<PAGE>


                                                                    EXHIBIT 10.5





<PAGE>


                                 ACTIVCARD S.A.

                           1997 U.S. STOCK OPTION PLAN

      In accordance with articles 208-1 to 208-2 of the French Commercial Act of
July 24, 1966 (the "Commercial Companies Act"), the general meeting of the
shareholders of ACTIVCARD S.A. ("ACTIVCARD S.A.") held on May 31, 1996, and on
September 26, 1996, and June 17, 1997, approved the establishment of a stock
option plan (the "1997 Plan") for full-time employees of ACTIVCARD S.A. and of
its subsidiaries; in particular, the U.S. subsidiary ACTIVCARD, Inc. ("ActivCard
US"). The purpose of this document is to set forth the terms and conditions for
the grant of options to employees of ActivCard US under the 1997 Plan, as
determined by the Board of Directors of ACTIVCARD S.A. taking into account the
modifications resulting from the last resolution adopted by the General Meeting
of Shareholders on September 26, 1996:

1.    DEFINITIONS.  As used herein, the following definitions shall apply:

      (A)   "ADMINISTRATOR" means the Board or any Committee appointed to
administer the Plan.

      (B)   "APPLICABLE LAWS" means the legal requirement relating to the
administration of stock option plans, if any, under applicable provision of U.S.
federal securities laws, California corporate and securities laws, the Code, the
rules of any applicable stock exchange or national markets system, and
provisions of French Law applicable to Options granted by companies organized
under the laws of France.

      (C)   "BOARD" means the Board of Directors of the Company.

      (D)   "CODE" means the Internal Revenue Code of 1986, as amended.

      (E)   "COMMITTEE" means any committee appointed by the Board to administer
the Plan.

      (F)   "COMPANY" means ACTIVCARD S.A.

      (G)   "CONTINUOUS STATUS AN EMPLOYEE, CONSULTANT OR DIRECTOR" means that
the employment relationship, consulting relationship or directorship with the
Company, any Parent or Subsidiary, is not interrupted or terminated.

      (H)   "EMPLOYEE" means any person, including an officer or director, who
is a full-time employee of the Company or any Parent or Subsidiary.

      (I)   "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.


<PAGE>


      (J)   "FAIR MARKET VALUE" means as of any date, the French franc value of
the U.S. dollar value of a Share, calculated with reference to the NOON buying
rate reported by the Federal Reserve Bank of New York (expressed in francs per
$1.00) determined as follows:

            (I)   If the shares are listed on any established stock exchange
or a national market system, including without limitation the [EASDAQ] the
Nasdaq National Market or the Nasdaq Small Cap Market of the Nasdaq Stock
Market, the Fair Market Value of a Share shall be THE CLOSING SALES PRICE FOR
SUCH SHARE (or the closing bid, if no sales were reported) as quoted on such
system or exchange or the day of determination, as reported in THE WALL
STREET JOURNAL or such source as the Board deems reliable;

            (II)  If the Shares are regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market value of a Share
shall be the means between the high bid and low asked prices for the Shares on
the day of determination, as reported in THE WALL STREET JOURNAL or such other
source as the Board deems reliable;

            (III) In the absence of an established market for the Shares or the
Ordinary Shares, the Fair Market Value shall be determined in good faith by the
Board.

      (K)   "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

      (L)   "NON-QUALIFIED STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

      (M)   "OPTION" means a stock option granted pursuant to the Plan.

      (N)   "OPTION AGREEMENT" means the written or electronic agreement
evidencing the grant of an Option executed by the Company and the Optionee,
including any amendments thereto.

      (O)   "OPTIONED STOCK" means the Shares subject to an Option.

      (P)   "OPTIONEE" means an Employee who receives an Option under the Plan.

      (Q)   "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

      (R)   "PLAN" means this 1997 U.S. Stock Option Plan.

      (S)   "SHARE" means an Ordinary share of the Company.

