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EXHIBIT 10.3
HEADS OF AGREEMENT
BETWEEN:
VASCO CORPORATION, represented by Xxxxxxx XXXX, Chief Executive Officer
AND:
VASCO DATA SECURITY EUROPE S.A., represented by Xxxxxxx XXXX, President and
Director
AND:
DIGILINE INTERNATIONAL LUXEMBOURG, represented by Xxxxx XXXXXXX and Xxxxxxxxx
XXXXXXXX, Directors
AND:
DIGILINE S.A., represented by Xxxxxxxxx XXXXXX, Managing Director
AND:
DIGIPASS S.A., represented by Xxxxxxxxx XXXXXX and Xxx XXXXXX, Directors
AND:
Xxxxxxxxx XXXXXX, residing at rue Gillemont 21, 6120 Ham sur Heure
AND:
TOPS S.A., represented by Xxxxxxxxx XXXXXX, President
1.- Vasco Corp. (Vasco) has set up a new company, Vasco Data Security Europe
(VDSE) in Brussels. VDSE is a holding company 100% owned by Vasco. VDSE's
mission is to act as the holding company for various business ventures and
activities in Europe, Eastern Bloc, Middle East, and other areas which provide
economic opportunities for Vasco. It will invest in companies which are
involved in computer security products and services, and have a << presence >>
in territories where VDSE would like to establish an on-going business.
2.- Digiline International Luxembourg (DIL), in its capacity as shareholder of
Digipass Belgium (DP), TOPS (TP) and Digiline Belgium (DB), on the one hand,
and VASCO and VDSE, on the other hand, hereby agree to the following structure
for the acquisition by VDSE of DP and of the assets and certain liabilities of
DB:
TP will transfer its DP shares for book value to DP.
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All of the assets of DB will be transferred to DP at their book value. In
addition, DP will assume for book value all of the current accounts payable and
accrued expenses of DB. The net value of such transfer and assumption will be
invoiced by DB to DP. The transfer will be structured so as to qualify as a
transfer of a branch of business activity in such a way that the employment
contracts of all concerned employees will be automatically transferred to DP.
VDSE will then purchase 100% of the stock of DP from DIL for the price of
$10,000,000.00 (USD) (ten million) less any positive net equity remaining in
the building owned by TOPS and occupied by DP and DB. Positive net equity
shall be defined as the fair market price of the building as determined by an
<< expert immobilier >>, less the remaining balance of the mortgage
indebtedness (plus costs associated with the planned refinancing of the
mortgage) due at the effective date of the final Agreement. Except for the
abovementioned adjustment for the net equity in the building the amount of the
purchase price shall not be subject to adjustment for any reason. In no event
shall DIL be responsible for the financial results of year 1996.
Any costs arising from such transfer of assets and liabilities, shall be for
the account of DP.
At Closing of the sale, the assets of DP will consist of all of the assets
previously owned by DB or DP associated with the operation of the business of
DP and DB including (1) cash, (2) accounts receivable, (3) furniture, fixtures,
machinery and equipment, (4) inventory (raw materials, work-in-process and
finished goods), (5) patents, trademarks and other intellectual property, (6)
contracts to provide tokens or other products to third parties, (7) deposits
and prepaid expenses, (8) product names including Digipass, Digiline, Digidial,
Easy Dial, Intermezzo, and other names being used by DP and DB, and (9) any
other assets owned by DP necessary for the operation of the business except the
following assets: patents, trademarks, other intellectual property and product
names related to Dynapark and Muslimclock.
DIL has agreed to retain the 1995 net after-tax profit and the 1996 net
after-tax profit, up to the Closing of the sale, in DP and DB that VDSE is
acquiring, except for the dividend distribution of BEF 1,000,000 approved by
the shareholders of DB at the general meeting on May 8th, 1996.
DIL represents and warrants to Vasco and VDSE that the financial statements of
DB and DP for the year ended December 31, 1995 have been prepared in good faith
and in accordance with the provisions of the applicable Belgian accounting
rules.
At Closing of the sale, the only liabilities of DP will be current accounts
payable and accrued expenses associated with the operation of business of DP
and DB. All intercompany receivables and payables on the books of DP will be
written off at Closing.
