CLASS A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
BETWEEN
SOFTQUAD SOFTWARE LTD.
(THE COMPANY)
AND
V C ADVANTAGE LIMITED PARTNERSHIP
(THE PURCHASER)
--------------------------------------------------------------------------------
DATED AS OF DECEMBER 9, 1999
CLASS A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
This Class A Convertible Preferred Stock Purchase Agreement (this
"Agreement") is made and entered into as of December 9, 1999 (the "Effective
Date"), between SoftQuad Software Ltd. (the "Company"), a Delaware corporation,
and V C Advantage Limited Partnership (the "Purchaser"), an Ontario, Canada,
limited partnership.
BACKGROUND
The Company has authorized the issuance, sale, and delivery of
1,473,405 shares (the "Shares") of the Company's Class A Convertible Preferred
Stock, par value $0.001 (the "Class A Preferred") at a price per Share of
$1.3574, in currency of the United States of America, for a total purchase price
of $2,000,000.00. Each Share of Class A Preferred is convertible into one share
of the Company's common stock, $0.001 par value ("Common Stock"). The Purchaser
wishes to purchase the Shares upon the terms and conditions stated in this
Agreement. The Purchaser is purchasing the Shares in reliance upon the exemption
from the registration requirements of Section 5 of the U.S. Securities Act of
1933, as amended (the "Securities Act"), in reliance upon the safe harbor
afforded by Rule 903 promulgated by the U.S. Securities and Exchange Commission
(the "SEC").
In connection with the issuance and sale of the Shares to the
Purchaser, the Company has authorized the issuance and delivery of (i) a warrant
in the form of Exhibit C attached to this Agreement (the "Purchaser's Warrant")
to the Purchaser to purchase 441,176 shares of Common Stock at $1.3574 per
share, and (ii) a warrant in the form of Exhibit D attached to this Agreement
(the "Agent's Warrant") to Thomson Kernaghan & Co. Limited ("the Agent"), the
placement agent for the Shares, to purchase 220,588 shares of Common Stock at
$1.3574 per share.
AGREEMENT
For and in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
SECTION 1. CLASS A PREFERRED.
SECTION 1.1. ISSUANCE AND SALE OF CLASS A PREFERRED AND WARRANTS
The Company agrees (i) to issue and sell the Shares to the Purchaser
and the Purchaser agrees to purchase the Shares from the Company, at the
Closing, for the Purchase Price of US$2,000,000.00; (ii) to issue and deliver
the Purchaser's Warrant to the Purchaser, and (iii) to issue and deliver the
Agent's Warrant to the Agent.
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SECTION 1.2. CLOSING.
The closing of the purchase and sale of the Shares (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stapells ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, at 3:00 p.m., Toronto
time, on Thursday, December 9, 1999 (the "Closing Date"), or on such other date
or such other time or place as the parties may agree.
SECTION 1.3 DELIVERIES AT CLOSING
At the Closing the Company shall deliver to Purchaser:
(a) this Agreement, executed by the Company;
(b) a certificate for the Shares, registered in the Purchaser's
name, free and clear of any claims, and containing a legend complying with the
requirements of SEC Rule 903(b)(3)(iii)(B)(3);
(c) the Purchaser's Warrant;
(c) the Registration Rights Agreement (defined in Section 4.9
below), executed by the Company, in substantially the form of Exhibit B hereto;
(d) the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., legal counsel to the
Company, in substantially the form of Exhibit A hereto; and
(e) the certificates described in Sections 6(d) (the "Compliance
Certificate") and 6(g) (the "Secretary Certificate") hereof, each executed by
the Company.
At the Closing, the Company shall also deliver the Agent's Warrant to
the Agent.
