Document:

<PAGE>

                            KBL CAPITAL PARTNERS INC.
                        130 KING STREET WEST, SUITE 2810
                            TORONTO, ONTARIO M5X IA9
                               TEL: (416) 941-1087
                               FAX: (416) 941-1090

                                           July 31, 1999

SoftQuad Software Inc.
161 Eglinton Avenue East
Suite 400
Toronto, Ontario
M4P 1J5

ATTENTION:  ROBERTO DRASSINOWER
----------  -------------------

Dear Sir:

         RE:      ADVISORY SERVICES AGREEMENT BETWEEN SOFTQUAD SOFTWARE INC.
                  ("SOFTQUAD") AND KBL CAPITAL PARTNERS INC. (THE "CONSULTANT")
                  MADE AS OF APRIL 9, 1999 (THE "ADVISORY SERVICES AGREEMENT")

         The following outlines our understanding of the terms upon which we
have agreed to amend the Advisory Services Agreement. This letter shall be read
in conjunction with and shall form part of the Advisory Services Agreement and
except as specifically modified by this letter, the Advisory Services Agreement
continues in full force and effect.

         All capitalized terms used herein which are not otherwise defined shall
have the meaning given to those terms in the Advisory Services Agreement.

         1.       The Term referred to in Section 1.2 of the Advisory Services
                  Agreement is hereby amended to mean a term of one (1) year
                  commencing on the date hereof to July 31, 2000, subject to the
                  automatic renewals for successive one year periods provided in
                  that section.

         2.       The Monthly Compensation referred to in Section 2.1 of the
                  Advisory Services Agreement is hereby amended to mean a fee
                  equal to $1 0,000 per month plus applicable taxes commencing
                  August 1, 1999.

         3.       The termination provision contained in Section 4.1 of the
                  Advisory Services Agreement is hereby amended to provide that
                  if the Corporation exercises its right to terminate the
                  engagement of the Consultant pursuant to Section 4.1 prior to
                  the end of the Term, the Corporation shall pay to the
                  Consultant an amount equal to the Monthly Compensation
                  (amended hereby) multiplied by the number of months, or part
                  months, remaining in the Term, after which payment the
                  Advisory Services Agreement shall terminate.

<PAGE>

         Please confirm your agreement with the foregoing by executing the
duplicate copy of this letter enclosed and returning it to me.

                                      Yours very truly,

                                      KBL CAPITAL PARTNERS INC.

                                      PER:

                                      Michael Mendelson

Agreed and acknowledged this
         day of July, 1999

SOFTQUAD SOFTWARE INC.

PER:

Roberto Drassinower

                                       2

<PAGE>

                           ADVISORY SERVICES AGREEMENT
                           ---------------------------

         THIS AGREEMENT made as of the 9th day of April, 1999.

B E T W E E N:

                           SOFTQUAD SOFTWARE INC.

                           (the "Corporation")

                           - and -

                           KBL CAPITAL PARTNERS INC.

                           (the "Consultant")

         WHEREAS the Corporation desires to engage the Consultant to provide
consulting and advisory services on the terms and conditions set forth in this
agreement;

         AND WHEREAS the Consultant has agreed to provide consulting and
advisory services as hereinafter set forth;

         THIS AGREEMENT WITNESSES that for and in consideration of the mutual
covenants and agreements which it contains, it is agreed that:

                                   ARTICLE 1
                               RETENTION AND TERM

1.1      RETENTION OF CONSULTANT
         -----------------------

         The Corporation hereby engages the Consultant to provide consulting and
advisory services to the Corporation concerning the business and affairs of the
Corporation or as may from time to time be assigned to the Consultant by the
senior officers of the Corporation (collectively. the "Services"). The
Consultant hereby agrees to accept such engagement and perform its duties
hereunder diligently and in the best interests of the Corporation in accordance
with the provisions of this agreement.

1.2      TERM
         ----

         The Corporation hereby retains the Consultant for a term of one (1)
year commencing on the date of this agreement (the "Term") provided that,
notwithstanding the foregoing, upon the expiry of such Term, this agreement
shall automatically be renewed for successive one year periods unless one party
gives at least three (3) month's prior written notice to the other party to end
the agreement upon the expiry of the Term or the relevant renewal term.

<PAGE>

                                   ARTICLE 2
                                  COMPENSATION

2.1      MONTHLY COMPENSATION
         --------------------

         The Corporation agrees to pay to the Consultant for consulting services
to be rendered hereunder a fee equal to Five Thousand Dollars ($5,000.00) per
month (the "Monthly Compensation") plus applicable taxes commencing on the date
of this agreement. The Monthly Compensation shall be payable in advance through
the Term and any renewal term of this agreement in equal monthly payments made
by the Corporation.

         If it is necessary to calculate Monthly Compensation for a period of
less than one calendar month. an appropriate apportionment and adjustment on a
pro rata daily basis shall be made.

2.2      ESCALATION
         ----------

         The Corporation and the Consultant shall review the amount of Monthly
Compensation from time to time during the Term and any renewal term of this
agreement and shall agree upon such increases to the Monthly Compensation as may
be reasonable after consideration of such factors including, without limitation,
inflation, increase of or change in responsibilities of the Consultant and
performance of the Consultant.

2.3      PROFESSIONAL SERVICES FEE
         -------------------------

         The Corporation agrees to pay to the Consultant a fee equal to Twenty
Thousand Dollars ($20,000.00) for professional services in connection with
arranging financing documentation which fee shall be paid in four equal payments
of $5,000.00 payable on the 9th day of each April, May, June and July, 1999.

                                   ARTICLE 3
                    CONSULTANT'S AND CORPORATION'S COVENANTS

3.1      CONFIDENTIAL INFORMATION
         ------------------------

         The Consultant acknowledges that. in the course of carrying out,
performing and fulfilling the Consultant's duties hereunder, the Consultant and
certain of the Consultant's employees will have access to and will be entrusted
with detailed, confidential and sensitive information relating to the business
of the Corporation (the "Confidential Information"), the disclosure of any of
which Confidential Information would be highly detrimental to the interests of
the Corporation. Except as may be required in the course of carrying out the
Services, the Consultant covenants and agrees with the Corporation that neither
the Consultant nor any of the Consultant's employees will disclose either during
the Term or at any time thereafter, any of such Confidential Information to any
person (subject to legal compulsion), nor shall the Consultant or any of its
employees use the same or any other information which it may acquire during the
Term with respect to the business of the Corporation for any purpose other than
to the benefit of the Corporation and in the Corporation's best interests.

                                       2

<PAGE>

3.2      INDEMNITY OF CONSULTANT
         -----------------------

         The Corporation hereby agrees to indemnify and save harmless the
Consultant and its directors, officers. shareholders and employees against all
damage costs, claims and expenses incurred in connection with the provision of
the Consultant's services to the Corporation in accordance with the terms of
this agreement (other than as a result of negligence on the part of the
Consultant).

                                   ARTICLE 4
                                   TERMINATION

4.1      TERMINATION
         -----------

         Either party may terminate this Agreement and the obligations hereunder
during the Term or any renewal term upon not less than thirty (30) days prior
written notice in writing to the other. Notwithstanding the foregoing, no
termination notice pursuant hereto may be given before the end of 120 days from
the date hereof.

         Upon the termination of this agreement at any time, the Corporation
shall pay to the Consultant the amount of the compensation to which the
Consultant would have been entitled up to the date of such termination of this
agreement, and the Consultant shall not be entitled to receive any further
remuneration or payments of any kind or nature hereunder from and after the
effective date of termination of this agreement.

4.2      CONSEQUENCES OF TERMINATION
         ---------------------------

         Upon termination of this agreement at any time, the engagement of the
Consultant and this agreement shall be wholly terminated, except for Article 3
which shall continue in full force and effect as provided for therein.

                                    ARTICLE 5
                                     GENERAL

5.1      COMPLETE AGREEMENT
         ------------------

         The foregoing contains the entire agreement of the parties hereto with
respect to consulting and advisory services and supersedes and replaces any
existing agreement, whether written or oral, between the parties relating
generally to the same subject matter.

5.2      PROPER LAW
         ----------

         This Agreement shall be deemed to have been made in and shall be
construed accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein. For the purposes of all legal proceedings, this
agreement shall be deemed to have been performed in the Province of Ontario.

                                       3

<PAGE>

5.3      INTERPRETATION
         --------------

         Any headings preceding the text and paragraphs in this agreement have
been inserted for convenience only and shall not be construed to affect the
meaning, construction or effect of the agreement.

5.4      ASSIGNMENT
         ----------

         Neither this agreement nor any rights or obligations hereunder shall be
assigned by either party hereto without the prior written consent of the other
party which consent, by either party, may be arbitrarily refused or withheld.

