Document:

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                                                                   EXHIBIT 10.23

                              EMPLOYMENT AGREEMENT

      The parties to this Employment Agreement (the "AGREEMENT") are Emmett Hume
(the "EXECUTIVE"), residing at 48 Hamlet Court, Skillman, New Jersey 08558, and
ORBCOMM Inc. (the "COMPANY"), a company organized under the laws of Delaware,
with principal offices located at 2115 Linwood Avenue, Fort Lee, NJ 07024.

      The Company desires to provide for the Executive's employment by the
Company, and the Executive desires to accept such employment under the terms and
conditions contained herein, and the parties hereto have agreed as follows:

            1. EMPLOYMENT. The Company shall employ the Executive, and the
Executive shall serve the Company, as Executive Vice President - International,
with duties and responsibilities compatible with that position. The Executive
agrees to devote his full business time, attention, skill, and energy to
fulfilling his duties and responsibilities hereunder; provided that the
Executive may (a) serve on corporate, civic, educational, philanthropic, or
charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements, or teach at educational institutions, and (c) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's duties and responsibilities hereunder and do not
violate Section 6 below. The Executive's services shall be performed principally
at the Company's Fort Lee, New Jersey office. The Executive understands and
acknowledges that he will be required to travel periodically to the Company's
offices in Dulles, Virginia.

            2. TERM OF EMPLOYMENT. The Executive's employment under this
Agreement commenced as of August 2, 2004 (the "START DATE") and shall continue
through August 1, 2007, unless sooner terminated pursuant to the provisions of
Section 4 (the "TERM"). The parties hereto may extend the Term by a written
agreement, signed by both parties, that specifically references this Agreement.
Upon the natural expiration of the Term (or any extended Term), the Executive's
employment will become "at-will" and will be terminable by either party hereto
for any reason not prohibited by law or for no reason, and with or without
notice.

            3. COMPENSATION. As full compensation for the services provided
under this Agreement, the Executive shall be entitled to receive the following
compensation during the Term:

            (a) Base Salary. The Executive shall be entitled to receive an
annual base salary (the "BASE SALARY") of $220,000. Upon each anniversary of the
Start Date, the Base Salary may be increased by the Company in its sole
discretion. Base Salary payments hereunder shall be made in arrears in
substantially equal installments (not less frequently than monthly) in
accordance with the Company's customary payroll practices for its other
executives, as those practices may exist from time to time.

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            (b) Bonus. For each calendar year, the Executive shall also be
eligible to receive a discretionary bonus (the "BONUS") in an amount, if any,
determined by the Company in its sole discretion. In order to receive such a
Bonus, if any, the Executive must be actively employed by the Company on the
date on which such Bonus is scheduled to be paid to the Executive.
Notwithstanding the foregoing, in the event that the Company meets or exceeds
its "100% performance goals" for any given year, as established by the Board
and/or its Compensation Committee for that year, then the Company agrees to make
a recommendation to the Compensation Committee of the Board that the Executive's
bonus for such year be equal to at least 50% of his then-current Base Salary.
The Executive acknowledges that such recommendation is not binding upon the
Board and/or its Compensation Committee and is not a guaranty of a specific
bonus amount for any given year.

            (c) Employee Benefits. The Executive shall be entitled to receive
Company-paid medical and disability insurance, Company-paid term life insurance
(which shall provide for a death benefit payable to the Executive's
beneficiary), Company-paid holiday and vacation time (such vacation time to be
not less than 20 business days per calendar year and pro-rated for partial years
of employment), and other Company-paid employee benefits (collectively,
"EMPLOYEE BENEFITS"), on a basis, as to each such benefit, no less favorable
than that generally provided to similarly situated employees of the Company or
any of its subsidiaries. In addition, the Executive shall be entitled to
participate in any qualified or non-qualified profit sharing plan and/or pension
plan generally provided for the executives of the Company or any of its
subsidiaries, on a basis no less favorable than that generally provided to
similarly situated executives of the Company or any of its subsidiaries.
Notwithstanding the foregoing, the Company reserves the right to amend, modify,
or terminate, in its sole discretion and consistent with applicable law, any
Employee Benefit and any Employee Benefit plan, program or arrangement provided
to employees and/or executives in general.

            (d) Equity Plan Participation. The Executive shall be entitled to
participate in any equity option plan or restricted equity plan, or other
equity-based compensation plan or arrangement, established by the Company in
which the Company's executives generally are permitted to participate. The terms
and conditions of the Executive's participation in, and/or any award under, any
such plan shall be in accordance with the applicable controlling plan document
and/or award agreement.

            Conditioned upon his execution of this Agreement, the Executive was
awarded on December 3, 2004 an option to purchase 125,000 shares of the
Company's Common Stock, par value $0.001 (the "Option"), with an exercise price
equal to $2.84 per share. The Option are subject to the terms and conditions of
the stock option agreement attached hereto as Exhibit A, which stock option
agreement will be executed by the Executive concurrently with this Agreement.

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            (e) Expenses. The Company shall reimburse the Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties under this Agreement, upon his presentation of appropriate vouchers
and/or documentation covering such expenses. Without limiting the generality of
the foregoing, the Company shall reimburse the Executive for all reasonable
transportation, lodging, food, and other expenses incurred by him in connection
with traveling on Company business, including for the Executive's reasonable
travel and lodging expenses related to his periodic travels to the Company's
Virginia offices.

            (f) Automobile. The Company shall provide the Executive with an $800
per month automobile allowance. This allowance will be paid on a monthly basis
and is in lieu of any reimbursement to you by the Company for the business use
of your vehicle.

            (g) Withholdings. All payments made under this Section 3, or any
other provision of this Agreement, shall be subject to any and all federal,
state, and local taxes and other withholdings to the extent required by
applicable law.

            4. TERMINATION OF EMPLOYMENT.

            (a) Disability. If the Executive shall be unable to perform his
essential duties under this Agreement on account of a physical or mental
disability, with or without reasonable accommodation, for one hundred eighty
(180) calendar days during any twelve (12) month period or for one hundred (120)
consecutive calendar days, then the Company may, by notice to the Executive,
terminate his employment under this Agreement as of the date of the notice. Any
such termination shall be made only in accordance with applicable law.

            (b) Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.

            (c) Termination by the Company. The Company shall have the right,
exercisable at any time in its sole discretion, to terminate the employment of
the Executive for any reason whatsoever with or without "cause" (as defined
below); provided that the Company must provide the Executive with at least one
(1) month of advance written notice of its decision to terminate the Executive
without cause. The Company reserves the right to remove any and all duties from
the Executive and exclude him from the Company's premises during the notice
period. The Executive's employment shall not be deemed to have been terminated
with "cause" unless he shall have received written notice from the Company at or
prior to the termination of employment advising him of the specific acts or
omissions alleged to constitute "cause" and, in the case of those acts or
omissions that are reasonably capable of being corrected, those acts or
omissions continue uncorrected after he shall have had a reasonable opportunity
(not to exceed fifteen (15) calendar days) to correct them.

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            As used in this Agreement, termination with "CAUSE" shall mean only
the Executive's involuntary termination by the Company for reason of (i) the
Executive's breach of a fiduciary duty of loyalty owed to the Company or any of
its subsidiaries, which breach has caused material harm to the Company or any of
its subsidiaries, (ii) the Executive's conviction of or plea of guilty or no
contest to (I) a crime involving moral turpitude that leads to material adverse
publicity or material harm to the Company, or (II) any felony, (iii) the
Executive's gross negligence or willful misconduct (including, without
limitation, embezzlement) in the performance of his duties, (iv) the Executive's
material breach of this Agreement, or (v) conduct by the Executive beyond the
scope of his authority as an officer and employee of the Company, which conduct
was not known in advance by the Company's Chief Executive Officer and which
conduct results in any governmental department or agency terminating or revoking
any governmental license of the Company or any subsidiary of the Company.

            (d) Termination by the Executive. The Executive shall have the right
to terminate his employment with the Company with or without "good reason" (as
defined below), provided that he provides the Company with at least two (2)
months of advance written notice of his decision to terminate his employment
without "good reason." Upon the receipt of such notice from the Executive
terminating his employment without good reason, the Company may withdraw any and
all duties from the Executive and exclude him from the Company's premises during
the notice period. The Executive's employment shall not be deemed to have been
terminated with "good reason" unless he shall have provided written notice to
the Company (either to the Chief Executive Officer or Board of Directors of the
Company) advising the Company of the specific acts or omissions alleged to
constitute "good reason" and those acts or omissions continue uncorrected after
the Company shall have had a reasonable opportunity (not to exceed thirty (30)
calendar days) to correct them.

            As used in this Agreement, termination with "GOOD REASON" shall mean
only the Executive's voluntary termination of his employment with the Company
following (i) a significant diminution by the Company of the scope of the
Executive's duties and responsibilities, including a diminution in title, (ii) a
material reduction in the Executive's Base Salary, or (iii) the Company's
material breach of this Agreement.

            (e) Severance. If, during the Term, the Company shall terminate the
Executive's employment without "cause" pursuant to Section 4(c) above or the
Executive shall terminate his employment with "good reason" pursuant to Section
4(d) above, then, upon the Executive's execution of the Release attached hereto
as Exhibit B (the "Release"), the Executive shall be entitled (i) to continue to
receive as severance payments Base Salary compensation under Section 3(a) above,
payable in accordance with the Company's periodic payroll schedule, for the
greater of (I) the remainder of the Term or (II) six (6) months and (ii)
provided that previously established Company performance goals or objectives are
met for the calendar year in which the Executive's termination of employment
occurs, to receive a pro rata portion of his Bonus under Section 3(b) above for
the calendar year in which his termination of employment occurs, such

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pro-rata Bonus to be paid on March 30th of the calendar year following the
calendar year in which the Executive's termination of employment occurs. The pro
rata Bonus will be calculated by multiplying the amount of the Bonus that the
Executive would have received for that calendar year had his employment not been
terminated by a fraction, the numerator of which is the number of calendar days
the Executive was employed by the Company during that calendar year and the
denominator of which is 365.

            Notwithstanding the forgoing, the Executive shall remain entitled to
receive any compensation and benefits to which he is specifically entitled under
any other plan, policy, or arrangement of the Company (including, but not
limited to, Employee Benefits, profit sharing and pension benefits, and the
Option), and shall remain entitled to be reimbursed pursuant to Section 3(e) for
any expenses properly incurred in accordance with such Section 3(e) prior to his
employment termination (collectively, the "Accrued Obligations"). Subject only
to the Executive's delivery of the Release, the Company's obligation under this
Section 4(e) shall be absolute and unconditional, and the Executive shall be
entitled to such severance payments regardless of the amount of compensation the
Executive may earn or be entitled to with respect to any other employment he may
obtain during the period for which severance payments are payable.

            If the Executive's employment with the Company is terminated
pursuant to Sections 4(a) or 4(b) above, if the Company terminates the
Executive's employment with "cause" pursuant to Section 4(c) above, or if the
Executive terminates his employment without "good reason" pursuant to Section
4(d) above, then the Executive shall not be entitled to any further payments
under this Agreement, including Base Salary, Bonus, Employee Benefits, or
Severance, except that the Executive shall be entitled to the Accrued
Obligations, payable no later than 30 days following the Executive's termination
of employment unless the plan, policy, or arrangement specifically provides for
an alternative payment date or schedule, in which case that alternative payment
date or schedule will control.

            5. MERGER OR SALE OF ASSETS. If the Company shall merge or
consolidate with another corporation or other entity, or shall transfer all or
substantially all of its assets to another person, corporation, or other entity,
then the Executive shall be entitled to Severance in accordance with Section
4(e) as if his employment were terminated by the Company without "cause," unless
such successor or transferee person, corporation, or entity assumes this
Agreement and continues the Executive's employment hereunder.

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            6. OBLIGATIONS OF THE EXECUTIVE.

            (a) Protectable Interests of the Company. The Executive acknowledges
that he has and will continue to play an important role in establishing the
goodwill of the Company and its related entities, including relationships with
clients, employees, and suppliers. The Executive further acknowledges that over
the course of his employment with the Company, he has and will continue to (i)
develop special relationships with clients, employees, and/or suppliers, and/or
(ii) be privy to Confidential Information (as defined below). As such, the
Executive agrees to the restrictions below in order to protect such interests on
behalf of the Company, which restrictions the parties hereto agree to be
reasonable and necessary to protect such interests.

            (b) Non-Competition. During the Executive's employment and for the
one (1) year period immediately thereafter, the Executive shall not, anywhere in
the world, whether directly or indirectly, for himself or for any third party:
(i) engage in any business activity; (ii) provide professional services to
another person or entity (whether as an employee, consultant, or otherwise); or
(iii) become a partner, member, principal, or stockholder in any entity; and in
each such case, that is in competition with the Business. For purposes of this
Section 6(b) and Section 6(c) below, "Business" shall mean the business of
offering data communication services via low-Earth orbit satellites, or any
other business which constitutes a material portion of the business of the
Company immediately preceding the Executive's termination of employment. The
Executive acknowledges and understands that, due to the global nature of the
Company's business and the technological advancements in electronic
communications around the world, any geographic restriction of the Executive's
obligation under this Section 6(b) would be inappropriate and counter to the
protections sought by the Company hereunder.

            (c) Non-Solicitation. During the Executive's employment and for the
one (1) year period immediately thereafter, the Executive shall not, anywhere in
the world, whether directly or indirectly, for himself or for any third party:
(i) solicit any business or contracts, or enter into any business or contract,
directly or indirectly, with any suppliers, licensees, customers, or partners of
the Company that (A) was a supplier, licensee, customer, or partner of the
Company at, or within six (6) months prior to, the termination of Executive's
employment, or (B) was a prospective supplier, licensee, customer, or partner of
the Business, with whom the Company was actively discussing entering into a
business relationship, at the time of the Executive's termination of employment,
and in either case, for purposes of engaging in an activity that is in
competition with the Business; or (ii) solicit or recruit, directly or
indirectly, any of the Company's or its subsidiaries' employees, or any
individuals who were employed by the Company's or its subsidiaries' within six
(6) months prior to the termination of the Executive's employment, for
employment or engagement (whether as an employee, consultant, or otherwise) with
a person or entity involved in marketing or selling products or services
competitive with the Business. The Executive acknowledges and understands that,
due to the

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global nature of the Company's business and the technological advancements in
electronic communications around the world, any geographic restriction of the
Executive's obligation under this Section 6(c) would be inappropriate and
counter to the protections sought by the Company hereunder. Notwithstanding the
foregoing, at all times following the termination of his employment with the
Company, the Executive will be entitled to solicit or enter into contracts with
any other person or entity to provide for any product or service that is not
competitive with the Business.

            (d) Confidential Information. The Executive acknowledges that,
during the course of his employment with the Company, he has had and will
continue to have access to information about the Company, and its clients and
suppliers, that is confidential and/or proprietary in nature, and which belongs
to the Company. As such, at all times, both during the Term and thereafter, the
Executive will hold in the strictest confidence, and not use or attempt to use
except for the benefit of the Company, and not disclose to any other person or
entity (without the prior written authorization of the Company) other than in
the performance of his duties and responsibilities hereunder, any Confidential
Information (as defined below). Notwithstanding anything contained in this
Section 6(d), the Executive will be permitted to disclose any Confidential
Information to the extent required by validly issued legal process or court
order, provided that the Executive notifies the Company immediately of any such
legal process or court order in an effort to allow the Company to challenge such
legal process or court order, if the Company so elects, prior to the Executive's
disclosure of any Confidential Information.

