Document:

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                                AGENCY AGREEMENT

                                                                  April _ , 2000

Softquad Software, Ltd.
Suite 400
161 Eglinton Avenue East
Toronto, Ontario  M4P 1J5
Canada

Attention:   Roberto Drassinower
             President

Ladies and gentlemen:

         We understand that Softquad Software Ltd., a Delaware corporation (the
"Corporation"), proposes to issue up to 2,500,000 units described below (each a
"Unit" and collectively the "Units) at a price of US$7.50 per Unit. We
understand that the Corporation is offering the Units in two separate offerings,
one solely to institutional accredited investors (as defined in Rule 501(a)
under the Securities Act of 1933, as amended (the "Securities Act"),) in the
United States (the "US Offering"), and the other in Canada and other
jurisdictions outside of the United States (the "Canadian Offering") solely to
such institutional accredited investors that are not US Persons as defined in
SEC Rule 902(k). We understand that the gross proceeds from the securities sold
in the Canadian Offering and the U.S. Offering (together the "Offerings") will
be up to US$18,750,000 payable to the Corporation.

         We understand that each Unit offered to Investors in the United States
will consist of one share of the Corporation's common stock, US$.001 par value
per share ("Common Stock"), and one one-half of one warrant (a "Warrant") to
purchase one share of Common Stock at an exercise price of US$12.50 per share.
(The Common Stock and Warrants that comprise the Units, together with the Common
Stock issuable upon exercise of the Warrants, are collectively referred to as
the "Subject Securities.") Each Unit offered to Investors outside the United
States (a "Canadian Unit") will consist of one special warrant (a "Special
Warrant") that will entitle the holder to receive, without payment upon exercise
of the Special Warrant, one share of Common Stock, and one-half of one Warrant.

         Subject to the terms and conditions set forth below, the Corporation
hereby appoints Small Caps Online LLC (the " US Agent") as the sole and
exclusive agent of the Corporation to solicit, solely in the United States, on a
best efforts basis, offers to purchase Units, and the US Agent hereby agree to
act as such agent. It is understood and agreed that the US Agent is under no
obligation to purchase Units, although they may subscribe for and purchase Units
if they so desire.

         1. Units. The material attributes and characteristics of the Units will
be substantially as described in the attached term sheet (the "Term Sheet").

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         2. The Offering

         (a) Sale on Exempt Basis. The US Agent will use its best efforts to
arrange for purchasers (the "Purchasers") of the Units in the United States. The
US Agent shall only solicit offers from prospective Purchasers who are
institutional "accredited investors" defined in clauses (1), (2), (3), or (7) of
paragraph (a) of Rule 504 under the Securities Act.

         (b) Commission. The Corporation agrees to pay to the US Agent at the
Time of Closing (as defined in Section 6) a commission of $25,000 (the
"Commission") in consideration of the services to be rendered by the US Agent in
connection with the Offering. The US Agent's services shall include:

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

                  (ii) 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

         (c) Covenants of the US Agent. The US Agent covenants, represents and
warrants to the Corporation that: (i) it will comply take such action or refrain
from taking such action, as the Corporation may reasonably request in order to
with all applicable federal and state securities laws and regulations of the
jurisdictions in which it solicits or procures subscriptions in connection with
the Offering (provided that the Corporation shall be required to complete all
necessary securities qualifications with respect to all jurisdictions in which
the Subject Securities shall be offered and sold); (ii) its a registered
broker-dealer in the United States and each state where such registration is
required for it to offer or solicit offers for Units; (iii) it will obtain from
each purchaser an executed Subscription Agreement in a form reasonably
acceptable to the Corporation and to the US Agent relating to the transactions
herein contemplated; (iv) it will refrain from advertising in printed public
media, radio, television or telecommunications, including electronic display,
with respect to the Offering; and (v) it will not make any representations or
warranties with respect to the Corporation or the Units other than as set forth
in this Agreement, the Subscription Agreement and the Term Sheet. [Note: Why did
former covenant (ii) get deleted?]

         3. Representations and Warranties of the Corporation. The Corporation
represents and warrants to the US Agent, and acknowledges that the US Agent is
relying upon such representations and warranties, as follows:

         (a) The Corporation has been incorporated and organized and is validly
subsisting under the laws of the State of Delaware, and has all requisite
corporate power and authority and is duly qualified or authorized to carry on
its business as now conducted and to own its property and assets in all
jurisdictions where such qualification or authorization is required and to enter
into this Agreement and the Subscription Agreement (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 Corporation under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

         (c) All press releases, reports and other documents and filings 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 as information therein relates to the capitalization of the
Corporation or to the timing of the acquisition of SoftQuad Software Inc.).