      (T)   "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.


                                      -2-

<PAGE>

2.   STOCK SUBJECT TO THE PLAN.

     (A)   Subject to the provisions of Section 9, below, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
1,200,000 Shares.  The Shares may be authorized, but unissued, or reacquired
Shares.

     (B)   If any Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option exchange program,
such unissued Shares shall become available for future grant under the Plan.
Shares that actually have been issued under the Plan shall not be become
available for future distribution under the Plan.

3.   ADMINISTRATION OF THE PLAN.

     (A)   PLAN ADMINISTRATOR.  The Plan shall be administered by (A) the
Board or (B) a Committee (or a subcommittee of such Committee) designated by
the Board, which Committee shall be constituted in such a manner as to
satisfy Applicable Laws.  Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.

     (B)   POWERS OF THE ADMINISTRATOR.  Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:

           (I)    to select the Employees to whom Options may be granted form
time to time hereunder;

           (II)   to determine whether and to what extent Options are granted
hereunder;

           (III)  to determine the number of Shares to be covered by each
Option granted hereunder;

           (IV)   to approve forms of Option Agreement for use under the Plan;

           (V)    to determine the terms and conditions of any Option granted
hereunder;

           (VI)   to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of France and to afford Optionees
favorable treatment under such laws; provided, however, that no Option shall
be granted under any such additional terms, conditions, rules or procedures
with terms or conditions which are inconsistent with the provisions of the
Plan;

           (VII)  to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan; and

           (VIII) to take such other actions, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.

                                      -3-
<PAGE>

     (C)   EFFECT OF ADMINISTRATOR'S DECISION.  All decisions,
determinations and interpretations of the Administrator shall be conclusive
and binding on all persons.

4.   ELIGIBILITY.  Options may be granted only to full-time Employees who are
not employees of the Company for French tax purposes.  An [EMPLOYEE] who has
been granted an Option may, if otherwise eligible, be granted additional
Options.

5.   TERMS AND CONDITIONS OF OPTIONS.

     (A)   DESIGNATION OF OPTIONS.  Each Option shall be designated as either
an Incentive Stock Option or a Non-Qualified Stock Option.  However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of Shares subject to Options designated as Incentive Stock
Options which become exercisable for the first time by any Optionee during
any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the date the Option with
respect to such Shares is granted.

     (B)   CONDITIONS OF OPTION.  Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Option.

     (C)   TERM OF OPTION.  The term of each Option shall be the term stated
in the Option Agreement, provided, however, that the term shall be no more
than ten (10) years from the date of grant thereof. However, in the case of
an Incentive Stock Option granted to an Optionee who, at the time the Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years form the date of grant thereof or
such shorter term as may be provided in the Option Agreement.

     (D)   NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.  Unless
determined otherwise by the Administrator, an Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option transferable, such Option shall contain such
additional terms and conditions as the Administrator deems appropriate.

     (E)   TIME OF GRANTING OPTIONS.  The date of grant of an Option shall
for all purposes, be the date on which the Administrator makes the
determination to grant such Option, or such other date as is determined by
the Administrator. Notice of the grant determination shall be given to each
Employee to whom an Option is so granted within a reasonable time after the
date of such grant.

6.   OPTION EXERCISE PRICE AND CONSIDERATION; TAXES

     (A)   INCENTIVE STOCK OPTIONS.  In the case of an Incentive Stock Option:


                                      -4-
<PAGE>

           (A)  granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.


           (B)  granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

     (B)   NON-QUALIFIED STOCK OPTION.  In the case of a Non-Qualified Stock
Option:

           (A)  granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be not less than one hundred ten percent
(110%) of the Fair Market Value per Share on the date of grant.

           (B)  granted to any person other than a person described in the
preceding paragraph, the per Share exercise price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.

     (C)   CONSIDERATION.  Subject to Applicable Laws, the method of payment
for Shares to be issued upon exercise of an Option shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant).

