OPTION HOLDER LOCK UP AGREEMENT DATED AS OF DECEMBER 10, 1999.
BETWEEN:
SOFTQUAD ACQUISITION CORP.
("SAC")
OF THE FIRST PART
-and-
SOFTQUAD SOFTWARE LTD.
("Softquad USA")
OF THE SECOND PART
-and-
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(the "Selling Shareholder")
OF THE THIRD PART
WHEREAS SAC is a wholly owned subsidiary of Softquad Software Ltd.
("Softquad USA").
AND WHEREAS Thomson Kernaghan & Co. Limited, as agent, has subscribed
for common and convertible preferred shares in Softquad USA on the condition
that SAC and/or Softquad USA make a Qualifying Offer (as herein defined) to
purchase all of the issued and outstanding shares of Softquad Software Inc.
("Softquad Canada") (other than US residents) pursuant to a securities exchange
takeover bid or Share Purchase Agreement on the basis of the issuance to the
Shareholder for each share of Softquad Canada either: (a) one (1) common share
of Softquad USA; or (b) one (1) SAC Exchangeable Share which may be converted
into one (1) Softquad USA common share at any time within 4 years and in any
event will be automatically converted on the fourth anniversary.
AND WHEREAS the Selling Shareholder is a party to an option agreement
with Softquad Software Inc. which entitles the Selling Shareholder to purchase
7,500 common shares of Softquad Canada (the rights to acquire such shares and/or
the shares which may be issued upon exercise shall be collectively referred to
as the "Softquad Canada Shares").
1. AGREEMENT TO TENDER SECURITIES OF SOFTQUAD CANADA
1.1 Softquad USA directly or in conjunction with its wholly owned subsidiary SAC
hereby agree to make a "Qualifying Offer" (as defined below) to acquire all of
the issued and outstanding common shares of Softquad Canada (other than those
owned by US residents) and to assume the obligation of Softquad Canada to issue
common shares of Softquad Canada upon the exercise of any existing common share
purchase agreements.
1.2 Subject to the terms and conditions hereof, the Selling Shareholder agrees
to unconditionally and irrevocably accept any "Qualifying Offer" made by SAC
and/or Softquad USA in respect of all of the Softquad Canada Shares and shall:
(a) duly deposit and not withdraw Softquad Canada Shares and
any shares issued to the Selling Shareholder in the capital of SAC or
Softquad USA with Thomson Kernaghan & Co. Limited in escrow pursuant to
the terms of the escrow Agreement attached (or in a form substantially
similar); and
(b) duly deposit and not withdraw the requisite Letter of
Transmittal form agreeing to tender Softquad Canada Shares, SAC or
Softquad USA shares, as applicable, in support of the Qualifying Offer.
1.3 A Qualifying Offer shall be an offer:
(a) made by Softquad USA and/or SAC or such other person as
they may designate in writing;
(b) made by takeover bid circular or share purchase agreement
to all of the holders of common shares of Softquad Canada (other than
US residents) and all holders of options to acquire common shares of
Softquad Canada (other than US residents); and
(c) made on or before March 1, 2000, and closing on or before
April 30, 2000 and having the following provisions:
(i) the consideration to be received by each
holder of a Softquad Canada common share
shall be $1.3574 US per share;
(ii) the consideration of Softquad USA and/or SAC
shall be either:
(A) the issuance of 1 Softquad USA
common share; or
(B) the issuance of 1 SAC Exchangeable
Share which may be converted into 1
Softquad USA common share at any
time within 4 years and which shall
be automatically converted on the
4th anniversary;
(iii) the consideration to be received by each
holder of a Softquad Canada option to
acquire Softquad common shares shall be,
subject to applicable law or regulatory
approval, the receipt of a Softquad USA
option to acquire a Softquad USA common
share for the same exercise price and under
the same terms and conditions as set out in
any agreement between the optionholder and
Softquad Canada;
It is acknowledged that any Qualifying Offer will include and be
subject to customary conditions appropriate in the context. The date
upon which SAC and/or Softquad USA accepts the tendered common shares
under the Qualifying Offer shall be referred to as the "Closing Date".
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2. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER
2.1 The Selling Shareholder, by its acceptance hereof, covenants, represents and
warrants as follows and acknowledges and confirms that SAC and/or Softquad USA
is relying upon such covenants, representations and warranties in connection
with the purchase by SAC and/or Softquad USA of the Softquad Canada Shares.
(a) the Selling Shareholder will not permit and will not
permit anyone to:
(i) sell, assign, convert or dispose of any
Softquad Canada Shares;
(ii) exercise any statutory or other rights of
withdrawal with respect to the Softquad
Canada Shares; or
(iii) exercise any shareholder rights or remedies
available at common law or pursuant to
applicable legislation to delay, binder,
upset or challenge the Qualifying Offer.
