit 23.3
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement No. 333-55988 on Form S-3 of Corel Corporation of our report dated
January 26, 2001, except for Note 17, which is as of September 5, 2001, relating
to the financial statements, which appears in Corel's Annual Report on Form
10-K/A for the year ended November 30, 2000. We also consent to the
incorporation by reference of our report dated January 26, 2001, except for Note
17, which is as of September 5, 2001, relating to the financial statement
schedule, which appears on such Form 10-K/A. We further consent to the
references to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Ottawa, Canada
October 1, 2001