5.5      WAIVER
         ------

         No waiver of any provision of this agreement shall be binding unless it
is in writing. No indulgence or forbearance by a party shall constitute a waiver
of such party's right to insist on performance in full and in a timely manner of
all covenants in this agreement. Waiver of any provision shall not be deemed to
waive the same provision thereafter or any other provision of this agreement at
any time.

5.6      FURTHER ASSURANCES
         ------------------

         The parties agree to sign all such documents and to do all such things
as may be necessary or desirable to more completely and effectively carry out
the terms and intentions of this agreement.

5.7      BINDING EFFECT
         --------------

         The provisions hereof, where the context permits, shall enure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.

5.8      TIME OF THE ESSENCE
         -------------------

         Time shall be of the essence of this agreement.

5.9      FACSIMILE AND COUNTERPARTS
         --------------------------

         Each of the parties shall be entitled to rely on delivery by facsimile
machine of an executed copy of this agreement, and acceptance by the parties of
such facsimile copy shall be legally effective to create a valid and binding
agreement between the parties in accordance with the terms hereof. In addition,
this agreement may be executed by the parties in separate counterparts each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.

                                       4

<PAGE>

         IN WITNESS WHEREOF each of the parties hereto has executed this
agreement as of the date first written above.

                                      SOFTQUAD SOFTWARE INC.

                                      PER:
                                          --------------------------------------
                                           Authorized Signatory

                                      PER:
                                          --------------------------------------
                                           Authorized Signatory

                                      KBL CAPITAL PARTNERS INC.

                                      PER:
                                          --------------------------------------
                                           Authorized Signatory

                                       5<PAGE>

                                AGENCY AGREEMENT
                                ----------------

                                                                  April 18, 2000

SoftQuad Software Ltd.
161 Eglington Avenue East, Suite 400
Toronto, Ontario
M4P IJ5

Attention:        Mr. Roberto Drassinower
                  President

Dear Sirs:

         We understand that Softquad Software Ltd. (the "Corporation") proposes
to issue up to 2,500,000 units (as defined below) at a price of US$7.50 per Unit
(the "Canadian Offering"). We understand that the Corporation is currently
offering U.S. Units (as defined below) in the United States (the "US Offering").
The gross proceeds from the securities sold in the Canadian Offering and the US
Offering (together the "Offering") will be up to US$18,750,000 payable to the
Corporation.

         Subject to the terms and conditions set forth below, the Corporation
hereby appoints Thomson Kemaghan & Co. Limited (the "Agent") as the sole and
exclusive agent of the Corporation to solicit, on a best efforts basis, offers
to purchase the Units, and the Agent hereby agree to act as such agent. It is
understood and agreed that the Agent is under no obligation to purchase any
Units, although it may subscribe for and purchase Units if it so desires.

         The terms and conditions relating to the purchase and sale of the Units
are as follows:

1. CANADIAN UNITS - The material attributes and characteristics of the Canadian
Units shall be substantially as described herein.

         The Canadian Units shall each be comprised of one special warrant
(collectively the "Special Warrants") and one-half (1/2) of a share purchase
warrant (collectively the "Share Purchase Warrants"), with the attributes
described herein.

         The Special Warrants shall be issued pursuant to the terms of a special
warrant certificate (the "Special Warrant Certificate"). The terms and
conditions of the Special Warrant Certificate shall be satisfactory to the
Corporation and the Agent and consistent with the terms of this Agreement.
Subject to adjustment in accordance with the terms of the Special Warrant
Certificate, the Special Warrants shall entitle the holders thereof to receive,
without additional payment upon exercise of the Special Warrants, one (1) newly
issued common share in the capital of the Corporation (the "Newly Issued
Shares").

         The Special Warrants will be exercisable by a purchaser at any time on
or before 5:00 p.m. (Toronto time) on the date (the "Expiry Date") which is the
fifth Business Day (as defined below) after a receipt is issued by the

<PAGE>

securities regulatory authority in the Qualifying Provinces (as defined in
Section 2(a)) in which such purchaser is resident, as indicated by the address
set forth by such purchaser in subscription agreements among such purchaser and
the Corporation, for a (final) prospectus of the Corporation (the "Prospectus")
qualifying (inter alia) the distribution of the Shares, the Warrant Shares and
the Compensation Shares (the "Prospectus Qualification"). All Special Warrants
not exercised on or before 5:00 p.m. (Toronto time) on the Expiry Date will be
deemed to have been exercised on behalf of the holders thereof immediately prior
thereto. For the purpose of this Agreement, "Business Day" shall mean any day
except Saturday, Sunday or a statutory holiday in Toronto, Ontario. The Special
Warrant Certificate shall be in the form of Schedule A attached.

         The Share Purchase Warrants shall be issued pursuant to the provisions
of a share purchase warrant indenture (the "Share Purchase Warrant Indenture")
to be entered into between the Corporation and Montreal Trust Company of Canada
(the "Warrant Agent"). The terms and conditions of the Share Purchase Warrant
Indenture shall be satisfactory to the Corporation and the Agent and consistent
with the terms of this Agreement. Each whole Share Purchase Warrant shall
entitle the holder thereof to purchase one Warrant Share at a price of US$12.50,
subject to adjustments as set forth therein, at any time on or before 5:00 p.m.
(Toronto time) on the date which is the first anniversary of the date of
effectiveness of the Registration Statement (as such ten-n is defined in the
Share Purchase Warrant Indenture). If the securities regulatory authority in
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 and the Warrant Shares are subject to resale
restrictions under applicable provincial securities laws (a "non-Qualification
Event"), by August 31, 2000, the exercise price per Share Purchase Warrant shall
be reduced by US$0.25 per month, or pro-rated portion thereof, until the earlier
of (i) the date of issuance of a receipt and (ii) October 31, 2000. If by
October 31, 2000 a Non-Qualification Event has occurred, the exercise price per
Purchase Warrant shall thereafter be reduced by US$0.50 per month (to a minimum
of US$3.75) or pro-rated portion thereof until a receipt has been issued. The
Share Purchase Warrants shall be subject to usual anti-dilution provisions to be
contained in the Share Purchase Warrant Indenture.

         The Newly Issued Shares in the capital of the Corporation issuable upon
exercise of the Special Warrants are referred to herein as the "Shares", the
common shares in the capital of the Corporation issuable upon exercise of the
Share Purchase Warrants are referred to herein individually as a "Warrant Share"
and collectively as the "Warrant Shares" and the common shares in the capital of
the Corporation are referred to herein as the "Common Shares".

2.       THE CANADIAN OFFERING
         ---------------------

         (a)      Sale on Exempt Basis. The Agent will use its best efforts to
                  arrange for purchasers who are Accredited Investors for the
                  purpose of (the "Purchasers") of the Special Warrants in the
                  provinces of Ontario, Quebec, Alberta and British Columbia
                  (the "Qualifying Provinces") and in such jurisdictions outside
                  of Canada as may be determined by the Agent and the
                  Corporation, to persons who are "Accredited Investors" within
                  the meaning of Regulation D of the U.S. Securities Act of

                                      -2-

<PAGE>

                  1933. The sale of the Units to Purchasers in Ontario shall be
                  effected in a manner exempt from the prospectus requirements
                  of the Securities Act (Ontario) and the rules and regulations
                  thereunder and the analogous provisions of securities
                  legislation in the other Qualifying Provinces (together with
                  applicable published policy statements of the securities
                  regulatory authorities in the Qualifying Provinces,
                  collectively, "Securities Laws"). Each Purchaser of Special
                  Warrants resident in Ontario shall purchase under subsections
                  72(l)(a), (c) or (d) of the Securities Act (Ontario), as
                  qualified by Rule 45-501 thereunder, and each Purchaser of
                  Special Warrants resident in any other Qualifying Province
                  shall purchase under the analogous provisions of securities
                  legislation of such Qualifying Province. Neither the
                  Corporation nor the Agent shall provide to prospective
                  purchasers any document or other material that would
                  constitute an offering memorandum within the meaning of the
                  Securities Laws.

         (b)      Commission. The Corporation agrees to pay to the Agent at the
                  Time of Closing (as defined in Section 6) a commission equal
                  to US$1,200,000 (the "Commission") and upon any Additional
                  Closing (as defined in Section 6) a commission to be agreed
                  upon between the parties in accordance with the terms of the
                  engagement letter between the Company and the Agent dated on
                  March 28, 2000 (the "Engagement Letter"), in consideration of
                  the services to be rendered by the Agent in connection with
                  the Offering. The Agent's services shall include:

                  (i)      acting as agent of the Corporation to solicit, on a
                           best efforts basis, offers to purchase the Units;

                  (ii)     participating in the preparation of the preliminary
                           version of the prospectus (the "Preliminary
                           Prospectus") and the Prospectus, together with any
                           documents supplemental thereto or any amending or
                           supplementary prospectus or other supplemental
                           documents or any similar document (collectively the
                           "Supplementary Material") required to be filed under
                           Securities Laws;

                  (iii)    assisting in the preparation of the forms of
                           subscription agreements (the "Subscription
                           Agreements") to be entered into by the Corporation
                           and each of the Purchasers; and

                  (iv)     advising the Corporation with respect to the private
                           placement of the Units.

