Investment Agreement

EXHIBIT 10.11


ASPACE SOLUTIONS LIMITED

STEVE KEOHANE

PAUL RYDER

JULIAN LOVELOCK

and


ACTIVECARD CORP


INVESTMENT AGREEMENT


DATED 31st July 2003

PARTIES

1 Company Aspace Solutions Limited (company registration no. 03970100) whose registered address is at Eagle House, 110 Jermyn Street, London, SW1Y 6RH; 2 Managers the Individuals whose names and addresses are set out in Schedule 2 (each a "Manager"); and 3 Investor ActivCard Corp a company incorporated in Delaware, USA whose registered address is at 6623 Dumbarton Circle, Fremont, California, 94555, USA.


OPERATIVE PROVISIONS

1. Definitions and interpretation

1.1 The following definitions apply:


Accounts Date 31 March 2003;

"A" Director a director appointed by the Investor pursuant to clause 4. 1;

Agreed Form the form agreed between the parties, a copy of which has been initialled for the purpose of identification by or on behalf of the parties;

"A" Ordinary Shares the "A" ordinary shares of 1p each in the capital of the Company having the rights set out in the Articles;

Articles the articles of association of the Company in the Agreed Form to be adopted pursuant to the Special Resolutions and as amended from time to time;

Associate

(a) (in relation to an individual);

(i) a relative, that is the individual's child, step child, spouse, brother, sister or parent;

(ii) a company of which the individual or a relative (referred to in (i) above), or two or more of them, has, or may have, Control or of which they are a director;

(iii) the trustees of a settlement whose beneficiaries include the individual and his relatives (referred to in (i) above); and


(b) (in relation to a company), a Subsidiary Undertaking or a Parent Undertaking of the Company or another Subsidiary Undertaking of any Parent Undertaking of the Company (in each case from time to time);

Accounts the balance sheet, as at the Accounts Date, and the profit and loss account for the financial period ended on the Accounts Date of the Company and the directors' report and notes ("financial year" being determined in accordance with s223 CA1985);

"Balance Sheet" the estimated unaudited balance sheet of the Company dated l6 July 2003;

"B" Director a director appointed by the Managers pursuant to clause 4.1.2;

Board the board of directors of the Company;

Business the development, licensing and maintenance of software and services to businesses;

Business Day a day (other than a Saturday or Sunday or public holiday) on which the clearing banks in the City of London and the United States of America are open for business; Business Plan and Budget the business plan and projections dated June 2003 and initialled for the purpose of identification by or on behalf of the parties;

CA1985 the Companies Act 1985;

Completion the completion of this Agreement in accordance with clause 2.4;

Completion Date means the date of completion of the Share Sale Agreement in all respects;

Control

(a) having an interest (within the meaning of part 1 of schedule 13 to and s324 of CA1985) in shares conferring in the aggregate more than 50% of the total voting rights conferred by all the shares in the


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equity share capital of the relevant company for the time being in issue and conferring the right to vote at all general meetings on all or substantially all matters; or

(b) having the right to appoint or remove directors of the relevant company holding a majority of the voting rights at meetings of the board on all or substantially all matters;

Deed of Adherence means a deed of adherence set out in Schedule 3;

Debenture the Agreed Form debenture of even date granted by the Company in favour of the Investor and initialled for the purpose of identification by or on behalf of the parties;

Disclosure Bundle the agreed disclosure bundle from the Managers to the Investor;

Disclosure Letter the letter dated with the same date as this agreement from the Managers to the Investor relating to the Warranties;

Documents this Agreement, the Share Sale Agreement, Facilty Agreement, Debenture, Articles, Service Agreements and the documents referred to in such agreements to be entered into on or about Completion;

Encumbrance a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of preemption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including, without limitation, a title transfer or retention arrangement) having similar effect;

"equity share capital" as defined in S744 CA 1985;

Exit means either i) a Listing ii) a sale of all or substantially all of the assets of the Company (other than as part of an inter group reorganisation) or iii) the sale of 50% or more of the equity share capital of the Company to a third


-4- party (other than as part of an inter group reorganisation) or to persons connected to such person (as defined by the City Code on Takeovers and Mergers);

Facility Agreement the 6% secured convertible loan agreement dated with the same date as this agreement in the Agreed Form between the Company and the Investor under which the Investor has agreed to provide a secured convertible loan to the Company;

GAAP Generally Accepted Accounting Principles;

ICTA the Income and Corporation Taxes Act 1988;