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         (d) The Corporation has two subsidiaries, Softquad Software, Inc. and
Softquad Acquisition Corp., which are material to the Corporation.

         (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 possesses
all material certificates, authorities, permits, 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) For the preceding twelve months the Corporation has filed with the
SEC in a timely manner all reports, statements, and other materials required to
be filed by it under the Securities Act and the Exchange Act ("SEC Filings").
Except as disclosed in the SEC Filings and in all press releases issued to date
(collectively the "Disclosure Documents") of the Corporation or as otherwise
disclosed to the U.S. Agent, 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 or as
otherwise disclosed to the U.S. Agent. 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 or as otherwise
disclosed to the U.S. Agent, 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, the
Corporation is not in material default of any of the provisions of any 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
or as otherwise disclosed to the U.S. Agent:

                  (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.

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

                  (i) the purchase of any property or any interest therein or
the sale, transfer or other disposition of any property or any interest therein
currently owned, directly or indirectly, by the Corporation whether by asset
sale, transfer of shares, or otherwise;

                  (ii) the change of control (by sale or transfer of shares or
sale of all or substantially all of the assets of the Corporation or otherwise)
of the Corporation, or

                  (iii) a proposed or planned disposition of shares by any
shareholder who owns, directly or indirectly,  5% or more of the issued and
outstanding shares of the Corporation.

         (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) Other than as disclosed in the Disclosure Documents, the
Corporation has no responsibility or obligation to pay any commission, royalty
or similar payment to any person with respect to their property rights.

         (l) The authorized capital of the Corporation consists of 75,000,001
shares, divided into (i) 50,000,000 shares of Common Stock, $0.001 par value;
(ii) 25,000,000 shares of Preferred Stock, $0.001 par value, of which (a)
1,473,405 shares have been designated Class A Convertible Preferred Stock, all
of which are issued and outstanding, and (b) 1,722,222 shares have been
designated Class B Convertible Preferred Stock, all of which are issued and
outstanding; and (iii) one share of Special Voting Stock, which is issued and
outstanding. The Corporation also has outstanding warrants to purchase 1,878,368
shares of Common Stock, options to purchase 3,863,500 shares of Common Stock and
5,773,605 exchangeable shares in the capital of the Corporation's subsidiary
SoftQuad Acquisition Corp., each of which is exchangeable for one share of
Common Stock. No shares of the Corporation's capital stock are subject to
preemptive rights or any other similar rights.

         (m) Except as disclosed in the Disclosure Documents or in clause (l)
above or otherwise disclosed to the U.S. Agent, 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.

         (n) The Common Stock is approved for quotation and is quoted on the OTC
Bulletin Board.

         (o) All necessary corporate action has been taken to duly authorize the
issue, sale and delivery of the Subject Securities and, upon payment of the
requisite consideration therefor, each of them will have been validly issued.

         (p) The offering and sale 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,

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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 under the Securities Laws of Canada for the Canadian Offering, 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.

         (q) 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, licence 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.

         (r) 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, 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.

         (s) 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.

         (t) 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.

         (u) 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.

         (v) 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

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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.

         (w) The Corporation has not withheld, and will not withhold, from the
US 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 US Agent that it will:

         (a) fulfil all legal requirements to permit the creation, issuance,
offering and sale of the Units as contemplated in this Agreement;

         (b) use its reasonable best efforts to obtain any necessary regulatory
consents; and

         (c) use its reasonable best efforts to maintain the quotation of
certain shares of its Common Stock on the OTC Bulletin Board until all Warrants
have been exercised, and maintain its status as a reporting Corporation under
the Exchange Act and file in a timely manner all SEC Filings required to be
filed by a reporting Corporation under the Exchange Act.

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

         (a) favourable legal opinions, in form and substance satisfactory to
the US Agent, acting reasonably, dated the Closing Date from counsel for the
Corporation, Sonfield & Sonfield, or, in the case of laws other than those of
the United States, from local counsel addressed to the US 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;

                  (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
75,000,001 shares, divided into (i) 50,000,000 shares of Common Stock, $0.001
par value, (ii) 25,000,000 shares of Preferred Stock, $0.001 par value, and
(iii) one share of Special Voting Stock.