SECTION 2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants with respect to only itself that:
SECTION 2.1. INVESTMENT PURPOSE
The Purchaser is acquiring the Shares, for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, provided however, that by making the
representations herein, the Purchaser does not agree to hold any Shares for any
minimum or other specific term. The Purchaser acknowledges that the Shares may
not be resold in the United States, or to or for the account of a U.S. person as
defined by SEC Rule 902(k), except pursuant to an effective registration
statement under the Securities Act or after the expiration of the one-year
distribution compliance period provided in SEC Rule 903(b)(3)(iii)(A).
SECTION 2.2. ACCREDITED PURCHASER STATUS
The Purchaser is an "accredited investor" as that term is defined in
Rule 501(a)(3) of Regulation D of the SEC.
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SECTION 2.3. RELIANCE ON REGULATION S EXEMPTION
The Purchaser understands that the Shares are being offered and sold to
it in reliance on the exemption from the registration requirements of Section 5
of the Securities Act for offshore transactions as defined in SEC Rule 902(h),
and that the Company is relying in part upon the truth and accuracy of, and the
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of the Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Purchaser to acquire such Shares. With respect to that exemption, the Purchaser
further represents and warrants to the Company that:
(a) The Purchaser is not a U.S. Person as defined in SEC Rule 902(k).
(b) The offer to sell the Shares to the Purchaser was not made in the
United States, and was made in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
(c) The Purchaser's buy order for the Shares was made outside the
United States, and was made in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
(d) The Purchaser has complied with all of the conditions required of
it by SEC Rule 903(b)(3).
SECTION 2.4. INFORMATION
The Purchaser and its advisors, if any, have been furnished with all
materials relating to the proposed business, financial condition, and operations
of the Company and materials relating to the offer and sale of the Shares, which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by the Purchaser
or its advisors, if any, or its representatives shall modify, amend, or affect
the Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. The Purchaser understands that its investment in
the Shares involves a high degree of risk. The Purchaser has sought such
accounting, legal, and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Shares.
SECTION 2.5. NO GOVERNMENTAL REVIEW
The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares, or the fairness or suitability of
the investment in the Shares, nor have such authorities passed upon or endorsed
the merits of the offering of the Shares.
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SECTION 2.6. AUTHORIZATION ENFORCEMENT
This Agreement has been duly and validly authorized, executed, and
delivered on behalf of the Purchaser and is a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, subject as to enforceability
to general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
SECTION 2.7. ORGANIZATION
The Purchaser is a limited partnership organized under the laws of
Bermuda.
SECTION 2.8. NO SCHEME TO EVADE REGISTRATION.
Purchaser represents and warrants to the Company that the acquisition
of the Shares is not a transaction (or any element of a series of transactions)
that is part of a plan or scheme by the Purchaser to evade the registration
provisions of the Securities Act.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
SECTION 3.1. ORGANIZATION AND QUALIFICATION
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is not qualified as a foreign corporation to do business
in any other jurisdiction. The Company has no subsidiaries. As soon as is
practicable after the Closing of the sale of the Shares to the Purchaser, the
Company will complete its acquisition of SoftQuad Software Inc., as the
Company's wholly-owned subsidiary, pursuant to and in accordance with the
SoftQuad Canada Acquisition Agreement (the "Acquisition Agreement") among the
Company, SoftQuad Software Inc. and SoftQuad Acquisition Corp., to be executed
on or about December 9, 1999.
SECTION 3.2. AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS.
(a) The Company has the requisite corporate power and authority to
enter into and perform this Agreement and to issue the Shares;
(b) the execution and delivery of this Agreement by the Company, and
the consummation by it of the transactions contemplated hereby, including
without limitation the issuance of the Shares, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders;
(c) this Agreement has been duly executed and delivered by the Company
and the persons signing on behalf of the Company have full power and authority
to do so; and
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(d) this Agreement constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
SECTION 3.3. CAPITALIZATION
Immediately prior to Closing, the authorized capital stock of the
Company consisted of 50,000,000 shares, divided into (i) 25,000,000 shares of
Common Stock, $0.001 par value, of which 736,702 are issued and outstanding; and
(ii) 25,000,000 shares of Preferred Stock, $0.001 par value, of which 1,473,405
shares have been designated Class A Convertible Preferred Stock, and of which no
shares are issued and outstanding. No shares of the Company's capital stock are
subject to preemptive rights or any other similar rights.