     (D)   TAXES.  No Shares shall be delivered under the Plan to any
Optionee or other person until such Optionee or other person has made
arrangements acceptable to the Administrator for the satisfaction of any
foreign, federal, state, or local income and employment tax withholding
obligations, including, without limitation, obligations incident to the
receipt of Shares or the disqualifying disposition of Shares received on
exercise of an Incentive Stock Option. Upon exercise of an Option the Company
shall withhold or collect from Optionee an amount sufficient to satisfy such
tax obligations.

7.   EXERCISE OF OPTION.

     (A)   PROCEDURE FOR EXERCISE: RIGHTS AS A SHAREHOLDER.

           (I)  Any Option granted hereunder shall vest and become
exercisable as follows: twenty-five percent (25%) of the Shares subject to
the Option shall vest one year after the Option's vesting Commencement Date
(as set forth in the Optionee's Notice of Grant), and one forty-eighth (1/48)
of the Shares subject to the Option shall vest each month thereafter;
provided that the Optionee's Continuous Status as an Employee, Consultant or
Director has not terminated on such dates.


                                      -5-

<PAGE>

           (II)    An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company.  Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of
the Company) of the Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to Optioned Stock,
notwithstanding the exercise of an Option.  The Company shall issue (or cause
to be issued) such Shares promptly upon exercise of the Option.  No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in the
Option Agreement or Section 9(a), below.

     (B)  EXERCISE OF OPTION FOLLOWING TERMINATION OF CONTINUOUS STATUS AS AN
EMPLOYEE, CONSULTANT OR DIRECTOR RELATIONSHIP.  In the event of termination
of an Optionee's Continuous Status as an Employee (other than by reason of
disability) such Optionee may, but only within three (3) months after the
date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise his
or her Option to the extent that the Optionee was entitled to exercise it at
the date of such termination or to such other extent as may be determined by
the Administrator.  If the Optionee should die within three (3) months after
the date of such termination, the Optionee's estate or the person who
acquired the right to exercise the Option by bequest or inheritance may
exercise the Option to the extent that the Optionee was entitled to exercise
it at the date of such termination within six (6) months of the Optionee's
date of death, but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement.

     (C)  DISABILITY OF OPTIONEE.  In the event of termination of an
Optionee's Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months form the date of
such termination (an in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to
the extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such
term is defined in Section 22(c)(3) of the Code, in the case of an Incentive
Stock Option such Incentive Stock Option shall automatically convert to a
Non-Qualified Stock Option on the day three (3) months and one day following
such termination.  To the extent that Optionee is not entitled to exercise
the Option at the date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.

     (D)  DEATH OF OPTIONEE.  In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death.  If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert
the Plan.  If, after

                                       -6-

<PAGE>
death, the Optionee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance does not exercise the Option within the
time specified herein, the Option shall terminate.

8.  CONDITIONS UPON ISSUANCE OF SHARES.

     (A)  Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and, to the
extent deemed necessary, shall be further subject to the approval of counsel
for the Company with respect to such compliance.

     (B)  As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any Applicable Laws.

9.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR SALE OF ASSETS.

     (A)  If the Company carries out any of the financial operations referred
to in article 195, paragraphs 5 and 6 of article 196, paragraphs 1 and 3, of
the French Companies Law, the Board shall, under the conditions prescribed by
law, adjust the number and price of Shares underlying outstanding Options, in
order to take account of the effects of the financial operation.  At the time
any such operation is carried out, the Board of Directors may temporarily
suspend option exercise rights for the period during which the registered
capital for the Company must remain unchanged.

     (B)  In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company,
each outstanding Option shall be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.  In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable.
If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option shall
be fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed
if, following the merger or sale of assets, the option or right confers to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale
of assets by holders of Shares for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares);  provided, however, that if such consideration received in the
merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option,

                                       -7-

<PAGE>

for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Shares in the merger or
sale of assets.