3.- Payment of the purchase price shall be made in cash in immediately
available US Dollars as follows :
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Payment Number Payment Date Amount
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No later than December 31, 1996 $ 5000000
1 No later than December 31, 1997 $ 5000000
2 Total Payments $10000000
Payment 1 above shall be paid in cash at the settlement date of Vasco Corp.'s
public offering but in no event later than December 31, 1996. Such payment
shall be irrevocably and unconditionally guaranteed by means of an Irrevocable
Letter of Credit or Irrevocable Bank Guarantee in favor of DIL issued by a
first-class bank acceptable to DIL.
Payment 2 shall be paid in cash no later than December 31, 1997. Such payment
shall be irrevocably and unconditionally guaranteed by means of an Irrevocable
Letter of Credit or Irrevocable Bank Guarantee in favor of DIL issued by a
first-class bank acceptable to DIL.
Based upon the assumption that DP, DB and DIL are not doing business in the
United States of America the above payments will be made without deduction,
withholding or offset for any US taxes.
Payments 1 and 2 may be delayed by written agreement of VDSE and DIL, provided
that DIL shall under no circumstances be obliged to grant its consent to any
such delay. Any amounts not paid on January the 1st 1997 shall bear interest
at the rate of 8% per annum. Interest due for any portion of a year shall be
prorated based on the actual number of days elapsed divided by 360.
At the sole election of DIL, payment 2 may be in the form of Vasco Common
Stock, priced at Fair Market Value at the time of delivery, in U.S. Dollars.
Fair Market Value (FMV) shall be defined as the average NASDAQ closing price
for the prior 20 trading days from the date of issuance. Under current SEC
regulations, shares are restricted from sale for 24 months from the date of
issuance.
As provided in Clause 13, DIL shall have the right to withdraw from this Heads
of Agreement if VASCO and VDSE have not presented to DIL the abovementioned
bank guarantees in form and substance meeting the requirements set forth above
within 30 business days from the date of signature of this Heads of Agreement.
DIL shall have 5 business days from the date of its receipt of the proposed
guarantees to confirm that the Guarantees are in accordance with the
requirements of this Heads of Agreement. In the case where DIL withdraws from
this Heads of Agreement, DB, DP, TP, and DC will not anymore be bound by this
Heads of Agreement except if otherwise provided in this agreement.
4.- The Parties will mutually agree when to disclose the terms of this
Agreement, until which time all terms will be kept private and confidential.
Under any circumstances, SEC regulations will govern the disclosure timing.
However, the disclosure of the terms of this Agreement will in any event not
occur before DIL will have confirmed that the bank guarantees are in accordance
with the requirements set forth above.
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5.- Xxxxx Xxxxxxxxx (MAH) will be the Managing Director of DP, the combined
operations of DP and DB.
6.- DC acting through TP shall be a consultant to the new management of DP for
a period of 6 months, with an option to extend this consulting agreement by
mutual consent of DC and DP. DC's role shall be to advise management during a
suitable transition period from the old management to the new management. DC
shall be considered an independent consultant, and shall spend an average of 4
days per week as a consultant to DP. His involvement shall be progressively
reduced to zero at the end of the period above.
TP will be paid by DP for these consultancy services at a fixed monthly fee of
309,337.00 BEF (plus applicable VAT).
During this consulting period, DC with the agreement of DP, may also be
involved part-time in the areas of innovation and research and development, but
will remain an independent consultant, not an employee.
7.- DC shall sign a non-compete contract for a period of 5 years. During this
period, DC shall be free to conduct other non-competitive business, including
designing, producing and selling devices that do not compete with Vasco's
family of current or future products as defined below.
VDSE's business definition of competing products is as follows : the
undertaking of any possible application of cryptography, any mathematical and
logical system, as well as satellite communication and voice digitalization,
assistance by means of services or consultancy, development, manufacturing and
commercialization of methods, systems, machines and products related to
security of data and programs, their transmission and their modification, as
well as electrical components, computer software and hardware, but only if and
to the extent that any of the foregoing is related to security as indicated
above. DYNAPARK and MUSLIMCLOCK are not considered competing products.
