Document:

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                             SUBSCRIPTION AGREEMENT

                           (FOR CANADIAN SUBSCRIBERS)

         This Subscription Agreement (this "Agreement") is made and entered into
as of April , 2000 (the "Effective Date"), between SoftQuad Software Ltd. (the
"Company"), a Delaware corporation, Thomson Kernaghan & Co. Limited (the
"Agent"), as agent, and the subscriber (the "Subscriber") which has executed and
delivered this Agreement in Section 9 hereof.

                                   BACKGROUND

         The Company has authorized the issuance, sale, and delivery of up to
2,000,000 (subject to increase on the exercise of an agent's option to a maximum
of 2,500,000) units (the "Units") at a purchase price of U.S.$7.50 per Unit
(with a minimum subscription by Canadian subscribers of the equivalent of
Cdn.$500,000 and by non-Canadian subscribers of U.S.$333,000), each Unit being
comprised of:

         (i)      one-half of one share purchase warrant (collectively, the
                  "Purchase Warrants"), each whole Purchase Warrant entitling
                  the holder thereof to acquire one share of Common Stock, par
                  value $0.01 ("Common Stock") at any time until the first
                  anniversary of the date of effectiveness of the Registration
                  Statement (as defined below) at an exercise price of
                  U.S.$12.50, subject to adjustments as set forth in subsection
                  3(d) of Schedule "A"; and

         (ii)     in the case of Canadian subscribers, one special warrant
                  (collectively, the "Special Warrants"), each Special Warrant
                  being exercisable, for no additional consideration, on and
                  subject to the terms set forth in Schedule "A" hereto, for one
                  (1) share of the Company's Common Stock; and

         (iii)    in the case of non-Canadian subscribers, one share of Common
                  Stock.

         The Subscriber wishes to purchase the number of Units set forth in
Section 9.1 hereof, upon the terms and conditions stated in this Agreement, in
reliance upon an exemption from the registration requirements of Section 5 of
the U.S. Securities Act of 1933, as amended (the "Securities Act"), the safe
harbor afforded by Rule 903 promulgated by the U.S. Securities and Exchange
Commission (the "SEC"), and upon an exemption from the prospectus requirements
of applicable Canadian provincial securities laws.

                                    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, the Agent and the
Subscriber hereby agree as follows:

SECTION 1         UNITS.

         SECTION 1.1       SUBSCRIPTION FOR THE UNITS.

         The Subscriber hereby irrevocably agrees to subscribe for that number
of Units (the "Purchased Units") set forth in Section 9.1 at the Closing (as
defined below), for the aggregate subscription price (the "Subscription Price")

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set forth in Section 9.1. The particulars of the Units and other terms and
conditions are set out in Schedule "A" hereto.

         SECTION 1.2       CLOSING.

         The closing of the purchase and sale of the Units (the "Closing") shall
take place at the offices of Goodman Phillips & Vineberg, 250 Yonge Street,
Toronto, Ontario, M5B 2M6, at 10:00 a.m., Toronto time (the "Closing Time"), on
April 14, 2000 (the "Closing Date"), or on such other date or such other time or
place as the Company and the Agent may agree.

         SECTION 1.3       DELIVERIES AT CLOSING

         At the Closing the Company shall deliver to the Agent, on behalf of the
Subscriber, in consideration of the receipt of the Subscription Price:

         (a)      this Agreement, executed by the Company;

         (b)      Certificates for the Special Warrants and Purchase Warrants
                  comprising the Purchased Units (the "Purchased Securities"),
                  registered in accordance with the Subscriber's instructions
                  set forth in Section 9.1 hereof, 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 Registration Rights Agreement (defined in Section 4.8
                  below), executed by the Company, in substantially the form of
                  Exhibit B hereto;

         (d)      an opinion of Goodman Phillips & Vineberg, Canadian counsel to
                  the Company, in customary form;

         (e)      an opinion of Sonfield & Sonfield, legal counsel to the
                  Company, in customary form; and

         (f)      the certificates described in Sections 6(d) (the "Compliance
                  Certificate") and 6(g) (the "Secretary Certificate") hereof,
                  each executed by the Company.

SECTION 2         SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES

         SECTION 2.1       U.S. SECURITIES REPRESENTATIONS

         The Subscriber represents and warrants with if the Company (and hereby
indemnifies the Company and the Agent and their respective directors, officers,
employees and agents for any damages they may suffer as a consequence of a
misrepresentation as to the following) that it:

         (a)      acquiring the Purchased Securities (and on exercise thereof
                  will be acquiring the underlying shares (the "Underlying
                  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 Subscriber does not
                  agree to hold any Purchased Securities or Underlying Shares

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                  for any minimum or other specific term. The Subscriber
                  acknowledges that the Purchased Securities and the Underlying
                  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);

         (b)      it is an "accredited investor" as that term is defined in Rule
                  501(a)(3) of Regulation D of the SEC;

         (c)      it understands and acknowledges that the Purchased Secirotoes
                  (and the Underlying 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 Subscriber's compliance with, its representations,
                  warranties, agreements, acknowledgements, and understandings
                  of the Subscriber set forth herein in order to determine the
                  availability of such exemptions and the eligibility of the
                  Subscriber to acquire such securities. With respect to that
                  exemption, the Subscriber further represents and warrants to
                  the Company that:

                  (i)      it is not a U.S. Person as defined in SEC Rule
                           902(k);

                  (ii)     the offer to sell the Purchased Units (and the
                           Underlying Shares) to the Subscriber was not made in
                           the United States, and was made in Canada;

                  (iii)    the Subscriber's buy order for the Purchased Units
                           was made outside the United States, and was made in
                           Canada; and

                  (iv)     the Subscriber has complied with all of the
                           conditions required of it by SEC Rule 903(b)(3);

         (d)      it (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 Purchased Units (and the
                  Underlying Shares), that have been requested. It (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 Subscriber or
                  its advisors, if any, or its representatives shall modify,
                  amend, or affect the Subscriber's right to rely on the
                  Company's representations and warranties contained in Section
                  3 below. It understands that its investment in the Purchased
                  Units (and the Underlying Shares) involves a high degree of
                  risk. It 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 Purchased
                  Units (and the Underlying Shares);

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         (e)      it 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 Units (or the
                  securities comprising the Units) (or the Underlying Shares),
                  or the fairness or suitability of the investment in the Units
                  (or the Underlying Shares), nor have such authorities passed
                  upon or endorsed the merits of the offering of such
                  securities;

         (f)      this Agreement has been duly and validly authorized, executed,
                  and delivered by the Subscriber and is a valid and binding
                  agreement of the Subscriber severally 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; and

         (g)      the acquisition of the Purchased Securities (and the
                  Underlying Shares) is not a transaction (or any element of a
                  series of transactions) that is part of a plan or scheme to
                  evade the registration provisions of the Securities Act.

         SECTION 2.2       CANADIAN SECURITIES AND OTHER REPRESENTATIONS

         The Subscriber hereby makes the representations and warranties to the
Company and to the Agent set forth in Schedule "B" hereto.

SECTION 3         REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to the Agent and the Subscriber
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 two wholly-owned subsidiaries,
SoftQuad Acquisition Corp. and SoftQuad Software Inc.

         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
                  Purchased Securities and the Underlying 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
                  Purchased Securities and the issuance of the Underlying Shares
                  on the due exercise thereof, 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;

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         (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

         (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 75,000,001 shares, divided into (i) 50,000,000 shares of
Common Stock, $0.001 par value, of which 5,372,372 are issued and outstanding
(on a non-diluted basis); (ii) 25,000,000 shares of Preferred Stock, $0.001 par
value, of which (a) 1,473,405 shares have been designated Class A Convertible
Preferred Stock, all of which are issued and outstanding, and (b) 1,722,222
shares have been designated Class B Convertible Preferred Stock, all of which
are issued and outstanding; and (iii) one share of Special Voting Stock, which
is issued and outstanding. There will be outstanding immediately prior to
Closing 1,878,367 share purchase warrants 1,000,000 special warrants
(exercisable for no additional consideration), 1,557,500 options to acquire
shares of Common Stock and 5,773,785 exchangeable shares in the capital of the
Company's subsidiary Softquad Acquisition exchangeable for shares of Common
Stock. No shares of the Company's capital stock are subject to preemptive rights
or any other similar rights.