                  In addition to the Commission, as additional consideration for
                  the performance of its obligations hereunder, the Corporation
                  shall issue to the Agent at the Closing, non-transferable
                  agent's compensation warrants (the "Agent's Compensation
                  Warrants"), in form and substance substantially similar to the
                  Agent's Compensation Warrant attached as Schedule B hereto,
                  entitling the holder thereof to acquire until 12 months
                  following the date of effectiveness of a registration
                  statement in the United States registering the Warrant Shares,
                  without additional payment upon exercise of the Agent's

                                      -3-

<PAGE>

                  Compensation Warrants, that aggregate number of compensation
                  options (the "Compensation Options") equal to 200,000 Units.
                  In the event of any Additional Closing, the Agent shall be
                  entitled to receive a additional Compensation Warrant
                  entitling the Agent to acquire a number of Units to be agreed
                  upon by the parties in accordance with the Engagement Letter.
                  The Compensation Options will be in form and substance
                  satisfactory to the Agent and each Compensation Option will be
                  exercisable at any time prior to twenty-four (24) months from
                  the date of the Prospectus Qualification in the province of
                  Ontario to purchase one Common Share (a "Compensation Share")
                  at U.S.$7.50 for each Compensation Share. The distribution of
                  the Compensation Options pursuant to the exercise of the
                  Agent's Compensation Warrants will be qualified by the
                  Prospectus to the extent possible, it being acknowledged and
                  agreed that proposed rule 48-502 of the Ontario Securities
                  Commission (the "Proposed Rule") and companion policy 48-502C
                  limit the amount of compensation securities that can be
                  qualified by a prospectus to 5% of the size of the relevant
                  offering. If not yet exercised by the holders, the Agent's
                  Compensation Warrants will be exercised by the Corporation on
                  behalf of the holder thereof, without any action on the part
                  of the holders, on 5:00 p.m. (Toronto time) on the Expiry
                  Date.

         (c)      Right of First Refusal. Provided that the Agent shall have
                  completed the Offering, the Agent shall also have a right of
                  first refusal to be the lead agent of any subsequent
                  financings contemplated by the Corporation for a period of one
                  year following the completion of the Offering, subject to the
                  Corporation and the Agent, both acting reasonably, agreeing to
                  the terms and conditions thereof.

         (d)      Appointment of Sub-agent. The Corporation agrees that the
                  Agent will be permitted to appoint other registered dealers
                  (or other dealers duly qualified in their respective
                  jurisdictions) as its agent to assist in the Offering and that
                  the Agent may determine the remuneration payable to such other
                  dealers appointed by it provided that the Corporation shall
                  not be required to pay or grant, as the case may be, to the
                  Agent or any sub-agent appointed, more than the Commission and
                  the Agent's Compensation Warrants and provided further that
                  the Agent shall advise any such sub-agents of its obligations
                  and covenants hereunder and shall be responsible for breaches
                  thereof of such sub-agents.

         (e)      Covenants of the Agent. The Agent covenants, represents and
                  warrants to the Corporation that: (i) it will comply with all
                  applicable Securities Laws in connection with the Offering and
                  the Prospectus Qualification; (ii) it will not solicit or
                  procure subscriptions for Units so as to require registration
                  thereof or filing of a prospectus with respect thereto under
                  the laws of any jurisdiction other than those of the
                  Qualifying Provinces; (iii) it, or its duly appointed
                  sub-agents, are duly qualified in the Qualifying Provinces in
                  which they solicit or procure subscriptions in connection with
                  the Offering; (iv) it will obtain from each purchaser an
                  executed Subscription Agreement in a form reasonably
                  acceptable to the Corporation and to the Agent relating to the
                  transactions herein contemplated; (v) it will, and will

                                      -4-

<PAGE>

                  require any sub-agent appointed by it to, refrain from
                  advertising in printed public media, radio television or
                  telecommunications, including electronic display, with respect
                  to the Offering; (vi) the Agent will provide a breakdown of
                  the number of Units distributed in each Qualifying Province
                  where such breakdown is required for the purposes of
                  calculating fees payable to a securities commission; (vii) it
                  will not, and will require any of the sub-agents not to, make
                  any representations or warranties with respect to the
                  Corporation, the Units, the Purchase Warrants, the Special
                  Warrants or Common Shares other than as set forth in this
                  Agreement, the Subscription Agreements, the Preliminary
                  Prospectus or the Prospectus; (viii) subject to section 5(i)
                  hereof, execute and deliver to the Corporation the certificate
                  required to be executed by it under the applicable Securities
                  Laws in connection with the Preliminary Prospectus, the
                  Prospectus and any Supplementary Material and (ix) upon the
                  Corporation obtaining the necessary final receipt therefor
                  from the securities regulatory authorities in the Qualifying
                  Provinces, it will deliver one copy of the Prospectus to
                  persons who are to acquire the securities pursuant to the
                  Prospectus. The Agent also acknowledges that the Compensation
                  Options and the Compensation Shares have not been registered
                  under the United States Securities Act of 1933 as amended (the
                  "U.S. Securities Act") and such securities may not be offered
                  or sold in the United States or to or for the account or
                  benefit of a U.S. person as defined in Regulation S under the
                  U.S. Securities Act. The Agent agrees that it will not offer
                  or sell such securities in the United States or to or for the
                  account or benefit of a U.S. person except: (1) pursuant to an
                  effective registration statement under the U.S. Securities
                  Act; (2) in a transaction that complies with Rule 903 or 904
                  of Regulation S if applicable; or (3) in a transaction that is
                  exempt from registration under the U.S. Securities Act.

3. Representations and Warranties of the Corporation - The Corporation
represents and warrants to the Agent and acknowledges that the Agent is relying
upon such representations and warranties, that, except as disclosed to the Agent
on April 17, 2000:

         (a)      The Corporation has been incorporated and organized and is
                  validly subsisting under the laws of its jurisdiction of
                  incorporation and has all requisite corporate power and
                  authority to enter into this Agreement, the Special Warrant
                  Certificates, the Share Purchase Warrant Indenture and the
                  Agent's Compensation Warrants (collectively the "Material
                  Contracts") and to carry out its obligations hereunder and
                  thereunder;

         (b)      The Corporation is not a reporting issuer or the equivalent
                  thereof, in any Canadian province. The Corporation is a
                  reporting company under the Securities Exchange Act of 1934.

         (c)      All press releases, material change reports and other
                  documents filed by or on behalf of the Corporation with the
                  securities regulatory authorities or the NASD during the last
                  two years were true and correct in all material respects
                  (except to the extent that information therein relates to the

                                      -5-

<PAGE>

                  capitalization of the Corporation or to the timing of the
                  acquisition of SoftQuad Software Inc.)

         (d)      The Corporation has two subsidiaries (as that term is defined
                  in the Securities Act (Ontario)) Softquad Software, Inc. and
                  Softquad Acquisition Corp. (the "Subsidiaries"), which are
                  material to the Corporation.

                  For the balance of this Section 3, the Corporation shall mean
                  the Corporation and its Subsidiaries.

         (e)      The Corporation has conducted and is conducting its business
                  in compliance in all material respects with all applicable
                  laws, rules and regulations of each jurisdiction in which it
                  carries on business and possess all material certificates,
                  authorities, pen-nits, licences, trademarks, copyrights,
                  patents or other intellectual property rights issued by the
                  appropriate provincial, state, municipal, federal or other
                  regulatory agency or body necessary to carry on the business
                  currently carried on by it, is in compliance in all material
                  respects with such certificates, authorities, permits,
                  licences, trademarks, copyrights, patents or other
                  intellectual property rights and with all laws, regulations,
                  tariffs, rules, orders and directives material to its
                  operation, and the Corporation has not received any notice of
                  proceedings relating to the revocation or modification of any
                  such certificates, authorities, permits, licences, trademarks,
                  copyrights, patents or other intellectual property rights
                  which, singly or in the aggregate, if the subject of an
                  unfavourable decision, order, ruling or finding, would
                  materially and adversely affect the conduct of the business,
                  operations, financial condition or income of the Corporation
                  on a consolidated basis.

