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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of April 18, 2000, by and between SoftQuad Software Ltd., a
Delaware corporation (the "Company"), and Small Caps Online LLC (the "Agent"),
for itself and as agent for the purchasers (the "Purchasers") referred to in the
agency agreement (the "Agency Agreement") of even date herewith by and between
the Company and the Agent.
PRELIMINARY STATEMENTS
In connection with the consummation of the transactions contemplated by
the Agency Agreement, the Company has agreed, upon the terms and subject to the
conditions of the Agency Agreement, to issue and sell to the Purchasers 200,010
units ("Units"), each Unit being comprised of one share of Common Stock, par
value $0.001, in the capital of the Company, and one-half (1/2) of one share
purchase warrant (collectively, the "Share Purchase Warrants") with the
attributes described in the Agency Agreement.
For the purposes of this Agreement the shares of the Company's Common
Stock forming part of the Units are referred to as the "Unit Shares"; the shares
of the Company's Common Stock underlying the Share Purchase Warrants are called
the "Warrant Shares"; and the Unit Shares and the Warrant Shares are
collectively referred to as the "Shares".
To induce the Purchasers and the Agent to execute and deliver the
Subscription Agreements, the Company has agreed, pursuant to the terms and
conditions of this Agreement, to provide certain registration rights with
respect to the Shares.
AGREEMENT
In consideration of the foregoing, the mutual covenants and conditions
set forth in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to become legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Agency Agreement" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Agent" shall mean Thomson Kernaghan & Co. Limited.
"Agreement" shall mean this Registration Rights Agreement, made and
entered into as of April 18, 2000, by and between the Company and the Agent (for
itself and on behalf of the Purchasers).
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"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Shares" shall mean shares of the Company's Common Stock.
"Company" shall mean SoftQuad Software, Ltd., a Delaware corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as in effect from time to time.
"Filing Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Holder" or "Holders" shall mean (a) a Purchaser, to the extent that
the Purchaser holds Registrable Securities, and (b) any Person holding
Registrable Securities as a transferee of the Purchaser (directly or indirectly,
including subsequent transfers).
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Purchasers" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing with the Commission one or more
registration statements covering Registrable Securities in compliance with the
Securities Act that is declared or ordered effective by the Commission.
"Registrable Securities" shall mean the Shares and any shares of
capital stock issued or issuable with respect to the Securities, as a result of
any stock split, stock dividend, recapitalization, exchange or similar event;
provided, however, that such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of pursuant to the registration statement, (b) such securities are
distributed to the public pursuant to Rule 144(k) (or any successor provisions)
promulgated under the Securities Act or (c) such securities shall have ceased to
be outstanding.
"Registration Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Registration Expenses" shall mean all expenses incurred in order to
comply with Article II hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, reasonable fees and disbursements of one (1) counsel for the Holders,
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration, but excluding the compensation of regular
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employees of the Company (which shall be paid in any event by the Company) and
excluding Selling Expenses.
"Restricted Securities" shall mean Registrable Securities that are
"restricted securities" as defined in Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions incurred in connection with the sale of securities pursuant to a
registration effected hereunder.
"Share Purchase Warrants" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Unit Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Warrant Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Purchase
Agreement.
ARTICLE II
REGISTRATION RIGHTS
2.1 MANDATORY REGISTRATION.
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(a) The Company shall prepare and file with the Commission within
sixty (60) days from the date of this Agreement (the "Filing
Deadline") a registration statement or registration statements
(as is necessary) on Form SB-2 or Form S-1 covering the
issuance and resale of the Shares. Such registration statement
shall initially register for resale at least 100% of the
Shares. The Company shall use its best efforts to have the
registration statement declared effective by the Commission
within one hundred and twenty (120) days after the Filing
Deadline (the "Registration Deadline"). The Company shall
permit the registration statement to become effective within
five (5) business days after receipt of a "no review" notice
from the Commission. Such registration statement shall be kept
current and effective for a period of at least twelve (12)
months from the Closing Date.
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2.2 EXPENSES OF REGISTRATION.
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All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.1 shall be borne by the
Company; and all Selling Expenses in connection with such registration,
qualification or compliance shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered.