         SECTION 3.4       ISSUANCE OF PURCHASED SECURITIES AND UNDERLYING
                           SHARES

         The Purchased Special Warrants and the Underlying 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 therein. The Purchased Securities and Underlying Shares
are "restricted securities" as defined by SEC rules, and may be transferred,
assigned or resold by the Subscriber 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 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

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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 and as required
under the Securities Act and any applicable state or provincial 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 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 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's financial statements, which the Company has delivered to
the Subscriber and which the Subscriber acknowledges having received, are 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
Subscriber which is not included in the Financial Statements, 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, in which an unfavorable decision, ruling or finding would
(a) have a material adverse effect on the transactions contemplated hereby, or
(b) have a material adverse effect on the business, operations, properties,
financial condition, or results of operation of the Company.

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         SECTION 3.9       THE AGENT

         The Company acknowledges that the Agent is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated herein. The Company further
represents to the Subscriber that the Company's decision to enter into 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 Subscriber.

         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 Units or the Underlying 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 securities comprising the Units or the
Underlying Shares under the Securities Act or cause this offering 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

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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.

         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 Units (or the
Underlying Shares) for which the Agent or the Subscriber is or may become
liable.

         SECTION 3.18      REGULATION S EXEMPTION

         The Company understands that the Subscriber is purchasing the Purchased
Units (and the Underlying 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 Subscriber (and the
Agent) are relying in part upon the truth and accuracy of, and the Company's
compliance with, the representations, warranties, agreements, acknowledgements,
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 Purchased Securities (and the Underlying Shares) to the Subscriber

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without having complied with those registration requirements. With respect to
that exemption, the Company further represents and warrants to the Agent and the
Subscriber that:

         (a)      The Company has not offered any of the Purchased Units (and
                  the Underlying 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 Purchased Units (and the Underlying
                  Shares) to the Subscriber are 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 Purchased
                  Units (and the Underlying 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 Section 5 and Section 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 Purchased Units (and the Underlying Shares).

         SECTION 4.3       REPORTING STATUS

         The Company is 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 use its commercially reasonable
efforts to 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 Subscriber is the holder or beneficial owner of any
Common Stock.

         SECTION 4.4       USE OF PROCEEDS

         The Company will use the proceeds from the sale of the Purchased Units
and the shares underlying the exercised Purchase Warrants) for general working
capital purposes.

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SECTION 4.5       LISTING

         The Company shall maintain the listing of its Common Stock on the
NASDAQ OTC Bulletin Board, and upon the NASDAQ Small Cap Market as soon
thereafter as it is eligible therefor.

         SECTION 4.6       CORPORATE EXISTENCE

         So long as the Subscriber holds 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 4.7       TRANSACTIONS WITH AFFILIATES

         So long as the Subscriber holds 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) customary employment arrangements and benefit programs on
reasonable terms, (ii) 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, (iii) 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,
direct or indirect, to conduct or govern the policies of another person or
entity.

         SECTION 4.8       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 (among other things) the resale of the Underlying 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.

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SECTION 5         CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL

         The obligation of the Company hereunder to issue and sell the Purchased
Units to the Subscriber 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 Subscriber shall have executed this Agreement and
                  delivered the same to the Company.

         (b)      The Agent shall (on behalf of the Subscriber) have delivered
                  the Subscription Price for the Purchased Units to the Company.

         (c)      The representations and warranties of the Subscriber 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 Subscriber 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 it at or prior to
                  the Closing Date.

SECTION 6         CONDITIONS TO THE SUBSCRIBER'S OBLIGATION TO PURCHASE

         The obligation of the Subscriber hereunder to purchase the Purchased
Units 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 Subscriber's sole benefit and may be waived by the Subscriber 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 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 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 Subscriber 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 Subscriber including, without
                  limitation an update as of the Closing Date regarding the
                  representation contained in Section 3.3 above.

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                                     - 12 -

         (d)      The Subscriber 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 Subscriber
                  and in substantially the form of Exhibit A attached hereto.

         (e)      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.

         (f)      The Subscriber 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,
                  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 Units (and the Underlying 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 Subscriber's execution and delivery of this
Agreement and acquiring the Purchased Units 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 Subscriber, 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
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, 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 (c) any cause of action, suit, or claim brought or made

<PAGE>

                                     - 13 -

against such Indemnitee and arising out of or resulting from the execution,
delivery, performance, or enforcement of this 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 Purchased
Units, or the status of the Subscriber 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.

         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.

<PAGE>

                                     - 14 -

         SECTION 8.5       ENTIRE AGREEMENT, AMENDMENTS

         This Agreement supersedes all other prior oral or written agreements
between the Subscriber, the Company, their affiliates and persons acting on
their behalf with respect to the issuance and sale of the Purchased Units, 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, the Agent nor the Subscriber 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 certified or registered 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, if to the Purchaser, at the
address set forth in Section 9.1:

if to the Company:                          with a copy (which shall not
                                            constitute notice) to:

SoftQuad Software Ltd.                      Sonfield & Sonfield
c/o Chell.com                               770 Post Oak Lane
1215 - 13th Street S.E., Suite 114          Houston, Texas 77056
Calgary, Alberta T2G 3J4, Canada
                                            Attention: Robert L. Sonfield, Jr.
Attention: Cameron Chell, President
                                            Telephone:  (713) 877-8333
Telephone:  (403) 303-2345
Facsimile:   (403) 303-2376

if to the Agent:                            with a copy (which shall not
                                            constitute notice) to:

Thomson Kernaghan & Co. Limited             John M. Mann
365 Bay Street, 10th Floor                  Attorney at Law
Toronto, Ontario M5H 2V2, Canada            1330 Post Oak Boulevard, Suite 2800
                                            Houston, Texas 77056-3060
Attention: Mark E. Valentine, Chairman
                                            Telephone:  (713) 622-7114
Telephone:  (416) 860-8800                  Facsimile:  (713) 622-7185
Facsimile:  (416) 367-8055

<PAGE>

                                     - 15 -

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 Subscriber. The Subscriber may assign its rights
hereunder without the consent of the Company, provided however, that any such
assignment shall not release the Subscriber 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

         The representations and warranties of the Company and the Subscriber
contained in Section 2 the agreements and covenants set forth in Section 4 and
Section 5 , and the indemnification provisions set forth in Section 7 , shall
survive the Closing.

         SECTION 8.10      PUBLICITY

         The Company and the Agent 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 Agent, to make any press release or
other public disclosure with respect to such transactions as is required by
applicable law and regulations (although the Agent 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.

<PAGE>

                                     - 16 -

         SECTION 8.12      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 8.13      CURRENCY

         All dollar amounts expressed in this Agreement are currency of the
United States of America.

SECTION 9         SUBSCRIPTION

         SECTION 9.1       SUBSCRIPTION

         The Subscriber, by its due execution hereof hereby irrevocably
subscribes, as of the date first above written, for Units as follows:

Number of Units to be purchased at U.S.$7.50 each: __________ Special Warrants

Total Subscription Price:  U.S.$ ______________

Name and Address of Subscriber:     Name:    ___________________________________
                                             (Please Print)

                                    Address: ___________________________________
                                             (Street Address)

                                             ___________________________________
                                             (City, Province and Postal Code)

Alternate Registration Instructions (if other than in the name of the
Subscriber):

                                    Name:    ___________________________________
                                             (Please Print)

                                    Address: ___________________________________
                                             (Street Address)

                                             ___________________________________
                                             (City, Province and Postal Code)

Delivery Instructions: The name and address (including contact name and
telephone number) of the person to whom the certificate representing the Special
Warrants is to be delivered, if other than the Subscriber:

                                    Name:   ____________________________________
                                            (Please Print)

                                    Address: ___________________________________
                                             (Street Address)

                                             ___________________________________

<PAGE>

                                     - 17 -

                                             (City, Province and Postal Code)

                                             ___________________________________
                                             Contact Name and Phone Number

         IN WITNESS WHEREOF the Subscriber has executed, or caused its duly
authorized representative to execute, on its own behalf and, if applicable, on
behalf of each other person for whom it is contracting hereunder, this
subscription agreement as of the date first above written. The Subscriber also
hereby authorizes the Agent to deliver a copy of this Agreement on its behalf to
the Company.

__________________________________________  ____________________________________
Signature of Subscriber (if an individual)  Name of Subscriber (if not an
                                            individual)

__________________________________________  Per: _______________________________
Name of Subscriber (if an individual)            (signature of authorized
                                                 representative)

                                            ____________________________________
                                            Name and Title of Authorized
                                            Representative

                               A C C E P T A N C E

         The forgoing is acknowledged, accepted and agreed to by the undersigned
as of the date first above written.

