Corel Complaint

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ------------------------------------------------------x : IN RE: COREL CORPORATION : Civil Action No: 00-CV-1257 INC. SECURITIES LITIGATION : ------------------------------------------------------x : THIS DOCUMENT RELATES TO: : All Actions : ------------------------------------------------------x CONSOLIDATED AND AMENDED CLASS ACTION COMPLAINT Lead Plaintiffs, Fred Spagnola, Michael Perron and David Chavez, (“Plaintiffs” or “Lead Plaintiffs”) individually and on behalf of all persons similarly situated, allege upon personal knowledge as to themselves and their own acts, and as to all other matters upon the investigation made by and through their counsel, which included, among other things, a review of Securities and Exchange Commission (“SEC”) filings, news reports, press releases, transcripts and other publicly available information, as follows: JURISDICTION AND VENUE 1. This action arises under Section 10(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder by the Securities and Exchange Commission (“SEC”) and Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). 2. This Court has jurisdiction over the action pursuant to Section 27 of the Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. §1331 and 1337. 3. Venue is proper in this judicial district pursuant to Section 27 of the Exchange Act and 28 U.S.C. § 1391(b). Defendant Corel Corporation (“Corel” or the “Company”) is a Canadian corporation headquartered in Ottawa, Ontario, Canada. Corel’s stock is traded on the NASDAQ national exchange under the ticker CORL. Corel has a substantial business presence, and many of the acts complained of, including the dissemination to the investing public of materially false and misleading information occurred in this District. Plaintiff Fred Spagnola resides in this District, and purchased his shares of Corel stock in this District, as do many members of the plaintiff Class. 4. In connection with the acts and conduct alleged in this Complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including the United States mails, telephone communications, and the facilities of the national securities exchanges. NATURE OF ACTION 5. This class action is brought on behalf of the Class as defined below, to recover damages caused to plaintiff and the Class by defendants' violations of the federal securities laws. 6. During the Class Period, defendants engaged in a plan, scheme and course of conduct which was designed to, and did: a. deceive the investing public, including Plaintiffs and other members of the Class, concerning the financial condition and performance of the Company, including, among other things, the nature and extent of the actual sales made, and expenses incurred by the Company during the Class Period; b. artificially inflate the market price of Corel's common stock during the Class Period; and c. cause Plaintiffs and other members of the Class to purchase Corel common stock at inflated prices. 7. In furtherance of this plan and course of conduct, defendants issued or caused to be issued during the Class Period a series of false and misleading public statements and took the actions alleged herein, which operated as a fraud and deceit upon the market for the Company's stock, Plaintiffs 2 and the other members of the Class. THE PARTIES 8. Pursuant to the Court’s Order dated June 28, 2000, and entered July 5, 2000, the following persons were appointed to serve as Lead Plaintiffs in this action: Fred Spagnola, Michael Perron and David Chavez. Each of the Lead Plaintiffs made purchases of Corel common stock at inflated prices during the Class Period and suffered losses as a result of defendants’ conduct. 9. Defendant Corel is a Canadian corporation headquartered at 1600 Carling Avenue, Ottowa, Ontario, Canada. Corel has two U.S. subsidiaries – Corel, Inc. and Corel Corporation, (U.S.A.) located at 567 Timpangos Parkway, Orem, Utah 84507. Corel also has a one third ownership interest in LinuxForce Inc. of Philadelphia, Pennsylvania, which it acquired during the Class Period. Corel’s stock is traded on the NASDAQ national exchange under the ticker CORL, and also on the Toronto Stock Exchange. Corel describes itself as a company which develops, manufactures, licenses, sells and supports a wide range of software products including graphics, business productivity, consumer and video applications as well as network computers. According to Corel’s 1998 Form 10-K, Corel products are available for users of most PC’s, Apple Macintosh, UNIX based and LINUX based systems. 10. Defendant Dr. Michael C.J. Cowpland, is and at all relevant times has been the Chairman of the Board, President and Chief Executive Officer of the Company. Defendant Cowpland signed the Company’s Form 10-K’s filed with the Securities and Exchange Commission (“SEC”) during the Class Period. 