SECTION 3.4. ISSUANCE OF SHARES
The Shares are duly authorized and, upon issuance in accordance with
the terms hereof, shall be validly issued, fully paid, and nonassessable, are
free from all taxes, liens, and charges with respect to the issue thereof and
are entitled to the rights and preferences set forth in the Shares. The Shares
are "restricted securities" as defined by SEC rules, and may be transferred,
assigned or resold by the Purchaser only in accordance with the Securities Act
and the SEC rules promulgated thereunder.
SECTION 3.5. NO CONFLICTS
The execution, delivery, and performance of this Agreement and the
Acquisition Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby, will not (a) result in a violation
of the Certificate of Incorporation, any Certificate of Designation applicable
to any Preferred Stock of the Company, or the Bylaws of the Company or (b)
conflict with, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration, or cancellation of, any agreement,
indenture, or instrument to which the Company is a party, or result in a
violation of any law, rule, regulation, order, judgment, or decree (including
federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected. The Company
is not in violation of any term of, or in default under, its Certificate of
Incorporation or Bylaws, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree, or order or any statute,
rule, or regulation applicable to the Company. The business of the Company is
not being conducted and shall not be conducted in violation of any law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement, the Acquisition Agreement and as required under
the Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization, or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver, and perform any of its obligations under or contemplated by
this Agreement and the Acquisition Agreement in accordance with the terms hereof
or thereof. All consents, authorizations, orders, filings, and registrations
which the Company is required to obtain pursuant to the preceding sentence have
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been obtained or effected on or prior to the date hereof. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing.
SECTION 3.6. FINANCIAL STATEMENTS
The Company is newly organized and is just commencing operations.
Accordingly, the Company's financial statements consist only of its opening
balance sheet, which the Company has delivered to the Purchaser and which is
true, accurate and complete in all material respects. The Company has not
engaged in any transaction, maintained any bank account, or used any of the
funds of the Company that are not reflected in the normally maintained books and
records of the Company. No other information provided by or on behalf of the
Company to the Purchaser which is not included in the Financial Statements,
including, without limitation, information referred to in Section 2.4 of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
SECTION 3.7. ABSENCE OF CERTAIN CHANGES
Since the date of the Company's opening balance sheet, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations, or prospects
of the Company. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
SECTION 3.8. ABSENCE OF LITIGATION
There is no action, suit, proceeding, inquiry, or investigation before
or by any court, public board, government agency, self-regulatory organization,
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company or the Class A Preferred, in which an unfavorable
decision, ruling or finding would (a) have a material adverse effect on the
transactions contemplated hereby, (b) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under this Agreement or the Acquisition Agreement, or any of the
other documents contemplated herein or therein, or (c) have a material adverse
effect on the business, operations, properties, financial condition, or results
of operation of the Company.
SECTION 3.9. PURCHASE OF SHARES
The Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement or the Acquisition
Agreement, or the transactions contemplated herein or therein. The Company
further represents to the Purchaser that the Company's decision to enter into
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this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
SECTION 3.10. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES
No event, liability, development, or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
businesses, properties, prospects, operations, or financial condition, which
could be material but which has not been publicly announced or disclosed in
writing to the Purchaser.
SECTION 3.11. NO GENERAL SOLICITATION
Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Shares.
SECTION 3.12. NO INTEGRATED OFFERING
Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would require registration of the Shares under the Securities Act or cause
this offering of the Shares to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable stockholder approval
provisions.
SECTION 3.13. INTERNAL ACCOUNTING CONTROLS
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management's general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 3.14. NO MATERIALLY ADVERSE CONTRACTS, ETC.