           SOFTQUAD SOFTWARE, LTD.

   By:                                                         By:
           __________________________________________________
           Name:
           Title

<PAGE>

                                  SCHEDULE "A"

                                TERMS OF OFFERING

THIS IS SCHEDULE "A" TO THE SUBSCRIPTION AGREEMENT RELATING TO THE PURCHASE OF
UNITS OF SOFTQUAD SOFTWARE, INC. CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE
DEFINED SHALL HAVE THE MEANINGS ASCRIBED THERETO IN THE SUBSCRIPTION AGREEMENT.

1.   OFFERING. The Units subscribed for hereunder form part of a larger sale of
     up to 2,000,000 Units (the "OFFERING") through the Agent, subject to the
     exercise of a right of KBL Capital Partners Inc. to sell, as agent for the
     Company, up to an additional 500,000 Units.

2.   DEFINITIONS. In the Agreement and the schedules, the defined terms set out
     in the first page of the Agreement shall apply and, unless the context
     otherwise requires:

         "AGENT" means Thomson Kernaghan & Co. Limited;

         "AGREEMENT" means the subscription agreement among the Company, the
         Agent and the Subscriber, pursuant to which the Subscriber agreed to
         purchase and the Company agreed to issue that number of Units specified
         therein, to which this Schedule is appended;

         "BUSINESS DAY" means any day except Saturday, Sunday or a statutory
         holiday in any Qualifying Province;

         "COMPANY" means SoftQuad Software, Ltd.;

         "FINAL PROSPECTUS" means the final version of the Prospectus;

         "MISREPRESENTATION" means, with respect to circumstances in which the
         Securities Laws of a Province are applicable, a misrepresentation as
         defined under the Securities Laws of that Province and, if not so
         defined or in circumstances in which no particular provincial laws are
         applicable, a misrepresentation as defined under the Securities Act
         (Ontario);

         "OFFERING" has the meaning ascribed thereto in section 1 hereof;

         "PRELIMINARY PROSPECTUS" means the preliminary version of the
         Prospectus;

         "PROSPECTUS", as the context may require, means the preliminary or
         final version of the prospectus to be filed in each Qualifying Province
         relating to the distribution of the Underlying Shares to the holders of
         Special Warrants upon exercise thereof and, unless the context
         otherwise requires, includes any amendments or supplements thereto;

         "PROSPECTUSES" means both the Preliminary Prospectus and Final
          Prospectus;

         "PURCHASERS" means those persons who subscribe for Special Warrants
         under the Offering, including the Subscriber;

         "QUALIFYING PROVINCES" means the Provinces of Ontario, Quebec, British
         Columbia and Alberta and "QUALIFYING PROVINCE" means any of them;

<PAGE>

                                     - 2 -

         "SECURITIES COMMISSIONS" means, collectively, the securities
         commissions or other securities regulatory authorities in the
         Qualifying Provinces, and "SECURITIES COMMISSION" means any one of
         them;

         "SECURITIES LAWS" means, collectively, the applicable securities laws
         of each of the Qualifying Provinces and the respective regulations made
         and forms prescribed thereunder together with all applicable published
         policy statements, rules and blanket orders and rulings of the
         Securities Commissions;

         "SHARES" means shares of Common Stock in the capital of the Company;

         "UNDERLYING SHARES" means the Shares issuable upon the exercise or
         deemed exercise of the Warrants;

         "UNDERWRITERS' COMMISSION" means the aggregate of:

         (i)      the fee payable by the Company to the Agent equal to 8.0% of
                  the gross proceeds of the Offering provided; and

         (ii)     a number of Warrants (the "Agent's Warrants") equal to 10% of
                  the number of Special Warrants sold pursuant to the Offering;
                  and

         "WARRANTS" means Special Warrants and the Purchased Warrants.

3.       DESCRIPTION OF WARRANTS.

         (a) Special Warrants. The holders of Special Warrants shall be entitled
to receive, upon the exercise thereof and without payment of any additional
consideration, one Share for each Special Warrant held, subject to adjustment as
described in paragraph (c).

         (b) Purchase Warrants. The holders of Purchase Warrants shall be
entitled to receive, upon due exercise thereof and payment of the U.S.$12.50 per
Purchase Warrant exercise price (subject to adjustment as paragraph (d), one
Share for each Purchase Warrant held, subject to adjustment as described in
paragraph (c). The Purchase Warrants will be created and issued pursuant to the
terms of a common share purchase warrant indenture (the "Purchase Warrant
Indenture") to be entered into between the Company and a purchase warrant agent.
The attributes of the Purchase Warrants will be set out in the Purchase Warrant
Indenture. The Purchase Warrant Indenture shall be in such form and contain such
terms as shall be approved by the Agent and its counsel and by the Company and
its counsel. The Subscriber acknowledges and agrees that the rights of holders
of Purchase Warrants may be modified under the Purchase Warrant Indenture in the
manner prescribed thereby.

         (c) Adjustment. In the event of any subdivision, consolidation,
reclassification or change of the Shares, or any capital reorganization of the
Company or a consolidation, amalgamation or merger with or into any other entity
or the sale of substantially all of the properties and assets as an entirety to
any other entity while any Warrant is outstanding, the holder of any such
Warrant, if the holder has not exercised such Warrant prior to the effective
date of such event, shall thereafter, upon exercise, be entitled to receive upon
due exercise and shall accept in lieu of the number of Shares previously due to
him upon exercise thereof the number of Shares (or other securities or property

<PAGE>

                                     - 3 -

of the entity resulting from such merger, amalgamation or consolidation or to
which such sale may be made, as the case may be), that the holder would have
been entitled to receive if such holder had exercised such warrant prior to the
occurrence of such event, all as more particularly to be set forth in the
Purchase Warrant Indenture, and the Subscriber expressly acknowledges and agrees
that its rights with respect to any adjustment shall, in the event of any
inconsistency between the Purchase Warrant Indenture and the terms hereof, be
governed by the terms of the Purchase Warrant Indenture, and that the foregoing
description of the attributes of the Purchase Warrants is expressly subject to
the detailed provisions of the Purchase Warrant Indenture.

         (d) Further Adjustment. If the Registration Statement is not declared
effective, and/or the Securities Commission in the Qualifying Province in which
the warrantholder is resident (for this purpose, warrantholders not resident in
a Qualifying Province shall be deemed to be resident in the province of Ontario)
has not issued a receipt for the Final Prospectus such that the Shares
underlying the Purchase Warrants are subject to resale restrictions under
applicable provincial securities laws (a "non-Qualification Event"), by August
31, 2000, the exercise price per Purchase Warrant shall be reduced by U.S.$0.25
per month, or pro-rated portion thereof, until the earlier of (i) the date of
effectiveness and/or issuance of a receipt, as the case may be, and (ii) October
31, 2000. If the Registration Statement is not declared effective by October 31,
2000 and a Non-Qualification Event has occurred, the exercise price per Purchase
Warrant shall thereafter be reduced by U.S.$0.50 per month (to a minimum of
U.S.$3.75), or pro-rated portion thereof until it is declared effective and/or a
receipt has been issued, as the case may be.

         (e) Restrictions. SINCE THE COMPANY IS NOT CURRENTLY A "REPORTING
ISSUER" IN ANY OF THE QUALIFYING PROVINCES OR ELSEWHERE, THE SPECIAL WARRANTS,
THE PURCHASE WARRANTS AND UNDERLYING SHARES WILL BE SUBJECT TO RESTRICTIONS ON
THEIR RESALE UNDER APPLICABLE SECURITIES LEGISLATION UNTIL SUCH TIME AS OR
UNLESS: (I) THE COMPANY BECOMES A "REPORTING ISSUER" UNDER SUCH LAWS AND THE
APPROPRIATE "HOLD PERIODS", IF ANY, UNDER SUCH LAWS HAVE EXPIRED; (II) A FURTHER
STATUTORY EXEMPTION FROM THE REGISTRATION AND PROSPECTUS REQUIREMENTS OF SUCH
LAWS IS RELIED UPON BY THE HOLDER; OR (III) AN APPROPRIATE DISCRETIONARY ORDER
OR RULING IS OBTAINED UNDER SUCH LAWS TO PERMIT THE TRANSFER BY THE PURCHASER OR
ITS SECURITIES.