10.  TERMS OF PLAN. Options may be granted under these Plan for a period of
five (5) years form the date the Plan was first authorized by the
extraordinary general meeting of the Company's shareholders (May 31, 1996).

11.  AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.

     (A)   The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a
degree as required.

     (B)   No Option may be granted during any suspension of the Plan or
after termination for the Plan.

     (C)   Any amendment, suspension or termination of the Plan shall not
affect Options already granted, and such Options shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and sighed by the Optionee and the Company.

12.  RESERVATION OF SHARES.

     (A)   The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

     (B)   The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

13.  NO EFFECT ON TERMS OF EMPLOYMENT. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.

14.  INFORMATION TO OPTIONEES. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options
outstanding, copies for financial statements as is presented to the annual
ordinary general meeting of the shareholders called to approve the financial
statements of the Company.


                                       -8-

<PAGE>

                     ACTIVCARD S.A. 1997 U.S. STOCK OPTION PLAN

                               STOCK OPTION AGREEMENT

I.   NOTICE OF STOCK OPTION GRANT

     Optionee's Name and Address:       Douglas Kernan
                                        17259 Deer Park Road
                                        Los Gatos, CA 95032

     You have been granted an option to purchase shares of Ordinary Shares of
the Company, subject to the terms and conditions of the 1997 Plan and this
Option Agreement, as follows:

<TABLE>

   <S>                                <C>
     Grant Number                       9721

     Date of Grant                      7/28/97

     Vesting Commencement Date          6/16/97

     Exercise Price per Share           $5.75

     Total Number of Shares Granted     70,000

     Total Exercise Price               $402,500.00

     Type of Option:                    $400,000.00   Incentive Stock Option
                                        -------------

                                        $2,500.00     Non-Qualified Stock Option
                                        -------------

     Term/Expiration Date:              6/15/04
</TABLE>

VESTING SCHEDULE:

     Subject to other limitations set forth in this Agreement, this Option
may be exercised, in whole or in part, in accordance with the following
schedule:

     Twenty-five percent (25%) of the Shares subject to the Option shall vest
twelve months after the Vesting Commencement Date, and 1/48th of the Shares
subject to the Option shall vest each month thereafter, so long as Optionee's
Continuous Status as an Employee, Consultant or Director has not terminated
on such dates.

TERMINATION PERIOD:

                                       9


<PAGE>

     This Option may be exercised for three (3) months after termination of
the Optionee's Continuous Status as an Employee, Consultant or Director, or
such longer period as may be applicable upon death or disability of Optionee
as provided in the 1997 Plan. In no event shall this Option be exercised
later than the Term/Expiration Date as provided above.

II.  AGREEMENT

     1.  GRANT OF OPTION.  ACTIVCARD S.A., a corporation organized under the
laws of France, (the "Company"), hereby grants to the Optionee named in the
Notice of Stock Option Grant (the "Optionee"), an option (the "Option") to
purchase the total number of shares of Ordinary Shares (the "Shares") set
forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the Company's 1997 Stock Option
Plan (the "1997 Plan"), and the 1997 U.S. Stock Option Plan (the "Plan")
which are incorporated herein by reference. Unless otherwise defined herein,
the terms defined in the Plan shall have the same defined meanings in this
Option Agreement.

         If designated in the Notice of Stock Option Grant as an Incentive
Stock Option, this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Section 422(d) of the Code, this Option shall be
treated as a Non-Qualified Stock Option.

     2.  EXERCISE OF OPTION.

         (a)  RIGHT TO EXERCISE.  This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and with the applicable provisions of the Plan and this Option
Agreement. In the event of termination of Optionee's Continuous Status as an
Employee, Director or Consultant, this Option shall be exercisable in
accordance with the applicable provisions of the Plan and this Option
Agreement.

         (b)  METHOD OF EXERCISE.  This Option shall be exercisable only by
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
election to exercise the Option, the whole number of Shares in respect of
which the Option is being exercised, and such other provisions as may be
required by the Administrator. Such Exercise Notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company accompanied by payment of the Exercise Price. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.