            For purposes of this Agreement, "CONFIDENTIAL INFORMATION" means any
confidential or proprietary information which belongs to the Company, or any of
its clients or suppliers (provided that such information regarding the Company's
clients or suppliers was disclosed to the Executive during the course of his
employment with the Company), including without limitation, technical data,
market data, trade secrets, trademarks, service marks, copyrights, other
intellectual property, know-how, research, business plans, product information,
projects, services, client lists and information, client preferences, client
transactions, supplier lists and information, supplier rates, software,
hardware, technology, inventions, developments, processes, formulas, designs,
drawings, marketing methods and strategies, pricing strategies, sales methods,
financial information, revenue figures, account information, credit information,
financing arrangements, and other information disclosed to the Executive by the
Company or otherwise obtained by the Executive during the course of his
employment, directly or indirectly, and whether in writing, orally, or by
electronic records, drawings, pictures, or inspection of tangible property.
"Confidential Information" does not include any of the foregoing information
which has entered the public domain other than by a breach of this Agreement.

            (e) Return of Company Property. Upon the termination of the
Executive's employment with the Company (whether upon the expiration of the Term
or otherwise), or at any time during such employment upon request by the
Company, the Executive will promptly deliver to the Company and not keep in his
possession, recreate, or deliver to any other person or entity,

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any and all property which belongs to the Company, or which belongs to any other
third party and is in the Executive's possession as a result of his employment
with the Company, including without limitation, computer hardware and software,
palm pilots, pagers, cell phones, other electronic equipment, records, data,
client lists and information, supplier lists and information, notes, reports,
correspondence, financial information, account information, product information,
files, and other documents and information, including any and all copies of the
foregoing; but not including the Executive's personal contact list developed
apart from his provision of services to the Company.

            (f) Ownership of Property. The Executive acknowledges that all
inventions, innovations, improvements, developments, methods, processes,
programs, designs, analyses, drawings, reports and all similar or related
information (whether or not patentable) that relate to the Company's or any of
its affiliates' actual or anticipated business, research, and development, or
existing or future products or services, and that are conceived, developed,
contributed to, made, or reduced to practice by Executive (either solely or
jointly with others) while engaged by the Company or any of its affiliates
(including any of the foregoing that constitutes any Confidential Information)
("WORK PRODUCT") belong to the Company or such affiliate, and the Executive
hereby assigns, and agrees to assign, all of the above Work Product to the
Company or such Affiliate.

            (g) Judicial Modification. The Executive acknowledges that it is the
intent of the parties hereto that the restrictions contained or referenced in
this Section 6 be enforced to the fullest extent permissible under the laws of
each jurisdiction in which enforcement is sought. If any of the restrictions
contained or referenced in this Section 6 is for any reason held by a court to
be excessively broad as to duration, activity, geographical scope, or subject,
then such restriction shall be construed or judicially modified so as to
thereafter be limited or reduced to the extent required to be enforceable in
accordance with applicable law.

            (h) Equitable Relief. The Executive acknowledges that the remedy at
law for his breach of this Section 6 will be inadequate, and that the damages
flowing from such breach will not be readily susceptible to being measured in
monetary terms. Accordingly, upon a violation of any part of this Section 6, the
Company, upon such showing as may be required by a court, shall be entitled to
immediate injunctive relief (or other equitable relief) from any court with
proper jurisdiction and may obtain a temporary order restraining any further
violation. Nothing in this Section 6(h) shall be deemed to limit the Company's
remedies at law or in equity for any breach by the Executive of any of the parts
of this Section 6 which may be pursued or availed of by the Company.

            7. ARBITRATION. Except as provided in Section 6(h) above, any
dispute or controversy between the parties hereto, whether during the Term or
thereafter, relating to this Agreement and the Executive's employment with the
Company and the cessation thereof shall be

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settled by arbitration administered by the American Arbitration Association
("AAA") in New York, New York pursuant to the AAA's National Rules for the
Resolution of Employment Disputes (or their equivalent), which arbitration shall
be confidential, final, and binding to the fullest extent permitted by law. The
parties agree to waive their right to a trial by jury and agree that they will
not make a demand, request or motion for a trial by jury or court. This
agreement to arbitrate shall be binding upon the heirs, successors, and assigns
and any trustee, receiver, or executor of each party. A party shall initiate the
arbitration process by delivering a written notice of such party's intention to
arbitrate to the other party at the address set forth above. There shall be one
arbitrator. The parties shall select an arbitrator by mutual agreement within
thirty (30) days after the written notice of intention to arbitrate is received.
If the parties fail to select an arbitrator by mutual agreement, the party
seeking arbitration shall notify the AAA of the demand for arbitration and
obtain a list of arbitrators from the AAA's Employment Dispute Resolution
Roster. If the parties fail to agree on an arbitrator, the AAA Administrator or
his/her delegate shall select an arbitrator, who is a member of the AAA's
Employment Dispute Resolution Roster. The arbitrator shall have the authority to
resolve all issues in dispute, including the arbitrator's own jurisdiction, and
to award compensatory remedies and other remedies permitted by law. The
arbitrator shall decide the matters in dispute in accordance with the governing
law provisions of this Agreement, except that the parties agree that this
agreement to arbitrate shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1, et seq. The award of the arbitrator shall be final and shall
be the sole and exclusive remedy between the parties regarding any claims,
counterclaims, issues, or accountings. Each party hereto shall be responsible
for paying its own attorneys' fees and costs incurred in connection with any
dispute between the parties, except as may otherwise be provided by the
arbitrator in applying the substantive law applicable to the dispute between the
parties hereto. To the extent inconsistent with the form of arbitration
agreement that the Company's employees generally are required to enter into,
including the Executive, this arbitration provision shall control. Otherwise, to
the extent compatible, effect shall be given to both this arbitration provision
and the Company's form of arbitration agreement that the Executive will be
required to execute.

            8. MISCELLANEOUS.

            (a) Notices. Any notice or other communication under this Agreement
shall be in writing and shall be considered given when delivered personally or
five (5) days after mailed by registered mail, return receipt requested, or one
(1) business day after deposit with a nationally recognized overnight delivery
service with instructions to deliver the next business day, to the Executive and
the Company at their respective addresses set forth above (or at such other
address as a party may specify by notice to the other).

            (b) Entire Agreement; Amendments. This Agreement (in addition to any
stock option agreement entered into by the parties hereto, and any written
benefit or compensation plan or policy in which the Executive participates, if
any) contains a complete statement of all of the arrangements between the
Executive and the Company with respect to the

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employment of the Executive by the Company and the Executive's compensation for
such employment, and supersedes all previous agreements, arrangements and
understandings, written or oral, relating thereto. This Agreement may not be
amended except by a written agreement signed by the Company and the Executive.

            (c) Severability. In the event that any provision of this Agreement,
or the application of any provision to the Executive or the Company, is held to
be unlawful or unenforceable by any court or arbitrator, then the remaining
portions of this Agreement shall remain in full force and effect and shall not
be invalidated or impaired in any manner.

            (d) Waiver. No waiver by any party hereto of any breach of any term
or covenant in this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such breach, or a waiver of any other term or covenant contained
in this Agreement.

            (e) Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New Jersey without regard to its
conflict of laws principles.

            (f) Indemnification. The Executive shall be entitled to
indemnification in accordance with the Company's Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws.

            IN WITNESS WHEREOF, the parties hereto have executed this document
as of the 6th day of April, 2005.

      ORBCOMM Inc.                                EMMETT HUME

      By: /s/ Jerome B. Eisenberg                   /s/ Emmett Hume
         ----------------------------             ------------------------------
      Name: Jerome B. Eisenberg
      Title: Chief Executive Officer

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                       EXHIBIT A -- STOCK OPTION AGREEMENT

                             STOCK OPTION AGREEMENT

            AGREEMENT (this "Agreement") entered into as of the 3rd day of
December, 2004 by and between ORBCOMM Inc., a Delaware corporation (the
"Company"), and Emmett Hume (the "Employee").

            WHEREAS, pursuant to the ORBCOMM Inc. Stock Option Plan (the
"Plan"), the Company's Board of Directors grants to the Employee 125,000 options
to acquire shares of Common Stock, par value $0.001 per share, of the Company
("Shares") conditioned upon the Employee entering into an employment agreement
with the Company;

            WHEREAS, the Employee in entering into the employment agreement with
the Company to which this Agreement is attached (the "Employment Agreement") and
the Employee desires to accept the option subject to the terms and conditions of
this Agreement.

            NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Employee,
intending to be legally bound, hereby agree as follows:

            1. Grant of Option. On the terms and conditions hereinafter set
forth, the Company hereby grants to the Employee an option to purchase all (or
any part) of 125,000 Shares (the "Option"). This Option is granted on December
3, 2004 (the "Grant Date"). The Option is intended to be an Incentive Stock
Option. This Option is granted pursuant to the Plan, and is governed by the
terms and conditions of the Plan. All defined terms used herein, unless
specifically defined in this Agreement, have the meanings assigned to them in
the Plan.

            2. Exercise Price. The exercise price (the "Exercise Price") for the
Shares covered by the Option will be $2.84.

            3. Time of Exercise of Option.

            (a) The Option will become exercisable as follows:

                  (i) 25,000 options will be exercisable immediately;

                  (ii) the remaining 100,000 options will be exercisable at the
rate of 6,250 options per calendar quarter as of the last day of the calendar
quarter coincident with or immediately following the Grant Date, until all of
the Option will be exercisable on the last day of the calendar quarter
immediately preceding or coincident with the fourth anniversary of the Grant
Date.

            (b) Notwithstanding any other provision of this Agreement to the
contrary, the Option will become immediately fully exercisable (i) on the date
of any Change of Control (as

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defined in the Plan), or (ii) upon the natural expiration of the term of the
Employment Agreement on August 1, 2007 if the Company shall have not offered to
extend the term of the Employment Agreement for at least one additional year
upon terms and conditions no less favorable to the Employee, in the aggregate,
than those set forth in the Employment Agreement, in each case without regard to
the satisfaction of any time-based criteria.

            (c) Notwithstanding any other provision of this Agreement to the
contrary, upon a termination of the Employee's employment with the Company
without "cause" or with "good reason" (as those terms are defined in the
Employment Agreement), an additional 25,000 options will become fully
exercisable upon such termination of employment (or, if fewer than 25,000
options hereunder are not yet exercisable at the time of such employment
termination, then such fewer number of options will become fully exercisable
upon such termination of employment).

            4. Term of Options.

            (a) The Option will expire 10 years from the date hereof, but will
be subject to earlier termination as provided below.

            (b) Upon ceasing to be an Employee,

                  (i) the unexercisable portion of the Option hereby granted
will terminate on the date of such termination of employment.

                  (ii) the exercisable portion of the Option hereby granted will
be treated as follows:

                        (A) Subject in each case to the repurchase rights
described in Paragraph 5 below and the Shareholders' Agreement (defined below),
if the Company terminates the Employee for any reason except for "cause" (as
defined in the Employment Agreement), or if the Employee voluntarily ceases to
be an employee, or if the Employee dies or his employment is terminated because
he is Disabled, the exercisable portion of the Option hereby granted will be
exercisable for ninety (90) days following the termination of employment.

                        (B) If the Employee is terminated for Cause, the
exercisable portion of the Option hereby granted will terminate on the date of
such termination of employment.

                  (iii) For purposes of this Agreement, "Disabled" means, the
      Employee is terminated due to "Disability" within the meaning of Code
      Section 22(e).

            (c) If the aggregate Fair Market Value (determined on the date the
Option is granted) of a Share subject to an Incentive Stock Option which is
exercisable for the first time during any calendar year exceeds $100,000, then
the portion of the Incentive Stock Option in excess of the $100,000 limitation
will be treated as a Non-Statutory Stock Option.

                                     - 12 -
<PAGE>

            5. Repurchase Rights.

            (a) The Company has the right to repurchase the Shares acquired upon
the exercise of Options for a period of three months after the Employee
terminates employment or three months after the Shares for which the Option is
exercised are acquired, whichever is later. The purchase price per Share payable
is as follows:

                  (i) if the Employee's employment ends because the Employee is
terminated by the Company for "cause" (as defined in the Employment Agreement),
the amount equal to the lesser of: (A) the Fair Market value of the Shares at
the time of the termination of employment; and (B) the Exercise Price; or

                  (ii) if the Employee's employment ends for any other reason
(death, termination without Cause, because the Employee is Disabled, or
voluntary resignation by the Employee), the amount equal to the greater of: (A)
the Fair Market Value of the Shares at the time of the termination of
employment; and (B) the Exercise Price.

            6. Manner of Exercise of Option. The Option may be exercised by
delivery, via first class mail, interoffice mail, fax or electronic mail of a
Notice of Option Exercise and related forms to the Company stating the number of
Shares with respect to which the Option is being exercised and accompanied by
payment of an amount equal to the Exercise Price multiplied by the number of
Shares being purchased pursuant to the Option (the "Total Exercise Cost") in
cash or by check, bank draft or money order payable to the order of the Company
or, subsequent to an Initial Public Offering, (i) through the delivery to the
Company of Shares of Common Stock with an aggregate Fair Market Value on the
date of exercise equal to the Total Exercise Cost, subject to such limitations
and prohibitions as the Committee may adopt from time to time or (ii) through
the delivery to the Company of an Authorization for Exercise of Options
"Cashless" Exercise Form with irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the Total Exercise Cost, subject to
such limitations as the Committee may adopt from time to time or by any
combination of the above methods of payment.

            7. Non-Transferability. The right of the Employee to exercise the
Option (as and when exercisable) may not be assigned or transferred by the
Employee other than by will or the laws of descent and distribution. The Option
may be exercised and the Shares may be purchased during the lifetime of the
Employee only by the Employee (or the Employee's legal representative in the
event that the Employee's employment is terminated due to becoming "Disabled"
within the meaning of Section 4(b)(iii) of this Agreement). Any attempted
assignment or transfer, except as hereinabove provided, including without
limitation any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition contrary to the provisions hereof, or
any levy of execution, attachment, trustee process or similar process, whether
legal or equitable, upon the Option, will in each instance be null and void.

                                     - 13 -
<PAGE>

            8. Representation Letter and Investment Legend.

            (a) In the event that for any reason the issuance of the Shares to
be issued upon exercise of an exercisable Option will not be effectively
registered under the Securities Act of 1933, as amended (the "1933 Act"), upon
any date on which the Option is exercised, the Employee (or the person
exercising the Option pursuant to Section 6) will give a written representation
to the Company in the form attached hereto as Exhibit A, and the Company will
place the legend described in Exhibit A, upon any certificate for the Shares
issued by reason of such exercise.

            (b) The Company will be under no obligation to qualify Shares or to
cause a registration statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issuance of Shares,
provided that to the extent that the Company is obligated to do so pursuant to
any written agreement between the Company and another executive of the Company,
the Company also will be obligated to do so for the Employee to the same extent
that the Company is obligated to do so for such other senior executives of the
Company.

            9. Adjustments. Subject to Section 8 of the Plan, in the event of
any change in the outstanding Shares by reason of an acquisition, spin-off or
reclassification, recapitalization or merger, combination or exchange of Shares
or other corporate exchange, Change of Control or similar event, or as required
under any Option Agreement, the Committee may adjust appropriately the number or
kind of Shares or securities subject to the Plan and available for or covered by
Grants and Share prices related to outstanding Grants and make such other
revisions to outstanding Grants as it deems are equitably required, provided
that, in all cases in which this Section 9 is applicable, the Employee's Options
will be adjusted in a manner consistent with adjustments made to the stock
options of the Company's other senior executives.

            10. No Special Employment Rights. Nothing contained in this
Agreement will be construed or deemed by any person under any circumstances to
bind the Company or any of its subsidiaries to continue the employment of the
Employee for the period within which this Option may vest or for any other
period.

            11. Rights as a Shareholder. The Employee will have no rights as a
shareholder with respect to any Shares which may be purchased upon the vesting
of this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee. If at any time during the
term of the Option, the Company will be advised by its counsel that the Shares
are required to be registered under the Securities Act or under applicable state
securities laws, or that delivery of the Shares must be accompanied or preceded
by a prospectus meeting the requirements of such laws, delivery of Shares by the
Company may be deferred until a registration is effective or a prospectus is
available or an appropriate exemption from registration is secured. Prior to an
Initial Public Offering, the Employee will be required to enter into a
shareholder agreement with the Company prohibiting the sale, transfer or
assignment of the Shares without first offering the Shares to the Company and/or
certain other

                                     - 14 -
<PAGE>

stockholders, on a form provided by the Company, upon the exercise of any Option
under the Plan.

