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EXECUTION VERSION
COREL CORPORATION
-and-
COREL JS ACQUISITION, INC.
-and-
COREL HOLDINGS CORPORATION
-and-
JASC SOFTWARE, INC.
-and-
PRINCIPAL STOCKHOLDERS (AS THAT TERM IS DEFINED IN THIS AGREEMENT)
-and-
EACH OTHER JASC STOCKHOLDER (AS THAT TERM IS DEFINED IN THIS AGREEMENT) THAT
BECOMES PARTY TO THIS AGREEMENT
----------
AGREEMENT AND PLAN OF
MERGER
----------
OCTOBER 8, 2004
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TABLE OF CONTENTS
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ARTICLE 1
INTERPRETATION.......................................................... 2
1.1 Definitions........................................................ 2
1.2 Schedules and Exhibits............................................. 10
1.3 Headings and Table of Contents..................................... 11
1.4 Gender and Number.................................................. 11
1.5 Date............................................................... 11
1.6 Laws............................................................... 12
1.7 Currency........................................................... 12
1.8 Generally Accepted Accounting Principles........................... 12
1.9 Construction of Agreement.......................................... 12
1.10 Invalidity of Provisions........................................... 12
1.11 Entire Agreement................................................... 12
1.12 Waiver, Amendment.................................................. 13
1.13 Governing Law...................................................... 13
ARTICLE 2
THE TRANSACTION......................................................... 13
2.1 The Transaction.................................................... 13
2.2 Closing and the Effective Time..................................... 13
2.3 Effect of the Merger............................................... 13
2.4 Articles of Incorporation and Bylaws............................... 14
2.5 Directors and Officers............................................. 14
2.6 Effect on Capital Stock............................................ 14
2.6.1 Conversion of Jasc Shares................................... 14
2.6.2 Conversion of Merger Subsidiary Common Stock................ 14
2.6.3 Fractional Shares........................................... 14
2.6.4 Dissenters' Rights.......................................... 14
2.7 Surrender of Certificates and Payment of Merger
Consideration...................................................... 15
2.8 Adjustments........................................................ 16
2.9 Working Capital Adjustment......................................... 16
2.10 Q3 Net Revenue Adjustment.......................................... 17
2.11 Dispute Process.................................................... 18
2.12 Escrow............................................................. 18
2.13 Convertible Securities and Option Plan............................. 18
2.14 Tax Related Payment................................................ 19
ARTICLE 3
REPRESENTATIONS AND WARRANTIES.......................................... 20
3.1 By the Corporation and the Principal Stockholders.................. 20
3.1.1 Formation and Status of the Corporation..................... 20
3.1.2 Power of the Corporation and Due Authorization.............. 20
3.1.3 Capital of the Corporation.................................. 20
3.1.4 Subsidiaries and Investments................................ 21
3.1.5 No Obligations to Issue Securities.......................... 21
3.1.6 No Contravention by the Corporation......................... 21
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3.1.7 Approvals and Consents...................................... 21
3.1.8 Financial Statements........................................ 21
3.1.9 Accounts Receivable......................................... 22
3.1.10 Inventory Valuation......................................... 22
3.1.11 Liabilities and Guarantees.................................. 22
3.1.12 Indebtedness................................................ 22
3.1.13 Absence of Unusual Transactions and Events.................. 22
3.1.14 No Dividends, Loans, etc.................................... 23
3.1.15 Insider Interests........................................... 24
3.1.16 As to Certain Contracts In and Out of the Ordinary
Course...................................................... 24
3.1.17 Certain Distribution and Master Representative
Agreements.................................................. 25
3.1.18 No Default Under Agreements................................. 25
3.1.19 No Owned Real Property...................................... 25
3.1.20 Leased Real Property........................................ 26
3.1.21 Zoning and Other Matters Relating to Real Property.......... 26
3.1.22 Title to Assets............................................. 26
3.1.23 Environmental Matters....................................... 27
3.1.24 Tax Matters................................................. 28
3.1.25 Employment Matters.......................................... 29
3.1.26 Employee Plans.............................................. 30
