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Corel to Acquire SoftQuad, Companies Sign Definitive Agreement

Wednesday, August 08, 2001

Press release from the issuing company

OTTAWA & TORONTO- Aug. 7, 2001--Corel Corporation and SoftQuad Software, Ltd. today announced that they have signed a definitive agreement whereby Corel will acquire SoftQuad in a stock-for-stock transaction to be accounted for as a purchase transaction. This acquisition advances key aspects of the company's growth strategy and builds upon its recently-announced plans to acquire Micrografx, Inc. By acquiring SoftQuad and its ground-breaking XML-enabling technologies, Corel is adding a key ingredient required to implement horizon two of its growth strategy. In addition, this acquisition will enable Corel to enrich the existing XML capabilities within its WordPerfect product line. "Upon completion of this acquisition, we believe we will have the core technologies needed to realize our vision of providing customers with an expansive cross-media publishing solution,'' said Derek Burney, president and CEO of Corel Corporation. "We intend to give customers the tools they need to create, manage and simultaneously deploy customized content across multiple delivery channels, including the Web. This streamlined production process will afford them maximum flexibility while saving them valuable time and resources. Our solution will capitalize on SoftQuad's expertise in the XML arena and its strong partnerships with leading content management system vendors, Micrografx's innovative emerging technologies and Corel's internationally recognized strengths in graphics and publishing. This acquisition will also benefit our WordPerfect customers. By integrating SoftQuad's market-leading XML technologies into our award-winning word-processing application, we will further enhance the XML functionality that many of our customers in the government and legal community currently enjoy. "We are very excited about the opportunities that lie ahead for Corel. With a clear focus on our immediate goals and intelligent investments to supplement our long-term growth, we believe we now have the tools necessary to position Corel as the new industry standard in emerging segments where there are currently no established leaders.'' "We are pleased to be joining forces with a company that shares our vision for pervasive XML content,'' said Roberto Drassinower, CEO of SoftQuad. "With Corel's development expertise, international brand recognition and strong balance sheet, we will be able to accelerate the delivery of XML-based content creation, transformation and exchange solutions to our shared customer base.'' Corel and SoftQuad share synergies which, when the two operations are combined, are expected to generate new revenue opportunities and cost efficiencies from which its collective global customer base will benefit. Based on preliminary estimates, after the realization of anticipated synergies and excluding any one-time integration costs, this acquisition is expected to be accretive to cash flow and cash earnings per share within approximately twelve months from the date of closing. The company does not expect any significant negative impact on cash flow as a result of this acquisition. Over the next several weeks, Corel and SoftQuad will work together on a comprehensive plan outlining how best to integrate the two companies. Following the closing of the deal, expected in the fourth quarter of Corel's fiscal 2001, the companies will announce further details related to the integration plan. Exchange terms: The transaction will be a stock-for-stock transaction. Each common share, or equivalent, of SoftQuad will be exchanged for .4152 of a Corel common share on closing, being the ratio of $1.50 to $3.6129. The $1.50 value for each SoftQuad share equals an approximate 34 per cent premium over the closing price of SoftQuad on August 6, 2001. The $3.6129 value for Corel common shares represents the prior 10 day volume weighted average share price of Corel common stock. At current values, Corel would issue approximately 9.85 million shares if all in-the-money options and warrants of SoftQuad are exercised prior to closing. All figures are expressed in US currency. The above noted exchange ratio will be fixed for movement in Corel's common share price between $2.71 per share and $4.52 per share. For prices outside this range, Corel would issue more shares at a lower price and fewer shares at a higher price. The maximum number of shares Corel could issue is approximately 11.2 million. The transaction is subject to regulatory approval and approval by SoftQuad's shareholders.

 

 

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