            12. Withholding Taxes. The Employee hereby agrees, as a condition to
any exercise of the Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount"), if any, by (a)
authorizing the Company to withhold the Withholding Amount from the Employee's
cash compensation, or (b) remitting the Withholding Amount to the Company in
cash; provided that, to the extent that the Withholding Amount is not provided
by one or a combination of such methods, the Company may at its election
withhold from the Shares delivered upon exercise of the Option that number of
Shares having a Fair Market Value equal to the Withholding Amount.

            13. Execution of Shareholders Agreement. The Employee acknowledges
that, in connection with his prior or future purchase of Shares of the Company,
he has previously executed and delivered that certain Shareholders Agreement,
dated the date hereof, by and among the Company and the shareholders of the
Company named therein (the "Shareholders Agreement"). The Employee further
agrees that all Shares acquired by him upon exercise of the Option will be
subject to the terms and conditions of the Shareholders Agreement, as the same
may have been amended or modified in accordance with its terms.

            14. Lock-Up Agreements. The Employee agrees that in the event of an
Initial Public Offering or any other offering of any securities of the Company,
if the Company so requests, the Employee will enter into an agreement on terms
and conditions satisfactory to the Company with the relevant underwriters of
such transaction that provides that the Employee may not directly or indirectly
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer the Shares or any other shares
of the Company's Common Stock or securities convertible into or exchangeable or
exercisable for such shares owned by the Employee, or enter into any swap or
other arrangement that transfers, in whole or in part, the economic consequences
of ownership of any such shares, for a period of up to one year after the date
of the relevant prospectus.

            15. Delivery of Certificates. The Employee will have no interest in
the Shares unless and until certificates for the Shares are issued following
exercise of the Option.

                                    *********

                         [Signatures on Following Page]

                                     - 15 -
<PAGE>

                                OPTION AGREEMENT

                           Counterpart Signature Page

            IN WITNESS WhEREOF, the Company has caused this Agreement to be
executed, by its officer thereunto duly authorized, and the Employee has
executed this Agreement, all as of the day and year first above written.

ORBCOMM INC.                                    EMMETT HUME

By: _______________________________             /s/ Emmett Hume
    Title:                                      --------------------------------
    Name:

                                     - 16 -
<PAGE>

                          EXHIBIT B -- GENERAL RELEASE

      FOR AND IN CONSIDERATION OF the employment agreement to which this General
Release is attached, I, EMMETT HUME, agree, on behalf of myself, my heirs,
executors, administrators, and assigns, to release and discharge ORBCOMM INC.
(the "Company"), and its current and former officers, directors, employees,
agents, owners, subsidiaries, divisions, affiliates, parents, successors, and
assigns (the "Released Parties") from any and all manner of actions and causes
of action, suits, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments, charges, claims, and demands whatsoever ("Losses") which
I, my heirs, executors, administrators, and assigns have, or may hereafter have,
against the Released Parties or any of them arising out of or by reason of any
cause, matter, or thing whatsoever from the beginning of the world to the date
hereof, including without limitation, my employment agreement, my employment by
the Company and the cessation thereof, and all matters arising under any
federal, state, or local statute, rule, or regulation, or principle of contract
law or common law, including but not limited to, the Worker Adjustment and
Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et
seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. Sections 201
et seq., the National Labor Relations Act of 1935, as amended, 29 U.S.C.
Sections 151 et seq., the Family and Medical Leave Act of 1993, as amended, 29
U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. Sections 2000e et seq., the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the
Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et
seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.
Sections 1001 et seq., the Virginia Human Rights Act, as amended, Va. Code Ann.
Sections 2.1-714 et seq., the Virginia Persons with Disabilities Act, as
amended, Va. Code Ann. Sections 51.5-1 et seq., the New Jersey Law Against
Discrimination, as amended, N.J. Stat. Ann. Sections 10:5-1 et seq., and any
other equivalent federal, state, or local statute; provided that I do not
release or discharge the Released Parties from any Losses arising under the ADEA
which arise after the date on which I execute this General Release, from any
obligations under the Employment Agreement to which this General Release is
attached which arise after the date on which I execute this General Release, or
from any Losses arising solely in my capacity as a shareholder of the Company.
It is understood that nothing in this General Release is to be construed as an
admission on behalf of the Released Parties of any wrongdoing with respect to
me, any such wrongdoing being expressly denied.

      I represent and warrant that I fully understand the terms of this General
Release, that I have had the benefit of advice of counsel or have knowingly
waived such advice, and that I knowingly and voluntarily, of my own free will,
without any duress, being fully informed, and after due deliberation, accepts
its terms and sign the same as my own free act. I understand that as a result of
executing this General Release, I will not have the right to assert that the
Company violated any of my rights in connection with my employment agreement, my
employment, or with the termination of such employment.

      I affirm that I have not filed, and agree to the maximum extent permitted
by law not to initiate or cause to be initiated on my behalf, any complaint,
charge, claim, or proceeding against the Released Parties before any federal,
state, or local agency, court, or other body relating to my

                                     - 17 -
<PAGE>

employment agreement, my employment, or the cessation thereof, and agree not to
voluntarily participate in such a proceeding. However, nothing in this General
Release shall preclude or prevent me from filing a claim with the Equal
Employment Opportunity Commission that challenges the validity of this General
Release solely with respect to my waiver of any Losses arising under the ADEA.

      I acknowledge that I have twenty-one (21) in which to consider whether to
execute this General Release. I understand that I may waive such 21-day
consideration period. I understand that upon my execution of this General
Release, I will have seven (7) days after such execution in which I may revoke
my execution of this General Release. In the event of revocation, I must present
written notice of such revocation to __________________ at the Company by
delivering such written notice to him at_______________________________________.

      IF SEVEN (7) DAYS PASS WITHOUT RECEIPT OF SUCH WRITTEN NOTICE OF
REVOCATION, THIS GENERAL RELEASE SHALL BECOME BINDING AND EFFECTIVE ON THE
EIGHTH DAY (THE "RELEASE EFFECTIVE DATE").

      This General Release shall be governed by the laws of the State of New
Jersey without giving effect to its conflict of laws principles.

______________________________                  ________________________________
EMMETT HUME                                     DATE

STATE OF _____________________ )
                               : ss.:
COUNTY OF ____________________ )

            On the ___ day of ___________________ in the year 200__, before me,
the undersigned, personally appeared EMMETT HUME, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument, and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument
he executed such instrument, and that such individual made such appearance
before the undersigned.

                                           _____________________________________
                                                       Notary Public

                                     - 18 -EX-4.6

 

Exhibit 4.6

COMBINATION AGREEMENT

among

AXALTO HOLDING N.V.

GEMPLUS INTERNATIONAL S.A.

T3 PARTNERS, LP

TPG GIANT, LLC

TPG PARTNERS III, LP

ACTON 1. BETEILIGUNGS GMBH

ACTON 2. BETEILIGUNGS GMBH

ACTON 3. BETEILIGUNGS GMBH

JOHANNA QUANDT

and

STEFAN QUANDT

December 6, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I Corporate Proceedings; Filings; Labor Matters	 	2
	1.1
	 	Corporate Authorizations of Axalto	 	2
	1.2
	 	Corporate Authorizations of Gemplus; Gemplus Board Recommendation	 	3
	1.3
	 	Executive Chairman of the Board of Directors of Gemalto	 	4
	1.4
	 	Senior Executive Officers of Gemalto	 	4
	1.5
	 	Required Filings	 	4
	1.6
	 	Labor Matters	 	4
	ARTICLE II Gemplus Distribution; Contribution in Kind	 	4
	2.1
	 	Gemplus Distribution	 	4
	2.2
	 	Contribution in Kind of the Gemplus Shares Held by S1 and S2	 	5
	2.3
	 	Consideration for the Contribution in Kind	 	5
	2.4
	 	Regulatory Filings	 	6
	2.5
	 	Closing of the Contribution in Kind	 	6
	ARTICLE III Offer	 	7
	3.1
	 	Launching by Gemalto of the French Offer	 	7
	3.2
	 	Launching by Gemalto of the US Offer	 	7
	3.3
	 	Specific Guarantee for Holders of Gemplus Stock Options	 	7
	ARTICLE IV Strategy; Integration	 	8
	4.1
	 	Strategy of the Combined Companies	 	8
	4.2
	 	Integration Team	 	8
	ARTICLE V Representations of Axalto	 	8
	5.1
	 	Organization, Good Standing and Qualification	 	9
	5.2
	 	Capital Structure	 	9
	5.3
	 	Authority Relative to this Combination Agreement	 	9
	5.4
	 	Governmental Filings; No Violations	 	10

- i -

 

	 	 	 	 	 
	 	 	 	 	Page
	5.5
	 	Axalto Reports; Financial Statements	 	10
	5.6
	 	Employee Benefits	 	11
	5.7
	 	Intellectual Property	 	11
	5.8
	 	Absence of Certain Changes	 	12
	5.9
	 	Litigation	 	12
	5.10
	 	Absence of Undisclosed Liabilities	 	12
	5.11
	 	Compliance with Laws; Permits	 	13
	5.12
	 	Tax Matters	 	13
	5.13
	 	Dividends	 	14
	ARTICLE VI Representations of Gemplus	 	14
	6.1
	 	Organization, Good Standing and Qualification	 	14
	6.2
	 	Capital Structure	 	14
	6.3
	 	Authority Relative to this Combination Agreement	 	15
	6.4
	 	Governmental Filings; No Violations	 	15
	6.5
	 	Gemplus Reports; Financial Statements	 	16
	6.6
	 	Employee Benefits	 	16
	6.7
	 	Intellectual Property	 	17
	6.8
	 	Absence of Certain Changes	 	17
	6.9
	 	Litigation	 	17
	6.10
	 	Absence of Undisclosed Liabilities	 	18
	6.11
	 	Compliance with Laws; Permits	 	18
	6.12
	 	Tax Matters	 	18
	6.13
	 	Dividends	 	19
	ARTICLE VII Representations of S1 and S2	 	19
	7.1
	 	Representations of S1	 	19
	7.2
	 	Representations of S2	 	19
	ARTICLE VIII Additional Covenants of Axalto	 	20
	8.1
	 	Indemnification of Gemplus Directors and Officers	 	20

- ii -

 

	 	 	 	 	 
	 	 	 	 	Page
	8.2
	 	Disposition of Shares of Gemalto Held by S1 or S2	 	20
	ARTICLE IX Additional Covenants of S1 and S2	 	21
	9.1
	 	Lock-Up Commitment of S1 and S2	 	21
	9.2
	 	Commitment to Vote	 	21
	ARTICLE X Additional Covenants of the Parties	 	21
	10.1
	 	Antitrust; Foreign Investment Laws	 	21
	10.2
	 	Conduct of Business; Interim Operations	 	22
	10.3
	 	Best Efforts; Cooperation; Consents; Listings	 	23
	10.4
	 	Acquisition Proposals; Board Recommendations	 	24
	10.5
	 	Access to Information; Notification of Certain Matters	 	24
	10.6
	 	Operations of Gemalto	 	25
	ARTICLE XI Conditions Precedent	 	25
	11.1
	 	Conditions Precedent to Certain Obligations of Axalto	 	25
	11.2
	 	Conditions Precedent to Certain Obligations of Gemplus	 	26
	11.3
	 	Conditions Precedent to Certain Obligations of S1 and S2	 	28
	ARTICLE XII Termination	 	29
	12.1
	 	Termination	 	29
	12.2
	 	Effect of Termination	 	30
	ARTICLE XIII Definitions	 	30
	13.1
	 	Definitions	 	30
	ARTICLE XIV Miscellaneous	 	37
	14.1
	 	Press Release	 	37
	14.2
	 	Costs and Expenses	 	37
	14.3
	 	Successors and Assigns	 	37
	14.4
	 	Third Party Beneficiaries	 	37
	14.5
	 	Entire Agreement	 	37
	14.6
	 	Severability	 	37
	14.7
	 	Amendments and Waivers	 	38

- iii -

 

	 	 	 	 	 
	 	 	 	 	Page
	14.8
	 	Notices	 	38
	14.9
	 	Governing Law	 	40
	14.10
	 	Dispute Resolution	 	40

- iv -

 

Exhibits

	 	 	 
	Exhibit 1.1(a)
	 	Axalto Board Resolutions
	 
	 	 
	Exhibit 1.1(b)
	 	Axalto Shareholders Meeting Resolutions
	 
	 	 
	Exhibit 1.1(c)
	 	Revised Articles of Association of Gemalto
	 
	 	 
	Exhibit 1.1(d)
	 	Initial Board of Directors of Gemalto
	 
	 	 
	Exhibit 1.2(a)
	 	Gemplus Board Resolutions
	 
	 	 
	Exhibit 1.2(c)(i)
	 	Gemplus Shareholders Meeting Resolutions
	 
	 	 
	Exhibit 1.2(c)(ii)
	 	Restructured Gemplus Board of Directors
	 
	 	 
	Exhibit 1.3
	 	Roles of Executive Chairman and CEO
	 
	 	 
	Exhibit 1.4
	 	Initial Senior Executive Officers of Gemalto
	 
	 	 
	Exhibit 2.2(c)(i)
	 	S1 Transfer Instruction
	 
	 	 
	Exhibit 2.2(c)(ii)
	 	S2 Transfer Instruction
	 
	 	 
	Exhibit 2.3
	 	Contribution Shares
	 
	 	 
	Exhibit 5.5
	 	Axalto Consolidated Statements of Income and of Cash Flows and Balance Sheet Data for the Third Quarter
	 
	 	of 2005 and Year-to-Date September 30, 2005
	 
	 	 
	Exhibit 11.1(h)((i)
	 	Form of Authorized Representative's Certificate of Gemplus
	 
	 	 
	Exhibit 11.1(h)((ii)
	 	Form of Authorized Representative's Certificate of S1
	 
	 	 
	Exhibit 11.1(h)((iii)
	 	Form of Authorized Representative's Certificate of S2
	 
	 	 
	Exhibit 11.2(h)
	 	Form of Authorized Representative's Certificate of Axalto delivered to Gemplus
	 
	 	 
	Exhibit 11.3(h)
	 	Form of Authorized Representative's Certificate of Axalto delivered to each of S1 and S2
	 
	 	 
	Exhibit 14.1
	 	Form of Joint Press Release

- v -

 

COMBINATION AGREEMENT

This Agreement (the “Combination Agreement”) is made and entered into as of December 6,
2005 among:

	1.	 	Axalto Holding N.V., a naamloze vennootschap organized under the laws of The Netherlands,
(“Axalto”),
	 
	2.	 	Gemplus International S.A., a société anonyme organized under the laws of Luxemburg,
(“Gemplus”),
	 
	3.	 	T3 Partners, LP, TPG Giant, LLC and TPG Partners III, LP, jointly and severally among them
(“S1”), and
	 
	4.	 	Acton 1. Beteiligungs GmbH, Acton 2. Beteiligungs GmbH, Acton 3. Beteiligungs GmbH, Johanna
Quandt and Stefan Quandt, jointly and severally among them (“S2”).

(Axalto, Gemplus, S1 and S2 individually hereinafter referred to as a “Party” and collectively
hereinafter referred to as the “Parties”.)

RECITALS

A. Axalto, whose shares are listed on the French Eurolist of Euronext Paris S.A., operates directly
and through its Subsidiaries in the business of selling secure plastic cards and related products
and services.