         THE COMPANY HAS AGREED TO USE ITS REASONABLE BEST EFFORTS, TO FILE,
CLEAR, AND OBTAIN A RECEIPT FOR THE FINAL PROSPECTUS IN EACH OF THE QUALIFYING
PROVINCES. IN THE EVENT THAT THE COMPANY IS UNABLE TO OBTAIN A RECEIPT FOR THE
FINAL PROSPECTUS IN A QUALIFYING PROVINCE, THE SPECIAL WARRANTS, THE PURCHASE
WARRANTS AND UNDERLYING SHARES WILL BE SUBJECT TO STATUTORY RESALE RESTRICTIONS
UNDER THE APPLICABLE SECURITIES LEGISLATION OF THAT PROVINCE AND THE APPLICABLE
HOLD PERIOD FOR THE SPECIAL WARRANTS, THE PURCHASE WARRANTS AND UNDERLYING
SHARES MAY NEVER EXPIRE. IN ADDITION, STATUTORY RESTRICTIONS MAY APPLY ON THE
RESALE OF THE UNDERLYING SHARES THAT ARE ACQUIRED PRIOR TO THE ISSUANCE OF
RECEIPTS FOR THE FINAL PROSPECTUS BY THE SECURITIES COMMISSION IN ANY OF THE
QUALIFYING PROVINCES.

         PURCHASERS ARE ADVISED TO CONSULT THEIR OWN LEGAL ADVISORS IN THIS
REGARD.

4.   COVENANT OF THE COMPANY. The Company hereby covenants and agrees to use its
     reasonable best efforts to obtain receipts for the Preliminary Prospectus
     and Final Prospectus and to qualify the Underlying Shares for distribution

<PAGE>

                                     - 4 -

     to the holders of Warrants resident in the Qualifying Provinces upon the
     exercise thereof.

5.   ACCEPTANCE OR REJECTION. The Company and the Agent will have the right to
     accept or reject the Subscriber's agreement to purchase at any time at or
     prior to the Closing Time. Notwithstanding the foregoing, the Subscriber
     acknowledges and agrees that the acceptance of the Subscription Agreement
     will be conditional inter alia upon the sale of the Units to the Subscriber
     being exempt from any prospectus and offering memorandum requirements of
     all applicable Securities Laws. The Company will be deemed to have accepted
     the Agreement upon the deliver at closing of the certificate representing
     the Purchased Special Warrants.

6.   INFORMATION AND DOCUMENTS. As soon as practicable and in any event by no
     later than 4:00 p.m. (Toronto time) on April 11, 2000 (or such other date
     as the Agent advises the Subscriber which shall in all cases be the last
     Business Day prior to the Closing Date), the Subscriber will deliver or
     arrange to have delivered or telecopied to the Agent (or to such other
     person or at such address as the Agent may direct by notice), a completed
     and executed copy of the Agreement, and will, promptly upon request by the
     Company or the Agent, provide the Company or the Agent with such
     information and execute and deliver to the Company or the Agent such
     additional undertakings, questionnaires and other documents as the Company
     or the Agent may request in connection with the issue and sale of the Units
     (and the filing of the Prospectuses, if applicable). The Subscriber
     acknowledges and agrees that such undertakings, questionnaires and other
     documents, when executed and delivered by it, will form part of and will be
     incorporated into the Subscription Agreement with the same effect as if
     each constituted a representation and warranty or covenant of the
     Subscriber hereunder in favour of the Company and the Agent. The Subscriber
     hereby consents to the filing of such undertakings, questionnaires and
     other documents as may be required to be filed with any securities
     regulatory authority in connection with the transactions contemplated
     hereby.

     The Subscriber acknowledges that pursuant to the Securities Laws in the
     Qualifying Province in which the Subscriber or, if applicable, the others
     for whom it is contracting, is resident or otherwise subject, the
     Subscriber or, if applicable, the others for whom it is contracting
     hereunder, may be required to file a report with the applicable Securities
     Commission in the required form within 10 days of each disposition of all
     or any of the Special Warrants purchased hereunder or any of the Underlying
     Shares issued upon the exercise thereof and, if so required, the
     Subscriber, on its behalf and, if applicable, on behalf of others for whom
     it is contracting hereunder, undertakes to file the required report.

7.   RESALE RESTRICTIONS. The Subscriber, on its own behalf and, if applicable,
     on behalf of others for whom it is contracting hereunder, understands and
     acknowledges that the securities comprising the Purchased Units and in
     certain circumstances the Underlying Shares, will be subject to resale
     restrictions under applicable Securities Laws and the Subscriber agrees to
     comply with such restrictions. THE SUBSCRIBER FURTHER UNDERSTANDS AND
     ACKNOWLEDGES THAT THE COMPANY IS NOT CURRENTLY A "REPORTING ISSUER" AND
     THAT HOLDERS OF SECURITIES OF THE COMPANY MAY NOT BE ABLE TO SELL SUCH
     SECURITIES FOR AN INDEFINITE PERIOD OF TIME WITHOUT THE FINAL PROSPECTUS
     BEING FILED AND A RECEIPT OBTAINED THEREFOR. The Subscriber, on its own
     behalf and, if applicable, on behalf of others for whom it is contracting
     hereunder, also acknowledges that it has been advised to consult its own
     legal advisors with respect to applicable resale restrictions and that it
     is solely responsible for complying with such restrictions (and neither the

<PAGE>

                                     - 5 -

     Company nor the Agent is in any manner responsible for ensuring compliance
     by the Subscriber, on its own behalf and, if applicable, on behalf of
     others for whom it is contracting hereunder, with such restrictions).

8.   NO REVOCATION. The Subscriber, on its own behalf and, if applicable, on
     behalf of others for whom it is contracting hereunder, agrees that this
     offer is made for valuable consideration and may not be withdrawn,
     cancelled, terminated or revoked by the Subscriber, on its own behalf and,
     if applicable, on behalf of others for whom it is contracting hereunder.

9.   COMPENSATION TO AGENT. The Subscriber, on its own behalf and, if
     applicable, on behalf of others for whom it is contracting hereunder,
     understands that in connection with the Offering, the Agent will receive
     the Agent's Commission and is entitled to reimbursement of certain of its
     expenses in connection with the Offering.

10.  INDEMNITY. The Subscriber, on its own behalf and, if applicable, on behalf
     of others for whom it is contracting hereunder, agrees to indemnify and
     hold harmless the Company and the Agent and their respective directors,
     officers, employees, agents, advisers and shareholders from and against any
     and all loss, liability, claim, damage and expense whatsoever (including,
     but not limited to, any and all fees, costs and expenses whatsoever
     reasonably incurred in investigating, preparing or defending against any
     claim, lawsuit, administrative proceeding or investigation whether
     commenced or threatened) arising out of or based upon any representation,
     warranty or covenant of the Subscriber, on its own behalf and, if
     applicable, on behalf of others for whom it is contracting hereunder,
     contained herein or in any document furnished by the Subscriber to the
     Company or the Agent in connection herewith being untrue in any material
     respect or any breach or failure by the Subscriber, on its own behalf and,
     if applicable, on behalf of others for whom it is contracting hereunder, to
     comply with any covenant or agreement made by the Subscriber herein or in
     any document furnished by the Subscriber, on its own behalf and, if
     applicable, on behalf of others for whom it is contracting hereunder, to
     the Company or the Agent in connection herewith.

11.  MODIFICATION. Neither the Agreement nor any provision hereof shall be
     modified, changed, discharged or terminated except by an instrument in
     writing signed by the party against whom any waiver, change, discharge or
     termination is sought.

12.  CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its acceptance and
     acknowledgement of the Agreement, the Company hereby agrees to provide a
     contractual right of action for rescission as hereinafter set forth, which
     right shall be exercisable by the Subscriber and assigned to any permitted
     assignee or transferee from time to time of the Purchased Special Warrants:

         (i)      In the event that a holder of a Special Warrant, who acquires
                  Underlying Shares upon exercise of the Special Warrant, is or
                  becomes entitled under applicable securities legislation to
                  the remedy of rescission by reason of the Final Prospectus or
                  any amendment thereto containing a misrepresentation, such
                  holder shall, subject to available defences and any limitation
                  period under applicable securities legislation, be entitled to
                  rescission not only of the holder's exercise of its Special
                  Warrant but also of the private placement transaction pursuant
                  to which the Special Warrant was initially acquired, and shall
                  be entitled in connection with such rescission to a full

<PAGE>

                                     - 6 -

                  refund of all consideration paid to the Underwriters or the
                  Company, as the case may be, on the acquisition of the Special
                  Warrant. The provisions hereof are a direct contractual right
                  extended to the holder of a Special Warrant and to any
                  permitted assignee of the interest of the Subscriber, such
                  permitted assignee to be entitled to exercise the rights of
                  rescission and refund granted hereunder as if such permitted
                  assignee was such original holder. The foregoing is in
                  addition to any other right or remedy available to a holder of
                  the Special Warrant under section 130 of the Securities Act
                  (Ontario) or other applicable Canadian provincial securities
                  legislation, or otherwise at law, and is subject to paragraph
                  (ii) below.