(b) all the Softquad Canada Shares are now, and at the time of
closing will be, owned by the Selling Shareholder as the sole
beneficial owner of record with a good and marketable title thereto,
free and clear of any mortgages, liens, charges, restrictions, security
interest, adverse claims, pledges, encumbrances or demands whatsoever,
and are issued and outstanding as fully paid and non-assessable;
(c) other than as set out in the Unanimous Shareholder
Agreement of Softquad Canada, no person, firm or corporation has any
agreement or option, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option
for the purchase, acquisition or transfer from the Selling Shareholder
of any of the Softquad Canada Shares or any interest therein or right
thereto, except SAC pursuant hereto;
(d) the Selling Shareholder does not act as nominee, agent,
trustee, executor, administrator or other legal representative on
behalf of any other person, firm or corporation in respect of the
Softquad Canada Shares;
(e) if the Selling Shareholder is a corporation, the Selling
Shareholder is a validly subsisting corporation under the laws of
Canada or a province of Canada or foreign jurisdiction (as the case may
be) and the Selling Shareholder has all necessary corporate power and
authority to execute and deliver this Lockup Agreement to sell the
Softquad Canada Shares to SAC and/or Softquad USA and to perform its
obligations hereunder;
(f) this Lockup Agreement has been duly executed and delivered
by and on behalf of the Selling Shareholder and constitutes a legal,
valid and binding obligation of the Selling Shareholder enforceable
against the Selling Shareholder in accordance with its terms;
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(g) the execution and delivery of this Lockup Agreement and
the completion of the transactions contemplated hereby will not
conflict with, result in a default under, or accelerate or permit the
acceleration of the performance required by, any agreement or
instrument to which the Selling Shareholder; or
(h) neither the Selling Shareholder nor any affiliate or
associate thereof is a party to, or is aware of, any agreement,
commitment or understanding between or among shareholder of Softquad
Canada with respect to the exercise of any voting rights attaching to
any securities of Softquad Canada beneficially owned by such
shareholders or any voting trust agreement or other shareholders
agreement relating to securities of Softquad Canada;
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF SAC/SOFTQUAD USA
3.1 SAC and/or Softquad USA jointly and severally, covenant, represent and
warrant as follows and hereby acknowledge and confirm that the Selling
Shareholder is relying upon such covenants, representations and warranties in
connection with the sale by it of the Softquad Canada Shares:
(a) SAC and/or Softquad USA have all necessary power and
authority to execute and deliver this offer, to purchase the Softquad
Canada Shares pursuant to the provisions hereof and to perform its
obligations hereunder; and
(b) this Lockup Agreement has been duly executed and delivered
by and on behalf of SAC and/or Softquad USA and this Lockup Agreement
will constitute a legal, valid and binding obligation of SAC and
Softquad USA enforceable against SAC and Softquad USA in accordance
with its terms.
4. CONDITIONS OF CLOSING
4.1 The obligation of SAC and/or Softquad USA to purchase the Softquad Canada
Shares shall be subject to the following conditions for the exclusive benefit of
SAC to be fulfilled and/or performed at any time:
(a) SAC and/or Softquad USA shall, upon written request
therefor made prior to the execution of this agreement by the Selling
Shareholder, receive the opinion of counsel to the Selling Shareholder,
which counsel shall be reasonably satisfactory to SAC and/or Softquad
USA, in form and terms reasonably satisfactory to counsel of SAC and/or
Softquad USA, to the effect that this Lockup Agreement has been duly
executed and delivered by, and constitutes a legal, valid and binding
obligation of, the Selling Shareholder enforceable against the Selling
Shareholder in accordance with its terms, subject to the qualifications
that enforcement thereof may be limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights generally and
that specific performance and injunction and other equitable remedies
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may only be granted in the discretion of a court of competent
jurisdiction;
(b) no action or proceeding shall be pending or threatened by
any person, company, firm, governmental authority, securities
commission, regulatory body or agency to enjoin or prohibit the
purchase and sale of the Softquad Canada Shares contemplated hereby or
the right of the SAC and/or Softquad USA to own the Softquad Canada
Shares or to suspend or stop trading in securities of Softquad Canada;
(c) the covenants, representations and warranties of the
Selling Shareholder contained in Article 2 hereof shall be true and
correct on and as of the date of the acceptance of this Lockup
Agreement and at the Closing Date;
(d) the Selling Shareholder shall have complied with all
covenants and agreements herein agreed to be performed or caused to be
performed by it;
(e) SAC and/or Softquad USA shall have received at the Closing
Date a certificate dated the Closing Date, in form reasonably
satisfactory to SAC and/or Softquad USA, executed by the Selling
Shareholder to the effect that the Selling Shareholder has neither
authorized nor taken any act referred to in subsection 2.1 (a) and that
no state of facts exists which would entitle the Selling Shareholder to
rescind the Agreement.
In case any of the foregoing conditions have not been fulfilled and/or performed
at or before the Closing Date to the satisfaction of SAC and/or Softquad USA,
SAC and/or Softquad USA may rescind this Lockup Agreement by notice to the
Selling Shareholder and in such event SAC and/or Softquad USA shall be released
from all obligations hereunder; provided that any of such conditions may be
waived in whole or in part by SAC and/or Softquad USA without prejudice to its
rights of rescission in the event of the non-fulfillment of any other condition
or conditions.