B. Gemplus, whose shares are listed on the French Eurolist of Euronext Paris S.A. and the NASDAQ
National Market system through an American depositary shares facility, also operates directly and
through its Subsidiaries in the business of selling secure plastic cards and related products and
services.

C. S1 owns 159,305,600 shares of outstanding Gemplus Common Stock (the “S1 Shares”),
representing at the date of execution of this Combination Agreement 25.3% of the outstanding share
capital and voting rights of Gemplus.

D. S2 owns 115,508,200 shares of outstanding Gemplus Common Stock (the “S2 Shares”, and,
together with the S1 Shares, the “Contribution Shares”), representing at the date of
execution of this Combination Agreement 18.4% of the outstanding share capital and voting rights of
Gemplus.

E. The Boards of Directors of each of Axalto and Gemplus have determined that it is in the best
corporate interests of Axalto and Gemplus to effect the combination of their respective businesses
as set forth herein in a “merger of equals” (the “Combination”). The Parties, taking into
consideration the respective valuations of Gemplus and Axalto, have set for purposes of the
Combination an exchange ratio of 25 Gemplus shares for two Axalto shares (the “Exchange
Ratio”), provided that (i) the Exchange Ratio takes into account the distribution of share
premium/reserves to be made by Gemplus as set forth in Section 2.1, (ii) Gemplus has received an
opinion of Morgan Stanley & Co. Limited, financial advisor to Gemplus, to the effect that, as of
the date of this Combination Agreement, the Exchange Ratio is fair to Gemplus and all of its
shareholders from a financial point of view and (iii) Axalto has received an opinion of Deutsche
Bank AG London Branch, financial advisor to Axalto, to the effect that, as of the date of this

 

 

Combination Agreement, the Exchange Ratio is fair to Axalto and all of its shareholders from a
financial point of view.

F. Axalto and Gemplus believe that the Combination will enable the combined companies to offer more
attractive products and services to customers, additional opportunities to employees and increased
resources and revenues for their shareholders, and that, as a result of the Combination, the
combined companies will be able to provide a broader range of products and services in the mobile
telephony and payment card segments of the secure plastic card market, as well as national ID and
healthcare and corporate identification and security cards, which today are niche segments in which
secure plastic cards compete with other technologies backed by numerous (and often much larger)
competitors. In particular, Axalto and Gemplus intend that the synergies resulting from the
Combination will increase the ability of the combined companies and their Affiliates to provide
high-quality products and services at competitive prices, to enable them to better serve their
customers, including with highly qualified sales and technical personnel, and to invest in research
and development and market acceptance of secure plastic cards in such new application segments.

G. As a condition to entering into this Combination Agreement and the transactions contemplated
hereby, Axalto has required S1 and S2, as the principal shareholders of Gemplus, and S1 and S2 have
agreed, to commit to contribute (subject to the satisfaction of certain conditions precedent as set
forth herein) all of their equity interests in Gemplus to Axalto in exchange for Axalto shares at
the Exchange Ratio as a condition precedent to the launching of the Offer by Axalto.

H. In furtherance of the Combination, the respective Boards of Directors of Axalto and

Gemplus, and the comparable governing bodies of S1 and S2, have approved and adopted this
Combination Agreement, and the Parties are entering into this Combination Agreement, for the
purpose of setting forth certain binding agreements reached among them and defining the framework
for the undertakings to be given and the transactions to be implemented in connection with the
completion of the Combination.

IN CONSIDERATION OF THE FOREGOING, IT IS AGREED AS FOLLOWS:

ARTICLE I

Corporate Proceedings; Filings; Labor Matters

1.1 Corporate Authorizations of Axalto

     Pursuant to resolutions (a certified copy of which is attached hereto as Exhibit
1.1(a)) adopted at a meeting held on the date hereof, the Board of Directors of Axalto shall
call, promptly upon, and in no event later than fifteen Business Days following, the execution of
this Combination Agreement, a general meeting of the shareholders of Axalto to be held no later
than February 28, 2006 (such meeting, including any adjournment or postponement thereof, the
“Axalto Shareholders Meeting”) in order to approve the resolutions set forth as Exhibit
1.1(b) hereto (the “Axalto Shareholders Meeting Resolutions”) authorizing, inter alia
and subject to the satisfaction of each of the conditions precedent set forth in Section 11.1, (i)
the Combination, (ii) the issuance of additional Axalto shares in connection with the Contribution
in Kind and the Offer, (iii) the Offer, (iv) the change, upon the Closing of the Contribution in
Kind, of Axalto’s name into Gemalto N.V., (v) the revised Articles of Association of Gemalto in
substantially the form attached hereto as Exhibit 1.1(c), and (vi) the restructuring of the
Axalto Board and the appointment of new members so that the Board of Directors of Gemalto consists,
upon and subject to the Contribution in Kind, of eleven Directors (statutaire bestuurders)
including the Executive Chairman

-2-

 

(the former Chief Executive Officer of Gemplus) and Chief Executive Officer (the former Chief
Executive Officer of Axalto), with the Board initially consisting of the Directors listed on
Exhibit 1.1(d) and with each of such Directors being initially appointed for the term
mentioned opposite his name in Exhibit 1.1(d), in order to avoid all such Directors coming
up for reelection at the same time.

1.2 Corporate Authorizations of Gemplus; Gemplus Board Recommendation

     (a) Prior to the execution of this Combination Agreement, at a meeting held on December 6,
2005 (the “December Gemplus Board Meeting”) the Board of Directors (Conseil
d’Administration) of Gemplus, pursuant to resolutions adopted at such meeting (a certified copy of
which is attached hereto as Exhibit 1.2(a)) has (i) approved the Combination, (ii) approved
the terms of the Offer, (iii) expressly stated that the terms of the Offer are in the best interest
of Gemplus, its employees, its clients and its shareholders, and (iv) recommended that all holders
of Gemplus Common Stock and Gemplus American depository shares tender their shares of Gemplus
Common Stock and Gemplus American depository shares to Gemalto pursuant to the Offer (the
recommendation in this clause (iv) referred to hereinafter as the “Gemplus Board
Recommendation”); provided that the recommendation contemplated in clause (iv) above shall be
subject only to the Reiteration of the Gemplus Board Recommendation pursuant to Section 1.2(b).

     (b) Subject to the provisions of Section 10.4, prior to the filing of the French Offer with
the Autorité des marchés financiers the (“AMF”) as contemplated by Section 3.1, and before
the restructuring of the Board of Directors of Gemplus as contemplated by Section 1.2(c), the Board
of Directors of Gemplus shall reiterate the Gemplus Board Recommendation without any reservation,
subject only to satisfaction of the conditions precedent set forth in Section 11.2 (the
“Reiteration of the Gemplus Board Recommendation”), it being understood that the
Reiteration of the Gemplus Board Recommendation shall occur upon the reiteration in a writing of
the recommendation set forth above in Section 1.2(a) by the Chief Executive Officer of Gemplus (or
such other officer or director of Gemplus as may be designated by the Board of Directors of
Gemplus) upon receipt of the certificate attached hereto as Exhibit 11.2(h), with such
certificate duly executed by an authorized representative of Axalto and delivered in accordance
with Section 11.2(h).

     (c) Pursuant to the resolutions adopted at the December Gemplus Board Meeting, the Board of
Gemplus shall call, promptly upon, and in no event later than fifteen Business Days following, the
execution of this Combination Agreement, its shareholders to a general meeting to be held as soon
as reasonably practicable following the Axalto Shareholders Meeting and in no event later than
March 15, 2006 (such meeting, including any adjournment or postponement thereof, the “Gemplus
Shareholders Meeting”) in order to approve the resolutions set forth in Exhibit
1.2(c)(i) (the “Gemplus Shareholders Meeting Resolutions”) authorizing, inter alia, the
restructuring of the Gemplus Board and the appointment of new members so that the Board of
Directors of Gemplus consists, subject to and upon Completion of the Contribution in Kind, of the
five Directors listed on Exhibit 1.2(c)(ii), such Directors to include the Chief Executive
Officer and, as the Chairman of the Board of Directors of Gemplus, the Executive Chairman of
Gemalto, as well as two of the current independent Directors of Gemplus and one of the current
independent Directors of Axalto, with each of such Directors being initially appointed for the term
mentioned opposite his name in Exhibit 1.2(c)(ii), in order to avoid all such Directors
coming up for reelection at the same time.

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1.3 Executive Chairman of the Board of Directors of Gemalto

     Upon Completion of the Contribution in Kind, the Chief Executive Officer of Gemplus, as
referred to in Section 1.1, shall assume the position and title of Executive Chairman of the Board
of Directors of Gemalto, with the commencement date of the assumption of such position and title to
be as reflected in the minutes of the initial meeting of the Board of Directors of Gemalto as
restructured in accordance with Section 1.1 (the “Commencement of Executive Period”). The
Executive Chairman of the Board of Directors of Gemalto shall have such position and title for a
term of eighteen months (the “Executive Period”) running from the Commencement of Executive
Period. The role of the Executive Chairman of Gemalto for the duration of the Executive Period
shall be as set forth in Exhibit 1.3.

1.4 Senior Executive Officers of Gemalto

     Upon Completion of the Contribution in Kind, the Board of Directors of Gemalto, as
restructured pursuant to Section 1.1, shall restructure the senior executive officers of Gemalto,
to consist, initially, of the executive officers listed on Exhibit 1.4.

1.5 Required Filings

     Following the execution of this Combination Agreement, the Parties shall make (a) all filings
and notices required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the “HSR Act”), EC Council Regulation 139/2004 (the “EC Antitrust Act”),
and such other filings as may be required by the antitrust or competition laws, rules or
regulations of the United States, the European Union, and any other applicable jurisdiction (such
laws, rules and regulations, together with the HSR Act and the EC Antitrust Act, are referred to as
the “Antitrust Laws”) and (b) all filings and notices required to be made with all other
competent Governmental Entities.

1.6 Labor Matters

     Each of Axalto and Gemplus shall inform its workers representative councils or other employees
representation (comité d’entreprise, etc.), as applicable, as may be required in order to perform
the transactions contemplated by this Combination Agreement, such information to be performed as
soon as practicable following announcement of the transactions contemplated by this Combination
Agreement.

ARTICLE II

Gemplus Distribution; Contribution in Kind

2.1 Gemplus Distribution

     (a) The resolutions adopted at the December Gemplus Board Meeting include a resolution to call
for the shareholders of Gemplus to approve, at the Gemplus Shareholders Meeting, inter alia and
subject only to the publication of the Avis de Dépôt published by the AMF pursuant to the filing
with the AMF of the French Offer, the pro rata distribution (which Gemplus hereby agrees to make)
to all of the Gemplus shareholders concurrent with the Contribution in Kind of an amount of its
available share premium/reserves equal to Eur 0.26 per outstanding share of Gemplus Common Stock
(the “Gemplus Distribution”).

     (b) The Gemplus Shareholders Meeting Resolutions shall decide to make (and, subject to the
provisions of Section 2.1(a), Gemplus agrees to make) the Gemplus Distribution notwithstanding any

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intervening act or event, including the entry by Gemplus into any letter of intent or similar
document or any Agreement pursuant to Section 10.4.

     (c) At the Gemplus Shareholders Meeting, each of S1 and S2 shall vote all of its shares of
Gemplus Common Stock in favor of the Gemplus Distribution.

     (d) The Parties acknowledge and agree that the S1 Shares to be transferred by S1 and the S2
Shares to be transferred by S2 to Axalto, in each case under the terms of the applicable
Contribution Agreement, shall be transferred with any and all rights and benefits attached thereto,
including all shares issued or property distributed and/or that may be so issued or distributed by
Gemplus following the date hereof and to which the S1 Shares and S2 Shares give right, without any
effect on the consideration set forth in Section 2.3 below; provided, that Axalto shall not be
entitled to any portion of the amount of the Gemplus Distribution to be paid with respect to the S1
Shares and S2 Shares.

2.2 Contribution in Kind of the Gemplus Shares Held by S1 and S2

     (a) S1 shall deliver, at the Closing of the Contribution in Kind and subject to the
satisfaction of the conditions precedent set forth in Section 11.3, the S1 Shares to Axalto (the
“S1 Contribution”) in accordance with Section 2.2(c) below and the terms and conditions of
the Contribution Agreement entered into between Axalto and S1 (the “S1 Contribution
Agreement”) simultaneously with the execution of this Combination Agreement.

     (b) S2 shall deliver, at the Closing of the Contribution in Kind and subject to the
satisfaction of the conditions precedent set forth in Section 11.3, the S2 Shares to Axalto (the
“S2 Contribution") and together with the S1 Contribution, (the “Contribution in
Kind”) in accordance with Section 2.2(c) below and the terms and conditions of the Contribution
Agreement entered into between Axalto and S2 (the “S2 Contribution Agreement”, and,
together with the S1 Contribution Agreement, the “Contribution Agreements”), simultaneously
with the execution of this Combination Agreement.

     (c) Promptly upon satisfaction of each of the conditions precedent set forth in Section 11.3,
S1, jointly with Axalto, shall deliver to the Registrar, with a copy to Gemplus, the irrevocable
instruction attached hereto as Exhibit 2.2(c)(i), duly executed and dated by an authorized
representative of each of S1 and Axalto, instructing the Registrar to record the transfer of the S1
Shares to Axalto upon the receipt, within the agreed upon time period set forth therein, from
Axalto of a copy of the Avis de Dépôt (the “Avis de Dépôt”) published by the AMF pursuant
to the filing by Axalto with the AMF of the French Offer (the “S1 Transfer Instruction”),
and S2 shall, jointly with Axalto, deliver to the Registrar, with a copy to Gemplus, the
irrevocable instruction attached hereto as Exhibit 2.2(c)(ii), duly executed and dated by
an authorized representative of each of S2 and Axalto, instructing the Registrar to record the
transfer of the S2 Shares to Axalto upon the receipt, within the agreed upon time period set forth
therein, from Axalto of a copy of the Avis de Dépôt (the “S2 Transfer Instruction” and,
together with the S1 Transfer Instruction, the “Transfer Instructions”).

     (d) If Axalto shall not have delivered to the Registrar a copy of the Avis de Dépôt within the
time period specified in the Transfer Instructions, such Transfer Instructions shall no longer have
any force and effect.

2.3 Consideration for the Contribution in Kind

     In consideration for the Contribution in Kind, upon the registration by the Registrar of the
transfer of the S1 Shares and the S2 Shares to Axalto in the Gemplus share register, Axalto shall
issue, in

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accordance with the Contribution Agreements, 21,985,104 newly issued shares of Axalto Common
Stock (the “Consideration Shares”) to S1 and S2, allocated as set forth opposite their
respective names in Exhibit 2.3, pursuant to the Exchange Ratio.

2.4 Regulatory Filings 

     (a) Promptly upon the execution of this Combination Agreement, each of Axalto, Gemplus and S1,
as the case may be, with the full cooperation of each of the other Parties, shall file the
necessary documentation in connection with the Contribution in Kind and the Offer with the
appropriate antitrust authorities, and in particular any required filings with the antitrust
authorities referred to in Section 1.5.

     (b) As promptly as practicable following the Axalto Shareholders Meeting, Axalto shall file
the application for listing form (the “Axalto Application for Listing Form”) to request the
listing of the Consideration Shares on the Eurolist by Euronext.