         (ii)     The contractual rights of action for rescission described in
                  paragraph (i) shall be subject to the defences, limitations
                  (including time limitations) and other provisions described
                  under section 130 of the Securities Act (Ontario) and the
                  equivalent provisions of any other applicable Canadian
                  provincial securities legislation, all of which are
                  incorporated herein by reference, mutatis mutandis, or
                  otherwise at law. No action shall be commenced to enforce the
                  foregoing rights of action for rescission or damages more than
                  180 days following the Qualification Date.

Subject to the foregoing, the Subscriber hereby waives and releases the Company
and the Agent from, to the fullest extent permitted by law, all rights of
withdrawal which the Subscriber might otherwise be entitled to under applicable
Securities Laws.

13.  COSTS. The Subscriber acknowledges and agrees that all costs and expenses
     incurred by the Subscriber (including any fees and disbursements of any
     special counsel retained by the Subscriber) relating to the sale of the
     Purchased Units to the Subscriber shall be borne by the Subscriber.

14.  LANGUAGE. The Subscriber, on its own behalf and, if applicable, on behalf
     of others for whom it is contracting hereunder, acknowledges its consent
     and requests that all documents evidencing or relating in any way to its
     purchase of Special Warrants be drawn up in the English language only. Nous
     reconnaissons par les presentes avoir consenti et demande que tous les
     documents faisant foi ou se rapportant de quelque maniere a notre achat
     soient rediges en anglais seulement.

<PAGE>

                                  SCHEDULE "B"

                   SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES

THIS IS SCHEDULE "B" TO THE SUBSCRIPTION AGREEMENT RELATING TO THE PURCHASE OF
SPECIAL WARRANTS OF SOFTQUAD SECURITIES SOFTWARE, INC. TERMS USED HEREIN AND NOT
OTHERWISE DEFINED SHALL HAVE THE MEANING ASCRIBED THERETO IN THE SUBSCRIPTION
AGREEMENT OR IN SCHEDULE "A" THERETO.

The Subscriber, on its own behalf and, if applicable, on behalf of others for
whom it is contracting hereunder, represents and warrants to the Company and the
Agent, as representations and warranties that are true as of the date of this
subscription agreement and as of the Closing Date (with the acknowledgement that
the representations and warranties of the Subscriber contained herein shall
survive the termination of all or part of the Subscription Agreement), that:

1.       General

         (a)      AUTHORIZATION AND EFFECTIVENESS. If the Subscriber is a
                  corporation, the Subscriber is a valid and subsisting
                  corporation, has the necessary corporate capacity and
                  authority to execute and deliver the Subscription Agreement
                  and to observe and perform its covenants and obligations
                  hereunder and has taken all necessary corporate action in
                  respect thereof. If the Subscriber is a partnership, syndicate
                  or other form of unincorporated organization, the Subscriber
                  has the necessary legal capacity and authority to execute and
                  deliver the Subscription Agreement and to observe and perform
                  its covenants and obligations hereunder and has obtained all
                  necessary approvals in respect thereof. If the Subscriber is a
                  natural person, he or she has attained the age of majority and
                  is legally competent to execute the subscription agreement and
                  to take all actions required pursuant thereto.

                  Whether the Subscriber is a natural person or a corporation,
                  partnership or other entity, upon acceptance by the Company,
                  the Subscription Agreement will have been duly executed and
                  delivered and will constitute a legal, valid and binding
                  contract of the Subscriber, and any beneficial purchaser for
                  whom it is purchasing, enforceable against the Subscriber and
                  any such beneficial purchaser in accordance with its terms.

         (b)      RESIDENCE. The Subscriber and any beneficial purchaser for
                  whom it is acting is a resident of the jurisdiction referred
                  to under "Name and Address of Subscriber" in Section 9.1 of
                  the Subscription Agreement, which address is the residence or
                  place of business of the Subscriber not created or used solely
                  for the purpose of acquiring Units.

         (c)      PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase by
                  the Subscriber of Units as agent or trustee for any principal
                  whose identity is disclosed or undisclosed or identified by
                  account number only, the Subscriber has due and proper
                  authority to act as agent or trustee for and on behalf of such
                  beneficial purchaser in connection with the transactions
                  contemplated hereby.

<PAGE>

                                     - 2 -

         (d)      NO OFFERING MEMORANDUM. The Subscriber has not received, nor
                  has it requested, nor does it have any need to receive, any
                  prospectus, offering memorandum, sales or advertising
                  literature or any other document (other than a document
                  setting out current information about the Company for the
                  benefit of prospective investors familiar with the Company
                  through prior investment or business contacts) purporting to
                  describe the business and affairs of the Company which has
                  been prepared primarily for delivery to, and review by, a
                  prospective purchaser in order to assist it in making an
                  investment decision in respect of the Units and it has not
                  become aware of any advertisement in printed public media,
                  radio, television or telecommunications, including electronic
                  display, with respect to the distribution of the Units or the
                  Underlying Shares.

         (e)      NO REPRESENTATIONS. In making its investment decision, the
                  Subscriber, and (if applicable) the others for whom it is
                  contracting hereunder, have relied solely upon publicly
                  available information relating to the Company and not upon any
                  verbal or written representation as to any fact or otherwise
                  made by or on behalf of the Company or the Agent or any
                  employee, agent or affiliate thereof or any person associated
                  therewith, and it, and (if applicable) the others for whom it
                  is contracting hereunder, agree that the Agent assumes no
                  responsibility or liability of any nature whatsoever for the
                  accuracy, adequacy or completeness of any publicly available
                  information concerning the Company.

         (f)      NO RE-SALE. No person has made any written or oral
                  representation(s) that any person will re-sell or re-purchase
                  the Purchased Units or Underlying Shares, as to the future
                  price or value of the securities comprising the Purchased
                  Units or the Underlying Shares that any person will refund the
                  purchase price of the Purchased Units, or that the securities
                  comprising the Purchased Units or the Underlying Shares will
                  be listed and posted for trading on any stock exchange on
                  which they are not presently listed or that application has
                  been or will be made therefor.

         (g)      INVESTMENT SUITABILITY. The Subscriber, and any beneficial
                  purchaser for whom it is purchasing, has such knowledge and
                  experience in financial and business affairs as to be capable
                  of evaluating the merits and risks of the investment hereunder
                  in Units (and the Underlying Shares in respect thereof) and is
                  able to bear the economic risk of loss of such investment.

         (h)      PROSPECTUS EXEMPTIONS. The Subscriber acknowledges and agrees
                  that the sale and delivery of the Units to the Subscriber (or,
                  if applicable, to others for whom it is contracting
                  hereunder), is conditional upon such sale being exempt from
                  the requirements under applicable Securities Laws requiring
                  the filing of a prospectus or delivery of an offering
                  memorandum in connection with the distribution of the Units or
                  upon the issuance of such rulings, orders, consents and
                  approvals as may be required to permit such sale without the
                  requirement of filing a prospectus or delivery of an offering
                  memorandum. The Subscriber acknowledges and understands that
                  no Canadian federal or provincial securities regulatory
                  authority or other governmental agency has passed on or made
                  any recommendation or endorsement of the Units (or the
                  securities comprising same or the Underlying Shares) or the

<PAGE>

                                     - 3 -

                  fairness or suitability of an investment in Units (or the
                  securities comprising same or the Underlying Shares), nor has
                  any such authority passed on or endorsed the merits of the
                  offering of such securities.