Indebtedness Any obligation of any person from time to time (present or future, actual or contingent, as principal or surety or otherwise) for the payment or repayment of money including, but not limited to:

(a) under acceptances, bills, boards, debentures, notes or similar instruments; or

(b) under guarantees or other assurances against financial loss; and

(c) in respect of the purchase, hire or lease of any asset or services;

Intellectual Property all copyright (including relating to source code)

Rights and object code of software programs) and rights in the nature of copyright, design rights, patents, trade marks, domain names, applications for any of the foregoing, moral rights, know-how, confidential information, trade secrets or any other intellectual or industrial property rights of the same or similar effect or nature whether or not registered or capable of registration in each case in any relevant jurisdiction used in connection with the Business;

Investor's Advisors Credo Corporate Finance Limited of 3rd Floor, 33 Margaret Street, London, W1G 0JD;


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Investor Group the Investor, and any holding company of the Investor and any subsidiaries of the Investor and any such holding company as such terms are defined in Section 736 of the Companies Act 1985 (as amended), in each case, from time to time

Key Man Insurance the key man insurance in the Agreed Form;

Listing the admission of any of the Company's equity share capital to the Official List or to the Alternative Investment Market of London Stock Exchange plc and admission becoming effective or the granting of an application by the Company for permission to deal in any of the Company's shares on any other public securities market and the permission becoming effective;

Loan the secured convertible loan the Investor has agreed to provide to the Company pursuant to the Facility Agreement;

Official List the Official List of the UK Listing Authority;

Ordinary Shares ordinary shares of 1p each in the capital of the Company;

Parent Undertaking as defined in s258 CA1985;

Party a party to this agreement;

Product Route Map the product route map in the Agreed Form

Programs the software programs that the Company owns and uses;

Questionnaire the due diligence questionnaire asking questions of the Managers in the Agreed Form;

Relevant Date the date on which a Manager and his Associates cease to be beneficially interested in any shares in the Company;

Relevant Period the period starting on the date of this Agreement and ending two years after the Relevant Date;

Sale Shares means the Shares in the issued share capital of the Company being sold to the Investor;

Sellers means collectively Orla Macallister and Una Gilmore as administrators of the Estate of Paul Gilmore (deceased), Alan Bates, Rick Peel, EFG


-6- Reads Trustees Limited, John Merchant, Corbett Keeling and Gary Rimmer;

"Service Documents" a writ, summons, order, judgement or other process in connection with any court or judicial proceedings;

Shares shares of any class of the Company in issue from time to time;

Share Sale Agreement the agreement in the Agreed Form to be entered into between the Sellers and the Investor under which the Sellers agree to sell and the Investor agrees to purchase the Sale Shares;

Special Resolutions the special resolutions of the Company in the Agreed Form;

Subsidiary as defined in s258 CA1985;

Undertaking

Tax means all present and future taxes, levies, duties, charges, assessments, deductions or withholdings whatsoever, including any interest thereon, and any penalties and fines with respect thereto, wherever imposed, levied, collected or withheld pursuant to any regulation having the force of law and "Taxation" shall be construed accordingly;

UK Listing Authority the Financial Services Authority; and

Warranties the representations, warranties, undertakings and obligations of the Managers contained in clause 8 and schedule 5 (each a Warranty).

1.2 A reference to a statutory provision includes a reference to:

1.2.1 a statutory amendment, consolidation or re-enactment (whether made before or after the date of this agreement) except to the extent that the amendment, consolidation or re-enactment coming into force after the date of this agreement would increase or extend the liability of one party to this agreement to another party;

1.2.2 statutory instruments or subordinate legislation or orders made under the statutory provision before the date of this agreement; and

-7- 1.2.3 statutory provisions of which the statutory provision is an amendment, consolidation or re-enactment; but does not include a substituted provision. 1.3 Reference to:

1.3.1 a document in "the Agreed Form" or "Agreed" means a reference to a document in the form agreed between the parties and duly initialled on behalf of each of them;

1.3.2 a person includes a legal or natural person, partnership, trust, company, government or local authority department or other body (whether corporate or unincorporate);

1.3.3 an individual includes, where appropriate, his personal representatives;

1.3.4 the singular includes the plural and vice versa; and

1.3.5 one gender includes all genders.

1.4 Unless otherwise stated, a reference to a clause, sub-clause or schedule is a reference to a clause or sub-clause of, or schedule to, this agreement and a reference to this agreement includes its schedules.