                  (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;

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                  (vii) the Units have been authorized, executed and issued by
the Corporation and certified and delivered in accordance with the provisions of
the Subscription Agreement, subject to the usual qualifications, constitute
legal, valid and binding obligations of the Corporation enforceable in
accordance with their terms;

                  (viii) the Common Stock included in the Units, and the Common
Stock issuable upon the exercise of the Warrants have been reserved for issuance
to the holders, from time to time, of the Warrants and such shares and the
Warrants will, when issued, be validly issued and, in the case of the shares, as
fully paid and non-assessable Common Stock;

                  (ix) 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;

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

                  (xi) the form and terms of the certificates representing the
Common Stock and Warrants has been or will be duly approved by the directors of
the Corporation, and in the case of the Common Stock, conforms with all legal
requirements relating thereto; and

                  (xii) Montreal Trust Company of Canada, at its principal
office in Toronto, Ontario, 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 US 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 US Agent may reasonably request;

         (c) 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 US Agent may
approve, addressed to the US 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 Stock 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

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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, 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 US Agent may reasonably
request; and

         (e) the Warrants [and the Warrant Indenture] shall have been executed
and delivered by the Corporation and the Warrant Agent, in form and substance
satisfactory to the US Agent and its counsel;

         (f) the Commission shall have been paid to the US Agent either by
deducting such amount from the amount to be received by the Corporation or by
certified cheque addressed to the US Agent to be delivered on Closing, as may be
agreed between the US 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 10:00 am
(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 US 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 this Offering as set out on
page one (1) hereof, and provided that the Corporation and the US Agent so
agree.

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

                  (i) certificates representing the Common Stock underlying the
Units, and the 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 US Agent or the applicable regulatory authorities may
reasonably require; or

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

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                  (i) certificates representing the Common Stock underlying the
Units, and the Warrants duly registered as the US Agent may direct;

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

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

in each case, against delivery by the US 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.

         7. Expenses. Whether or not the Closing or Additional Closing occurs,
the Corporation shall pay all costs, fees and expenses of the US Agent which
relate to or are incidental to the performance of the obligations of the US
Agent or the Corporation under this Agreement.

         8. Material Changes. If after the date hereof and prior to the Closing
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
Subscription Agreement or the Term Sheet; or

         (c) any new material fact arises which would, under the applicable
federal or state Securities Laws, require an amendment to the Subscription
Agreement or the Term Sheet, the Corporation shall:

                  (i) promptly notify the US 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 Subscription Agreement and Term Sheet; and

                  (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.

                  The Corporation shall in good faith discuss with the US 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 US
Agent pursuant to this section and shall consult the US Agent with respect to
the form and content of any amendment to the Subscription Agreement or Term
Sheet, 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.

         9. Indemnities. - The Corporation covenants and agrees to protect,
indemnify and hold harmless the US 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

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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 US Agent of its services hereunder or
otherwise in connection with the matters contained herein;

         (b) any information or statement (except any information or statement
relating solely to the US Agent) contained in the Subscription Agreement or Term
Sheet being or being alleged to be a misrepresentation;

         (c) the omission to state in the Subscription Agreement or Term Sheet 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 US Agent);

         (d) the Corporation not complying with any requirement of any
securities legislation or regulatory requirements of any jurisdiction in which
Purchasers reside in connection with the Offering;

         (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 Subscription Agreement or Term Sheet exists
(except information and statements relating solely to the US Agent) which
prevents or restricts the trading in or distribution of the Subject Securities;
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.

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

                                      -10-

<PAGE>

         The Corporation hereby waives its right to recover contribution from
the US Agent with respect to any liability of the Corporation by reason of or
arising out of any misrepresentation contained in the Subscription Agreement or
Term Sheet; 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 US 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 US 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 US 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
US 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 US Agent be responsible for any amount in excess of the portion of the
Commission actually received by it. 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 US Agent may have by statute or
otherwise by law.

         11. Termination Rights - In addition to any other remedies which may be
available to the US Agent, the US 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 US Agent has
solicited to purchase the Units 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 US 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;

         (b) there is in the sole opinion of the US 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 Units, Common Stock,
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 US Agent, seriously affects, or may seriously affect, the financial

                                      -11-

<PAGE>

markets or the business of the Corporation, or the market price or value of the
Units, Common Stock, or other securities of the Corporation;

         (d) the state of the financial markets is such that in the sole opinion
of the US 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 US Agent terminates this Agreement pursuant to this section
there shall be no further liability on the part of the US Agent or of the
Corporation to the US Agent except in respect of any liability which may have
arisen or may thereafter arise under Sections 7, 9 or 10 hereof.