8.- DIL shall undertake to use its best efforts to obtain that any DB
employees whose employment contracts are not automatically transferred to DP
pursuant to the business transfer referred to in Clause 2 above, shall sign new
Employment Agreements with DP, containing terms and conditions consistent with
Belgian law. It is understood that VDSE feels a moral obligation to maintain
its business in Belgium and has no plans to relocate its business outside
Belgium.
9.- Once DP has been acquired by VDSE, key employees of DP will be eligible to
participate in the Vasco Corp. Stock Option Plan. Vasco will work with Price
Waterhouse to assure that such participation is structured in such a way so as
to optimize the tax treatment for such individuals.
10.- DP shall sign a new rental agreement with TP for the current DP and DB
office facilities for a period of 24 months at a competitive fair market price.
By giving at least 6 months written notice
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prior to the end of such initial term or of any renewal term, DP may extend the
term of this rental agreement for up to 3 additional 12-month periods.
11.- The undersigned parties agree that all information furnished to either of
them or to any affiliate, employee or agent of either of them by DC, DB or DIL
in connection with the acquisition of DP will be treated as strictly
confidential and will not without the prior written consent of DIL, be
disclosed by Vasco or VDSE or by any of their employees, agents or affiliates
to any third parties either (i) prior to the Closing of VDSE's acquisition of
DP, or (ii) if for any reason VDSE does not acquire DP. Following VDSE's
acquisition of DP such obligation of confidentiality and nondisclosure shall
remain applicable to any information furnished by DIL, DC or DB in connection
with DIL's sale of DP which does not relate exclusively to DP.
12.- Vasco shall indemnify DB and DIL (and any of their affiliates, officers or
shareholders) and hold each of them harmless against any liabilities, claims or
expenses related to Vasco's public offering.
13.- The present Heads of Agreement shall be governed by Belgian law. Any
controversies arising hereunder shall be submitted to arbitration in Brussels
in accordance with the CEPANI rules. The acquisition of DP contemplated by the
present Heads of Agreement shall be further implemented by means of
documentation to be negotiated amongst the parties reflecting all of the terms
and conditions set forth herein and other terms and conditions, including
certain representations, warranties and covenants with respect to the business
of DP and DB and, the assets and liabilities of DP, not inconsistent with the
terms hereof. However, DC, DB, DP, TP and DIL reserve the right to withdraw
from this Agreement if within 30 business days from the date of this Heads of
Agreement they shall not have received the guarantees referred to in Clause 3
hereof. If DC, DB, DP, TP and DIL elect not to withdraw, the agreement shall
be modified so that the guaranties referred to in clause 3 need not to be
delivered. In case they elect to withdraw, the only obligation of Vasco and
VDSE under Clause 11 hereof shall survive the termination of this Agreement and
shall remain in effect for a period of 36 (thirty-six) months.
14.- VASCO shall be jointly and severally liable with VDSE for any and all
obligations of VDSE under the present Heads of Agreement and under the
definitive documentation referred to in Clause 13.
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Done in Brussels, on May, 13th 1996
VASCO Corp. DIGILINE INTERNATIONAL LUX.
By /s/ Xxxxxxx Xxxx By /s/ Xxxxxxxxx Xxxxxxxx
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Xxxxxxx XXXX Xxxxxxxxx XXXXXXXX
Chairman & CEO Director
VASCO DATA SECURITY
EUROPE S.A.
By /s/ Xxxxxxx Xxxx By /s/ Xxxxx Xxxxxxx
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Xxxxxxx XXXX Xxxxx XXXXXXX
President and Director Director
TOPS S.A. DIGILINE BELGIUM S.A.
By /s/ Xxxxxxxxx Xxxxxx By /s/ Xxxxxxxxx Xxxxxx
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Xxxxxxxxx XXXXXX Xxxxxxxxx XXXXXX
President Managing Director
DIGIPASS S.A.
By /s/ Xxxxxxxxx Xxxxxx
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Xxxxxxxxx XXXXXX
Director
By /s/ Jan Valcke
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Jan VALCKE
Director
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