2.3 REGISTRATION PROCEDURES.
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In the case of each registration, qualification or compliance effected
by the Company pursuant to this Article II, the Company will keep the Agent (as
agent for the Holders) advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense, the Company will:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
such registration statement;
(b) furnish to the Agent (as agent for the Holders) such numbers
of copies of a prospectus, including a preliminary prospectus,
in conformity with the requirement of the Securities Act, and
such other documents as it may reasonably request (including a
conformed copy of the registration statement filed with the
Commission and any amendments thereto and an original executed
underwriting agreement (if any) entered into in connection
with such registration) in order to facilitate the disposition
of Registrable Securities owned by the Holders;
(c) use reasonable efforts to register and qualify the securities
covered by such registration statement under such other
securities or blue sky laws of one (1) jurisdiction (in
addition to those jurisdictions in which the Company has
otherwise agreed to so register and qualify such securities)
as shall be reasonably requested by the Agent (as agent for
the Holders) provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of
process in any such states or jurisdictions;
(d) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement
with the managing underwriter(s) of such offering; each Holder
participating in such underwriting shall also enter into and
perform its obligations under such underwriting agreement;
(e) notify the Agent (as agent for each Holder of Registrable
Securities covered by such registration statement) at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to
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be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then
existing; and
(f) furnish, at the request of the Agent (as agent for the Holders
requesting registration of Registrable Securities pursuant to
this Article II) on the date that such Registrable Securities
are delivered to the underwriters for sale in connection with
registration pursuant to this Article II, if such securities
are being sold through underwriters, or on the date that the
registration statement with respect to such securities becomes
effective, if such securities are not being sold through
underwriters, (i) a copy of any opinion, dated such date, of
the counsel representing the Company for the purposes of such
registration, addressed to the underwriters of the Company,
and (ii) a copy of any letter, dated such date, from the
independent accountants of the Company, addressed to the
underwriters of the Company.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (e) of this Section 2.3, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of a supplemented or amended prospectus and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense), all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities that was in effect prior to such amendment
or supplement. In the event the Company shall give any such notice, the period
set forth in clause (a) of Section 2.1 shall be extended by the number of days
during the period from and including the date of the giving of such notice
pursuant to clause (e) of this Section 2.3 to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of a supplemented or amended prospectus.
2.4 INDEMNIFICATION.
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(a) The Company will indemnify each Holder, each Holder's
officers, directors and partners, and each Person controlling
such Holder (collectively, "Holder's Parties"), participating
in any registration, qualification, or compliance effected
pursuant to this Article II with respect to Registrable
Securities held by such Holder against all claims, losses,
damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to which they may become
subject under the Securities Act, the Exchange Act or other
federal or state law, arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other
similar document (including any related registration
statement, notification or the like prepared by the Company)
incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
(ii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company in
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connection with any such registration, qualification or
compliance, and will reimburse each such Holder's Parties for
any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim,
loss, damage, liability or action, as incurred, provided that
the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises
out of or is based on any untrue statement or omission, made
in reliance on and in conformity with written information
furnished to the Company by such Holder's Parties specifically
for use in the preparation thereof.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such
registration, qualification or compliance is being effected,
severally and not jointly, indemnify the Company, each of its
directors and officers, and each Person who controls the
Company within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) any untrue statement
(or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular
or other similar document, or any omission (or alleged
omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors,
officers, Persons or control Persons for any legal or any
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent,
but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular or
other document in reliance upon and in conformity with the
written information furnished to the Company by such Holder
specifically for use in the preparation thereof, or (ii) any
violation by any such Holder of any federal, state or common
law rule or regulation applicable to such Holder in connection
with the distribution of securities pursuant to a registration
statement, and will reimburse the Company, such Holders, such
directors, officers, Persons, or control Persons for any legal
any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability, or action, as incurred; provided, however, that the
obligations of each such Holder hereunder shall be limited to
an amount equal to the aggregate proceeds received by such
Holder in such offering.
(c) Each party entitled to indemnification under this Section 2.4
(the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has received written
notice of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the
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Indemnifying Party shall bear the expense of such defense of
one counsel representing the Indemnified Party (or Indemnified
Parties) if counsel reasonably acceptable to the Indemnifying
Party provides a written opinion that representation of both
parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest. The failure of any
Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this
Section 2.4, except to the extent such failure to give notice
shall materially and adversely prejudice the Indemnifying
Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified
Party, not to be unreasonably withheld, consent to entry of
any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
(d)
(i) If the indemnification provided for in this Section
2.4 is held by a court of competent jurisdiction to
be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party
hereunder shall contribute to the amount paid or
payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense, in such
proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other hand in connection
with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by
reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the
omission to state a material fact relates to
information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relevant
intent, knowledge, access to information and
opportunities to correct or prevent such statement or
omission.
(ii) The parties agree that it would not be just and
equitable if contribution pursuant to this Section
2.4 were determined by pro rata allocation or by any
other method of allocation that does not take account
of the equitable considerations referred to above.
The amount paid or payable by an Indemnified Party as
a result of the claims, losses, damages and
liabilities referred to above shall be deemed to
include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by
such Indemnified Party in connection with
investigating or defending any such action or claim.