         (f)      Except as disclosed in the documents which have been filed by
                  the Corporation with the Securities Exchange Commission and in
                  all press releases (the "Disclosure Documents") of the
                  Corporation, the Corporation is the legal and beneficial owner
                  of, and has good and marketable title to, all of the material
                  assets of the Corporation, as described in the Disclosure
                  Documents including, without limitation, all patents,
                  trademarks and other intellectual property, free of all
                  mortgages, liens, charges, pledges, security interests,
                  encumbrances, claims or demands whatsoever other than as
                  disclosed in the Disclosure Documents. No other material
                  property rights are necessary for the conduct of the
                  Corporation's business. There are no restrictions on the
                  ability of the Corporation to use, transfer or otherwise
                  exploit any such property rights, and the Corporation does not
                  know of any claim or basis for a claim that may adversely
                  affect such rights.

         (g)      Except as disclosed in the Disclosure Documents any and all
                  agreements pursuant to which the Corporation holds its assets
                  are valid and subsisting agreements in full force and effect,
                  enforceable in accordance with their respective terms (subject
                  to customary qualifications concerning the application of laws
                  affecting creditors rights and the availability of equitable
                  remedies being in the discretion of courts), the Corporation
                  is not in material default of any of the provisions of any

                                      -6-

<PAGE>

                  such agreements nor has any such default been alleged and such
                  assets are in good standing under the applicable statutes and
                  regulations of the jurisdictions in which they are situate,
                  all leases pursuant to which the Corporation derives its
                  interest in such assets are in good standing and there has
                  been no material default under any such leases and all real or
                  other property taxes required to be paid with respect to such
                  assets to the date hereof have been paid.

         (h)      Except as disclosed in or contemplated by the Disclosure
                  Documents:

                  (i)      the Corporation has not paid or declared any
                           dividends or incurred any material capital
                           expenditure or made any commitment therefor;

                  (ii)     the Corporation has not incurred any obligation or
                           liability, direct or indirect, contingent or
                           otherwise, except in the ordinary course of business
                           and which is not material; and

                  (iii)    the Corporation has not entered into any material
                           transaction;

         (i)      Other than as disclosed in the Disclosure Documents, the
                  Corporation has not approved, is not contemplating, has not
                  entered into any agreement in respect of, and has no knowledge
                  of:

         (j)      To the best of the knowledge of the Corporation, none of the
                  directors or officers of the Corporation or any associate or
                  affiliate of any of the foregoing had, has or intends to have
                  any material interest, direct or indirect, in the transactions
                  contemplated by this agreement or in any proposed material
                  transaction with the Corporation which, as the case may be,
                  materially affects, is material to or will materially affect
                  the Corporation.

         (k)      The authorized capital of the Corporation consists of
                  50,000,000 Common Shares and 25,000,000 Preference Shares and
                  one Special Voting Share. As of the date hereof, the
                  Corporation has outstanding options, warrants and other
                  outstanding rights to acquire 1,878,368, 3,863,500 and
                  5,773,605 Common Shares, respectively.

         (l)      Except as set forth in Schedule C and except for options,
                  warrants and rights referred to in clause (k) above, no person
                  has any agreement or option, or right or privilege (whether
                  pre-emptive or contractual) capable of becoming an agreement
                  for the purchase, subscription or issuance of any of the
                  unissued shares, securities, warrants (including convertible
                  securities or warrants) of the Corporation.

         (m)      Certain common shares in the share capital of the Corporation
                  are quoted on the OTC Bulletin Board.

         (n)      The Warrant Agent has been duly appointed as warrant agent
                  under the Share Purchase Warrant Indenture.

                                      -7-

<PAGE>

         (o)      All necessary corporate action has been taken to duly
                  authorize the issue, sale and delivery of the Units (and the
                  securities comprising same) and, upon payment of the requisite
                  consideration therefor, the Units (and the securities
                  comprising same) will be validly issued.

         (p)      At the Closing and any Additional Closing, (i) the Agent's
                  Compensation Warrants will be duly and validly created and
                  issued, (ii) the Shares will be duly and validly allotted and
                  reserved for issuance upon the exercise of the Special
                  Warrants, (iii) the Compensation Shares will be duly and
                  validly allotted and reserved for issuance upon the exercise
                  of the Compensation Options; and (iv) the Warrant Shares will
                  be duly and validly allotted and reserved for issuance upon
                  the due exercise of the Share Purchase Warrants.

         (q)      The offering and sale in the Qualifying Provinces of the
                  Units, the compliance by the Corporation with the provisions
                  of this Agreement and the consummation of the transactions
                  referred to herein do not (i) require the consent, approval,
                  authorization, registration or qualification of or with any
                  governmental authority, stock exchange, securities regulatory
                  authority or other third party, except (A) such as have been
                  obtained, and (B) such as may be required (and shall be
                  obtained as provided in this Agreement) under the Securities
                  Laws of the Qualifying Province, or (ii) conflict with or
                  result in any breach or violation of any of the terms and
                  provisions of, or constitute a default under, any indenture,
                  mortgage, deed of trust, lease or other agreement or
                  instrument to which the Corporation or any of its properties
                  is bound, or the articles or by-laws of the Corporation or any
                  statute or any judgment, decree, order, rule or regulation of
                  any court or other governmental authority or any arbitrator,
                  or stock exchange or securities regulatory authority
                  applicable to the Corporation or any of its properties or
                  assets which could have a material adverse effect on the
                  condition (financial or otherwise), business, properties, net
                  worth, or results of operations of the Corporation, on a
                  consolidated basis.

         (r)      The execution and delivery of each of the Material Contracts
                  and the performance and compliance with the terms of the
                  Material Contracts will not result in any material breach of,
                  or be in conflict with, or constitute a material default under
                  or create a state of facts which after notice or lapse of time
                  or both, constitutes a material default under, any term or
                  provisions of the articles, by-laws or resolutions of the
                  directors or shareholders of the Corporation or any mortgage,
                  note, indenture, contract, agreement (written or oral),
                  instrument, lease, license or other document, to which the
                  Corporation is a party or to which it is subject or any
                  judgment, decree, order, statute, rule or regulation
                  applicable to the Corporation.

         (s)      Each of the Material Contracts has been (or will be at the
                  Closing Date) duly authorized, executed and delivered by the
                  Corporation and constitutes or will constitute a valid and
                  binding obligation of the Corporation, enforceable against the
                  Corporation in accordance with its terms, except that
                  enforcement thereof may be limited by bankruptcy, insolvency,

                                      -8-

<PAGE>

                  reorganization, moratorium or similar laws affecting the
                  rights of creditors generally; equitable remedies, including,
                  without limitation, specific performance and injunction, may
                  be granted only in the discretion of a court of competent
                  jurisdiction; and rights of indemnity, contribution and waiver
                  of contribution provided for herein may be limited under
                  applicable law.

         (t)      No order preventing or suspending trading in any securities of
                  the Corporation or prohibiting the issue and sale of
                  securities by the Corporation has been issued and no such
                  proceedings for such purposes are pending or, to the best of
                  the knowledge of the Corporation, threatened.

         (u)      No federal, provincial, state, municipal or other governmental
                  department, commission, board, bureau, agency or
                  instrumentality, domestic or foreign, has given written notice
                  or to the best of the knowledge of the Corporation has been
                  threatened in writing to modify or remove any licence, permit
                  or operating certificate necessary in order for the
                  Corporation to carry on business and the Corporation is in
                  compliance in all material respects with the terms and
                  conditions of its licences, permits and operating
                  certificates.

         (v)      The Corporation has filed all necessary tax returns and
                  notices and has paid all applicable taxes of whatever nature
                  for all tax years to the date hereof to the extent such taxes
                  have become due or have been alleged to be due and the
                  Corporation is not aware of any tax deficiencies or interest
                  or penalties accrued or accruing, or alleged to be accrued or
                  accruing, thereon where, in any of the above cases, it might
                  reasonably be expected to result in any material adverse
                  change in the condition, financial or otherwise of the
                  Corporation.

         (w)      There are no actions, suits, proceedings or enquiries pending
                  or, to the best of the knowledge of the Corporation,
                  threatened, against or affecting the Corporation or to which
                  any property of the Corporation is subject, at law or in
                  equity, or before or by any federal, provincial, state,
                  municipal or other governmental department, commission, board,
                  bureau, agency or instrumentality, domestic or foreign, which
                  may in any way materially and adversely affect the
                  Corporation, on a consolidated basis.

         (x)      The Corporation has not withheld, and will not withhold, from
                  the Agent any facts relating to the Corporation or to the
                  offering of the Units that could reasonably be expected to be
                  material to a prospective purchaser of the Units.