The Company is not subject to any charter, corporate, or other legal
restriction, or any judgment, decree, order, rule, or regulation which in the
judgment of the Company's officers has, or is expected in the future to have, a
material adverse effect on the business, properties, operations, financial
condition, results of operations, or prospects of the Company. The Company is
not a party to any contract or agreement which in the judgment of the Company's
officers has, or is expected to have, a material adverse effect on the business,
properties, operations, financial condition, results of operations, or prospects
of the Company.
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SECTION 3.15. TAX STATUS
The Company has made or filed all federal and state income and all
other tax returns, reports, and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes), and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports, and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports,
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
SECTION 3.16. CERTAIN TRANSACTIONS
Except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers, and
directors), including any contract, agreement, or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director, or such employee or, to the knowledge of the Company, any
corporation, partnership, trust, or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee, or partner.
SECTION 3.17. FEES AND RIGHTS OF FIRST REFUSAL
The Company is not obligated to offer the securities offered hereunder
on a right of first refusal basis or otherwise to any third parties including,
but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents, or other third parties. The Company is not obligated to pay any
commission or fee in connection with the issuance and sale of the Shares for
which the Purchaser is or may become liable.
SECTION 3.18. REGULATION S EXEMPTION
The Company understands that the Purchaser is purchasing the Shares in
reliance on the exemption from the registration requirements of Section 5 of the
Securities Act for offshore transactions as defined in SEC Rule 902(h), and that
the Purchaser is relying in part upon the truth and accuracy of, and the
Company's compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of the Company set forth herein in order to
determine the availability of such exemptions and the eligibility of the Company
to issue and sell the Shares to the Purchaser without having complied with those
registration requirements. With respect to that exemption, the Company further
represents and warrants to the Purchaser that:
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(a) The Company has not offered any of the Shares to a U.S. Person (as
defined in SEC Rule 902(k)) or to a person in the United States.
(b) The offer and sale of the Shares to the Purchaser is being made in
an offshore transaction as defined in SEC Rule 902(h).
(c) The Company has not engaged in any directed selling efforts, as
defined in SEC Rule 902(c), with respect to the Shares.
(d) The Company has complied with all of the conditions required of it
under SEC Rule 902(b)(3).
SECTION 4. COVENANTS
SECTION 4.1. BEST EFFORTS
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 5 and 6 of this
Agreement.
SECTION 4.2. COMPLIANCE WITH REGULATION S
Each party shall comply with all of the terms of SEC Rule 903(b)(3)
required of it with respect to the Shares.
SECTION 4.3. REPORTING STATUS
As soon as is practicable, the Company will take all necessary action
to cause the Company to become a "reporting company" under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), as defined by the rules
and regulations of the SEC and the NASD, and shall timely file all reports and
other information required by it to be filed with the SEC under the Exchange Act
in order to remain a reporting company, for so long as the Purchaser is the
holder or beneficial owner of any Class A Preferred or Common Stock.
SECTION 4.4. USE OF PROCEEDS
The Company will use the proceeds from the sale of the Shares to make a
loan to SoftQuad Software Inc., as contemplated by the Acquisition Agreement,
and for general working capital purposes.
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SECTION 4.5 LISTINGS
The Company shall secure and maintain the listing of its Common Stock
(including the Shares), on the NASDAQ OTC Bulletin Board as soon as is
practicable, and upon the NASDAQ Small Cap Market as soon thereafter as it is
eligible therefor. The Company shall promptly provide to the Purchaser copies of
any notices it receives regarding the eligibility of the Common Stock for
trading in the over-the-counter market.
SECTION 4.6. EXPENSES
The Company shall pay the Purchaser's expenses, including reasonable
attorney's fees, incurred in connection with this Agreement.
SECTION 4.7. CORPORATE EXISTENCE
So long as the Purchaser is the holder of 1% or more of the outstanding
Common Stock, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets, or any similar transaction or related
transactions (each such transaction, a "Sale of the Company") except if the
surviving or successor entity in such transaction is a publicly traded
corporation whose Common Stock is listed for trading on the New York Stock
Exchange, Inc., the American Stock Exchange, or the NASDAQ National Market.