2. If the Subscriber is resident in Canada:

         (a)      PURCHASING AS PRINCIPAL. In the case of the purchase by the
                  Subscriber of Units as principal, (A) the Subscriber is
                  purchasing as principal for its own account, and not for the
                  benefit of any other person, a sufficient number of Units such
                  that the aggregate acquisition cost to the Subscriber for such
                  Units is sufficient to ensure the availability of an exemption
                  from the prospectus requirements of applicable securities
                  legislation (being $97,000 for residents of British Columbia
                  and Alberta and $150,000 for persons resident elsewhere in
                  Canada), or (B) the Subscriber is purchasing as principal or:

                  (i)      (is not a resident of Quebec or British Columbia and)
                           is a bank listed in Schedule I or II to the Bank Act
                           (Canada), or the Business Development Bank of Canada
                           incorporated under the Business Development Bank of
                           Canada Act (Canada) or a subsidiary of such entity
                           where such entity owns all of the voting securities
                           of such subsidiary;

                  (ii)     (is not a resident of Quebec or British Columbia and)
                           is a trust company or trust corporation licensed or
                           registered under the applicable act respecting trust
                           companies or trust corporations in the Subscriber's
                           province of residence and, if so defined, as defined
                           in the securities legislation of the province of
                           residence of the Subscriber;

                  (iii)    (is not a resident of Quebec or British Columbia and)
                           is an insurance company or insurance corporation
                           licensed under the applicable act respecting insurers
                           in the Subscriber's province of residence and, if so
                           defined, as defined in the securities legislation of
                           the province of residence of the Subscriber;

                  (iv)     (is not a resident of Quebec or British Columbia and)
                           is a loan company or loan corporation (or, in the
                           case of Alberta, is a loan corporation, credit union
                           or treasury branch) licensed or registered under the
                           applicable act respecting loan companies or loan
                           corporations (other than a credit union or treasury
                           branch in Alberta which is licensed or registered as
                           required under the laws of Alberta) and if so
                           defined, as defined, where applicable, in the
                           securities legislation of the province of residence
                           of the Subscriber;

                  (v)      is recognized or designated under the securities laws
                           of its province of residence as being an exempt
                           purchaser (and, if a resident of British Columbia, is
                           not an individual) or a "sophisticated investor" as
                           defined in sections 44 and 45 of the Securities Act
                           (Quebec) if a resident of Quebec;

<PAGE>

                                     - 4 -

                  (vi)     is the Government of Canada or the Government of a
                           Canadian province or a municipal corporation, public
                           board or commission in Canada;

                  (vii)    is resident in British Columbia and is an insurer or
                           a savings institution within the meaning of the
                           Securities Act (British Columbia) or the Business
                           Development Bank of Canada incorporated under the
                           Business Development Bank of Canada Act (Canada);

                  (viii)   is resident in British Columbia and is a subsidiary
                           of the Business Development Bank of Canada or of an
                           insurer or a savings institution within the meaning
                           of the Securities Act (British Columbia), all of the
                           voting securities of which are owned beneficially by
                           the Business Development Bank of Canada or such
                           insurer or savings institution, except the voting
                           securities required by law to be owned by directors
                           of that subsidiary;

                  (ix)     is resident in Alberta and is a wholly-owned
                           subsidiary of a financial institution within the
                           meaning of the Securities Act (Alberta);

                  (x)      is a dealer or adviser registered in conformity with
                           the Securities Act (Quebec);

                  (xi)     is resident in Quebec and is the Caisse Centrale
                           Desjardins du Quebec established under the Act
                           respecting the Mouvement des Daisses Desjardins
                           (Quebec);

                  (xii)    is resident in Quebec and is a pension fund with
                           assets of over $100,000,000 and governed by the
                           Supplemental Pension Plans Act (Quebec) or the
                           Pension Benefits Standards Act, 1985 (Canada);

                  (xiii)   is a resident in Quebec and is a bank governed by the
                           Bank Act or by the Quebec Savings Banks Act, an
                           insurance company licensed under the Act Respecting
                           Insurance (Quebec) or a trust company licensed under
                           An Act Respecting Trust Companies and Savings
                           Companies (Quebec) or a wholly-owned subsidiary
                           thereof;

                  (xiv)    is resident in Quebec and is a federation or
                           confederation of savings and credit unions within the
                           meaning of the Savings and Credit Union Act (Quebec);
                           or

                  (xv)     the purchase is otherwise exempt under applicable
                           Securities Laws and the Purchaser has satisfied the
                           Company and the Underwriters in that respect.

         (b)      PURCHASING AS AGENTS FOR DISCLOSED PRINCIPAL(S). In the case
                  of the purchase by the Subscriber of Units as agent for a
                  disclosed principal, each beneficial purchaser of the Units
                  for whom the Subscriber is acting is either (i) purchasing as
                  principal for its own account, and not for the benefit of any
                  other person, a sufficient number of Units such that the
                  aggregate acquisition cost to each such purchaser for such

<PAGE>

                                     - 5 -

                  Units is sufficient to ensure the availability of an exemption
                  from the prospectus requirements of applicable Securities Laws
                  (being $97,000 for residents of British Columbia and Alberta,
                  and $150,000 for persons resident elsewhere in Canada), or
                  (ii) if not resident in Quebec, is recognized under the
                  securities laws of its province of residence as being an
                  exempt purchaser (and, if a resident of British Columbia, is
                  not an individual) or, if resident in Quebec, is a
                  "sophisticated investor" as defined in sections 44 and 45 of
                  the Securities Act (Quebec) if a resident of Quebec.

         (c)      PURCHASING FOR UNDISCLOSED PRINCIPAL(S). In the case of the
                  purchase by the Subscriber of Units as trustee, agent or
                  portfolio manager for a principal which is undisclosed or
                  identified by account number only the Subscriber acknowledges
                  that the Company may be required by law to disclose to certain
                  regulatory authorities the identity of each beneficial
                  purchaser of Units for whom the Subscriber may be acting and
                  the Subscriber is:

                  (i)      resident in or otherwise subject to the securities
                           laws of the Province of Ontario and is a portfolio
                           manager registered under the Securities Act (Ontario)
                           (or a broker or investment dealer who is exempt from
                           registration as an advisor pursuant to subsection
                           148(a) of the Regulations under such Act and who is
                           not exempt from the by-laws or regulations of The
                           Toronto Stock Exchange or the Investment Dealers
                           Association referred to in that subsection) and is
                           purchasing the Units as trustee or as agent for
                           accounts of clients established in writing under
                           which the portfolio adviser to the account makes
                           investment decisions for the account without
                           requiring the client's express consent to a
                           transaction in accordance with Ontario Securities
                           Commission Rule 45-504 under such Act;

                  (ii)     resident in British Columbia and is a trust company
                           or insurer authorized to carry on business under the
                           Financial Institutions Act (British Columbia) or is a
                           trust company or an insurance company authorized
                           under the terms of a Province or Territory of Canada
                           other than British Columbia to carry on business in
                           that Province or Territory and is purchasing Units
                           having an aggregate acquisition cost of not less than
                           $97,000 as trustee or as agent for accounts fully
                           managed by it; the Subscriber is solely responsible
                           for management of its managed accounts and has
                           absolute discretion as to purchasing or selling for
                           the account; all investment decisions are made by the
                           Subscriber and the Subscriber receives no
                           instructions respecting purchasing or selling for the
                           account from any person beneficially interested in
                           the account or any other person;

                  (iii)    resident in British Columbia and is registered under
                           the Securities Act (British Columbia) as a portfolio
                           manager (as therein defined) or is exempt from such
                           registration under the Act, and in either case is
                           purchasing as agent for accounts that are fully
                           managed by the Subscriber; the Subscriber is solely
                           responsible for management of its managed accounts

<PAGE>

                                     - 6 -

                           and has absolute discretion as to purchasing or
                           selling for the account; all investment decisions are
                           made by the Subscriber and the Subscriber receives no
                           instructions respecting purchasing or selling for the
                           account from any person beneficially interested in
                           the account of any other person as agent in
                           connection with such purchase and is purchasing Units
                           having an aggregate acquisition cost of not less than
                           $97,000;

                  (iv)     resident in Alberta and is a trust corporation within
                           the meaning of the laws of Alberta and is purchasing
                           Units having an aggregate acquisition cost of not
                           less than $97,000, for accounts fully managed by it,
                           as trustee or as agent;

                  (v)      resident in Alberta and is registered as a portfolio
                           manager under the Securities Act (Alberta), or is
                           exempt under the Securities Act (Alberta) from such
                           registration under the Act, and is purchasing Units
                           having an aggregate acquisition cost of not less than
                           $97,000, as agent for accounts fully managed by it;

                  (vi)     resident in Ontario and is a trust corporation
                           registered under the Loan and Trust Corporations Act
                           (Ontario) and is purchasing the Units as trustee or
                           as agent for accounts fully managed by it;

                  (vii)    resident in Quebec and is a trust company licensed
                           under an Act respecting trust companies and savings
                           companies (Quebec), an insurance company holding a
                           license under an Act respecting insurance (Quebec),
                           or a dealer or advisor appropriately licensed or
                           registered under the Securities Act (Quebec), and is
                           purchasing the Units as trustee or as agent for the
                           account or portfolio of third persons managed solely
                           by it and is purchasing Units having an aggregate
                           acquisition cost to the Subscriber of not less than
                           $150,000;