4. Covenants of the Corporation - The Corporation hereby covenants to and with
the Agent that it will:

         (a)      fulfil all legal requirements to permit the creation,
                  issuance, offering and sale of the Units (including the
                  securities comprising and underlying same) as contemplated in
                  this Agreement including, without limitation, compliance with

                                      -9-

<PAGE>

                  the Securities Laws to enable the Units to be offered for sale
                  and sold to Purchasers without the necessity of filing a
                  prospectus in the Qualifying Province;

         (b)      use its reasonable best efforts to arrange for the posting for
                  trading of the Shares, and the Warrant Shares and the
                  Compensation Shares on the OTC Bulletin Board as soon as
                  possible under applicable securities laws;

         (c)      use its reasonable best efforts to maintain the quotation of
                  certain of the Common Shares on the OTC Bulletin Board and
                  maintain its status as a registrant;

         (d)      prepare and file the Preliminary Prospectus and other related
                  documents relating to the proposed distribution of Shares,
                  Warrant Shares and Compensation Shares in each of the
                  Qualifying Provinces and use its best efforts to do so as soon
                  as possible;

         (e)      both before and after the Qualification Deadline, resolve as
                  soon as reasonably practicable any regulatory deficiencies in
                  respect of the Preliminary Prospectus on a basis acceptable to
                  the Agent, acting reasonably, and, as soon as reasonably
                  practicable after such deficiencies have been resolved or
                  satisfied, prepare, file and use its best efforts to obtain
                  receipts under the applicable legislation of each of the
                  Qualifying Provinces for the Prospectus and take all other
                  steps and proceedings that may be necessary in order to
                  qualify the Shares, Warrant Shares and (subject to the
                  limitations of the Proposed Rule) Compensation Shares for
                  distribution or distribution to the public in the Qualifying
                  Provinces as soon as possible;

         (f)      prior to the filing of the Preliminary Prospectus and
                  thereafter and prior to the filing of the Prospectus and any
                  Supplementary Material, permit the Agent and its counsel to
                  participate fully in the preparation of such documents and
                  allow the Agent and its counsel to conduct all due diligence
                  which the Agent may reasonably require to conduct in order to
                  fulfil its obligations under the Securities Laws and in order
                  to enable the Agent responsibly to execute any certificate
                  required to be executed by the Agent in connection with the
                  Preliminary Prospectus, the Prospectus or any Supplementary
                  Material;

         (g)      if the Prospectus is not filed and receipts issued therefor by
                  the securities regulatory authorities in the Qualifying
                  Provinces where a Purchaser is resident on or before the
                  Qualification Deadline, issue to persons who exercise their
                  Share Purchase Warrant after the Qualification Deadline,
                  without payment of any additional consideration, a revised
                  number of Warrant Shares in accordance with the adjustment
                  provisions provided for in the Share Purchase Warrants;

         (h)      ensure that at the respective times of filing and at all times
                  subsequent to the filing thereof during the distribution of
                  the Shares and Warrant Shares, the Preliminary Prospectus,
                  Prospectus and any Supplementary Material will fully comply
                  with the requirements of applicable securities legislation,
                  provided that the foregoing shall not apply with respect to

                                      -10-

<PAGE>

                  statements contained in such documents relating solely to the
                  Agent and the Corporation hereby acknowledges and agrees that
                  the Agent shall be under no obligation to sign the certificate
                  page of the Preliminary Prospectus, the Prospectus or any
                  Supplementary Material until it is satisfied in its sole
                  discretion, that the Securities Laws of the Qualifying
                  Provinces have been complied with;

         (i)      deliver in Toronto, within three Business Days of the issue of
                  a receipt for the Preliminary Prospectus and the Prospectus,
                  as the case may be, and within three Business Days of
                  execution of any Supplementary Material, without charge to the
                  Agent, as many copies of the Preliminary Prospectus, the
                  Prospectus and any Supplementary Material as the Agent may
                  reasonably request for the purposes contemplated hereunder and
                  contemplated by the Securities Act (Ontario), and such
                  delivery shall constitute: (A) the consent of the Corporation
                  to use such documents in connection with the distribution or
                  the distribution to the public, as the case may be, of the
                  Shares and Warrant Shares, subject to the provisions of the
                  securities legislation of the Qualifying Provinces; and (B)
                  the Corporation's representation and warranty to the Agent
                  that, at the time of delivery, the information and statements
                  contained therein (except information and statements relating
                  solely to or provided by the Agent) contain no
                  misrepresentation and constitute full, true and plain
                  disclosure of all material facts relating to the Offering, the
                  Corporation and the Common Shares;

         (j)      cause to be delivered to the Agent concurrently with the
                  filing of the Prospectus and any Supplementary Material,
                  comfort letters of the auditors of the Corporation in each
                  case dated the date of the Prospectus or the Supplementary
                  Material to which such letter relates (as the case may be)
                  addressed to the Agent and to the directors of the
                  Corporation, in form and substance satisfactory to the Agent
                  acting reasonably, relating to the financial statements to be
                  included in the Prospectus and any Supplementary Material and
                  verifying in accordance with U.S. Generally Accepted
                  Accounting Principles, the financial information, accounting
                  data and other numerical data contained in the Prospectus or
                  any Supplementary Material and matters involving changes or
                  developments since the respective dates as of which specified
                  financial information is given in the Prospectus to a date not
                  more than two Business Days prior to the date of such letter;
                  and

         (k)      forthwith after the Closing, to file such documents as may be
                  required under the Securities Laws of the Qualifying Provinces
                  relating to the private placement of the Units which, without
                  limiting the generality of the foregoing, shall include a Form
                  45-501F as prescribed by Rule 45-501 under the Securities Act
                  (Ontario) and the equivalent thereof in the other Qualifying
                  Provinces.

         The obligation of the Agent to execute any certificate or deliver any
         documents pertaining to the Preliminary Prospectus, the Prospectus or
         any Supplementary Material shall be conditional upon compliance by the
         Corporation to the date of such execution and delivery with those

                                      -11-

<PAGE>

         covenants contained in this Agreement to be complied with prior to the
         filing of the Preliminary Prospectus, the Prospectus or any
         Supplementary Material as the case may be.

5. Conditions of Closing - The Agent's obligation to complete the Closing, and
the Purchasers' obligations to purchase the Units at the Closing, shall be
subject to the Agent having received at the Time of Closing:

         (a)      favourable legal opinions, in form and substance satisfactory
                  to the Agent, acting reasonably, dated the Closing Date from
                  counsel for the Corporation, Goodman, Philips and Vineberg,
                  Toronto, or, in the case of laws other than those of Canada
                  and the Province of Ontario from local counsel addressed to
                  the Agent and the Purchasers and to the extent appropriate as
                  to matters of fact based on certificates of officers of the
                  Corporation to the following effect:

                  (i)      the Corporation has been incorporated and is existing
                           under the laws of the State of Delaware and is
                           qualified as a corporation to do business under the
                           laws of the Province of Ontario;

                  (ii)     the Corporation has all necessary corporate power and
                           authority to own, lease and operate its business and
                           assets and to conduct its business as now conducted;

                  (iii)    the authorized capital of the Corporation consists of
                           50,000,000 Common Shares and 25,000,000 Preference
                           Shares and one Special. Voting Share;

                  (iv)     the Corporation has all necessary corporate power,
                           capacity and authority to authorize, execute and
                           deliver the Material Contracts and to perform all of
                           its obligations thereunder;

                  (v)      the execution, delivery of and performance by the
                           Corporation of the Material Contracts have been
                           authorized by all necessary corporate action on the
                           part of the Corporation;

                  (vi)     each of the Material Contracts has been duly executed
                           and delivered by the Corporation and, subject to the
                           usual qualifications, constitutes a legal, valid and
                           binding obligation of the Corporation enforceable
                           against the Corporation in accordance with its terms;

                  (vii)    the Special Warrants and Share Purchase Warrants have
                           been authorized, executed and issued by the
                           Corporation and certified and delivered in accordance
                           with the provisions of the Special Warrant
                           Certificate and the Share Purchase Warrants and,
                           subject to the usual qualifications, constitute
                           legal, valid and binding obligations of the
                           Corporation enforceable in accordance with their
                           respective terms, and are entitled to the benefit of

                                      -12-

<PAGE>

                           the Special Warrant Certificate and the Share
                           Purchase Warrant Certificate, respectively;

                  (viii)   the Shares issuable upon the exercise of the Special
                           Warrants have been allotted and reserved for issuance
                           to the holders, from time to time, of the Special
                           Warrants and such Shares will, when issued upon the
                           exercise of the Special Warrants (without additional
                           payment) in accordance with the terms of the Special
                           Warrant Certificate be validly issued as fully paid
                           and non-assessable Common Shares;

                  (ix)     the Agent's Compensation Warrants have been validly
                           issued and the Compensation Options to be issued upon
                           the exercise of the Agent's Compensation Warrants
                           will, when issued upon the exercise of the Agent's
                           Compensation Warrants in accordance with the terms of
                           the Agent's Compensation Warrants, be validly issued
                           to the Agent without additional payment;