1.5 Clause headings in this agreement are for ease of reference only and do not affect its construction.

1.6 If at any time the Company has a Subsidiary Undertaking, then the provisions of this Agreement, in so far as they refer to the Company, shall also be deemed to apply to each and every Subsidiary Undertaking.

2. Conditions

2.1 This agreement (other than clauses 1 (Definitions), 10 (Announcements), 11 (Waiver), 12 (Contracts (Rights of Third Parties) Act 1999), 14 (Communications), 15 (Invalidity), 16 (No partnership), 19 (Confidentiality), 20 (Variation) and 24 (Proper law)) shall cease to have effect and no party shall have a claim under it except in respect of a prior breach unless, on or before 1 August 2003 (or such later date as the Investor and the Managers may agree) the Share Sale Agreement has been completed in all respects.


-8- 2.2 Each of the Parties undertake to use his or its reasonable endeavors to ensure the satisfaction of the condition in clause 2.1. 2.3 Each of the Managers waives all and any preemption rights or other rights (whether arising pursuant to the Articles or otherwise) to which be is or may be entitled in relation to any share capital of the Company or in any other capacity whatsoever in connection with the sale of Shares to the Investor pursuant to the Share Sale Agreement.

2.4 At Completion:

2.4.1 the Company, the Managers and the Investor (as the case may be for the respective Documents) shall execute and deliver this Agreement, the Share Sale Agreement, the Facility Agreement, and the Service Agreements;

2.4.2 the parties shall fulfil the requirements of clauses 2.1 to 2.2 ;

2.4.3 subject to the due fulfilment of the conditions and terms of the Facility Agreement the Investor shall deliver the advance under the Facility Agreement in the sum of a32,500,000 in accordance therewith.

3. Compliance with this Agreement and the Articles

3.1 Each party undertakes to the other that it shall take all practical steps, including without limitations, the exercise of votes it and the procuring of the exercise of votes its Associates directly or indirectly control at the meetings of the Board and general meetings of the Company to ensure that the terms of this Agreement are complied with and to procure that the Board and the Company complies with its obligations.

3.2 Each party undertakes to the other to comply fully and promptly with the provisions of the Articles so that each and every provision of the Articles shall be enforceable by the Parties as between themselves in whatever capacity.

3.3 If there is a conflict between the provisions of the Agreement and the Articles, the provisions of the Agreement shall prevail.

-9- 3.4 The Parties shall procure that the actions necessary to effect the following events (including the passing of appropriate resolutions of the holders of Shares) are taken as soon as reasonably practicable after Completion:

3.4.1 Any Sale Shares which are "A" Shares shall be re-designated as Ordinary Shares;

3.4.2 All holders of Shares resolve to waive any pre-emption rights in relation to the allotment of shares pursuant to the right of conversion under the Facility Agreement and that the directors of the Company are given due authority to allot the said Shares.

3.5 The Company and the Managers shall use their reasonable endeavours to procure that as soon as reasonably practicable after Completion; 3.5.1 the employees of the Company (other than the Managers) shall agree to their employment agreements being amended so as to include restrictive covenants of a scope similar to those imposed on the Managers in clauses 9.1 to 9.3; and

3.5.2 the Confidential Information is properly and adequately documented to enable the Company to retain its full benefit. 4. Board

4.1 Each of the Parties shall be entitled to appoint Directors to the Board as follows:

4.1.1 The Investor has the exclusive right to appoint and maintain in office a maximum of two directors of the Company. The Company will pay all expenses reasonably and properly incurred by the ?A' Directors (or an alternate) in connection with his office as directors but the "A" Directors shall not be entitled to any directors' fees. 4.1.2 The Managers shall be exclusively entitled to appoint and maintain in office a maximum of four directors of the Company. 4.2 An ?A' Director or a ?B' Director shall not be removed except in the case of an ?A' Director, by the Investor and, in the case of a ?B' Director, by the Managers.

4.3

The Investor has the right to remove an ?A' Director appointed by it and appoint another ?A' Director in his place. Each appointment or removal will


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be effected by giving notice in writing to the Company signed by or on behalf of the Investor and shall take effect on receipt or, if later, from the date and time stated in the notice.

4.4 The Managers have the right to remove a ?B' Director appointed by them and appoint another ?B' Director in his place. Each appointment or removal will be effected by giving notice in writing to the Company signed by or on behalf of the Managers and shall take effect on receipt or, if later, from the date and time stated in the notice. 4.5 An ?A' Director or ?B' Director may, by giving notice in writing to the Board, appoint another person to be his alternate and may, in the same way, remove an alternate appointed by him. An alternate is entitled to receive notice of all meetings of the Board and attend and vote as such at any meeting at which his appointor is not personally present and generally, in the absence of his appointor, to do all the things which his appointor is authorised or empowered to do.

