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Purchaser's Warrant
Warrant No. 1
Void after 5:00 p.m. Toronto, Ontario time, on December 9, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
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WARRANT TO PURCHASE 442,022 SHARES OF COMMON STOCK
OF
SOFTQUAD SOFTWARE LTD.
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This it to certify that, FOR VALUE RECEIVED, V C Advantage Limited
Partnership or assigns ("Holder") is entitled to purchase, subject to the
provisions of this Warrant, from SOFTQUAD SOFTWARE LTD., a Delaware corporation
(the "Company"), the fully paid, validly issued and non-assessable shares of
Common Stock, $0.001 par value, of the Company ("Common Stock") at any time or
from time to time during the period from the date hereof, through and including
December 9, 2002, but not later than 5:00 p.m. Toronto, Ontario time, on
December 9, 2002 (the "Exercise Period") at the price of US$1.3574 per share
(the "Exercise Price"). The total number of shares of Common Stock to be issued
upon exercise of this Warrant shall be 442,022 shares. The price to be paid for
each share of Common Stock may be adjusted from time to time as hereinafter set
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forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the respective exercise price of a share of Common Stock in effect
at any time and as adjusted from time to time is hereinafter sometimes referred
to as the "Exercise Price". This Warrant is being issued pursuant to the Class A
Convertible Preferred Stock Purchase Agreement, dated as of December 9, 1999,
between the Company and the Holder.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or from
time to time during the Exercise Period; provided, however, that (i) if the last
day of the Exercise Period is a day on which banking institutions in the City of
Toronto are authorized by law to close, then the Exercise Period shall terminate
on the next succeeding day that shall not be such a day, and during such period
the Holder shall have the right to exercise this Warrant into the kind and
amount of shares of stock and other securities and property (including cash)
receivable by a holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant may
be exercised by presentation and surrender hereof to the Company of this Warrant
at the Company's principal office, with the Exercise Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a certificate
or certificates for the designee. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of Warrant Shares purchasable thereunder. Upon receipt by
the Company of this Warrant at its principal office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, the Holder
shall be deemed to be holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (I) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (II) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (III) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (IV) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
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REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for issuance
and/or delivery upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance and delivery upon exercise of the
Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant
to the exercise of the Warrants to be duly issued and
delivered in accordance herewith and the terms hereof;
2. all shares of Common Stock that shall be issued upon exercise
of the right to purchase provided for herein, upon payment of
the prevailing Exercise Price herein provided, shall be fully
paid and non-assessable;
3. it will use its best efforts to maintain its corporate
existence; and
4. generally, it will well and truly perform and carry out all of
the acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the
current market value shall be the last reported sale price of
the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or,
if no such sale is made (or reported) on such day, the average
closing bid and asked prices for such day on such exchange or
system; or
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2. If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean
to the last reported bid and ask prices reported by the
Electronic Bulletin Board or National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of
this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not so reported,
the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal
year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
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F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of the Warrant shall be subject
to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the respective Exercise Price by a fraction,
the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event
listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above,
the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the respective
number of Shares initially issuable upon exercise of this
Warrant by a fraction, the denominator of which shall be the
Exercise Price after giving effect to such action and the
numerator of which shall be the Exercise Price in effect
immediately prior to such action.
3. No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided,
however, that any adjustment that by reason of this Subsection
(3) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (F) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section (F) to
the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the
respective Exercise Price, in addition to those required by
this Section (F), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any federal income tax
liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
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4. In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares
of the Company, other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and
kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required by
the provisions of the foregoing Section (F), the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office,
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock or (ii) if the
Company shall offer to the holders of Common Stock for subscription or purchase
by them any share of any class or any other rights, options or warrants (other
than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
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rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other change
of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date of
issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Delaware; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Delaware, but is
enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
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the Province of Ontario. The parties agree that the courts of the Province of
Ontario, Canada, shall have exclusive jurisdiction and venue for the
adjudication of any civil action between them arising out of relating to this
Agreement, and hereby irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
SOFTQUAD SOFTWARE LTD.
By:_____________________________
Its:____________________________
DATED: December __, 1999
ATTEST:
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FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (I) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (II) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (III) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (IV) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing $______________ worth of the shares of
Common Stock of SOFTQUAD SOFTWARE, LTD. The undersigned has determined the
closing bid price for the Common Stock of SOFTQUAD SOFTWARE LTD. for the twenty
(20) trading days preceding the date of this Notice of Exercise on the principal
market for such Common Stock, was $____, $_____ $____, $_____ and $______, or an
average of $________. Therefore pursuant to the Warrant, the Exercise Price is
$_____ per share.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________________
(Please typewrite or print in block letters)
Address________________________________________
Social Security or Federal I.D. Number_________________
THE UNDERSIGNED REPRESENTS AND WARRANTS TO SOFTQUAD SOFTWARE LTD. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND NO U.S. PERSON HAS
ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.
Signature_____________________________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
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ASSIGNMENT FORM
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FOR VALUE RECEIVED,
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hereby sells, assigns and transfers unto
Name
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(Please typewrite or print in block letters)
Address
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Social Security Federal I.D. Number
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the right to purchase shares of Common Stock of SoftQuad Software Ltd.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint __________________________ Attorney,
to transfer the same on the books of SoftQuad Software Ltd. with full power of
substitution in the premises.
Date: ______________________
Signature: ____________________________________________
(sign exactly as your name
appears on the first page of
this Warrant)
NOTE: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