                  (x)      the Compensation Shares to be issued upon the
                           exercise of the Compensation Options have been
                           allotted and reserved for issuance to the holders of
                           the Compensation Options, and such Compensation
                           Shares will, when issued upon exercise of the
                           Compensation Options in accordance with the terms of
                           the Compensation Options, be validly issued and,
                           fully paid and non-assessable Common Shares;

                  (xi)     the Warrant Shares to be issued upon the exercise of
                           the Share Purchase Warrants have been allotted and
                           reserved for issuance to the holders, from time to
                           time of the Share Purchase Warrants, and such Warrant
                           Shares will, when issued upon the exercise of the
                           Share Purchase Warrants in accordance with the terms
                           of the Share Purchase Warrant Indenture, be validly
                           issued as fully paid and non-assessable Common
                           Shares;

                  (xii)    the offering, sale and delivery of the Units and the
                           Agent's Compensation Warrants has been effected in
                           such a manner as to be exempt, either by statute,
                           regulation or order, from the prospectus and
                           registration requirements of the Securities Laws of
                           the Qualifying Provinces subject to the filing of all
                           necessary reports, certificates or undertakings
                           required to be filed under the Securities Laws;

                  (xiii)   upon the issuance of a receipt for the Prospectus
                           from the securities regulatory authorities in each of
                           the Qualifying Provinces prior to the exercise of the
                           Special Warrants, the Share Purchase Warrant and the
                           Agent's Compensation Warrants, the Shares,
                           Compensation Shares, and Warrant Shares will not be
                           subject to any statutory holding period (except to
                           the extent that the Prospectus does not qualify the
                           distribution of the Compensation Shares) under the
                           laws of the Qualifying Provinces and no other
                           documents are required to be filed, proceedings taken
                           or approvals, permits consents, orders or

                                      -13-

<PAGE>

                           authorizations of regulatory authorities required to
                           be obtained under the Securities Laws, in connection
                           with the first trade of the Shares, Compensation
                           Shares (except to the extent that the Prospectus does
                           not qualify the distribution of the Compensation
                           Shares), and Warrant Shares, in each case through
                           registrants registered under the applicable
                           securities laws of such Qualifying Provinces who have
                           complied with such applicable laws (subject to the
                           usual qualifications);

                  (xiv)    in the event that a receipt for the Prospectus is not
                           issued prior to the exercise of the Special Warrants
                           by a Purchaser or the exercise of the Agent's
                           Compensation Warrants by an Agent, then the issuance
                           of the Shares, Compensation Shares, and Warrant
                           Shares will be exempt from the registration and
                           prospectus requirements of the Securities Laws of the
                           Qualifying Provinces;

                  (xv)     in the event that a receipt for the Prospectus is not
                           issued prior to the exercise of the Special Warrants
                           or Share Purchase Warrants by a Purchaser or the
                           exercise of the Agent's Compensation Warrants by an
                           Agent, with respect to the statutory hold period
                           applicable to the resale of the Shares, Compensation
                           Shares, and Warrant Shares (subject to the usual
                           qualifications);

                  (xvi)    the authorization, execution and delivery of and
                           performance by the Corporation of the Material
                           Contracts and the performance by the Corporation of
                           its obligations contemplated thereunder, do not and
                           will not conflict with, and do not and will not
                           result in a breach of (whether after notice or lapse
                           of time, or both), any of the terms, conditions or
                           provisions of the articles or by-laws of the
                           Corporation or resolutions of the directors (or any
                           committee thereof) or shareholders of the
                           Corporation;

                  (xvii)   the Corporation is a reporting company under the
                           Securities Exchange Act of 1934 and not in default
                           under the applicable federal and state laws;

                  (xviii)  the form and terms of the certificates representing
                           each of the Common Shares, Special Warrants, Agent's
                           Compensation Warrants, Compensation Options and Share
                           Purchase Warrants has been or will be duly approved
                           by the directors of the Corporation and in the case
                           of the Common Shares, conforms with all legal
                           requirements relating thereto;

                  (xix)    Atlas Stock Transfer Corp. at its principal office in
                           Salt Lake City, Utah has been appointed as the
                           registrar and transfer agent for the Common Shares;
                           and

                                      -14-

<PAGE>

                  (xx)     Montreal Trust Company of Canada at its principal
                           office in Toronto has been appointed as warrant agent
                           for the Share Purchase Warrants under the Share
                           Purchase Warrant Indenture.

         (b)      certificates dated the Closing Date, signed by appropriate
                  officers of the Corporation, addressed to the Agent, its
                  counsel, and the Purchasers, with respect to the articles and
                  by-laws of the Corporation, all resolutions of the directors
                  of the Corporation and other corporate action relating to this
                  Agreement and to the creation, allotment, issue and sale of
                  the Units and specimen signatures of signing officers and with
                  respect to such other matters as the Agent may reasonably
                  request;

         (c)      evidence satisfactory to the Agent that the Corporation has
                  obtained all necessary approvals for the quotation of the
                  common shares on the OTC Bulletin Board;

         (d)      a certificate or certificates dated the Closing Date and
                  executed on behalf of the Corporation by the President and
                  Chief Executive Officer of the Corporation or such other
                  officer of the Corporation as the Agent may approve, addressed
                  to the Agent, its counsel and the Purchasers certifying, to
                  the best of the information, knowledge and belief of the
                  person so signing, after having made due enquiry, that

                  (i)      there are no contingent liabilities affecting the
                           Corporation which are material to the Corporation;

                  (ii)     no order, ruling or determination having the effect
                           of suspending the sale or ceasing the trading of the
                           Common Shares or any other securities of the
                           Corporation has been issued or made by any stock
                           exchange, securities commission or other regulatory
                           authority and is continuing in effect and no
                           proceedings for that purpose have been instituted or
                           are pending or contemplated or threatened by any
                           stock exchange, securities commission or other
                           regulatory authority;

                  (iii)    there are no actions, suits, proceedings or enquiries
                           pending or threatened against or affecting the
                           Corporation or to which any property of the
                           Corporation is subject, at law or in equity, or
                           before or by any federal, provincial, state,
                           municipal or other governmental department,
                           commission, board, bureau, agency or instrumentality,
                           domestic or foreign, which may, in any way,
                           materially and adversely affect the Corporation;

                  (iv)     no failure or default on the part of the Corporation
                           exists under any law or regulation applicable to the
                           Corporation or under any licence, permit, contract,
                           agreement or other instrument to which the
                           Corporation is a party or by which the Corporation is
                           bound, which may in any way materially and adversely
                           affect the Corporation and the execution, delivery
                           and performance of this Agreement and the allotment,

                                      -15-

<PAGE>

                           issue and sale of the Units will not result in any
                           such default;

                  (v)      the Corporation has duly complied in all material
                           respects with all of the terms and conditions of this
                           Agreement on its part to be complied with up to the
                           Time of Closing;

                  (vi)     the representations and warranties of the Corporation
                           contained in this Agreement are true and correct as
                           of the Closing Date with the same force and effect as
                           if made at and as of the Time of Closing after giving
                           effect to the transactions contemplated by this
                           Agreement; and

                  (vii)    such other matters as the Agent may reasonably
                           request; and

         (e)      the Special Warrant Certificates and the Share Purchase
                  Warrant Indenture shall have been executed and delivered by
                  the Corporation and the Warrant Agent, in form and substance
                  satisfactory to the Agent and its counsel;

         (f)      the Commission shall have been paid to the Agent either by
                  deducting such amount from the amount to be received by the
                  Corporation or by certified cheque addressed to the Agent to
                  be delivered on Closing, as may be agreed between the Agent
                  and the Corporation.

6. Closing. The purchase and sale of the Units (the "Closing") shall be
completed at the offices of Goodman, Phillips and Vineberg, Toronto at [ ] p.m..
(Toronto time) (the "Time of Closing") on April [18], 2000 or at such other time
or on such other date as the Corporation and the Agent may agree upon (the
"Closing Date" which for greater certainty, shall not include any Additional
Closing, as such term is defined below), provided that the purchase and sale of
additional Units (the "Additional Closing"), if any, may occur within five
Business Days of the Closing Date, for an additional number of Units not to
exceed when added to the number of Units issued on the Closing Date, the
aggregate number of Units to be issued pursuant to the Offering as set out on
page one (1) hereof, and provided that the Corporation and the Agent so agree.