3.1.27 Labor Relations............................................. 32
3.1.28 Insurance................................................... 32
3.1.29 Intellectual Property....................................... 32
3.1.30 Permits, Registrations and Elections........................ 36
3.1.31 Compliance with Laws........................................ 37
3.1.32 Litigation and Other Proceedings and Warranty
Claims...................................................... 37
3.1.33 Corporate Records........................................... 37
3.1.34 Books of Account and Internal Controls...................... 37
3.1.35 Bank Accounts, etc.......................................... 38
3.1.36 Customers and Suppliers..................................... 38
3.1.37 Conduct of Business......................................... 38
3.1.38 Disclosure.................................................. 38
3.2 By Principal Stockholders.......................................... 39
3.2.1 Corel Common Shares......................................... 39
3.2.2 No Foreign Person........................................... 39
3.2.3 Incorporation and Status of the Principal
Stockholder................................................. 39
3.2.4 Power of the Principal Stockholder and Due
Authorization............................................... 39
3.2.5 Title to, and Right to Sell, Purchased Shares............... 39
3.2.6 No Contravention by Principal Stockholders.................. 40
3.2.7 Accredited Investor......................................... 40
3.3 By Merger Subsidiary and Corel Holdings............................ 40
3.3.1 Incorporation and Status.................................... 40
3.3.2 Corporate Power and Due Authorization....................... 40
3.3.3 No Contravention............................................ 41
3.3.4 Approvals and Consents...................................... 41
3.4 By Corel........................................................... 41
3.4.1 Incorporation and Status of Corel........................... 41
3.4.2 Corporate Power of Corel and Due Authorization.............. 41
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3.4.3 Capital of Corel............................................ 42
3.4.4 No Obligations to Issue Securities.......................... 42
3.4.5 No Contravention of Corel................................... 42
3.4.6 Approvals and Consents...................................... 42
3.4.7 Equity Consideration........................................ 42
3.4.8 Corel Financial Statements.................................. 42
3.4.9 Sufficiency of Capital, Access to Capital................... 42
3.5 No Finder's Fees................................................... 43
3.6 Survival of Covenants, Representations and Warranties.............. 43
ARTICLE 4
CONDITIONS.............................................................. 43
4.1 Conditions for the Benefit of Corel and the Merger
Subsidiary...................................................... 43
4.1.1 Accuracy of Representations and Compliance With
Covenants................................................ 43
4.1.2 Opinion of Faegre & Benson LLP.............................. 44
4.1.3 Force Majeure............................................... 44
4.1.4 No Adverse Legislation...................................... 44
4.1.5 No Action to Restrain....................................... 44
4.1.6 [Reserved].................................................. 44
4.1.7 Consents and Approvals...................................... 44
4.1.8 Delivery of Other Agreements and Documents.................. 45
4.1.9 Q3 Net Revenue.............................................. 45
4.1.10 Exercise of Dissenters' Rights.............................. 45
4.1.11 Certain Terminations........................................ 45
4.2 Conditions for the Benefit of the Corporation...................... 46
4.2.1 Accuracy of Representations of Merger Subsidiary and
Corel and Compliance With Covenants...................... 46
4.2.2 Opinion of Torys LLP........................................ 46
4.2.3 No Action to Restrain....................................... 46
4.2.4 [Reserved].................................................. 46
4.2.5 Delivery of Other Agreements................................ 46
ARTICLE 5
ADDITIONAL AGREEMENTS OF THE PARTIES.................................... 47
5.1 Access to Information.............................................. 47
5.2 Conduct of Business Until Time of Closing.......................... 47
5.3 Negative Covenant.................................................. 48
5.4 Merger Subsidiary's Covenant....................................... 48
5.5 Corporate Action, Releases......................................... 48
5.6 Obtaining of Consents and Approvals................................ 49
5.7 Additional Insurance............................................... 49
5.8 Non-Solicitation................................................... 49
5.9 [Reserved]......................................................... 49
5.10 Tax Matters........................................................ 49
5.11 Certain Payments and Expenses...................................... 50
5.12 Goodwill........................................................... 51