2.5 Closing of the Contribution in Kind

     The closing of the Contribution in Kind (the “Closing of the Contribution in Kind”)
shall take place at the offices of Loyens & Loeff Law Firm, Fred. Roeskestraat 100, 1076 ED
Amsterdam, The Netherlands, or such other location as shall be mutually agreeable to Axalto and
Gemplus promptly upon, and in any event no later than three Business Days immediately following,
the date on which the Parties receive the last approval, authorization, clearance or exemption from
competition authorities exercising jurisdiction under applicable Antitrust Laws, or at such other
time and place as Axalto and Gemplus shall agree. At the Closing of the Contribution in Kind, each
of the following actions shall occur, subject to the satisfaction of any conditions precedent
contained herein and the terms and conditions of the Contribution Agreements, in the following
order:

	(a)	 	Axalto shall deliver to Gemplus the certificate required by Section 11.2(h);
	 
	(b)	 	Axalto shall deliver to each of S1 and S2 the respective certificates required by Section
11.3(h);
	 
	(c)	 	Each of Gemplus, S1 and S2 shall deliver to Axalto the respective certificates required by
Section 11.1(h);
	 
	(d)	 	S1, jointly with Axalto, shall deliver the S1 Transfer Instruction to the Registrar and
S2, jointly with Axalto, shall deliver the S2 Transfer Instruction to the Registrar pursuant to
Section 2.2(c);
	 
	(e)	 	The Reiteration of the Gemplus Board Recommendation shall occur pursuant to Section 1.2(b)
(except insofar as the Reiteration of the Gemplus Board Recommendation does not occur as a result
of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4);
	 
	(f)	 	Axalto shall file the appropriate documents to launch the French Offer pursuant to Section
3.1;
	 
	(g)	 	Axalto shall deliver to the Registrar a copy of the Avis de Dépôt pursuant to Section
2.2(c);

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     (h) The Gemplus Distribution shall be made pursuant to Section 2.1;

     (i) The Registrar shall register the transfer of the Contribution Shares to Axalto pursuant to
Section 2.2(c);

     (j) Axalto shall deliver to S1 and S2 the Consideration Shares pursuant to Section 2.3;

     (k) The Axalto Board shall be restructured pursuant to Section 1.1; and

     (l) The Gemplus Board shall be restructured pursuant to Section 1.2(c).

ARTICLE III

Offer

3.1 Launching by Gemalto of the French Offer

     As promptly as practicable following the satisfaction of the conditions precedent in Section
11.1, Gemalto shall file in France a voluntary exchange public tender offer (the “French
Offer”and, together with the US Offer, to the extent a US Offer is launched, the
“Offer”) in compliance with the provisions of Article 232-1 et seq. of the Réglement
général of the AMF to exchange Axalto shares for all the remaining shares of Gemplus Common Stock
or securities granting access to the share capital or voting rights of Gemplus owned by any and all
shareholders or securityholders of Gemplus (as well as, during the course of the French Offer, to
holders of shares of the Gemplus French Subsidiary not held by Gemplus exchangeable into shares of
Gemplus Common Stock), with the exception of such shareholders referred to in Section 3.2, to the
extent a US Offer is launched by Axalto pursuant to Section 3.2. The exchange ratio stipulated in
the terms and conditions of the French Offer for the shares of Gemplus Common Stock tendered as
part of the French Offer shall be the Exchange Ratio.

3.2 Launching by Gemalto of the US Offer

     To the extent deemed by Axalto to be required under applicable Laws or to be otherwise
advisable, and in such case concurrent with or as soon as reasonably practicable after the
launching of the French Offer, Gemalto shall launch in the United States an exchange offer (the
“US Offer”) in compliance with applicable US Securities Laws and regulations to exchange
Axalto shares or American depository shares representing Axalto shares, as the case may be, for the
outstanding Gemplus shares tendered by US resident holders or American depositary shares
representing Gemplus shares tendered by holders without regard to residency, respectively. The
exchange ratio stipulated in the terms and conditions of the US Offer for the Gemplus shares,
including such Gemplus underlying American depository shares shall be the Exchange Ratio.

3.3 Specific Guarantee for Holders of Gemplus Stock Options

     (a) For (i) all Gemplus stock options as well as all stock options of the Gemplus French
Subsidiary exchangeable into Gemplus stock options or shares which will not have been exercised or,
as the case may be, exchanged by the last day of the Offer at the latest, and (ii) all shares in
the Gemplus French Subsidiary to be issued upon exercise of such Gemplus French Subsidiary stock
options following completion of the Offer, Gemalto will guarantee to such stock option holders the
right to exchange their future shares of Gemplus Common Stock for shares of Gemalto Common Stock,
on the basis of the Exchange Ratio of the Offer, adjusted to take into account any changes to the
share capital of either Gemalto or Gemplus.

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     (b) Gemalto will also offer to exchange for all Gemplus stock options and all stock options of
the Gemplus French Subsidiary which will not have been exercised or exchanged by the last day of
the Offer at the latest, Gemalto stock options as described below, provided that acceptance of such
offer does not trigger any adverse tax or labor consequence for Gemplus or Axalto. From and after
an exchange of Gemplus stock options and Gemplus French Subsidiary options for Gemalto stock
options, (i) each Gemalto stock option received in the exchange may be exercised solely for shares
of Gemalto Common Stock, (ii) the number of shares of Gemalto Common Stock subject to each such
Gemalto stock option shall be equal to the number of shares of Gemplus Common Stock subject to such
Gemplus stock option and Gemplus French Subsidiary option immediately prior to the filings of the
Offer divided by the Exchange Ratio presented in the Offer, rounding down to the nearest whole
share, (iii) the per share exercise price under each such Gemalto stock option shall be adjusted by
multiplying the per share exercise price under such Gemplus stock option and Gemplus French
Subsidiary option by the Exchange Ratio and rounding up to the nearest Cent of Euro, and (iv) the
term and other provisions of such Gemalto stock option shall be substantially similar to the term
and other provisions of the exchanged Gemplus option and Gemplus French Subsidiary option and shall
continue in full force and effect and otherwise remain unchanged. Prior to the filing of the Offer
and subject to the Completion of the Contribution in Kind, Gemplus shall take all actions necessary
(under the plans and/or agreements pursuant to which Gemplus stock options and the Gemplus French
Subsidiary stock options are outstanding and otherwise) to effectuate the provisions of this
Section 3.3(b).

ARTICLE IV

Strategy; Integration

4.1 Strategy of the Combined Companies

     Axalto and Gemplus shall, in order to realize the intended synergies of the combined
companies, implement a global development strategy as promptly as practicable after the Completion
of the Contribution in Kind that will greatly benefit from their respective resources. In that
context, Axalto will organize, together with Gemplus, the management of their respective businesses
in order to optimize the assets of both entities in the world. Such management shall be conducted
under the joint leadership of the Executive Chairman and the Chief Executive Officer.

4.2 Integration Team

     As promptly as practicable after the Completion of the Contribution in Kind, the Gemalto
Executive Chairman and Chief Executive Officer shall constitute an Integration Team to oversee the
integration of the two companies’ operations. The members of such Integration Team shall be
selected within the managers of the combined entities to implement the strategy of the combined
entities as described in Section 4.1 reporting to the Executive Chairman of Gemalto.

ARTICLE V

Representations of Axalto

     Except as disclosed in the Axalto Reports or the Axalto Disclosure Letter delivered to each of
Gemplus, S1 and S2 separately prior to, or contemporaneously with, the date hereof, Axalto
represents to each of Gemplus, S1 and S2 that:

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5.1 Organization, Good Standing and Qualification

     Each of Axalto and its Subsidiaries has been duly organized and is validly existing as a
corporation, and to the extent relevant under the applicable corporate law, in good standing, under
the laws of its respective jurisdiction of organization and has all requisite corporate or similar
power and authority to own and operate its properties and assets and to carry on its business as
presently conducted and is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business requires such standing, except
where the failure to comply with this Section 5.1 would not have an Axalto Material Adverse Effect.

5.2 Capital Structure

     The authorized capital stock of Axalto consists of 150,000,000 shares of Axalto Common Stock,
of which 40,578,335 shares of Axalto Common Stock were outstanding as of the close of business on
November 30, 2005. All of the outstanding shares of Axalto Common Stock have been duly authorized
and are validly issued and fully paid, and the Consideration Shares and the shares of Axalto Common
Stock to be issued in the Offer, when issued, shall be duly authorized and validly issued and shall
rank pari passu with all other shares of Axalto Common Stock. There is no liability on the part of
the holders to pay any further amount in respect of any outstanding share of Axalto Common Stock.
Each of the outstanding shares of capital stock or other outstanding securities of each of Axalto’s
Subsidiaries is duly authorized, validly issued and fully paid and there is no liability on the
part of the holders to pay any further amount in respect of any outstanding shares of capital stock
or other outstanding securities of each of Axalto’s Subsidiaries and, except for directors’
qualifying shares, and except as provided in the Axalto Reports filed prior to the date hereof, is
owned by Axalto or a direct or indirect wholly-owned Subsidiary of Axalto, free and clear of any
Encumbrance. Except as set forth above, and except as provided in the Axalto Reports prior to the
date hereof, there are no pre-emptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights, Agreements, arrangements
or commitments to issue or sell any shares of capital stock or other securities of Axalto or any of
its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable
for, or giving any person or entity a right to subscribe for or acquire, any securities of Axalto
or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized,
issued or outstanding. Axalto does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders of Axalto on any matter.

5.3 Authority Relative to this Combination Agreement

     (a) Axalto has all requisite corporate power and authority and has taken or, as the case may
be, will take all corporate actions necessary in order to execute, deliver and perform its
obligations under this Combination Agreement. This Combination Agreement is a legal, valid and
binding agreement of Axalto enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity principles.

     (b) The Board of Directors of Axalto has approved this Combination Agreement, the Combination,
the Offer and the other transactions contemplated hereby to which it will be a party and,
concurrently with the execution of this Combination Agreement, has resolved to recommend to
Axalto’s shareholders to approve the Offer.

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5.4 Governmental Filings; No Violations.

     (a) Other than the filings, approvals and/or notices required to be made (i) under the HSR
Act, the EC Antitrust Act, and such other filings as may be required by the Antitrust Laws, (ii)
under the Exchange Act and the Securities Act (and the rules and regulations adopted by the SEC
thereunder), local securities or “blue-sky” laws, takeover, company or securities laws, rules or
regulations of the United States (and the several states thereof), France (including the
regulations of the AMF and Euronext), the Netherlands, the European Union and any other applicable
jurisdiction (all such laws, rules and regulations are referred to as the “Securities
Laws”), (iii) under any stock exchange rules or regulations in the United States and France,
the European Union and any other applicable jurisdiction and (iv) under the Foreign Investment
Laws, no notices, reports or other filings are required to be made by Axalto with, nor are any
consents, registrations, approvals, permits or authorizations required to be obtained by Axalto
from, any Governmental Entity, in connection with the execution of this Combination Agreement by
Axalto and the consummation of the Combination, the Offer and the other transactions contemplated
by this Combination Agreement to which Axalto will be a party, except those that the failure to
make or obtain (y) would not, individually or in the aggregate, have an Axalto Material Adverse
Effect or (z) would not prevent, materially delay or materially impair the ability of Axalto to
consummate the Combination.

     (b) The execution and performance of this Combination Agreement by Axalto do not, and the
consummation by Axalto of the Combination and the other transactions contemplated hereby to which
Axalto will be a party will not, (i) constitute or result in (A) a breach or violation of, or a
default under, the articles of association or by-laws of Axalto, (B) a breach or violation of, or a
default under, the articles of association or by-laws or the comparable governing instruments of
any Axalto Subsidiary, (C) a breach or violation of, or a default under, the acceleration of any
obligations or the creation of an Encumbrance on or rights in respect of the assets of Axalto or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, any Contracts
binding upon Axalto or any of its Subsidiaries or any Law or governmental or non-governmental
permit or license to which Axalto or any of its Subsidiaries is subject or (D) any change in the
rights or obligations of any party under any of the Contracts to which Axalto or any of its
Subsidiaries is a party or (ii) require the consent of any counterparty to any of the Contracts to
which Axalto or any of its Subsidiaries is a party, except, in the case of sub-clauses (B), (C) and
(D) of clause (i), for any breach, violation, default, acceleration, creation, change or, in the
case of clause (C), any consent that in each case would not, individually or in the aggregate, have
an Axalto Material Adverse Effect or prevent, materially delay or materially impair the ability of
Axalto to consummate the transactions contemplated by this Combination Agreement to which it will
be a party.

5.5 Axalto Reports; Financial Statements

     As of the respective dates of the Axalto Reports (or, if amended, as of the date of such
amendment), the Axalto Reports were true, complete and correct in all material respects and comply
in all material respects with applicable legal requirements. Each of the consolidated balance
sheets included in or incorporated by reference into the Axalto Reports (including the related
notes and schedules) fairly presents in all material respects the consolidated financial position
of Axalto and its Subsidiaries as of its date and each of the consolidated statements of income and
of cash flows included in or incorporated by reference into the Axalto Reports (including any
related notes and schedules) fairly presents in all material respects the results of operations,
retained earnings and cash flows, as the case may be, of Axalto and its Subsidiaries on a
consolidated basis for the periods set forth therein (subject, in the case of unaudited statements,
to notes and normal year-end audit adjustments that will not be material in amount

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or effect), in each case in accordance with the generally accepted accounting principles of
IFRS, as applicable, consistently applied during the periods involved, except as may be noted
therein. The unaudited consolidated statements of income and of cash flows and consolidated balance
sheet for third quarter 2005 and year to date ending September 30, 2005 provided by Axalto to
Gemplus and attached hereto as Exhibit 5.5 fairly present in all material respects the
results of operations, cash flows and retained earnings of Axalto and its Subsidiaries on a
consolidated basis for such period (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that will not be material in amount or effect), in each case in
accordance with the generally accepted accounting principles of IFRS, as applicable, consistently
applied during the period, except as may be noted therein. Without prejudice to the representation
contained in the preceding sentence, it is understood among the Parties that the consolidated
statements of income and cash flows and consolidated balance sheet for third quarter 2005 and year
to date ending September 30, 2005 have been prepared by Axalto for its management and that the
consolidated revenue statements have been subject to review procedures by Axalto’s auditors.

5.6 Employee Benefits

     Promptly following the execution of this Combination Agreement, Axalto shall provide Gemplus
with complete employment and benefits information concerning the Chief Executive Officer of Axalto
and the top eight members of senior management of Axalto including, in particular, copies of
employment contracts and complete compensation and employee benefit information, including
information on salary, bonus, stock options, individual pension plans and/or individual retirement
bonuses, multi-year bonus plan benefits, severance arrangements, and identification of any
consequences including payments or acceleration of stock options resulting from change of control
or the Combination. Each Axalto Compensation and Benefit Plan has been maintained in compliance
with its terms and with the requirements prescribed by Laws applicable to such plan, except where
the failure to so comply would not, individually or in the aggregate, have an Axalto Material
Adverse Effect. No director or officer or other employee of Axalto or any of its Subsidiaries will
become entitled to any (i) payment (whether of severance or otherwise ) or similar benefit or (ii)
enhanced or accelerated benefit (including any acceleration of vesting or lapse of repurchase
rights or obligations with respect to any Axalto Compensation and Benefit Plan) solely as a result
of the announcement or consummation of any of the transactions contemplated hereby (either alone or
in conjunction with another event, including termination of employment).

5.7 Intellectual Property

     Except as would not, individually or in the aggregate, have an Axalto Material Adverse Effect:
(i) Axalto and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear
of any Encumbrances), all Intellectual Property used in or necessary for the conduct of their
business as currently conducted; (ii) to the Knowledge of the Axalto Executive Officers, the use of
any Intellectual Property by Axalto and its Subsidiaries does not infringe upon or otherwise
violate the rights of any Person; (iii) the use of any Intellectual Property by Axalto or its
Subsidiaries is in accordance with applicable licenses pursuant to which Axalto or any Subsidiary
acquired the right to use any Intellectual Property; (iv) to the Knowledge of the Axalto Executive
Officers no Person is challenging, infringing upon or otherwise violating any right of Axalto or
any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to
Axalto or its Subsidiaries; and (v) to the Knowledge of the Axalto Executive Officers, there is no
pending Claim, order or proceeding with respect to any Intellectual Property used by Axalto and its
Subsidiaries and no Intellectual Property owned and/or licensed by Axalto or its Subsidiaries is

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being used or enforced in a manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property.