4.6 Despite the duties owed by the ?A' Directors to the Company, the ?A' Directors (and their alternates) may disclose information and provide relevant documents and materials about the Company to, and discuss their affairs, accounts and finances with, appropriate officers and senior employees of the Investor (and to any person to whom the Investor is permitted to disclose information) and its Associates.

4.7 The Company shall take out and maintain in force a policy of insurance in respect of matters permitted by s310 CA1985 for the ?A' Directors for the duration of their appointment.

4.8 The Investor may appoint up to two representatives to attend, as observers, and speak (but not vote) at meetings of the Board (including committee meetings). The representatives will be entitled to receive all written materials and other information given to the members of the Board in connection with the meetings at the same time as those materials or information are circulated to the members of the Board. The representatives shall be subject to the same duties of confidentiality as the directors, except that they shall be able to disclose information in accordance with clause 4.6. The Company will, unless an ?A' Director has been appointed, pay the reasonable and properly incurred out-of-pockets expenses of the representatives in connection with attending meetings.


-11- 4.9 Unless otherwise agreed by the ?A' Directors:

4.9.1 meetings of the Board shall be held at least once every month;

4.9.2 meetings of the Board shall be held at the principal place of business of the Company;

4.9.3 no meeting of the Board may be convened on notice of less than five Business Days;

4.9.4 documents relating to issues to be considered by the Board at meetings shall be distributed in advance of the meeting to the ?A' Directors and their alternates so as to ensure that they are received at least three Business Days prior to the date fixed for the meeting;

4.9.5 the ?A' Directors shall receive a copy of the minutes of each meeting within ten Business Days of the meeting; and 4.9.6 the quorum of a board meeting shall be at least one "A" Director and one "B" Director (being one of the Managers) unless the meeting is inquorate when the quorum at the reconvened meeting (which shall be convened on not less than five Business Days notice) shall be the directors present.

4.10 The provisions of this clause 4 shall apply to each committee of the Board and to the board of directors of each Subsidiary Undertaking (if any) of the Company and to committees of those Boards in the same way as to the Board and references within this clause to the Board shall in that context be read as references to the relevant committee or to the board of directors of the relevant Subsidiary Undertaking (if any), as the case may be.

5. Financial information and other undertakings

5.1 The Company shall prepare and supply the Investor (and the Managers shall procure that the Investor is supplied) with the following information: 5.1.1 not later than 30 days after the end of each financial year copies of the statutory accounts of the Company in accordance with UK GAAP and adjusted to be in accordance with US GAAP;


-12- 5.1.2 not later than 10 days after the end of each calendar month copies of the unaudited management accounts of the Company and its Subsidiary Undertakings (if any) as at the end of each month in accordance with US GAAP and consistently applied including a balance sheet and profit and loss account and cash flow forecast for the next month and a comparison of actual performance with budget; 5.1.3 not later than 30 June and 31 December in each year, semi-annual budgets and cash flow forecasts showing the position of the Company and its Subsidiary Undertakings (if any) for the next 12 months;

5.1.4 minutes of each board meeting of the Company within ten business days of the relevant meeting; and

5.1.5 all additional information that the Investor at any time reasonably requests.

5.2 The Company and the Managers shall procure that the statutory accounts of the Company and its Subsidiary Undertakings (if any) are tabled for approval at a Board meeting of the Company not later than three months after the Company's accounting reference date in each year.

5.3 If the Company is in breach of any of its obligations under clauses 5.1 and 5.2, the Investor may (without prejudice to any other remedies it may have in respect of the breach) appoint an independent accountant or accountants of its choosing to investigate the affairs of the Company with a view to obtaining the information required by the Investor. If an accountant or accountants are appointed: 5.3.1 the Company and the Managers shall afford or shall procure that the Company and any necessary third party affords to the accountant or accountants all assistance and co-operation (including, without limitation, full and unrestricted access to the accounting books and records of the Company) as he or they may from time to time reasonably request; and

5.3.2 the reasonable and properly incurred costs of an appointment under this clause shall be borne by the Company and shall be paid by it in full within 28 Business Days of presentation of the relevant invoice.


-13- 6. Transfer of shares

6.1 Each of the Managers agrees that prior to an Exit he shall not sell, transfer, assign, pledge, charge or otherwise dispose of a Share or an interest in a Share other than as permitted by and in accordance with the Articles.