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(iii) No Holder that is a seller of Registrable Securities
covered by such registration statement or Person
controlling such seller other than the Company shall
be obligated to make contribution hereunder that in
the aggregate exceeds the total public offering price
of the Registrable Stock sold by such Holder, less
the aggregate amount of any damages that such Holder
and its controlling Persons have otherwise been
required to pay pursuant to this Section 2.4. The
obligations of such Holders to contribute are several
in proportion to their respective ownership of the
securities covered by such registration statement and
not joint.
(iv) The indemnity and contribution provided herein shall
be in addition to, and not in lieu of, any other
liability that one party may have to another.
2.5 INFORMATION BY HOLDER.
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Each Holder of Registrable Securities included in any registration
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Article II.
2.6 RULE 144 REPORTING.
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With a view to making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) use its best efforts to facilitate the sale of the
Restricted Securities to the public without
registration under the Securities Act, pursuant to
Rule 144 under the Securities Act;
(b) make and keep public information available, as those
terms are understood and defined in Rule 144 under
the Securities Act, at all times after the effective
date of the first registration statement filed by the
Company for an offering of its securities to the
general public;
(c) file with the Commission in a timely manner all
reports and other documents required of the Company
under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting
requirements); and
(d) so long as a Holder owns any Restricted Securities to
furnish to the Holder forthwith upon request a
written statement by the Company as to its compliance
with the public information requirements of said Rule
144, and the reporting requirements of the Securities
Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such
other reports and documents so filed by the Company
as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing
a Holder to sell any such securities without
registration.
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2.7 TRANSFER OF REGISTRATION RIGHTS.
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The rights granted under this Article II may be assigned or otherwise
conveyed by any Holder of Registrable Securities to any transferee, subject to
compliance with all applicable securities laws and regulations and the written
assumption by the transferee of all of the transferor's obligations under this
Agreement.
2.8 RESTRICTIONS ON MARKET MANIPULATION.
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In the event any shares of Common Stock are offered or sold by any
Holder in a registration, each such Holder will:
(a) advise the Company in writing of any offer, sale or other
disposition by it of any Common Stock in any manner other than
as set forth in the registration statement or any prospectus
included therein on or for the 30-day period prior to the
filing of such registration statement until the distribution
under the registration statement has been completed;
(b) not effect any stabilization activity in connection with the
Company's Common Stock;
(c) not bid or purchase, for any account in which it has a
beneficial interest, any Common Stock except as may be
permitted pursuant to Regulation M under the Exchange Act (if
applicable);
(d) not until it has sold all of such shares of Common Stock,
attempt to induce any Person to purchase any Common Stock
except as may be permitted pursuant to Regulation M; and
(e) not until it has sold all such shares of Common Stock, pay any
compensation for soliciting another to purchase any securities
of the Company, except as may be permitted pursuant to Rule
10b-6.
ARTICLE III
MISCELLANEOUS
3.1 GOVERNING LAW; JURISDICTION AND VENUE.
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This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware.
3.2 SUCCESSORS AND ASSIGNEES.
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Except as otherwise provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assignees, heirs,
executors and administrators (as the case may be) of the parties hereto.
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3.3 ENTIRE AGREEMENT.
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This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter hereof.
3.4 NOTICES, ETC.
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All notices and other communications required or permitted hereunder
shall be in writing and shall be effective four days after mailed by first-class
mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed
(a) if to the Agent, at 365 Bay Street, 10th Floor Toronto, Ontario M5H 2V2,
Canada, Attention: Mark E. Valentine, Chairman; (b) if to any other Holder of
Registrable Securities, at such address as such Holder shall have furnished the
Company in writing, or, until any such Holder so furnishes an address to the
Company, then to and at the address of the last Holder of such Registrable
Securities who has so furnished an address to the Company; or (c) if to the
Company, at 161 Eglinton Avenue East, Suite 400, Toronto, Ontario M4P 1J5.
3.5 DELAYS OR OMISSIONS.
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No delay or omission to exercise any right, power or remedy accruing to
any Holder of any Registrable Securities, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default or an acquiescence therein or of or in any similar breach or default
thereunder occurring nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder shall be cumulative and
not alternative.
3.6 COUNTERPARTS.
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This Agreement may be executed in any number of counterparts, each of
which may be executed by less than all of the parties hereto, each of which
shall be enforceable against the parties actually executing such counterparts
and all of which together shall constitute one instrument.
3.7 SEVERABILITY.
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In the event any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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3.8 AMENDMENTS.
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The provisions of this Agreement may be amended at any time and from
time to time, and particular provisions of this Agreement may be waived, with
and only with, an agreement or consent in writing signed by the Company and by
the Holders of a majority of the Registrable Securities voting as a single
class.
The parties have executed this Registration Rights Agreement as of the
date first written above.
SOFTQUAD SOFTWARE, LTD.
By:
---------------------------------
Name:
Title:
SMALL CAPS ONLINE LLC, AS AGENT
By:
---------------------------------
Name:
Title:
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