SECTION 4.8. TRANSACTIONS WITH AFFILIATES
So long as the Purchaser is the holder of 1% or more of the outstanding
Preferred Stock, or 1% or more of the outstanding Common Stock, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify, or supplement, or permit any subsidiary to enter into, amend, modify, or
supplement any agreement, transaction, commitment, or arrangement with any of
its or any subsidiary's officers, directors, persons who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of any class of the Company's capital stock, or
affiliates, or with any individual related by blood, marriage, or adoption to
any such individual or with any entity in which any such entity or individual
owns a 5% or more beneficial interest (each, a "Related Party"), except for (i)
transactions contemplated by the Acquisition Agreement, (ii) customary
employment arrangements and benefit programs on reasonable terms, (iii) any
agreement, transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (vi) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company, for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(1) has a 5% or more equity interest in that person or entity, (2) has 5% or
more common ownership with that person or entity, (3) controls that person or
entity, or (4) share common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
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direct or indirect, to conduct or govern the policies of another person or
entity.
SECTION 4.9. REGISTRATION RIGHTS
As soon as is practicable after the date of this Agreement, the Company
shall file a registration statement (the "Registration Statement") with the SEC
to register the resale of the Shares, and shall use its best efforts to cause
the Registration Statement to become effective, all as provided in the
Registration Rights Agreement (the "Registration Rights Agreement") attached as
Exhibit B to this Agreement.
SECTION 5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the Shares to
The Purchaser at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) The Purchaser shall have executed this Agreement and delivered the
same to the Company.
(b) The Purchaser shall have delivered the Purchase Price for the
Shares to the Company.
(c) The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time, and the Purchaser shall have
performed, satisfied, and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied,
or complied with by the Purchaser at or prior to the Closing Date.
SECTION 6. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE
The obligation of The Purchaser hereunder to purchase the Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion:
(a) The Company shall have executed this Agreement.
(b) The Company shall have executed the Registration Rights Agreement.
(c) The Company shall have executed the Acquisition Agreement, or shall
have undertaken to execute the Acquisition Agreement immediately following the
Closing.
(d) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
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correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied, and complied in all material respects with the covenants,
agreements, and conditions required by this Agreement to be performed,
satisfied, or complied with by the Company at or prior to the Closing Date. The
Purchaser shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by The Purchaser
including, without limitation an update as of the Closing Date regarding the
representation contained in Section 3.3 above.
(e) The Purchaser shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope, and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit A
attached hereto.
(f) The Board of Directors of the Company shall have authorized and
adopted the resolutions in substantially the form attached to the Secretary
Certificate delivered herewith.
(g) The Purchaser shall have received a certificate of the Secretary of
the Company dated the Closing Date and certifying: (i) that attached thereto is
a true and complete copy of the Certificate of Incorporation as then in effect,
together with the Certificate of Designation for the Company's Class A
Convertible Preferred Stock, certified or bearing evidence of filing by the
Secretary of State of the State of Delaware, and (ii) a certificate of the
Delaware Secretary of State, dated as of a recent date as to the due
incorporation and good standing of the Company, the payment of all franchise
taxes by the Company, and listing all documents of the Company on file with the
Secretary of State; (iii) that attached thereto is a true and complete copy of
the Bylaws of the Company as in effect on the date of such certification; (iv)
that attached thereto is a true and complete copy of all resolutions adopted by
the Board of Directors of the Company authorizing the execution, delivery, and
performance of this Agreement and the issuance, sale, and delivery of the
Shares, and that all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the foregoing agreements and the
transactions contemplated thereby; (v) that the Certificate of Incorporation has
not been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i) above; and (vi) to the incumbency
and specimen signature of each officer of the Company executing this Agreement
and any certificate or instrument furnished pursuant hereto and thereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate.