6.2 Except in the event of an Exit the parties agree that before an allotment or transfer of any Shares is effected, the allottee or transferee shall be required by the Company to execute a deed of adherence in the form set out in Schedule 3. This requirement shall not apply to an allotment or transfer to a party to this agreement (in the capacity in which such party is already a party) or to persons exercising options under the Employee Benefit Trust of the Company.

6.3 All deeds of adherence executed pursuant to clause 6.2 shall also be executed by the Company for itself and as attorney for all those persons who are parties to this Agreement at that time. Each of the parties, either by executing this agreement or by executing the relevant deed of adherence, appoints the Company as his attorney.

6.4 This agreement binds each party's successors and permitted assigns.

7. Matters requiring consent

The Company undertakes to the Investor that (and each of the Managers undertakes to the Investor that it or he will procure that) none of the matters set out in Schedule 4 will occur in relation to the Company without the prior written consent of the Investor.

8. Warranties

8.1 The Managers jointly and severally warrant to the Investor that as at the Completion Date except as fully and fairly set out in the Disclosure Letter or the Disclosure Bundle, the statements in Schedule 5 are true and accurate.

8.2 As far as the Managers are aware after reasonable enquiry the contents of the Disclosure Letter and the Disclosure Bundle are accurate and fully and clearly disclose everything to which they relate.

8.3 Each of the Warranties is without prejudice to the other Warranties and, except where expressly stated otherwise, no clause governs or limits the extent or application of the other clauses.


-14- 8.4 Each of the Managers warrants, in relation to any Warranty which refers to the knowledge, information, belief or awareness of the Managers, that he has made reasonable enquiries into the subject matter of the Warranty.

8.5 Each of the Managers undertakes to the Investor that he will immediately disclose to one of the ?A' Directors in writing any material matter or thing which may arise or become known to him after Completion which:

8.5.1 is inconsistent with any of the Warranties or the warranties contained in the Share Sale Agreement, the Facility Agreement or the Debenture; 8.5.2 constitutes a breach of any Document; or

8.5.3 has or might reasonably be thought to have a material and adverse effect on the business of the Company.

8.6 The Investor acknowledges and agrees that it shall have no remedy in respect of any misrepresentation or untrue statement (other than fraudulent misrepresentation) made by or on behalf of any of the Managers unless and to the extent that a claim lies for damages for breach of Warranty.

8.7 With effect from Completion, the Investor hereby irrevocably and unconditionally waives any rights which it might otherwise have had to seek to rescind or terminate this agreement for, or arising out of, a claim for breach or non-fulfilment of any of the Warranties.

8.8 If the Investor has a claim under the Warranties the Managers shall pay the Investor (at the Investor's option) an amount equal to either: 8.8.1 the reduction caused in the value of the Sale Shares and the Loan; or

8.8.2 if

(i) the value of an asset of the Company is or becomes less than the value would have been had the breach not occurred; or (ii)

the Company is subject to or incurs a liability or an increase in a liability which it would not have been subject to or would not have incurred had the breach not occurred,


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38.165% of the reduction in the value of the asset or, as the case may be, of the amount of the liability or increased liability, and in each case all reasonable costs (including legal fees) in connection with the Warranty Claim together with any interest accruing in connection with such Warranty Claim.

8.9 The Warranties in clause 8 are without prejudice to other rights of the Investor in relation to the breach or circumstance. 8.10 Each of the Managers acknowledges that in calculating the loss or damage suffered by the Investor in respect of a breach of the Warranties, account shall be taken of the total amounts paid by the Investor for the Sale Shares purchased under the Share Sale Agreement and the Loan made under the Facility Agreement.

8.11 The provisions of Schedule 8 shall apply to restrict and/or to exclude the liability of the Managers under the Warranties. 8.12 The Investor warrants to each of the Managers and to the Company that as at the Completion Date the statements in Schedule 9 are true and accurate. 8.13 The Managers jointly and severally hereby agree that they shall pay the Company upon demand an amount equal to the amount that the liabilities of the Company (including contingent liabilities and the payment to CSTIM CFAS Limited in connection with the investment by the Investor in the Company (the "Investment") but excluding any sums that may become liable to be repaid to the Inland Revenue in respect of tax credits granted to the Company in connection with its business) less the current assets of the Company as at the Completion Date exceeds a32.175m.

9. Restrictive agreement

9.1

In order to protect both the investment in the Company by the Investor and also the legitimate business interests of the Company and each of its Subsidiary Undertakings (if any), each of the Managers undertakes as separate and in ...