11. Defendant Cowpland, by reason of his shareholdings, direct and substantial management position and responsibilities during the relevant time of this Complaint, was a “controlling person” of Corel within the meaning of Section 20 of the Exchange Act, and had the power and 3 influence to control Corel, and exercised such control to cause the Company to engage in the violations of law and improper practices complained of herein. Cowpland, because of his position as an officer and director of Corel, had access to material adverse non-public information about the Company’s business, operations, financial condition and performance alleged herein. 12. As an officer and director of a publicly-held company, Cowpland had a duty at all relevant times to disseminate timely, accurate, truthful and complete information with respect to the Company's business, operations, financial condition, performance and future prospects, so that, among other things, the market price of the Company's stock would be based on truthful, accurate and complete information. As hereinafter alleged, Cowpland violated this duty and obligation during the Class Period. CLASS ACTION ALLEGATIONS 13. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23, on behalf of a class (the “Class”) consisting of all U.S. citizens who purchased Corel common stock on the NASDAQ national exchange at any time from December 7, 1999, through and including March 20, 2000 (the “Class Period”), and who were damaged thereby. Excluded from the Class are defendants, their subsidiaries and affiliates, and members of defendant Cowpland’s immediate family. 14. During the Class Period, Plaintiffs and the other members of the Class purchased shares of Corel common stock in the open market without knowledge of the misconduct of defendants alleged in this Complaint, and suffered damages as a result. Plaintiffs and each member of the Class relied, directly or indirectly, upon defendants' public reports, press releases, and other public statements, as more fully described below, and/or upon the integrity of the market for Corel common stock. 15. The Class is so numerous that joinder of all Class members is impracticable. While the exact number of Class members is unknown to Plaintiffs at this time and can only be ascertained from 4 the records maintained by Corel or its agents, as of February 21, 2000, the Company estimated that the number of beneficial holders of Corel common shares approximated 110,000 holders. 16. Shares of Corel common stock have been actively traded during the Class Period in an open and efficient market on the National Association of Securities Dealers Automatic Quotation system ("NASDAQ"). 17. Plaintiffs’ claims are typical of the claims of the members of the Class, since all members of the Class purchased shares of Corel common stock during the Class Period and sustained damages arising out of defendants' wrongful conduct in violation of federal securities laws as alleged herein. 18. Plaintiffs will fairly and adequately protect the interests of the members of the Class. Plaintiffs have retained counsel competent and experienced in prosecuting class actions and securities litigation, and plaintiffs have no interests antagonistic to, or in conflict with, the other members of the Class. 19. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Joinder of all Class members is impracticable. The likelihood of individual Class members prosecuting separate individual claims is remote. Since the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impracticable for Class members individually to seek redress for the wrongs done to them. No unusual difficulties are likely to be encountered in the management of this class action. 20. There are questions of law and fact common to the members of the Class which predominate over any questions affecting any individual members. These common questions of law and fact include, among others: a. whether defendants violated Sections 10(b) and 20(a) of the Exchange Act and 5 SEC Rule 10-b-5; b. whether defendants participated in and/or conspired in the common course of conduct complained of herein; c. whether documents, releases, reports, and statements disseminated to the investing public during the Class Period omitted to state or misrepresented material facts about the financial results of Corel; d. whether defendants acted with knowledge or with reckless disregard for the truth in misrepresenting and/or omitting to state material facts about the business and financial results of Corel; e. whether, during the Class Period, the market price of Corel common stock was artificially inflated due to the material misrepresentations and/or non-disclosures complained of herein; and, f. whether the members of the Class have sustained damages, and, if so, the proper measure thereof. 21. Plaintiffs will rely, in part, upon the presumption of reliance established by the fraud-on- the-market doctrine, in that: a.

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