5.8 Absence of Certain Changes

     Except as disclosed in the Axalto Reports filed prior to the date hereof and except as
contemplated hereby, since the Axalto Audit Date, Axalto and its Subsidiaries have conducted their
respective businesses only in, and have not engaged in any material transaction other than
according to, the ordinary course of such businesses and there has not been (i) any change in the
financial condition, properties, business or results of operations of Axalto and its Subsidiaries
or any development of which the Axalto Executive Officers have Knowledge that has had or would
have, individually or in the aggregate, an Axalto Material Adverse Effect; (ii) any damage,
destruction or other casualty loss with respect to the assets or property owned, leased or
otherwise used by Axalto or any of its Subsidiaries, whether or not covered by insurance, other
than any damage, destruction or other casualty loss that would not, individually or in the
aggregate, have an Axalto Material Adverse Effect; (iii) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of Axalto or its
Subsidiaries, except for dividends or other distributions on its capital stock publicly announced
prior to the date hereof or made by a wholly-owned Subsidiary of Axalto; or (iv) any change by
Axalto in accounting principles, practices or methods. Since the Axalto Audit Date, except as
provided for herein or as disclosed in the Axalto Reports filed prior to the date hereof, there has
not been any increase in the compensation payable or that could become payable by Axalto or any of
its Subsidiaries to officers or key employees or any of the Axalto Compensation and Benefit Plans
other than increases or amendments in the ordinary course of business consistent with past
practice, it being understood that recent or ongoing conversion to IFRS shall not constitute such a
change.

5.9 Litigation

     Except as disclosed in the Axalto Reports filed prior to the date of this Combination
Agreement, as of the date hereof there is no Claim pending, or to the Knowledge of the Axalto
Executive Officers threatened in a formal writing, against Axalto or any Axalto Subsidiary or any
of their respective assets or properties before any court, arbitrator or Governmental Entity that,
individually or in the aggregate, would have an Axalto Material Adverse Effect. There are no
outstanding judgments, decrees, injunctions, awards or orders against Axalto that would have,
individually or in the aggregate, an Axalto Material Adverse Effect.

5.10 Absence of Undisclosed Liabilities

     Except as disclosed in the Axalto Reports filed prior to the date of this Combination
Agreement, as of the date hereof there are no obligations or liabilities, including, in respect of
obligations and liabilities disclosed in any Axalto Report, any change in those obligations or
liabilities, whether or not required to be disclosed, or any other facts or circumstances of which
the Axalto Executive Officers have Knowledge that would result in any Claims against, or
obligations or liabilities of, Axalto or any of its Subsidiaries, except for those that would not
have an Axalto Material Adverse Effect or prevent or materially delay or materially impair the
ability of Axalto to consummate the transactions contemplated by this Combination Agreement to
which it will be a party.

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5.11 Compliance with Laws; Permits

     Except as set forth in the Axalto Reports filed prior to the date hereof, the businesses of
each of Axalto and its Subsidiaries have not been, and are not being, conducted in violation of any
Law, except for violations or possible violations that would not, individually or in the aggregate,
have an Axalto Material Adverse Effect or prevent or materially delay or materially impair the
ability of Axalto to consummate the transactions contemplated by this Combination Agreement to
which it will be a party. Except as set forth in the Axalto Reports filed prior to the date
hereof, no investigation or review by any Governmental Entity with respect to Axalto or any of its
Subsidiaries is pending or, to the Knowledge of the Axalto Executive Officers, threatened in a
formal writing, nor has any Governmental Entity indicated to Axalto an intention to conduct the
same, except for those the outcome of which would not, individually or in the aggregate, have an
Axalto Material Adverse Effect or prevent or materially delay or materially impair the ability of
Axalto to consummate the transactions contemplated by this Combination Agreement to which it will
be a party. To the knowledge of the Axalto Executive Officers, no material change is required in
Axalto’s or any of its Subsidiaries’ processes, properties or procedures in connection with any
such Laws, except those that, individually or in the aggregate, would not have an Axalto Material
Adverse Effect, and, as of the date hereof, Axalto has not received any notice or communication of
any material noncompliance with any such Laws that has not been cured as of the date hereof.
Axalto and its Subsidiaries each has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted except those the absence of which would not, individually or in the
aggregate, have an Axalto Material Adverse Effect or prevent or materially delay or materially
impair the ability of Axalto to consummate the transactions contemplated by this Combination
Agreement to which it will be a party.

5.12 Tax Matters

     All Tax returns, statements,
reports and forms (collectively, the “Axalto Returns”)
required to be filed with any taxing authority by, or with respect to, Axalto and the Axalto
Subsidiaries have been filed in substantial compliance with all applicable Laws. Axalto and the
Axalto Subsidiaries have timely paid all Taxes shown as due and payable on the Axalto Returns that
have been so filed, and all other Taxes not subject to reporting obligations, and, as of the time
of filing, the Axalto Returns correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of Axalto and the Axalto Subsidiaries, except as would not,
individually or in the aggregate, have an Axalto Material Adverse Effect. Axalto and the Axalto
Subsidiaries have made provision for all Taxes payable by them for which no Axalto Return has yet
been filed, except as would not, individually or in the aggregate, have an Axalto Material Adverse
Effect. The charges, accruals and reserves for Taxes with respect to Axalto and the Axalto
Subsidiaries reflected on the Axalto Balance Sheet are adequate under IFRS to cover the tax
liabilities accruing through the date thereof. As of the date hereof, there is no Claim pending
against or with respect to Axalto or any of the Axalto Subsidiaries in respect of any Tax that
would have an Axalto Material Adverse Effect.

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5.13 Dividends

     Other than the SAIT Dividend, (i) all dividends or distributions on shares of Axalto Common
Stock or shares of capital stock of any Axalto Subsidiary which have been authorized or declared
prior to the date of this Combination Agreement have been paid in full and (ii) Axalto is not
obligated to authorize or declare any dividend or distribution on shares of Axalto Common Stock or
shares of capital stock of any Axalto Subsidiary.

ARTICLE VI

Representations of Gemplus

     Except as disclosed in the Gemplus Reports, or the Gemplus Disclosure Letter delivered to
Axalto prior to, or contemporaneously with, the date hereof, Gemplus represents to Axalto that:

6.1 Organization, Good Standing and Qualification

     Each of Gemplus and its Subsidiaries has been duly organized and is validly existing as a
corporation, and to the extent relevant under the applicable corporate law, in good standing, under
the laws of its respective jurisdiction of organization and has all requisite corporate or similar
power and authority to own and operate its properties and assets and to carry on its business as
presently conducted and is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business requires such standing, except
where the failure to comply with this Section 6.1 would not have a Gemplus Material Adverse Effect.

6.2 Capital Structure

     (a) The authorized capital stock of Gemplus consists of 1,889,466,266 shares of Gemplus Common
Stock, of which 628,602,107 shares of Gemplus Common Stock were outstanding as of the close of
business on November 30, 2005. All of the outstanding shares of Gemplus Common Stock have been
duly authorized and are validly issued and fully paid, and there is no liability on the part of the
holders to pay any further amount in respect of any outstanding shares of Gemplus Common Stock. Out
of the authorized share capital referred to in the first sentence hereof, the following shares of
Gemplus Common Stock were reserved for issuance as of November 30, 2005: (i) up to 20,000,000
shares authorized for issuance in exchange for outstanding shares of the Gemplus French Subsidiary
not held by Gemplus, (ii) up to 56,845,700 shares authorized for issuance in exchange for Gemplus
French Subsidiary options, (iii) up to 50,000,000 shares authorized for issuance in exchange for
options granted to employees or officers of the Gemplus Group, (iv) up to 60,000,000 shares
authorized for issuance to senior management, board members and/or executives of Gemplus, including
shares issuable upon exercise of options and (v) 30,000,000 shares authorized for issuance in
relation to public offering(s) of shares to take place prior to December 5, 2005. Each of the
outstanding shares of capital stock or other outstanding securities of each of Gemplus’
Subsidiaries is duly authorized, validly issued and fully paid and there is no liability on the
part of the holders to pay any further amount in respect of any outstanding shares of capital stock
or other outstanding securities of each of Gemplus’ Subsidiaries and, except for directors’
qualifying shares, and except as provided in the Gemplus Reports filed prior to the date hereof, is
owned by Gemplus or a direct or indirect wholly-owned Subsidiary of Gemplus, free and clear of any
Encumbrance. Except as set forth above, and except as provided in the Gemplus Reports prior to the
date hereof, there are no pre-emptive or other outstanding rights, options, warrants, conversion
rights, stock

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appreciation rights, redemption rights, repurchase rights, Agreements, arrangements or
commitments to issue or sell any shares of capital stock or other securities of Gemplus or any of
its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable
for, or giving any person or entity a right to subscribe for or acquire, any securities of Gemplus
or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized,
issued or outstanding. Gemplus does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of Gemplus on any matter.

     (b) Gemplus has available the share premium/reserves necessary to make the Gemplus
Distribution set forth in Section 2.1(a).

6.3 Authority Relative to this Combination Agreement

     (a) Gemplus has all requisite corporate power and authority and has taken or, as the case may
be, will take all corporate actions necessary in order to execute, deliver and perform its
obligations under this Combination Agreement. This Combination Agreement is a legal, valid and
binding agreement of Gemplus enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity principles.

     (b) The Board of Directors of Gemplus has approved this Combination Agreement, the
Combination, the Offer and the other transactions contemplated hereby to which Gemplus will be a
party and, concurrently with the execution of this Combination Agreement, has resolved to recommend
to Gemplus’ shareholders to accept the Offer, such recommendation subject only to the Reiteration
of the Gemplus Board Recommendation pursuant to Section 1.2(b) of this Combination Agreement.

6.4 Governmental Filings; No Violations.

     (a) Other than the filings, approvals and/or notices required to be made (i) under the
Antitrust Laws, (ii) under the Securities Laws, (iii) under any stock exchange rules or regulations
in the United States, Luxembourg, France and the European Union and any other applicable
jurisdiction and (iv) under the Foreign Investment Laws, no notices, reports or other filings are
required to be made by Gemplus with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Gemplus from, any Governmental Entity, in connection with
the execution of this Combination Agreement by Gemplus and the consummation of the Combination, the
Offer and the other transactions contemplated by this Combination Agreement to which Gemplus will
be a party, except those that the failure to make or obtain would not, individually or in the
aggregate, have a Gemplus Material Adverse Effect or to prevent, materially delay or materially
impair the ability of Gemplus to consummate the Combination.

     (b) The execution and performance of this Combination Agreement by Gemplus do not, and the
consummation by Gemplus of the Combination and the other transactions contemplated hereby to which
Gemplus will be a party will not, (i) constitute or result in (A) a breach or violation of, or a
default under, the articles of association or by-laws of Gemplus, (B) a breach or violation of, or
a default under, the articles of association or by-laws or the comparable governing instruments of
any Gemplus Subsidiary (C) a breach or violation of, or a default under, the acceleration of any
obligations or the creation of an Encumbrance on or rights in respect of the assets of Gemplus or
any of its Subsidiaries (with or without

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notice, lapse of time or both) pursuant to, any Contracts binding upon Gemplus or any of its
Subsidiaries or any Law or governmental or non-governmental permit or license to which Gemplus or
any of its Subsidiaries is subject or (D) any change in the rights or obligations of any party
under any of the Contracts to which Gemplus or any of its Subsidiaries is a party or (ii) require
the consent of any counterparty to any of the Contracts to which Gemplus or any of its Subsidiaries
is a party, except, in the case of sub-clauses (B), (C) and (D) of clause (i), for any breach,
violation, default, acceleration, creation, change or, in the case of clause (C), any consent that
in each case would not, individually or in the aggregate, have a Gemplus Material Adverse Effect or
prevent, materially delay or materially impair the ability of Gemplus to consummate the
transactions contemplated by this Combination Agreement to which it will be a party.

6.5 Gemplus Reports; Financial Statements

     As of the respective dates of the Gemplus Reports (or, if amended, as of the date of such
amendment), the Gemplus Reports were true, complete and correct in all material respects and comply
in all material respects with applicable legal requirements. Each of the consolidated balance
sheets included in or incorporated by reference into the Gemplus Reports (including the related
notes and schedules) fairly presents in all material respects the consolidated financial position
of Gemplus and its Subsidiaries as of its date and each of the consolidated statements of income
and of cash flows included in or incorporated by reference into the Gemplus Reports (including any
related notes and schedules) fairly presents in all material respects the results of operations,
retained earnings and cash flows, as the case may be, of Gemplus and its Subsidiaries on a
consolidated basis for the periods set forth therein (subject, in the case of unaudited statements,
to notes and normal year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with the generally accepted accounting principles of IFRS, as applicable,
consistently applied during the periods involved, except as may be noted therein.

6.6 Employee Benefits

     Promptly following the execution of this Combination Agreement, Gemplus shall provide Axalto
with complete employment and benefits information concerning the Chief Executive Officer of Gemplus
and the top eight members of senior management of Gemplus including, in particular, copies of
employment contracts and complete compensation and employee benefit information, including
information on salary, bonus, stock options, individual pension plans and/or individual retirement
bonuses, multi-year bonus plan benefits, severance arrangements, and identification of any
consequences including payments or acceleration of stock options resulting from change of control
or the Combination. Each Gemplus Compensation and Benefit Plan has been maintained in compliance
with its terms and with the requirements prescribed by Laws applicable to such plan, except where
the failure to so comply would not, individually or in the aggregate, have an Gemplus Material
Adverse Effect. No director or officer or other employee of Gemplus or any of its Subsidiaries will
become entitled to any (i) payment (whether of severance or otherwise ) or similar benefit or (ii)
enhanced or accelerated benefit (including any acceleration of vesting or lapse of repurchase
rights or obligations with respect to any Gemplus Compensation and Benefit Plan) solely as a result
of the announcement or consummation of any of the transactions contemplated hereby (either alone or
in conjunction with another event, including termination of employment). Each Gemplus Compensation
and Benefit Plan has been maintained in compliance with its terms and with the requirements
prescribed by Laws applicable to such plan, except where the failure to so comply would not,
individually or in the aggregate, have an Gemplus Material Adverse Effect.

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6.7 Intellectual Property

     Except as disclosed in the Gemplus Reports or as would not, individually or in the aggregate,
have a Gemplus Material Adverse Effect: (i) Gemplus and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Encumbrances), all Intellectual Property used
in or necessary for the conduct of its business as currently conducted; (ii) to the Knowledge of
the Gemplus Executive Officers, the use of any Intellectual Property by Gemplus and its
Subsidiaries does not infringe upon or otherwise violate the rights of any Person; (iii) the use of
any Intellectual Property by Gemplus and its Subsidiaries is in accordance with applicable licenses
pursuant to which Gemplus or any Subsidiary acquired the right to use any Intellectual Property;
(iv) to the Knowledge of the Gemplus Executive Officers no Person is challenging, infringing upon
or otherwise violating any right of Gemplus or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to Gemplus or its Subsidiaries; and (v) to the
Knowledge of the Gemplus Executive Officers, there is no pending Claim, order or proceeding with
respect to any Intellectual Property used by Gemplus and its Subsidiaries and no Intellectual
Property owned and/or licensed by Gemplus or its Subsidiaries is being used or enforced in a manner
that would reasonably be expected to result in the abandonment, cancellation or unenforceability of
such Intellectual Property.