         (a)      At the Time of Closing the Corporation shall deliver to the
                  Agent on behalf of the Purchasers:

                  (i)      certificates representing the Special Warrants and
                           Purchase Warrants duly registered as the Agent may
                           direct;

                  (ii)     the requisite legal opinions and certificates as
                           contemplated in Section 5 hereof; and

                  (iii)    such further documentation as may be contemplated
                           herein or as counsel to the Agent or the applicable
                           regulatory authorities may reasonably require; or

                                      -16-

<PAGE>

         (b)      On any Additional Closing, the Corporation shall deliver to
                  the Agent on behalf of the Purchasers;

                  (i)      certificates representing the Special Warrants and
                           Purchase Warrants duly registered as the Agent may
                           direct;

                  (ii)     certificates as contemplated in Section 5 hereof (as
                           may be reasonably requested by Counsel to the Agent)
                           updated to the date of the Additional Closing; and

                  (iii)    such further documentation as may be contemplated
                           herein or as counsel to the Agent or the applicable
                           regulatory authorities may reasonably require;

in each case, against delivery by the Agent to the Corporation of duly executed
Subscription Agreements to purchase such Units, and payment of the purchase
price by certified cheque or bank draft payable to the Corporation.

         In the event that the Prospectus Qualification does not occur by the
Qualification Deadline, each Purchaser shall be entitled, without payment of any
additional consideration, upon exercise of the Share Purchase Warrants, to
receive a revised number of Warrant Shares in accordance with the adjustment
provided for in the Share Purchase Warrant Certificate.

7. Expenses - Whether or not the Closing or Additional Closing occurs, the
Corporation shall pay all costs, fees and expenses of the Agent which relate to
or are incidental to the performance of the obligations of the Agent or the
Corporation under this Agreement including, without limitation: (i) the cost of
qualifying the Shares, Warrant Shares and Compensation Shares for distribution
in the Qualifying Provinces, (ii) the cost of printing the Preliminary
Prospectus, the Prospectus, any Supplementary Material and certificates for the
Special Warrants, Purchase Warrants, Compensation Option, Shares, Compensation
Shares and Warrant Shares, (iii) the cost of registration, countersignature (in
the case of Share Purchase Warrants) and delivery of the Special Warrants, Share
Purchase Warrants, Shares, Warrant Shares, Compensation Option and Compensation
Shares (iv) the fees and expenses of the Corporation's auditors, counsel and any
local counsel, and (v) the reasonable fees and expenses of the Agent's counsel,
Messrs. Stikeman Elliott and the Agent's reasonable out-of-pocket expenses
(including marketing expenses). Such amounts payable to the Agent shall be paid
by the Corporation to the Agent in respect of expenses and fees incurred upon
receipt of invoices regarding such expenses but in any event no later than on
the Expiry Date.

8. Material Changes - If after the date hereof and prior to the Expiry Date:

         (a)      there occurs any material change or material changes (actual,
                  proposed or prospective) in respect of the Corporation;

         (b)      there occurs any change in any material fact contained in the
                  Preliminary Prospectus, Prospectus or any Supplementary
                  Material; or

                                      -17-

<PAGE>

         (c)      any new material fact arises which would, under the Securities
                  Laws of any of the Qualifying Provinces, require an amendment
                  to the Preliminary Prospectus, Prospectus or any Supplementary
                  Material,

the Corporation shall:

                  (i)      promptly notify the Agent, in writing, providing full
                           particulars of any such change;

                  (ii)     if required by applicable law, prepare and deliver to
                           each Purchaser an amendment to the Prospectus;

                  (iii)    file or cause to be filed with reasonable promptness,
                           and in any event within any statutory limitation
                           period therefor, any document required to be filed
                           with any regulatory body having jurisdiction and
                           comply with all requirements of any applicable
                           securities legislation of such jurisdiction; and

                  (iv)     comply with all legal requirements necessary to
                           qualify the Shares, Warrant Shares and (subject to
                           the limitations of the Proposed Rule) the
                           Compensation Shares for distribution in the
                           Qualifying Provinces.

                  The Corporation shall in good faith discuss with the Agent any
change in circumstances (actual, proposed or prospective) in respect of which
there is reasonable doubt whether written notice should be given to the Agent
pursuant to this section and shall consult the Agent with respect to the form
and content of any amendment to the Preliminary Prospectus, Prospectus or
Supplementary Material proposed to be issued or filed or any public announcement
or communication to holders of the Corporation's securities proposed to be made
by the Corporation as a result of such change prior to the issuance or filing
thereof.

                  In this Agreement, the terms "material change", "material
fact", "misrepresentation" and "distribution" include the respective meanings
ascribed thereto in the Securities Act (Ontario).

9. Indemnities - The Corporation covenants and agrees to protect, indemnify and
hold harmless the Agent and its directors, officers, employees, shareholders,
representatives and agent (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") from and against all losses (except for
loss of profits), claims, expenses, costs, damages and/or liabilities, whether
joint or several (including the aggregate amount paid in reasonable settlement
of any actions, suits, proceedings or claims) which they may suffer or incur
caused by or arising directly or indirectly by reason of:

         (a)      the performance by the Agent of its services hereunder or
                  otherwise in connection with the matters contained herein;

                                      -18-

<PAGE>

         (b)      any information or statement (except any information or
                  statement relating solely to the Agent) contained in the
                  Preliminary Prospectus, Prospectus or any Supplementary
                  Material being or being alleged to be a misrepresentation;

         (c)      the omission to state in the Preliminary Prospectus,
                  Prospectus or any Supplementary Material a material fact
                  required to be stated therein or necessary to make the
                  statements therein not misleading (except the omission to
                  state a material fact relating solely to the Agent);

         (d)      the Corporation not complying with any requirement of the
                  Securities Laws in connection with the Offering or the
                  Prospectus Qualification;

         (e)      any order made or any inquiry, investigation or proceeding
                  commenced or threatened by any regulatory authority based upon
                  an allegation that any untrue statement or alleged omission or
                  any misrepresentation or alleged misrepresentation in the
                  Preliminary Prospectus, the Prospectus or any Supplementary
                  Material exists (except information and statements relating
                  solely to the Agent) which prevents or restricts the trading
                  in or distribution of the Special Warrants, Share Purchase
                  Warrants or Common Shares; or

         (f)      the Corporation's failure to comply with any of its
                  obligations hereunder.

                  If any action or claim shall be asserted against an
Indemnified Party in respect of which indemnity may be sought from the
Corporation pursuant to the provisions hereof, or if any potential claim
contemplated by this section shall come to the knowledge of an Indemnified
Party, the Indemnified Party shall promptly notify the Corporation in writing of
the nature of such action or claim (provided that any failure to so notify shall
not affect the Corporation's liability under this paragraph unless such delay
has prejudiced the defence to such claim). The Corporation shall be entitled but
not obliged to participate in or assume the defence thereof, provided, however
that the defence shall be through legal counsel acceptable to the Indemnified
Party, acting reasonably. In addition, the Indemnified Party shall also have the
right to employ separate counsel in ' any such action and participate in the
defence thereof, and the reasonable fees and expense of such counsel shall be
borne by the Indemnified Party unless (i) the employment thereof has been
specifically authorized in writing by the Corporation (ii) the Indemnified Party
has been advised by counsel acceptable to the Corporation, acting reasonably,
that representation of the Corporation and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing interests
between them; or (iii) the Corporation have failed within a reasonable time
after receipt of such written notice to assume the defence of such action or
claim. It is understood and agreed that the Corporation shall not, in connection
with any suit in the same jurisdiction, be liable for the legal fees and
expenses of more than one separate legal firm to represent the Indemnified
Parties. Neither party shall effect any settlement of any such action or claim
or make any admission of liability without the written consent of the other
party, such consent not to be unreasonably withheld or delayed. The indemnity
hereby provided for shall remain in full force and effect and shall not be
limited to or affected by any other indemnity in respect of any matters
specified in this section obtained by the Indemnified Party from any other
person.

                                      -19-

<PAGE>

                  To the extent that any Indemnified Party is not a party to
this Agreement, the Agent shall obtain and hold the right and benefit of this
section in trust for and on behalf of such Indemnified Party.

                  The Corporation hereby waives its right to recover
contribution from the Agent misrepresentation contained in the Preliminary
Prospectus, the Prospectus or in any Supplementary Material; provided, however,
that such waiver shall not apply in respect of liability caused or incurred by
reason of or arising out of any misrepresentation which is based upon or results
from information relating solely to the Agent contained in such document.

                  The Corporation hereby consents to personal jurisdiction and
service and venue in any court in which any claim which is subject to
indemnification hereunder is brought against the Agent or any Indemnified Party
and to the assignment of the benefit of this section to any Indemnified Party
for the purpose of enforcement provided that nothing herein shall limit the
Corporation's right or ability to contest the appropriate jurisdiction or forum
for the determination of any such claims.