              No Shares will be issued pursuant to the exercise of the Option
unless such issuance and such exercise shall comply with all Applicable Laws.
Assuming such compliance, for income tax purposes, the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.


                                       10

<PAGE>

         (c)  TAXES.  No Shares will be issued to the Optionee or any other
person pursuant to the exercise of the Option until the Optionee or such
other person has made arrangements acceptable to the Administrator for the
satisfaction of foreign, federal, state and local income and employment tax
withholding obligations.

     3.  OPTIONEE'S REPRESENTATIONS.  In the event the Shares purchasable
pursuant to the exercise of the Option have not been registered under the
Securities Act of 1933, as amended, at the time the Option is exercised, the
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion the Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.

     4.  METHOD OF PAYMENT.  Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee;
provided, however, that such exercise method does not then violate Applicable
Laws:

         (a)  cash;

         (b)  check;

         (c)  consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or

         (d)  surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

     5.  RESTRICTIONS ON EXERCISE.  This Option may not be exercised if the
issuance of the Shares subject to the Option upon such exercise would
constitute a violation of Applicable Laws.

     6.  NON-TRANSFERABILITY OF OPTION.  This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs and successors of the Optionee.

     7.  TERM OF OPTION.  This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Option Agreement.

     8.  TAX CONSEQUENCES.  Set forth below is a brief summary as of the date
of this Option Agreement of some of the federal tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND


                                       11

<PAGE>

REGULATIONS ARE SUBJECT TO CHANGE.  OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
           (a)   EXERCISE OF INCENTIVE STOCK OPTION.  If this Option
qualifies as an Incentive Stock Option, there will be no regular federal
income tax liability upon the exercise of the Option, although the excess, if
any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative minimum
tax for federal tax purposes and may subject the Optionee to the alternative
minimum tax in the year of exercise.

           (b)   EXERCISE OF NON-QUALIFIED STOCK OPTION.  There may be a
regular federal income tax liability upon the exercise of a Non-Qualified
Stock Option.  The Optionee wil be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the Exercise
Price.  If Optionee is an Employee or a former Employee, the Company will be
required to withhold from Optionee's compensation or collect from Optionee
and pay to the applicable taxing authorities an amount in cash equal to a
percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.

           (c)  DISPOSITION OF SHARES.  In the case of a Non-Qualified Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes.  In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year
after receipt of the Shares and two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes.  If Shares purchased under an
Incentive Stock Option are disposed of within such periods, any gain realized
on such disposition wil be treated as compensation income (taxable at
ordinary income rates) to the extent of the difference between the Exercise
Price and the lesser of (i) the Fair Market Value of the Shares on the date
of exercise, or (ii) the sale price of the Shares.

      9.  LOCK-UP AGREEMENT.

           (a)   AGREEMENT.  Optionee, if requested by the Company and the
lead underwriter of any public offering of the Ordinary Shares or other
securities of the Company (the "Lead Underwriter"), hereby irrevocably agrees
not to sell, contract to sell, grant any option to purchase, transfer the
economic risk of ownership in, make any short sale for, pledge or otherwise
transfer or dispose of any interest in any Ordinary Shares or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire Ordinary Shares (except Ordinary Shares included in such
public offering or acquired on the public market after such offering) during
the 180-day period following the effective date of a registration statement
of the Company filed under the Securities Act of 1933, as amended, or such
shorter period of time as the Lead Underwriter shall specify.  Optionee
further agrees to sign such documents as may be requested by the Lead
Underwriter to effect the foregoing and agrees that the Company may impose
stop-transfer instructions with respect to such Ordinary Shares until the end
of such period. The Company and

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<PAGE>

Optionee acknowledge that each Lead Underwriter of a public offering of the
Company's stock, during the period of such offering and for the 180-day
period thereafter, is an intended beneficiary of this Section 9.