                  (viii)   acting on behalf of one or more beneficial purchasers
                           of the Units who are individuals or corporations and
                           are purchasing as principal for their own account,
                           and not for the benefit of any other person, and are
                           purchasing a sufficient number of Units so that each
                           such beneficial purchaser has an aggregate
                           acquisition cost for such Units of not less than the
                           amount specified in paragraph (a)(A) and complies
                           with the provisions of paragraphs (d) through (n)
                           hereof, as applicable, or the purchase of the Units
                           by such beneficial purchasers is otherwise exempt
                           under the applicable securities legislation and the
                           Subscriber has satisfied the Company and the
                           Underwriters in that respect; or

                  (ix)     relying on and is purchasing the Units in accordance
                           with an order of the applicable Securities Commission
                           of the Subscriber's province of residence exempting
                           the sale of such Units from the requirements to file
                           a prospectus or deliver an offering memorandum issued
                           on or before the Closing Date, a copy of which order
                           and evidence of compliance of the Subscriber with the

<PAGE>

                                     - 7 -

                           terms thereof shall be provided to the Company and
                           the Underwriters forthwith upon request;

and the Subscriber has due and proper authority to execute this subscription
agreement and all other documentation in connection with the purchase on behalf
of each such undisclosed principal;

         (d)      if the Subscriber is resident in Ontario and is a corporation
                  or a syndicate, partnership, trust, investment club or other
                  unincorporated organization, it was not created or is not
                  being used primarily to permit purchases without a prospectus
                  or, if it was created or is being used primarily to permit
                  purchases without a prospectus, the share or portion of each
                  member or partner of the partnership, syndicate or
                  unincorporated organization, each beneficiary of the trust or
                  each shareholder of the corporation of the aggregate
                  acquisition cost to the corporation, syndicate, partnership,
                  trust or other unincorporated organization of the purchased
                  Units is not less than $150,000;

         (e)      if the Subscriber is resident in Ontario and is an investment
                  club, the share or portion of each member of the investment
                  club of the aggregate acquisition cost to the investment club
                  of the Units being purchased is at least $150,000;

         (f)      if the Subscriber is resident in British Columbia and is not
                  an individual but is a corporation, partnership, trust, fund,
                  association or any other organized group of persons, it was
                  not created solely, nor is it used primarily, to permit a
                  group of individuals to purchase securities without a
                  prospectus and the Subscriber would have an aggregate
                  acquisition cost of purchasing the Units of not less than
                  $97,000 or, if the Subscriber is an entity created or used
                  primarily for such purpose, the aggregate acquisition cost of
                  Units to each of the individuals who form part of the group is
                  at least $97,000;

         (g)      if the Subscriber is resident in Alberta and is a corporation,
                  syndicate, partnership or other form of unincorporated
                  organization, it pre-existed the offering of the Units and has
                  a bona fide purpose other than investment in Units or, if
                  created to permit such investment, the individual share of the
                  aggregate acquisition cost for each participant is not less
                  than $97,000 and it acknowledges that it must file a report on
                  Form 21 with the Alberta Securities Commission within 10 days
                  of each disposition of all or any part of the Units; and

         (h)      if the Subscriber is resident in Quebec it is not a company
                  established solely to acquire the Units or, if it was so
                  established, each shareholder has contributed at least
                  $150,000 for the investment in the Units of the Company, and
                  each such person is acting for his own account.

         (i)      BRITISH COLUMBIA FILING REQUIREMENTS. The Subscriber, or any
                  beneficial purchaser (the "beneficiary") for whom it is
                  purchasing, if a resident of British Columbia, acknowledges
                  being advised that the Subscriber or their beneficiary must
                  file with the British Columbia Securities Commission (i) a
                  report in the form attached to the Blanket Order and Ruling

<PAGE>

                                     - 8 -

                  #95/17 of the British Columbia Securities Commission (the
                  "Initial Trade Report"), or (ii) the report required under the
                  laws of the jurisdiction in which the Company carries on
                  business or in which the Company is organized, provided that
                  the report requires substantially the same information as
                  required in the Initial Trade Report (the "Purchaser's
                  Report"), within ten days of the initial trade of the Units or
                  the Underlying Shares by the Subscriber (in the event that
                  such Underlying Shares are acquired prior to the issuance of a
                  receipt for the Final Prospectus by the British Columbia
                  Securities Commission). Where the Subscriber or their
                  beneficiary has filed an Initial Trade Report or the
                  Purchaser's Report, the Subscriber is not required to file a
                  further report in respect of additional trades of securities
                  acquired on the same date and under the same exemption as the
                  security which is the subject of the Initial Trade Report or
                  the Purchaser's Report; and

         (j)      BRITISH COLUMBIA FORM. The Subscriber, or any beneficial
                  purchaser for whom it is acting, if an individual who is a
                  resident of British Columbia or subject to the laws of British
                  Columbia, has completed and executed the Form 20A(IP) under
                  the Regulation to the Securities Act (British Columbia) in the
                  form attached hereto as Schedule "C".

4. RELIANCE. The Subscriber acknowledges that the representations and warranties
contained herein are made by it with the intention that they may be relied upon
by the Agent and the Company in determining the Subscriber's eligibility, or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase Units under relevant securities legislation. The
Subscriber further agrees that by accepting delivery of the Purchased Units on
the Closing Date, it will be representing and warranting that the foregoing
representations and warranties are true and correct as at the time of Closing
with the same force and effect as if they had been made by the Subscriber at the
time of Closing and that they will survive the purchase by the Subscriber of
Units and will continue in full force and effect notwithstanding any subsequent
disposition by the Subscriber of such Units or the Underlying Shares issued for
the exercise thereof. The Subscriber hereby agrees to notify the Company and the
Agent immediately of any change in any representation, warranty, covenant or
other information relating to the Subscriber or any beneficial purchaser on
whose behalf it is acting contained in the Subscription Agreement which takes
place prior to the Closing.

<PAGE>

                                  SCHEDULE "C"

             FORM 20A (TP) - ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
                          RESIDENT IN BRITISH COLUMBIA

                        SECURITIES ACT (BRITISH COLUMBIA)

1.       I have agreed to purchase from Softquad Software, Ltd. (the "Issuer")
         _____________ Units, each comprised of one special warrant and one-half
         of one share purchase warrant (the "Securities") of the Issuer.

2.       I am purchasing the Securities as principal and, on closing of the
         agreement of purchase and sale, I will be the beneficial owner of the
         Securities.

3.       I have not received an offering memorandum describing the Issuer and
         the Securities.

4. I acknowledge that:

         (a)      no securities commission or similar regulatory authority has
                  reviewed or passed on the merits of the Securities, and

         (b)      there is no government or other insurance covering the
                  Securities, and

         (c)      I may lose all of my investment, and

         (d)      there are restrictions on my ability to resell the Securities
                  and it is my responsibility to find out what those
                  restrictions are and to comply with them before selling the
                  Securities, and

         (e)      I will not receive a prospectus that the British Columbia
                  Securities Act (the "Act") would otherwise require be given to
                  me because the Issuer has advised me that it is relying on a
                  prospectus exemption, and

         (f)      because I am not purchasing the Securities under a prospectus,
                  I will not have the civil remedies that would otherwise be
                  available to me, and

         (g)      the Issuer has advised me that it is using an exemption from
                  the requirement to sell through a dealer registered under the
                  Act, except purchases referred to in paragraph 5(g), and as a
                  result I do not have the benefit of any protection that might
                  have been available to me by having a dealer act on my behalf.

5.       I also acknowledge that I am purchasing Securities that have an
         aggregate acquisition cost of $97,000 or more.

<PAGE>

                                     - 2 -

         The statements made in this report are true.

         DATED this _____ day of April, 2000.

                                            ------------------------------------
                                            Signature of Purchaser

                                            ------------------------------------
                                            Name of Purchaser

                                            ------------------------------------
                                            Address of Purchaser<PAGE>

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 9, 1999, by and between SoftQuad Software Ltd., a
Delaware corporation (the "Company"), V C Advantage Limited Partnership (the
"Purchaser") and Thomson Kernaghan & Co. Limited (the "Agent").