10. Contribution - In the event that, for any reason, the indemnity provided for
in section 9 hereof is illegal or unenforceable, the Agent and the Corporation
shall contribute to the aggregate of all losses, claims, costs, damages,
expenses and/or liabilities (except loss of profits in connection with the sale
of Units) of the nature provided for in Section 9 hereof such that the Agent
shall be responsible for that portion represented by the percentage that the
Commission bears to the gross proceeds from the Offering and the Corporation
shall be responsible for the balance provided that in no event shall the Agent
be responsible for any amount in excess of the portion of the Commission
actually received by them. Notwithstanding the foregoing, a person guilty of
fraudulent misrepresentation shall not be entitled to contribution from any
other party. Any party entitled to contribution will, promptly after receiving
notice of commencement of any claim, action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this section, notify such party or parties from whom
contribution may be sought. In no case shall such party from whom contribution
may be sought be liable under this Agreement unless such notice shall have been
provided, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
otherwise than under this section. The right to contribution provided in this
section shall be in addition and not in derogation of any other right to
contribution which the Agent may have by statute or otherwise by law.

11. Termination Rights - In addition to any other remedies which may be
available to the Agent, the Agent shall be entitled, at its option, to terminate
and cancel, without any liability on its part, all of its obligations under this
Agreement and the obligations of any person whom the Agent has solicited to
purchase the Units and who has executed a Subscription Agreement, by notice in
writing to that effect delivered to the Corporation prior to the Time of Closing
or prior to the Additional Closing with respect to the Units purchased at such
time if:

         (a)      the Agent is not satisfied in its sole discretion, acting
                  reasonably, with the results of all or any portion of its due
                  diligence review and investigations of the Corporation;

                                      -20-

<PAGE>

         (b)      there is in the sole opinion of the Agent a material change or
                  change in material fact or new material fact or an undisclosed
                  material fact or material change which might be expected to
                  have a significant adverse effect on the business, affairs,
                  profitability or prospects of the Corporation on a
                  consolidated basis or on the market price or value of the
                  Common Shares, Special Warrants, Share Purchase Warrants or
                  other securities of the Corporation;

         (c)      there should develop, occur or come into effect any occurrence
                  of national or international consequence, or any action, law
                  or regulation, inquiry, or other occurrence of any nature
                  whatsoever which, in the sole opinion of the Agent, seriously
                  affects, or may seriously affect, the financial markets or the
                  business of the Corporation, or the market price or value of
                  the Common Shares, Special Warrants, Share Purchase Warrants
                  or other securities of the Corporation;

         (d)      the state of the financial markets is such that in the sole
                  opinion of the Agent, acting reasonably, it would be
                  unprofitable to offer or continue to offer the Units for sale;

         (e)      there is an inquiry, action, suit, proceeding or investigation
                  (whether formal or informal instituted or announced or
                  threatened) in relation to the Corporation or any one of the
                  Corporation's directors, officers or principal shareholders;

         (f)      any order to cease trading in the securities of the
                  Corporation is made, threatened or announced by a competent
                  securities regulatory authority; or

         (g)      the Corporation is in breach of a term, condition, or covenant
                  of this Agreement or any representation or warranty given by
                  the Corporation in this Agreement is or becomes false.

                  If the Agent terminates this Agreement pursuant to this
section there shall be no further liability on the part of the Agent or of the
Corporation to the Agent except in respect of any liability which may have
arisen or may thereafter arise under Sections 7, 9 or 1 0 hereof.

                  The right of the Agent to terminate its obligations under this
Agreement is in addition to such other remedies as it may have in respect of any
default, act or failure to act of the Corporation in respect of any of the
matters contemplated by this Agreement.

12. Breach of Agreement - All terms and conditions of this Agreement to be
performed or satisfied by the Corporation shall be constituted as conditions and
any breach of, or failure by the Corporation to comply with, any term or
condition of this Agreement shall entitle the Agent, on behalf of the Purchasers
of the Special Warrants, to terminate their respective obligations to purchase
the Special Warrants by notice to that effect given to the Corporation prior to
the Time of Closing. In the event of any such termination, there shall be no
further liability on the part of the Corporation or the Agent except in respect
of any liability which may have arisen or may thereafter arise under 7, 9 or 10
hereof. The Agent may waive, in whole or in part, or extend the time for
compliance with, any terms and conditions without prejudice to its rights in
respect of any other terms and conditions or any other or subsequent breach or

                                      -21-

<PAGE>

non-compliance provided, however, that any waiver or extension must be in
writing and signed by the Agent IN order to be binding upon them.

13. No Further Offerings - The Corporation shall not, from the date hereof,
until September 1, 2000 directly or indirectly sell, agree or offer to sell,
grant any option for the sale of, or otherwise dispose of any Common Shares or
Securities convertible into its Common Shares without the prior written consent
of the Agent, which consent shall not be unreasonably withheld, other than
Common Shares which are issued in connection with:

         (a)      normal course exercises of options pursuant to any existing
                  stock option plan or similar agreement of the Corporation; and

         (b)      the exercise of any convertible securities, options or
                  warrants to acquire securities of the Corporation outstanding
                  on the Closing Date.

14. Notices - Any notice under this Agreement shall be given in writing and
either delivered or telecopied to the party to receive such notice at the
address or telecopy numbers indicated below:

to the Corporation:

                  Softquad Software Ltd..
                  Suite 400
                  161 Eglington Avenue East
                  Toronto, Ontario M4P IJ5
                  Canada
                  Attention:        Roberto Drassinower
                                    President
                  Fax:              (416) 554-0306

with a copy to:

                  Goodman Phillips & Vineberg
                  Suite 2400, 250 Yonge Street
                  Toronto, Ontario
                  M3B2M6

                  Attention:        Neill May and Robert Vaux
                  Fax:              (416) 979-1234

                                      -22-

<PAGE>

to the Agent or any Indemnified Party:

                  Thomson Kemaghan & Co. Limited 365 Bay Street
                  Toronto, Ontario
                  M5H 2V2

                  Attention-    Lionel Conacher and John Koshan
                  Fax:           416 367-8055

with a copy to:

                  Stikeman Elliott
                  Barristers and Solicitors
                  Suite 5300
                  Commerce Court West
                  Toronto, Ontario
                  M5L IB9

                  Attention:        Nathalie Mercure
                  Fax:              (416) 947-0866

or such other address or telecopy number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; and if such notice is telecopied (with
receipt confirmed), it shall be effective on the Business Day following the date
such notice is telecopied.

15. Survival - All representations, warranties, and agreements of the
Corporation contained herein or contained in any document submitted pursuant to
this Agreement or in connection with the purchase of the Units shall survive the
purchase of the Units by the Purchasers and shall continue in full force and
effect unaffected by any subsequent disposition or conversion of the Units,
Special Warrants, Share Purchase Warrants and Compensation Warrants, until the
earlier of (i) the issuance of a receipt from the securities commission where
the Purchaser is resident; or (ii) eighteen months from the Closing, and the
Agent shall not be limited or prejudiced by any investigation made by or on
behalf of the Agent in the course of the preparation of the Preliminary
Prospectus, the Prospectus or any Supplementary Material or the distribution of
the Units, Special Warrants, Share Purchase Warrants and Compensation Warrants.

16. Entire Agreement - The provisions herein contained constitute the entire
agreement between the parties hereto and supersede all previous communications,
representations, understandings and agreements between the parties with respect
to the subject matter hereof, whether verbal or written.

17. Counterparts - This Agreement may be executed in any number of counterparts
all of which when taken together shall be deemed to be one and the same document
and not withstanding their actual date of execution shall be deemed to be dated
as of the date first above written.

                                      -23-

<PAGE>

18. General - The Agreement shall be governed by and interpreted in accordance
with the laws of Ontario and the federal laws of Canada applicable therein and
time shall be of the essence hereof.

19. Language - At the request of the parties hereto, this Agreement as well as
all documents relating thereto, including notices, have been and shall be
drafted in English; a la demande des parties aux presentes, cette convention, de
meme que toutes conventions s'y rapportant, y compris les avis, ont ete seront
rediges en anglais.

20. Currency - Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in lawful money of Canada.

21. Contractual Right or Action for Rescission - As part of the Subscription
Agreements, the Corporation shall deliver, and shall be deemed to have delivered
to the Purchasers (including the Agent) contractual rights of action for
rescission at the Time of Closing or subsequent thereto.

                  If the above is in accordance with your understanding, please
sign and return to the Agent a copy of this letter, whereupon this letter and
your acceptance shall constitute a binding agreement between the Corporation and
the Agent.

                         THOMSON KERNAGHAN & CO. LIMITED

                         Per:
                             ------------------------------

                  The above offer is hereby accepted and agreed to as of the
date first above written.

                             SOFTQUAD SOFTWARE, LTD.

                         Per:
                             ------------------------------

                                      -24-

<PAGE>

                                   SCHEDULE A

                           SPECIAL WARRANT CERTIFICATE

                                      -25-

<PAGE>

                                   SCHEDULE B

                              COMPENSATION WARRANTS

                                      -26-

<PAGE>

                                   SCHEDULE C

                                   DISCLOSURE

                                      -27-

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