SECTION 7. INDEMNIFICATION
In consideration of the Purchaser's execution and delivery of this
Agreement and acquiring the Shares hereunder and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify, and hold harmless the Purchaser, and all of its officers,
directors, employees, and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities, and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
13
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement of the
Acquisition Agreement, or any other certificate, instrument, or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement, or
obligation of the Company contained in this Agreement or the Acquisition
Agreement, or (c) any cause of action, suit, or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or the Acquisition Agreement, or
any other instrument, document, or agreement executed pursuant hereto by any of
the Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Shares, or the
status of the Purchaser or holder of the Shares, as a stockholder in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 8. GENERAL PROVISIONS
SECTION 8.1. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware; provided, however, (i) 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
the Province of Ontario; and (ii) that the exemption from the registration
requirements of the Securities Act for the sale shall be governed by SEC Rule
903. 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.
SECTION 8.2. COUNTERPARTS
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof.
SECTION 8.3. HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
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SECTION 8.4. SEVERABILITY
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
SECTION 8.5. ENTIRE AGREEMENT, AMENDMENTS
This Agreement supersedes all other prior oral or written agreements
between the Purchaser, the Company, their affiliates and persons acting on their
behalf with respect to the issuance and sale of the Shares, and this Agreement
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Purchaser
makes any representation, warranty, covenant, or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged with enforcement.
SECTION 8.6. NOTICES
Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (a) upon receipt, when delivered
personally, (b) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested, (c) three (3) days after being
sent by certified mail, return receipt requested, or (d) one (1) day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
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if to the Company: with a copy (which shall
not constitute notice) to:
SoftQuad Software Ltd.
c/o SoftQuad Software Inc. ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, President Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Purchaser: with a copy (which shall
V C Advantage Limited Partnership not constitute notice) to:
c/o Thomson Kernaghan & Co. Limited ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at Law
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide five (5) day's prior written notice to the other party
of any change in address or facsimile number.
SECTION 8.7. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Purchaser. The Purchaser may assign its rights hereunder
without the consent of the Company, provided however, that any such assignment
shall not release the Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
SECTION 8.8. NO THIRD PARTY BENEFICIARIES
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
SECTION 8.9. SURVIVAL
Unless this Agreement is terminated under Section 8.12, the
representations and warranties of the Company and the Purchaser contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 5,
and the indemnification provisions set forth in Section 7, shall survive the
Closing. The Purchaser shall be responsible only for its own representations,
warranties, agreements, and covenants hereunder.
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SECTION 8.10. PUBLICITY
The Company and the Purchaser shall have the right to approve, before
issuance, any press releases or any other public statements with respect to the
transactions contemplated hereby; provided however, that the Company shall be
entitled, without the prior approval of the Purchaser, to make any press release
or other public disclosure with respect to such transactions as is required by
applicable law and regulations (although the Purchaser shall be consulted by the
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
SECTION 8.11. FURTHER ASSURANCES
Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
SECTION 8.12. TERMINATION
In the event that the Closing shall not have occurred with respect to
the Purchaser on or before five (5) business days from the date hereof due to
the Company's or Purchaser's failure to satisfy the conditions set forth in
Sections 5 and 6 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided however, that if this Agreement is terminated pursuant to this Section
8.12, the Company shall remain obligated to reimburse the Purchaser for the
expenses described in Section 4.6 above.
SECTION 8.13. NO STRICT CONSTRUCTION
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
SECTION 8.14. CURRENCY
All dollar amounts expressed in this Agreement are currency of the
United States of America.
[Signatures are on the following page]
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IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Class A Convertible Preferred Stock Purchase Agreement to be duly executed as of
the date first written above.
SOFTQUAD SOFTWARE LTD. V C ADVANTAGE LIMITED PARTNERSHIP
By _______________________________________ By _______________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, President and CEO General Partner
By _______________________________
By ________________________________________ Name _____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary Title ____________________________
18
EXHIBIT A
OPINION OF ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
PURCHASER'S WARRANT
EXHIBIT D
AGENT'S WARRANT