6.8 Absence of Certain Changes

     Except as disclosed in the Gemplus Reports filed prior to the date hereof and except as
contemplated hereby, since the Gemplus Audit Date, Gemplus and its Subsidiaries have conducted
their respective businesses only in, and have not engaged in any material transaction other than
according to, the ordinary course of such businesses and there has not been (i) any change in the
financial condition, properties, business or results of operations of Gemplus and its Subsidiaries
or any development of which the Gemplus Executive Officers have Knowledge that has had or would
have, individually or in the aggregate, a Gemplus Material Adverse Effect; (ii) any damage,
destruction or other casualty loss with respect to the assets or property owned, leased or
otherwise used by Gemplus or any of its Subsidiaries, whether or not covered by insurance, other
than any damage, destruction or other casualty loss that would not, individually or in the
aggregate, have a Gemplus Material Adverse Effect; (iii) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of Gemplus or its
Subsidiaries, except for dividends or other distributions on its capital stock publicly announced
prior to the date hereof or made by a wholly-owned Subsidiary of Gemplus; or (iv) any change by
Gemplus in accounting principles, practices or methods. Since the Gemplus Audit Date, except as
provided for herein or as disclosed in the Gemplus Reports filed prior to the date hereof, there
has not been any increase in the compensation payable or that could become payable by Gemplus or
any of its Subsidiaries to officers or key employees or any of the Gemplus Compensation and Benefit
Plans other than increases or amendments in the ordinary course of business consistent with past
practice, it being understood that recent or ongoing conversion to IFRS shall not constitute such
a change.

6.9 Litigation

     Except as disclosed in the Gemplus Reports filed prior to the date of this Combination
Agreement, as of the date hereof, there is no Claim pending, or to the Knowledge of the Gemplus
Executive Officers threatened in a formal writing, against Gemplus or any Gemplus Subsidiary or any
of their respective assets or properties before any court, arbitrator or Governmental Entity that,
individually or in the aggregate, would have a Gemplus Material Adverse Effect. There are no
outstanding judgments,

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decrees, injunctions, awards or orders against Gemplus that would have, individually or in the
aggregate, a Gemplus Material Adverse Effect.

6.10 Absence of Undisclosed Liabilities

     Except as disclosed in the Gemplus Reports filed prior to the date of this Combination
Agreement, as of the date hereof there are no obligations or liabilities, including, in respect of
obligations and liabilities disclosed in any Gemplus Report, any change in those obligations or
liabilities, whether or not required to be disclosed, or any other facts or circumstances of which
the Gemplus Executive Officers have Knowledge that would result in any Claims against, or
obligations or liabilities of, Gemplus or any of its Subsidiaries, except for those that would not
have a Gemplus Material Adverse Effect or prevent or materially impair the ability of Gemplus to
consummate the transactions contemplated by this Combination Agreement to which it will be a party.

6.11 Compliance with Laws; Permits

     Except as set forth in the Gemplus Reports filed prior to the date hereof, the businesses of
each of Gemplus and its Subsidiaries have not been, and are not being, conducted in violation of
any Law, except for violations or possible violations that would not, individually or in the
aggregate, have a Gemplus Material Adverse Effect or prevent or materially delay or materially
impair the ability of Gemplus to consummate the transactions contemplated by this Combination
Agreement to which it will be a party. Except as set forth in the Gemplus Reports filed prior to
the date hereof, no investigation or review by any Governmental Entity with respect to Gemplus or
any of its Subsidiaries is pending or, to the Knowledge of the Gemplus Executive Officers,
threatened in a formal writing, nor has any Governmental Entity indicated to Gemplus an intention
to conduct the same, except for those the outcome of which would not, individually or in the
aggregate, have a Gemplus Material Adverse Effect or prevent or materially delay or materially
impair the ability of Gemplus to consummate the transactions contemplated by this Combination
Agreement to which it will be a party. To the knowledge of the Gemplus Executive Officers, no
material change is required in Gemplus’ or any of its Subsidiaries’ processes, properties or
procedures in connection with any such Laws, except those that, individually or in the aggregate,
would not have a Gemplus Material Adverse Effect, and, as of the date hereof, Gemplus has not
received any notice or communication of any material noncompliance with any such Laws that has not
been cured as of the date hereof. Each of Gemplus and its Subsidiaries has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations, consents and
approvals necessary to conduct its business as presently conducted except those the absence of
which would not, individually or in the aggregate, have a Gemplus Material Adverse Effect or
prevent or materially delay or materially impair the ability of Gemplus to consummate the
transactions contemplated by this Combination Agreement to which it will be a party.

6.12 Tax Matters

     All Tax returns, statements,
reports and forms (collectively, the “Gemplus Returns”)
required to be filed with any taxing authority by, or with respect to, Gemplus and the Gemplus
Subsidiaries have been filed in substantial compliance with all applicable Laws. Gemplus and the
Gemplus Subsidiaries have timely paid all Taxes shown as due and payable on the Gemplus Returns
that have been so filed, and all other Taxes not subject to reporting obligations, and, as of the
time of filing, the Gemplus Returns correctly reflected the facts regarding the income, business,
assets, operations, activities and the status of Gemplus and the Gemplus Subsidiaries, except as
would not, individually or in the aggregate, have a Gemplus Material Adverse Effect. Gemplus and
the Gemplus Subsidiaries have made provision for all

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Taxes payable by them for which no Gemplus Return has yet been filed, except as would not,
individually or in the aggregate, have a Gemplus Material Adverse Effect. The charges, accruals
and reserves for Taxes with respect to Gemplus and the Gemplus Subsidiaries reflected on the
Gemplus Balance Sheet are adequate under IFRS to cover the tax liabilities accruing through the
date thereof. As of the date hereof, there is no Claim pending against or with respect to Gemplus
or any of the Gemplus Subsidiaries in respect of any Tax that would have a Gemplus Material Adverse
Effect.

6.13 Dividends

     (i) All dividends or distributions on shares of Gemplus Common Stock or shares of capital
stock of any Gemplus Subsidiary which have been authorized or declared prior to the date of this
Combination Agreement have been paid in full, and (ii) Gemplus is not obligated to authorize or
declare any dividend or distribution on shares of Gemplus Common Stock or shares of capital stock
of any Gemplus Subsidiary.

ARTICLE VII

Representations of S1 and S2

7.1 Representations of S1

     (a) Corporate Existence and Power. (i) TPG Giant, LLC is a limited liability company
duly organized and validly existing under the laws of the State of Delaware, USA; (ii) T3 Partners,
L.P. is a limited partnership duly organized and validly existing under the laws of the State of
Delaware, USA; and (iii) TPG Partners III, L.P. is a limited partnership duly organized and validly
existing under the laws of the State of Delaware, USA.

     (b) Authorization. The execution and performance by S1 of this Combination Agreement
and the S1 Contribution Agreement and the consummation by S1 of the transactions contemplated
hereby and thereby are within the corporate powers of S1 and have been duly authorized by all
necessary corporate action. This Combination Agreement constitutes a valid and binding agreement
of S1, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors’ rights
and remedies and to general principles of equity. S1 has taken or, as the case may be, will take
any and all corporate actions or measures to perform its obligations under this Combination
Agreement.

     (c) Title to the S1 Shares. S1 has valid title to the S1 Shares as set forth in
Paragraph C of the Recitals, free and clear of all Encumbrances, it being understood that S1 does
not hold, directly or indirectly, any shares of Gemplus Common Stock other than the S1 Shares. S1
owns no other securities of Gemplus or Gemplus Subsidiaries.

7.2 Representations of S2

     (a) Corporate Existence and Power. S2 includes companies duly organized and validly
existing under the laws of Germany.

     (b) Authorization. The execution and performance by S2 of this Combination Agreement
and the S2 Contribution Agreement and the consummation by S2 of the transactions contemplated
hereby and thereby are within the corporate powers of S2 and have been duly authorized by all
necessary

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corporate action. This Combination Agreement constitutes a valid and binding agreement of S2,
enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors’ rights
and remedies and to general principles of equity. S2 has taken or, as the case may be, will take
any and all corporate actions or measures to perform its obligations under this Combination
Agreement.

     (c) Title to the S2 Shares. S2 has valid title to all S2 Shares as set forth in
Paragraphs D of the Recitals, free and clear of all Encumbrances, it being understood that S2 does
not hold, directly or indirectly, any shares of Gemplus Common Stock other than the S2 Shares. S2
owns no other securities of Gemplus or Gemplus’ Subsidiaries.

ARTICLE VIII

Additional Covenants of Axalto

8.1 Indemnification of Gemplus Directors and Officers

     From the date of Completion of the Contribution in Kind, and to the extent permissible under
applicable Law, Gemalto:

     (a) shall cause Gemplus to indemnify and hold harmless each Person who, on or prior to the
Completion of the Offer, was a director or officer of Gemplus or any of its Subsidiaries with
respect to all acts or omissions by such Person in his or her capacity as such;

     (b) shall, and shall cause Gemplus to, maintain Gemplus’ current directors’ and officers’
insurance and indemnification policies and related arrangements, or substantially equivalent
policies and related arrangements, subject in either case to terms and conditions substantially as
advantageous to the present and former directors and officers of Gemplus and any of its
Subsidiaries as those contained in the policies and arrangements in effect on the date hereof and
disclosed to Axalto, for all present and former directors and officers of Gemplus and any of its
Subsidiaries covering Claims made and insurable events with respect to matters arising or omissions
occurring before, on, or existing at, the Completion of the Offer, it being understood that the
foregoing obligations shall be assumed by Axalto in the event that Gemplus is unable to assume such
obligations; and

     (c) shall cause Gemplus to fulfill and honor in all respects the obligations of Gemplus
pursuant to any indemnification agreements between Gemplus and any director or officer of Gemplus,
or any person who has served as a director or officer of Gemplus at any time prior to the
completion of the Offer.

8.2 Disposition of Shares of Gemalto Held by S1 or S2

     (a) Following expiration of the Lock-Up Period and subject to Section 8.2(b), Gemalto shall,
upon request by S1 and/or S2 (as the case may be), and subject to restrictions imposed by Law and
as set forth in the Contribution Agreements, undertake commercially reasonable efforts to support,
facilitate and promote the sale of:

          (i) any and all shares of Gemalto held by S1, and S1 shall indemnify Gemalto against any out
of pocket costs and expenses incurred by Gemalto as a result of its efforts to support, facilitate
and promote the sale of such shares of Gemalto held by S1; and

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          (ii) any and all shares of Gemalto held by S2, and S2 shall indemnify Gemalto against any out
of pocket costs and expenses incurred by Gemalto as a result of its efforts to support, facilitate
and promote the sale of such shares of Gemalto held by S2;

provided, however, that Gemalto shall not be required under this Section 8.2 to make any
registration or related filing regarding the sale of such shares under the Securities Laws of the
United States or any jurisdiction thereof.

     (b) If, following expiration of the Lock-Up Period the shares of Gemalto held by S1 and/or S2
are to be sold in connection with an Gemalto Offering, any out of pocket costs and expenses
incurred by Gemalto in connection with such Gemalto Offering shall be for Gemalto’ own account and
the indemnities set forth in Section 8.2(a) shall not apply.

ARTICLE IX

Additional Covenants of S1 and S2

9.1 Lock-Up Commitment of S1 and S2

     (a) Each of S1 and S2 expressly agrees and commits that it will not dispose, transfer, or
otherwise commit to dispose or transfer, directly or indirectly, any of those shares of Gemalto
Common Stock received in connection with the Contribution in Kind for a period expiring on the
ninetieth calendar day following Completion of the Contribution in Kind (the “Lock-Up
Period”).

     (b) Following expiration of the Lock-Up Period, the Parties acknowledge and agree that each of
S1 and S2 shall have the right to dispose, at any time, any or all of the shares of Gemalto Common
Stock received in connection with the Contribution in Kind, subject to restrictions imposed by Law,
and as set forth in the Contribution Agreements.

     (c) Should S1 or S2 elect to dispose of any or all of its shares of Gemalto Common Stock, S1
or S2, as the case may be, shall inform Axalto in advance of its intention to sell such shares of
Gemalto Common Stock, it being understood that Axalto shall keep such information strictly
confidential.

9.2 Commitment to Vote

     At the Gemplus Shareholders Meeting, each of S1 and S2 shall vote all of the S1 and the S2
Shares, respectively, in favor of the Gemplus Shareholders Meeting Resolutions.

ARTICLE X

Additional Covenants of the Parties

10.1 Antitrust; Foreign Investment Laws

     In the event that a Governmental Entity raises objections to the Combination under any
Antitrust Law or any Foreign Investment Law, the Parties undertake to use their respective Best
Efforts to agree on appropriate measures to overcome these objections, it being understood that any
such agreed upon measure shall take effect only upon the Completion of the Contribution in Kind.

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10.2 Conduct of Business; Interim Operations

     Except as expressly contemplated by this Combination Agreement, the Parties acknowledge and
agree that Axalto and Gemplus shall, and shall cause their respective Subsidiaries to, use their
commercially reasonable efforts to conduct their respective businesses and operations in all
material respects in the ordinary and usual course of business consistent with their past practice,
it being understood that, from the date of execution of this Combination Agreement until the date
of Completion of the Contribution in Kind, neither Axalto nor Gemplus shall, nor shall either
permit any of its Subsidiaries to (without the prior consent of the other Party, with such consent
not being unreasonably withheld or delayed):

     (a) amend its articles of association, by-laws or other comparable governing instruments,
other than in relation to one or both of the following: (i) the issuance of shares upon exercise of
outstanding Gemplus stock options or the contribution of shares of the Gemplus French Subsidiary or
(ii) the renewal by Gemplus for a period of five years of the authorizations to issue shares in
accordance with the current authorized share capital as set out in Article 5.2 of the articles of
association of Gemplus;

     (b) (i) issue, split, combine or reclassify any shares or capital stock (or rights to acquire
shares of capital stock), except pursuant to obligations in effect on the date hereof or pursuant
to existing employee stock option or stock purchase plans or the contribution of shares of the
Gemplus French Subsidiary to Gemplus in amounts and to the extent consistent with past practice or
(ii) amend in any material respect any material term of any outstanding security;

     (c) repurchase, redeem or otherwise acquire any shares or capital stock or permit its
Subsidiaries (other than wholly-owned subsidiaries) to repurchase, redeem or otherwise acquire any
shares or capital stock (or rights to acquire shares or capital stock), except that each of Axalto
and Gemplus may repurchase, redeem or acquire shares in it in connection with its employee stock
plans in amounts and to the extent consistent with past practice;

     (d) make any declaration, set aside a payment of, or pay any dividend or other distribution in
respect of its capital stock or the capital stock of its Subsidiaries except (i) dividends by a
wholly-owned Subsidiary of either Axalto or Gemplus to another wholly-owned Subsidiary of such
Party; and (ii) the SAIT Dividend;

     (e) make or commit to make any capital expenditures by the Axalto Group or the Gemplus Group,
as the case may be, exceeding an aggregate amount of Eur 50 million, except for costs incurred by
Axalto in connection with the move of its Paris office premises to Meudon, France;

     (f) acquire in one transaction or series of related transactions any assets (including any
equity interests) having a fair market value in excess of Eur 100 million or all or substantially
all of the equity interests of any Person or any business or division of any Person having a fair
market value in excess of Eur 100 million or sell, lease, encumber or otherwise dispose of any
assets having a net book value in excess of Eur 100 million, other than (i) sales in the ordinary
course of business consistent with past practice, (ii) equipment and property no longer used in the
operation of its business or (iii) assets related to discontinued operations;

     (g) (i) except in the ordinary course of business consistent with past practice or as required
by Law or an existing Agreement, materially increase the amount of compensation (including stock

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options) of any director or executive officer or make any material increase in or material
commitment to increase any employee benefits, (ii) except as required by Law, an Agreement existing
on the date hereof or a severance policy as of the date hereof, grant any severance or termination
pay to any director, officer or employee or (iii) adopt any additional employee benefit plan, amend
in any material respect any employee benefit plan (except as may be required by Law), or, except in
the ordinary course of business, make any contribution to any such existing plan; or

     (h) change the Party’s methods of accounting in effect at September 30, 2005, except as
required by changes in IFRS, as concurred with by its independent public accountants.