         The right of the US 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 US Agent, on behalf of the
Purchasers of the Units, 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 US Agent except in
respect of any liability which may have arisen or may thereafter arise under 7,
9 or 10 hereof. The US 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
non-compliance provided, however, that any waiver or extension must be in
writing and signed by the US Agent in order to be binding upon them.

                                      -12-

<PAGE>

13. 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:                      to the Agent or
         Softquad Software, Ltd.                  any Indemnified Party:
         Suite 400                                Small Caps Online LLC
         161 Eglinton Avenue East                 35th Floor
         Toronto, Ontario  M4P 1J5                1285 Avenue of the Americas
         Canada                                   New York, NY  10019
         Attention: Roberto Drassinower           Attention:  Jeffrey B. Davis
         Fax:                                     Fax:  (212) 554-4058

             with a copy to:
         Goodman Philips & Vineberg
         Suite 2400, 250 Yonge Street
         Toronto, Ontario  M5B 2M6
         Attention:  Mr. Neill May
         Fax: (416) 979-1234

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.

         14. 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 until
the earlier of (i) the effectiveness date of the Registration Statement to be
filed by the Corporation with respect to the Subject Securities and (ii) the
eighteen month anniversary the Closing, and the US Agent shall not be limited or
prejudiced by any investigation made by or on behalf of the US Agent in the
course of the preparation of the Subscription Agreement or Term Sheet or the
distribution of the Units.

         15. 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.

         16. 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.

         17. General. The Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York and time shall be of the
essence hereof.

         18. Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are lawful money of the United States.

                                      -13-

<PAGE>

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

                                           SMALL CAPS ONLINE LLC

                                           By:
                                               ---------------------------------
                                               Jeffrey B. Davis, President

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

                                           SOFTQUAD SOFTWARE, LTD.

                                           By:
                                               ---------------------------------

                                      -14-<PAGE>   1

                                                                  Exhibit 10.16a

                 AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

            AMENDMENT NO. 2, dated as of May 5, 2000, among SELECTIVE INSURANCE
GROUP, INC., a New Jersey corporation ("Selective"), having an office at 40
Wantage Avenue, Branchville, New Jersey 07826, SELECTIVE INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("SICA"), having an office at 40 Wantage
Avenue, Branchville, New Jersey 07826, and GREGORY E. MURPHY, having an address
at 10 Condit Road, Mountain Lakes, New Jersey 07046 (the "Executive"), to
Employment Agreement dated as of August 1, 1995, among Selective, SICA and the
Executive, as heretofore amended by Amendment No. 1 thereto dated as of May 1,
1998 (as so amended, the "Employment Agreement").

            WHEREAS, Selective, SICA and the Executive have executed and
delivered the Employment Agreement, and Selective has guaranteed all of the
obligations of SICA as the Employer under the Employment Agreement; and

            WHEREAS, the parties hereto desire to further amend the Employment
Agreement to modify the description of the duties of the Executive, as set forth
in Section 4(a) of the Employment Agreement, and to modify the Salary (as
defined in Section 3 of the Employment Agreement) provided for therein.

            THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:

            1. The Salary, as defined and provided for in Section 3 of the
Employment Agreement, shall be paid to the Executive at a rate of not less than
Four Hundred Seventy-Five Thousand and 00/100 ($475,000.00) Dollars per year
during the Renewal Term.

            2. The Executive is presently serving as an President and Chief
Executive Officer of SICA and Selective, and all reference to the Employment
Agreement to Executive serving as an President and Chief Executive Officer of
the Company (as defined in the Employment Agreement) are hereby amended to refer
to the Executive as an Chairman of the Board, President and Chief Executive
Officer of the Company (as defined in the Employment Agreement) and Selective.

            3. Selective reaffirms that it guarantees to the Executive the full
performance by SICA of all of its obligations under the Employment Agreement as
amended herein.

            4. Except as amended herein, the Employment Agreement shall continue
in full force and effect on and after the date hereof.

            IN WITNESS WHEREOF, this Amendment has been duly executed by the
Executive and on behalf of Selective and SICA by their duly authorized officers
as of the date and year first above written.

                                        SELECTIVE INSURANCE GROUP, INC.

                                        By:_____________________________________
                                           Name:  Thornton R.Land
                                           Title: Executive Vice President and
                                                  General Counsel
<PAGE>   2

                                        SELECTIVE INSURANCE COMPANY
                                        OF AMERICA

                                        By:_____________________________________
                                           Name:  Thornton R. Land
                                           Title: Executive Vice President and
                                                  General Counsel

                                        ________________________________________
                                        Executive

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