5.13 Cooperation........................................................ 51
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5.14 Termination........................................................ 51
5.15 Jasc Stockholder Approval.......................................... 52
5.16 Jasc YE Bonus Program.............................................. 52
5.17 Jasc Founder's Computer and Cell Phone............................. 52
5.18 Post-Closing Access................................................ 52
ARTICLE 6
INDEMNIFICATION......................................................... 53
6.1 Indemnification.................................................... 53
6.2 Notice of Claim.................................................... 54
6.3 Procedure for Indemnification...................................... 54
6.3.1 Corel Indemnified Party's Claims............................. 54
6.3.2 Third Party Claims........................................... 54
6.4 Additional Rules and Procedures.................................... 55
6.5 Escrow Agreement................................................... 56
6.6 Limitation of Remedies............................................. 56
ARTICLE 7
CLOSING................................................................. 57
7.1 Location and Time of the Closing................................... 57
7.2 Deliveries at the Closing.......................................... 57
ARTICLE 8
GENERAL MATTERS......................................................... 57
8.1 Public Notices..................................................... 57
8.2 Stockholder Representative......................................... 57
8.3 Expenses........................................................... 57
8.4 Assignment......................................................... 59
8.5 Notices............................................................ 59
8.6 Time of Essence.................................................... 60
8.7 Consent to Jurisdiction............................................ 60
8.8 Waiver of Jury Trial............................................... 61
8.9 No Third-Party Beneficiaries....................................... 61
8.10 Further Assurances................................................. 61
8.11 Counterparts....................................................... 61
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(TORYS LLP NEW YORK TORONTO LOGO)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 8th day of
October, 2004,
AMONG:
COREL CORPORATION, a corporation existing under the laws of the
Province of Ontario ("COREL")
- and -
COREL JS ACQUISITION, INC., a corporation existing under the laws
of the State of Minnesota (the "MERGER SUBSIDIARY")
- and-
COREL HOLDINGS CORPORATION, a corporation existing under the laws
of the Province of New Brunswick (the "COREL HOLDINGS")
- and-
JASC SOFTWARE, INC., a corporation existing under the laws of the
State of Minnesota (the "CORPORATION")
-and-
the PRINCIPAL STOCKHOLDERS (as defined below)
- and-
each other JASC STOCKHOLDER (as defined below) that becomes party
to this Agreement
RECITALS:
A. The Boards of Directors of the Corporation, Corel and the Merger Subsidiary
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that (1) the Corporation sell
the Specified Assets (as defined below) to a wholly-owned subsidiary of
Corel (the "ASSET SALE"); and (2) the Corporation and the Merger Subsidiary
combine into a single company through the statutory merger of the Merger
Subsidiary with and into the Corporation (the "MERGER") and, in furtherance
of these actions, have declared the advisability of and approved the
Transaction.
B. The Corporation, the Jasc Stockholders, Corel and the Merger Subsidiary
desire to make certain representations and warranties and other agreements
in connection with the Transaction.
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NOW THEREFORE in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties to this
Agreement agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement,
1.1.1 "ACCREDITED INVESTOR" means an accredited investor within the meaning
of Rule 501 (a) under the Securities Act;
1.1.2 "ADJUSTED SEPTEMBER 30 WORKING CAPITAL" means the Working Capital as
of September 30, 2004 (excluding accruals in respect of the Jasc YE Bonus
Program) adjusted to reflect all expenses and accruals for Stockholder
Expenses occurring prior to the Closing Date;
1.1.3 "AFFILIATE" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with that Person;
1.1.4 "AGREEMENT" means this agreement and all schedules attached to this
agreement, in each case as they may be amended or supplemented from time to
time, and the expressions "hereof," "herein," "to this Agreement,"
"hereunder," "hereby" and similar expressions refer to this agreement; and
unless otherwise indicated, references to Articles, sections and Schedules
are to Articles in, sections in, and Schedules to this agreement;
1.1.5 "ALBUM SOFTWARE PROGRAM" means the Paint Shop Photo Album 5 Software;
1.1.6 "ARTICLES OF MERGER" has the meaning given to that term in section
2.1.2;
1.1.7 "ASSET SALE" has the meaning given to that term in Recital A;
1.1.8 "ASSET SALE CASH CONSIDERATION" means $30,870,000, less, (1) any