4.2 The obligation of SAC and/or Softquad USA to purchase the Softquad Canada
Shares shall be subject to the further condition for the exclusive benefit of
SAC that, on or before the close of business on March 1, 2000, SAC shall be
satisfied that it is or will be in compliance with all applicable legal and
regulatory requirements relating to it with respect to its investment in the
Softquad Canada Shares and shall have received, in its discretion, all necessary
or appropriate orders, rulings and consents from regulatory bodies, securities
commissions, government agencies and others with respect thereto.
4.3 In the event that SAC shall not have notified the Selling Shareholder on or
before 4:00 o'clock in the afternoon Toronto, Ontario time on March 1, 2000 that
the condition referred to in Section 4.2 has been fulfilled or waived, then such
condition shall be deemed not to have been fulfilled.
4.4 In the event that the condition referred to in section 4.3 shall not have
been fulfilled or waived by SAC and/or Softquad USA, this Lockup Agreement shall
be rescinded and each of the parties hereto shall be released from all
obligations hereunder.
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5. COVENANTS OF THE SELLING SHAREHOLDER
5.1 The Selling Shareholder agrees to use its best efforts to cause the
conditions referred to in subsection 4.1 to be fulfilled and/or performed prior
to the Closing Date.
5.2 The Selling Shareholder covenants and agrees that, between the date hereof
and the Closing Date, it will not take any step or act with respect to or in
furtherance of the sale of the Softquad Canada Shares or any portion thereof to
any person, firm or corporation other than SAC and/or Softquad USA and, without
limiting the generality of the foregoing, will not negotiate with, solicit any
offer from, or have any discussion with, any other person, firm or corporation
with a view to such a sale.
6. ENTIRE AGREEMENT
6.1 The agreement resulting from acceptance of this offer shall constitute the
entire agreement and understanding between the parties with respect to the
subject matter hereof and shall supersede any prior agreement, representation or
understanding with respect thereto.
7. TIME OF THE ESSENCE
7.1 Time shall be of the essence hereof.
8. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
8.1 The respective covenants, representations and warranties of the parties
contained herein shall survive the closing of the purchase and sale of the
Softquad Canada Shares herein provided for, and, notwithstanding such closing,
or any investigation made by or on behalf of any party, shall continue in full
force and effect for the benefit of the party to whom the covenant,
representation or warranty was made.
9. NOTICES
9.1 Any notice, direction or other instrument required or permitted to be given
to either party hereto shall be in writing and may be given by delivering or
telecopying the same to:
If to SAC: If to the Selling Shareholder:
Softquad Acquisition Corp. ----------------------------------
000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000 ----------------------------------
Toronto, Ontario M4P lJ5 ----------------------------------
----------------------------------
Attention: Xxxxxxx Xxxxxxxxxxx ----------------------------------
Facsimile No. (000) 000-0000 ----------------------------------
9.2 Any such notice, direction or other instrument shall be deemed to have been
given or made on the date on which it was delivered or telecopied (or, if such
day is not a business day, on the next following business day).
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10. GOVERNING LAW
10.1 The Agreement shall be construed and enforced in accordance with, and the
respective rights and obligations of the parties shall be governed by, the laws
of the province of Ontario and the applicable federal laws of Canada.
11. CONFIDENTIALITY
11.1 The Agreement shall be kept confidential by the parties hereto and no
public announcement or press release concerning the Agreement shall be made by
either party without the consent of the other party or except as may be required
by law.
12. SUCCESSORS AND ASSIGNS
12.1 Neither party may assign any of its rights or obligations hereunder to any
other person, firm or corporation without the prior written consent of the other
party hereto, except that SAC and/or Softquad USA may assign this agreement and
its rights hereunder in whole or in part to one or more corporations all of the
shares of which are beneficially owned by SAC and/or Softquad USA.
12.2 This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
13. TERMINATION
13.1 The Selling Shareholder may at any time thereafter, by notice in writing to
SAC, terminate its obligations hereunder if:
(a) no Qualifying Offer is made by March 1, 2000; and/or
(b) if the Qualifying Offer is made by March 1, 2000, but the
acquisition of 90% of the common shares of Softquad Canada is not
completed by April 30, 2000.
14. TERMINATION OF UNANIMOUS SHAREHOLDER AGREEMENT
14.1 The Selling Shareholder hereby agrees to the immediate termination of the
unanimous shareholders agreement of Softquad Software Inc. dated November 6,
1998 (the "Unanimous Shareholders Agreement") and agrees that if on April 30,
2000, 90% of Softquad Software Inc.'s common shares have not been purchased by
SAC and/or Softquad USA as set forth herein, the terms of the Unanimous
Shareholders Agreement shall be reinstated and shall be in full force and effect
as of the date thereof and the Selling Shareholder agrees to execute and deliver
any documentation necessary to evidence such reinstatement of the Unanimous
Shareholders Agreement.
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15. SIGNED IN COUNTERPART
15.1 This Agreement may be signed in counterpart.
SOFTQUAD ACQUISITION CORP.
Per:
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SOFTQUAD SOFTWARE LTD.
Per:
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Witness Signature of Selling Shareholder
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(Print Name)
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