           (b)   PERMITTED TRANSFERS.  Notwithstanding the foregoing, Section
9(a) shall not prohibit Optionee from transferring any shares of Ordinary
Shares or securities convertible into or exchangeable or exercisable for the
Company's Ordinary Shares, to the extent such transfer is not otherwise
prohibited by this Agreement, either during Optionee's lifetime or on death
by will or intestacy to Optionee's immediate family or to a trust the
beneficiaries of which are exclusively the Optionee and/or a member or
members of Optionee's immediate family; provided, however, that prior to any
such transfer, each transferee shall execute an agreement pursuant to which
each transferee shall agree to receive and hold such securities subject to
the provisions hereof.  For the purposes of this subsection, the term
"immediate family" shall mean spouse, lineal descendant, father, mother,
brother or sister of the tranferor.

           (c)   NO AMENDMENT WITHOUT CONSENT OF UNDERWRITER.  During the
period from identification as a Lead Underwriter in connection with any
public offering of the Company's Ordinary Shares until the earlier of (i) the
expiration of the lock-up period specified in Section 9(a) in connection with
such offering or (ii) the abandonment of such offering by the Company and the
Lead Underwriter, the provisions of the Section 9 may not be amended or
waived except with the consent of the Lead Underwriter.

      10.  ENTIRE AGREEMENT; GOVERNING LAW.  This 1997 Plan and the Plan are
incorporated herein by reference.  The 1997 Plan, the Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertaking
and agreements of the Company and the Optionee with respect to the subject
matter hereof, and may not be modified adversely to the Optionee's interest
except by means of a writing signed by the Company and Optionee.  This
agreement is governed by California law, except for that body of law
pertaining to conflicts of laws.

      11.  HEADINGS.  The captions used in this Agreement are inserted for
convenience and shall not be deemed a part of this Agreement for construction
or interpretation.

      12.  INTERPRETATION.  Any dispute regarding the interpretation of this
Option Agreement shall be submitted by the Optionee or by the Company
forthwith to the Board or the Administrator that administers the Plan, which
shall review such dispute at its next regular meeting.  The resolution of
such dispute by the Board or the Administrator shall be final and binding on
all persons.

                                             ACTIVCARD S.A., a corporation
                                             organized under the laws of France.

                                             By: /s/ [ILLEGIBLE]
                                                ------------------------------


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<PAGE>



                                                           Its:
                                                               -------------

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY OPTIONEE'S CONTINUED EMPLOYMENT, CONSULTANCY OR
DIRECTORSHIP AT THE WILL OF THE COMPANY OR ACTIVCARD, INC. (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR
IN THE 1996 PLAN OR THE PLAN WHICH ARE INCORPORATED HEREIN BY REFERENCE,
SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUING AS AN
EMPLOYEE, CONSULTANT OR DIRECTOR OF THE COMPANY OR ACTIVCARD, INC., NOR SHALL
IT INTERFERE IN ANY WAY WITH THE COMPANY'S RIGHT OR ACTIVCARD, INC.'S RIGHT
TO TERMINATE OPTIONEE'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the 1997 Plan and the Plan and
represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Option Agreement subject to all of the terms and
provisions thereof. Optionee has reviewed the 1997 Plan, the Plan and this
Option Agreement in their entirety, has had an opportunity to obtain the
advise of counsel prior to executing this Option Agreement and fully
understands all provisions of the Option Agreement. Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations
of the Administrator upon any questions arising under the 1997 Plan, the
Plan or this Option Agreement. Optionee further agrees to notify the Company
upon any change in the residence address indicated below.

Dated:  August 15, 1997
      ----------------------
       Signed: /s/  Douglas Kernan
              -------------------------
                               Optionee


                              Residence Address:
                                   17259 DEER PARK RD
                              -------------------------------------------------
                                   Los Gatos, CA
                              -------------------------------------------------
                                              95032
                              -------------------------------------------------


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