Stockholder Expenses not satisfied or accrued by the Corporation prior to
the Effective Time to the extent not reflected in the calculation of the
Initial Working Capital Shortfall, (2) the Initial Working Capital
Shortfall, if any, and (3) the Initial Q3 Net Revenue Shortfall, if any;
1.1.9 "ASSET SALE CONSIDERATION" means the Asset Sale Cash Consideration
and the Asset Sale Equity Consideration to be paid or issued, as the case
may be, by Corel or a subsidiary of Corel to the Corporation as
consideration pursuant to the Transfer Agreement;
1.1.10 "ASSET SALE EQUITY CONSIDERATION" means 4,001,581 Corel Common
Shares;
1.1.11 "AUDITED FINANCIAL STATEMENTS" means the balance sheet of the
Corporation as at the Audited Statements Date and the accompanying
statements of income, changes in stockholders' equity and cash flows for
the year then ended, including the notes to those financial statements, and
the report of the auditors of the Corporation on those financial
statements, all as attached as Schedule 1.1.11;
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1.1.12 "AUDITED STATEMENTS DATE" means December 31, 2003;
1.1.13 "BENEFIT PLANS" has the meaning given to that term in section
1.1.40.3;
1.1.14 "BUSINESS" means the development and global marketing and
distribution of digital photography and imaging software business (i)
carried on by the Corporation prior to the Effective Time; and (ii) carried
on by the Surviving Corporation, Corel and/or one or more direct or
indirect subsidiaries of Corel following the Effective Date utilizing
assets of the Corporation;
1.1.15 "BUSINESS DAY" means any day, other than Saturday, Sunday or any
statutory holiday in the State of California, the State of Minnesota and/or
the Province of Ontario;
1.1.16 "CHARGE" means any security interest, lien, charge, pledge,
encumbrance, mortgage, adverse claim or title retention agreement of any
nature or kind;
1.1.17 "CLAIM," "COREL INDEMNIFIED PARTY'S CLAIM" and "THIRD PARTY CLAIM"
have the meanings given to those terms respectively in section 6.2;
1.1.18 "CLOSING" means the consummation of the Transaction and the other
transactions contemplated by this Agreement;
1.1.19 "CLOSING DATE" has the meaning given to that term in section 2.2;
1.1.20 "CLOSING BALANCE SHEET" means the statement of assets and
liabilities of the Corporation as at the Closing Date calculated in
accordance with GAAP, delivered in accordance with section 2.14;
1.1.21 "CLOSING REQUIRED CONSENTS" means the Required Consents listed under
that heading on Schedule 3.1.7;
1.1.22 "CLOSING WORKING CAPITAL AMOUNT" means the Adjusted September 30
Working Capital as determined based upon the Working Capital Closing
Balance Sheet;
1.1.23 "CODE" means the United States Internal Revenue Code of 1986, as
amended;
1.1.24 "CONFIDENTIALITY AGREEMENTS" means the Confidentiality Agreement
between Goldsmith, Agio, Helms & Lynner, LLC and Corel dated April 7, 2004
and the Mutual Non-Disclosure Agreement among Vector Capital Corporation,
Corel and the Corporation dated July 30, 2004;
1.1.25 "CONSENTS" means those consents, authorizations and approvals set
out in Schedule 3.1.7;
1.1.26 "CONTRACT" means any commitment, contract, agreement, license,
lease, guarantee, binding arrangement or other instrument and includes any
amendments;
1.1.27 "CONTROL," when used with respect to any Entity, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Entity, whether through
the ownership, directly or indirectly, of more than 20% of the voting or
equity securities or other interests of that Entity and/or by contract or
otherwise; and the terms "controlling" and "controlled" have correlative
meanings;
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1.1.28 "CONVERTIBLE SECURITIES" means all shares (excluding shares of
common stock of the Corporation), options, warrants, rights or other
securities to acquire shares of common stock of the Corporation;
1.1.29 "COREL AUDITED FINANCIAL STATEMENTS" means the consolidated balance
sheet of Corel as at the Corel Audited Statements Date and the accompanying
consolidated statements of operations and cash flows for the year then
ended, including the notes to those financial statements, and the report of
the auditors of the Corporation on those financial statements, all as
attached as Schedule 1.1.29;
1.1.30 "COREL AUDITED STATEMENTS DATE" means November 30, 2003;
1.1.31 "COREL COMMON SHARES" means Class B Common Shares in the capital of
Corel;
1.1.32 "COREL INDEMNIFIED PARTIES" has the meaning given to that term in
section 6.1.1:
1.1.33 "COREL MINORITY SHAREHOLDERS AGREEMENT" means the shareholders
agreement to be entered into at the Time of Closing between Corel, its
shareholders and the Jasc Stockholders in the form attached as Schedule
1.1.33;
1.1.34 "COREL UNAUDITED FINANCIAL STATEMENTS" means the consolidated
balance sheet of the Corporation as at August 31, 2004 and the accompanying
consolidated statements of operations and cash flows for the nine months
then ended, all as attached as Schedule 1:1.34;
1.1.35 "COREL Q3 NET REVENUE PAYMENT" has the meaning given to that term in
section 2.10.3.2;
1.1.36 "COREL WORKING CAPITAL PAYMENT" has the meaning given to that term
in section 2.9.3.2;
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