While Oakbrook Terrace, Illinois-based Vasco will pay $4m in cash and is issuing two million shares of common stock for the preferred stock and common share warrants, it is significantly less than the $15m in cash or common stock the access control software vendor would have had to have paid out at the mandatory conversion date of July 2004.

It has become apparent that the market, our customers, and financing sources were all concerned about the dilution that may have resulted if the preferred stock reached the mandatory conversion date, said Kendall Hunt, chairman and CEO of Vasco. With this agreement in place, Vasco can now work more effectively with all parties.

Vasco will be making the payment in stages, which is not surprising considering that it only has $3.9m in cash, according to its recent second-quarter trading update. While a cash payment of $4m will therefore require some strict financial controls, it will be considerably easier to stomach than a $15m payment.

The company will pay Ubizen $3m in cash and issue two million shares of common stock by July 25, followed by a further payment of $1m by November 14. The shares will be subject to a lock-up period that will release the shares 500,000 at a time on October 15, 2003, January 15, 2004, April 15, 2004 and July 15, 2004, and will be subject to volume trading restrictions until January 1, 2005.

While Leuven, Belgium-based Ubizen is losing a significant percentage of the $15m it invested in Vasco in July 2000, it at least gets a cash boost as it begins cost-cutting exercises in response to flat demand for its managed security service offerings.

In light of our strategy to focus on our core business, managed security solutions, we decided to enter into this agreement with Vasco, said Stijn Bijnens, CEO of Ubizen. This early settlement not only generates upfront cash but also enables us to put a market value on our remaining shareholding in Vasco today. The acquired funds will help us to continue to focus on increasing profitability and scalabilty of our core offering.

Source: Computerwire