                             PRELIMINARY STATEMENTS

         In connection with the consummation of the transactions contemplated by
that certain Common Stock Purchase Agreement (the "Common Stock Purchase
Agreement") of even date herewith by and between the Company and the Purchaser,
the Company has agreed, upon the terms and subject to the conditions of the
Common Stock Purchase Agreement, to issue and sell to the Purchaser 736,702
shares of the Company's Common Stock (the "Common Shares").

         In addition, in connection with the consummation of the transactions
contemplated by that certain Class A Convertible Preferred Stock Purchase
Agreement (the "Class A Preferred Stock Purchase Agreement" and, together with
the Common Stock Purchase Agreement, the "Purchase Agreements") of even date
herewith by and between the Company and the Purchaser, the Company has agreed,
upon the terms and subject to the conditions of the Class A Preferred Stock
Purchase Agreement, to issue and sell to the Purchaser 1,473,405 shares of the
Company's Class A Convertible Preferred Stock (the "Class A Preferred Shares").
Each share of the Class A Preferred Shares is convertible into one share of the
Company's Common Stock, par value $.001 per share (the "Converted Common
Shares").

         The Company has also agreed, upon the terms and subject to the
conditions of the Class A Preferred Stock Purchase Agreement, to issue to the
Purchaser a Warrant to purchase 441,176 shares of the Company's Common Stock
(the "Purchaser's Warrant") and to issue to the Agent a Warrant to purchase
220,588 shares of the Company's Common Stock (the "Agent's Warrant").

         The Common Shares, the Converted Common Shares, the Purchaser's Warrant
and the Agent's Warrant are hereinafter collectively referred to as the
"Securities." The Common Stock issuable upon exercise of the Purchaser's Warrant
is hereinafter called the "Purchaser's Warrant Shares" and the Common Stock
issuable upon exercise of the Agent's Warrant is hereinafter called the "Agent's
Warrant Shares" (the Purchaser's Warrant Shares and the Agent's Warrant Shares
are sometimes collectively referred to as the "Warrant Shares").

         To induce the Purchaser to execute and deliver the Purchase Agreements,
the Company has agreed, pursuant to the terms and conditions of this Agreement,
to provide certain registration rights with respect to the Common Shares, the
Converted Common Shares and the Warrant Shares.

<PAGE>

                                    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:

         "Agent" shall mean Thomson Kernaghan & Co. Limited.

         "Agent's Warrant" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.

         "Agent's Warrant Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.

         "Agreement" shall mean this Registration Rights Agreement, made and
entered into as of December 8, 1999, by and between the Company and the
Purchaser.

         "Class A Preferred Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.

         "Class A Preferred Stock Purchase Agreement" shall have the meaning
ascribed to such term in the Preliminary Statements to this Agreement.

         "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.

         "Common Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.

         "Common Stock Purchase Agreement" shall have the meaning ascribed to
such term in the Preliminary Statements to this Agreement.

                                       2

<PAGE>

         "Company" shall mean SoftQuad Software Ltd., a Delaware corporation.

         "Converted Common Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.

         "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) the 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.

         "Purchase Agreements" shall mean, together, (i) that certain Common
Stock Purchase Agreement, dated as of December 8, 1999, by and between the
Company and the Purchaser and (ii) that certain Class A Convertible Preferred
Stock Purchase Agreement, dated as of December 8, 1999, by and between the
Company and the Purchaser.

         "Purchaser" shall mean V C Advantage Limited Partnership.

         "Purchaser's Warrant" shall have the meaning ascribed to such term in
the Preliminary Statements to this Agreement.

         "Purchaser's Warrant Shares" 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 Common Shares, the Converted
Common Shares, the Purchaser's Warrant Shares and the Agent's Warrant Shares,
and any shares of capital stock issued or issuable with respect to the
Securities, the Purchaser's Warrant Shares or the Agent's Warrant Shares 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

                                       3

<PAGE>

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
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" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.

         "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.

         "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
Agreements.

                                       4

<PAGE>

                                   ARTICLE II
                               REGISTRATION RIGHTS

         Section 2.1       Mandatory Registration.

                  (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 (i) the issuance of the
         Converted Common Shares and the Warrant Shares, and (ii) the resale of
         all of the Registrable Securities. Such registration statement shall
         initially register for resale at least 100% of the Common Shares, the
         Converted Common Shares and the Warrant 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 the
         greater of (i) a period of at least twelve (12) months from the Closing
         Date and (ii) a period of at least ninety (90) days after (x) all of
         the Class A Convertible Preferred Shares shall have been converted into
         Converted Common Shares or redeemed and (y) the Purchaser's Warrant and
         the Agent's Warrant shall have been fully exercised or expired. If a
         registration statement with respect to the Common Shares, the Converted
         Common Shares and the Warrant Shares is not effective on the
         Registration Deadline date, the Company agrees to and shall pay a cash
         penalty equal to two percent (2%) per month of the final amount of the
         completed offering under each Purchase Agreement, payable monthly and
         pro-rated for partial months until the registration statement is
         effective.

         Section 2.2 Expenses of Registration. 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.

         Section 2.3 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Article II,
the Company will keep each Holder 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 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 they may
         reasonably request (including a conformed copy of the registration
         statement filed with the Commission and any amendments thereto and an

                                       5

<PAGE>

         original executed underwriting agreement entered into in connection
         with such registration) in order to facilitate the disposition of
         Registrable Securities owned by them;

                  (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 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 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 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 any Holder 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 (f) 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

                                       6

<PAGE>

or supplement. In the event the Company shall give any such notice, the period
set forth in clause (a) of this Section 2.3 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.

         Section 2.4       Indemnification.

                  (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
         and each underwriter, if any, and each Person who controls any
         underwriter, 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) 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 connection with any such registration, qualification or
         compliance, and will reimburse each such Holder's Parties each such
         underwriter, and each Person who controls any such underwriter, 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 or
         underwriter or Person controlling such underwriter 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,
         each underwriter, if any, of the Company securities covered by such a
         registration statement, and each Person who controls the Company or
         such underwriter 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

                                       7

<PAGE>

         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, underwriters 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, underwriters 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 Indemnifying Party
         shall bear the expense of such defense of one counsel representing the
         Indemnified Party if 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,
         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,

                                       8

<PAGE>

                  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.

                           (iii) No Holder that is a seller of Registrable Stock
                  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.

         Section 2.5 Information by Holder. 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.

                                       9

<PAGE>

         Section 2.6 Rule 144 Reporting. 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.

         Section 2.7 Transfer of Registration Rights. 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.

         Section 2.8       Certain Limitations in Connection with Future Grants
                           of Registration Rights.

         From and after the date of this Agreement, without the prior written
consent of the Holders of a majority of the Registrable Securities, the Company
shall not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights that would be superior to those granted to Holders pursuant
to Section 2.1.

         Section 2.9 Restrictions on Market Manipulation. In the event any
shares of Common Stock are offered or sold by any Holder in a registration, each
such Holder will:

                                       10

<PAGE>

                  (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 Rule 10b-6 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 Rule 10b-6; 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

         Section 3.1 Governing Law; Jurisdiction and Venue. This Agreement 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 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.

         Section 3.2 Successors and Assignees. 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.

         Section 3.3 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.

         Section 3.4 Notices, etc. 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 Purchaser, c/o Thomson Kernaghan &

                                       11

<PAGE>

Co. Limited at 365 Bay Street, 10th Floor, Toronto, Ontario M5H 2V2, Canada,
Attention: Mark E. Valentine, Chairman; (b) if to the Agent, at 365 Bay Street,
10th Floor Toronto, Ontario M5H 2V2, Canada, Attention: Mark E. Valentine,
Chairman; (c) 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 (d) if to the Company, at 161 Eglinton Avenue East, Suite 400,
Toronto, Ontario, Canada M4P 1J5, Attention: Secretary.

         Section 3.5 Delays or Omissions. 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.

         Section 3.6 Counterparts. 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.

         Section 3.7 Severability. 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.

         Section 3.8 Amendments. 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.

                                    * * * * *

                               [SIGNATURES FOLLOW]

                                       12

<PAGE>

         The parties have executed this Registration Rights Agreement as of the
date first written above.

                                            SOFTQUAD SOFTWARE LTD.

                                            By:
                                                --------------------------------
                                                     Name:
                                                     Title:

                                            V C ADVANTAGE LIMITED PARTNERSHIP

                                            By:
                                                --------------------------------
                                                     Name:
                                                     Title:

                                            THOMSON KERNAGHAN & CO. LIMITED

                                            By:
                                                --------------------------------
                                                     Name:
                                                     Title:

                                       13

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