10.3 Best Efforts; Cooperation; Consents; Listings

     (a) Except as otherwise required by Law and subject to the provisions of Section 10.4, each of
the Parties shall cooperate and use its Best Efforts to take, or cause to be taken, or make, or
cause to be made, all things necessary, proper or advisable, including all filings necessary,
proper or advisable under applicable Laws and regulations to complete and make effective, in the
most expeditious manner practicable and in compliance with applicable Laws, the Combination (by way
of the transactions contemplated by this Combination Agreement, including but not limited to
cooperation in the preparation and filing of the necessary documentation relating to the
Contribution in Kind and the Offer with the appropriate Governmental Entities).

     (b) Gemplus and Axalto shall cooperate with one another in (i) determining whether any other
action by or in respect of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any Contracts, in
connection with the consummation of the transactions contemplated hereby and (ii) seeking any such
other actions, consents, approvals or waivers or making any such filings, furnishing information
required in connection therewith and seeking promptly to obtain any such actions, consents,
approvals or waivers, including consents, letter and reports of auditors, opinions and disclosure
letters of outside legal counsel and customary affiliate letters.

     (c) Each of the Parties shall promptly inform the other Parties of any material communication
from a Governmental Entity regarding the Combination. If any Party or any Affiliate thereof
receives a request for additional information or documentary material from any such Governmental
Entity with respect to the transactions contemplated hereby, such Party shall endeavor in good
faith to make, as soon as reasonably practicable and jointly (if appropriate) or after
consultation, with the other Parties, an appropriate response to such request.

     (d) Axalto shall undertake its Best Efforts to cause the Consideration Shares to be approved
for listing on Eurolist by Euronext.

     (e) If Gemalto elects to register shares of Gemalto Common Stock pursuant to a US Offer under
the Securities Act, and so registers such shares, Gemalto shall undertake, to the extent
practicable, its Best Efforts to cause such shares to be approved for listing in the form of shares
or American depository shares on the New York Stock Exchange, the Nasdaq Stock Market or any other
National Securities Exchange, as defined in the Exchange Act, upon the closing of such US Offer.

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10.4 Acquisition Proposals; Board Recommendations

     (a) From the date of this Combination Agreement through the completion of the Combination,
none of the Parties shall, directly or indirectly, nor shall any of the Parties authorize or permit
any of their Affiliates, employees, agents or representatives, directly or indirectly, to, (i)
solicit, initiate or encourage the initiation of any inquiries or proposals regarding, constituting
or that may lead to an Acquisition Proposal, or its announcement, or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) engage in discussions or
negotiations with any Person with respect to any Acquisition Proposal, or (iii) enter into any
letter of intent or similar document or any Agreement contemplating or otherwise relating to any
Acquisition Proposal, except that (A) either of Gemplus or Axalto may provide information in
response to an Acquisition Proposal (after having entered into a confidentiality agreement in
substantially the same form and on substantially the same terms as the Confidentiality Agreement,
with such confidentiality agreement not preventing any such Party from complying with its
obligations under this Combination Agreement) and (B) either of Gemplus, pursuant to a resolution
approved by members of the Gemplus Board of Directors other than directors affiliated with S1 or
S2, or Axalto may undertake the actions set forth in Clauses (ii) and (iii) of this Section 10.4(a)
to the extent (y) the relevant Party has received written advice of outside legal counsel that such
action could be required in order for the Board of Directors of such Party to comply with its
fiduciary obligations under applicable Laws (including the Law of the Party’s country of
incorporation) and (z) the Board of Directors of such Party determines that such Acquisition
Proposal constitutes a Superior Offer.

     (b) Each of the Parties shall promptly advise the other Parties in writing of any Acquisition
Proposal, any inquiry or indication of interest that could lead to an Acquisition Proposal or any
request for nonpublic information relating to any of Axalto, the Axalto Subsidiaries, Gemplus or
the Gemplus Subsidiaries or their respective securities, including the S1 Shares and the S2 Shares
(including the identity of the Person making or submitting such Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or submitted by any Person
during or prior to Completion of the Contribution in Kind. Each of the Parties shall keep the other
Parties fully informed in writing on a prompt basis with respect to the status of any such
Acquisition Proposal, inquiry, indication of interest or request and any modification or proposed
modification thereto. Each of the Parties shall simultaneously provide to the other Parties any
non-public information concerning such Party (or any other Party) provided to any Person in
connection with any Acquisition Proposal which was not previously provided to such other Parties.

10.5 Access to Information; Notification of Certain Matters

     From the date of the execution of this Combination Agreement until the date of Completion of
the Contribution in Kind, and subject to applicable Law, Gemplus and Axalto shall each provide
copies of books and records, financial and operating data and other information of such Party to
employees, directors or other persons acting as representatives of the other Party, including
advisors (hereinafter, collectively, the “Representatives”), who need to have access to
such documents and information for the purpose of continuing the Parties’ due diligence
investigation and confirming the continued accuracy of their representations and warranties;
provided, that it is understood that the exchange of such documents and information shall be
subject to the provisions of the Confidentiality Agreement and of the Side Letter Confidentiality
Agreement; and provided further, that competitively sensitive information of either Party shall be
disclosed only to Representatives who need to have access thereto for the purpose of obtaining
approvals, authorizations, clearances or exemptions under applicable Antitrust Laws.

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10.6 Operations of Gemalto

     It is the intent of the Parties:

     (a) to regroup the Geneva staff of Gemplus with the Axalto staff in the Paris area, subject to
prior receipt by the Parties of confirmation from any competent Governmental Entities that such
regrouping will not result in material adverse Tax consequences for Gemalto.

     (b) to maintain key elements of research and development activity and a major operational
center of the combined entities in the south of France.

     (c) until completion of the Combination, to maintain Axalto and Gemplus as two different legal
entities, with their registered offices in Amsterdam and Luxembourg, respectively, allowing the
companies to preserve their historic presences there.

ARTICLE XI

Conditions Precedent

11.1 Conditions Precedent to Certain Obligations of Axalto

     The obligations of Axalto to file the Offer and issue and deliver the Consideration Shares to
S1 and S2 shall be subject to the satisfaction of each of the following conditions precedent, and
failure to satisfy any such condition shall excuse and discharge all obligations of Axalto to
proceed with filing of the Offer and the issuance and delivery of the Consideration Shares to S1
and S2 as contemplated by this Combination Agreement, unless such failure is agreed to in writing
by Axalto:

     (a) Other than such approvals, authorizations, clearance or exemptions that may be required
under the Securities Laws for the Offer only, the transactions contemplated by this Combination
Agreement shall have been approved, authorized, cleared or exempted by the European Commission and
the relevant Governmental Entities, including, in particular, all competition authorities
exercising jurisdiction under applicable Antitrust Laws and all Governmental Entities exercising
jurisdiction under applicable Foreign Investment Laws, except approvals, authorizations, clearances
or exemptions which (i) if not obtained, would not have a Gemalto Material Adverse Effect or (ii)
are not required to be obtained prior to the Contribution in Kind as a matter of applicable Law.

     (b) The approval by the shareholders of Axalto at the Axalto Shareholders Meeting of the
Axalto Shareholders Meeting Resolutions;

     (c) The approval, by the shareholders of Gemplus at the Gemplus Shareholders Meeting of the
Gemplus Shareholders Meeting Resolutions;

     (d) The representations made by Gemplus, S1 and S2 in this Combination Agreement shall be
true, accurate and complete in all material respects when made and on and as of the date of the
Reiteration of the Gemplus Board Recommendation (or, insofar as the Reiteration of the Gemplus
Board Recommendation does not occur as a result of Gemplus’ having entered into a binding Agreement
pursuant to Section 10.4, on and as of the date of the Closing of the Contribution in Kind) as
though such representations were made on and as of such date, (except for any representations made
as of a specified date, which shall be true, accurate and complete as of the specified date),
except where the failure of such

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representations to be true, accurate and complete does not have and would not reasonably be
expected to have, individually or in the aggregate, a Gemplus Material Adverse Effect;

     (e) Gemplus shall have performed and complied in all material respects with its obligations
pursuant to Section 10.2 required by this Combination Agreement to be performed or complied with by
Gemplus up through the date of the Reiteration of the Gemplus Board Recommendation (or, insofar as
the Reiteration of the Gemplus Board Recommendation does not occur as a result of Gemplus’ having
entered into a binding Agreement pursuant to Section 10.4, up through the date of the Closing of
the Contribution in Kind);

     (f) No Claim, including any action by or before any Governmental Entity, shall have been
instituted or threatened (and not subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to materially restrain, prohibit or invalidate the transactions contemplated by
this Combination Agreement, other than an action or proceeding instituted or threatened by Axalto;

     (g) Gemplus shall have received all consents, authorizations and approvals of Persons required
to be obtained by Gemplus, other than those that may be required under the Securities Laws for the
Offer only, in order to consummate the transactions contemplated by this Combination Agreement and
such consents, authorizations and approvals shall be in full force and effect on the date of the
Reiteration of the Gemplus Board Recommendation (or, insofar as the Reiteration of the Gemplus
Board Recommendation does not occur as a result of Gemplus’ having entered into a binding Agreement
pursuant to Section 10.4, on the date of the Closing of the Contribution in Kind), except where the
failure to obtain such consents, authorizations and approvals shall not have, individually or in
the aggregate, a Gemalto Material Adverse Effect;

     (h) Each of Gemplus, S1 and S2 shall have delivered to Axalto a certificate in the form
attached hereto as Exhibit 11.1(h)(i), Exhibit 11.1(h)(ii) or Exhibit
11.1(h)(iii), respectively, dated as of the date of the Reiteration of the Gemplus Board
Recommendation (or, insofar as the Reiteration of the Gemplus Board Recommendation does not occur
as a result of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4, as of the
date of the Closing of the Contribution in Kind) and executed by an authorized representative of
each of Gemplus, S1 and S2, certifying to the fulfillment of the conditions set forth in Section
11.1(c) (with respect to Gemplus only), Section 11.1(d) (with respect to each of Gemplus, S1 and
S2), Section 11.1(e) (with respect to Gemplus only) and Section 11.1(g) (with respect to Gemplus
only);

     (i) Since the date of execution of this Combination Agreement, there shall not have been any
event, occurrence, development of state of circumstances, which, individually or in the aggregate,
has had or would give rise to a Material Adverse Change as to Gemplus; and

     (j) S1, jointly with Axalto, shall have delivered the S1 Transfer Instruction to the Registrar
and S2, jointly with Axalto shall have delivered the S2 Transfer Instruction to the Registrar as
contemplated by Section 2.2.

11.2 Conditions Precedent to Certain Obligations of Gemplus

     The obligation of Gemplus to make the Reiteration of the Gemplus Board Recommendation shall be
subject to the satisfaction of each of the following conditions precedent, and failure to satisfy
any such condition shall excuse and discharge the obligation of Gemplus to make the Reiteration of
the Gemplus Board Recommendation, unless such failure is agreed to in writing by Gemplus (it being
understood that, in the case of the condition precedent set forth in Section 11.2(c), if either S1
or S2 has not voted all of its

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shares in favor of the Gemplus Shareholders Meeting Resolutions at the Gemplus Shareholders
Meeting, or, with respect to the condition precedent set forth in Section 11.2(h), only
the members of the Gemplus Board of Directors other than S1 and S2 shall determine whether such
condition precedent has been satisfied):

     (a) Other than such approvals, authorizations, clearance or exemptions that may be required
under the Securities Laws for the Offer only, the transactions contemplated by this Combination
Agreement shall have been approved, authorized, cleared or exempted by the relevant Governmental
Entities, including, in particular, all competition authorities exercising jurisdiction under
applicable Antitrust Laws and all Governmental Entities exercising jurisdiction under applicable
Foreign Investment Laws, except approvals, authorizations, clearances or exemptions which (i) if
not obtained, would not have a Gemalto Material Adverse Effect or (ii) are not required to be
obtained prior to the Contribution in Kind as a matter of applicable Law;

     (b) The approval by the shareholders of Axalto at the Axalto Shareholders Meeting of the
Axalto Shareholders Meeting Resolutions;

     (c) The approval by the shareholders of Gemplus at the Gemplus Shareholders Meeting of the
Gemplus Shareholders Meeting Resolutions;

     (d) The representations made by Axalto in this Combination Agreement shall be true, accurate
and complete when made and on and as of the date of the Reiteration of the Gemplus Board
Recommendation (or, insofar as the Reiteration of the Gemplus Board Recommendation does not occur
as a result of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4, on and as
of the date of the Closing of the Contribution in Kind) as though such representations were made on
and as of such date, except where the failure of such representations to be true, accurate and
complete does not have and would not reasonably be expected to have, individually or in the
aggregate, an Axalto Material Adverse Effect;

     (e) Axalto shall have performed and complied in all material respects with its obligations
pursuant to Section 10.2 required by this Combination Agreement to be performed or complied with by
Axalto up through the date of Reiteration of the Gemplus Board Recommendation (or, insofar as the
Reiteration of the Gemplus Board Recommendation does not occur as a result of Gemplus’ having
entered into a binding Agreement pursuant to Section 10.4, up through the date of the Closing of
the Contribution in Kind);

     (f) No Claim, including any action by or before any Governmental Entity shall have been
instituted or threatened (and not subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to materially restrain, prohibit or invalidate the transactions contemplated by
this Combination Agreement, other than an action or proceeding instituted or threatened by Axalto;

     (g) Axalto shall have received all consents, authorizations and approvals of Persons required
to be obtained by Axalto, other than those that may be required under the Securities Laws for the
Offer only, in order to consummate the transactions contemplated by this Combination Agreement and
such consents, authorizations and approvals shall be in full force and effect on the date of the
Reiteration of the Gemplus Board Recommendation (or, insofar as the Reiteration of the Gemplus
Board Recommendation does not occur as a result of Gemplus’ having entered into a binding Agreement
pursuant to Section 10.4, on the date of the Closing of the Contribution in Kind), except where the
failure to obtain such consents, authorizations and approvals shall not have, individually or in
the aggregate, a Gemalto Material Adverse Effect;

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     (h) Axalto shall have delivered to Gemplus a certificate in the form attached hereto as
Exhibit 11.2(h), dated as of the date of the Reiteration of the Gemplus Board
Recommendation (or, insofar as the Reiteration of the Gemplus Board Recommendation does not occur
as a result of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4, as of the
date of the Closing of the Contribution in Kind) and executed by an authorized representative of
the Axalto, certifying to the fulfillment of the conditions set forth in Sections 11.2(b), 11.2(d),
11.2(e) and 11.2(g); and

     (i) Since the date of execution of this Combination Agreement, there shall not have been any
event, occurrence, development of state of circumstances, which, individually or in the aggregate,
has had or would give rise to a Material Adverse Change as to Axalto.

11.3 Conditions Precedent to Certain Obligations of S1 and S2

     The obligations of each of S1 and S2 to deliver the S1 Transfer Instruction and the S2
Transfer Instruction to the Registrar shall be subject to the satisfaction of each of the following
conditions precedent, and failure to satisfy any such condition shall excuse and discharge all
obligations of S1 and S2 to proceed with the delivery of the S1 Transfer Instruction and the S2
Transfer Instruction to the Registrar, unless such failure is agreed to in writing by S1 and S2 or,
in the case of the condition precedent set forth in Section 11.3(c), if either S1 or S2 has not
voted all of its shares in favor of the Gemplus Shareholders Meeting Resolutions at the Gemplus
Shareholders Meeting:

     (a) Other than such approvals, authorizations, clearance or exemptions that may be required
under the Securities Laws for the Offer only, the transactions contemplated by this Combination
Agreement shall have been approved, authorized, cleared or exempted by the European Commission and
the relevant Governmental Entities, including, in particular, all competition authorities
exercising jurisdiction under applicable Antitrust Laws and all Governmental Entities exercising
jurisdiction under applicable Foreign Investment Laws, except approvals, authorizations, clearances
or exemptions which (i) if not obtained, would not have a Gemalto Material Adverse Effect or (ii)
are not required to be obtained prior to the Contribution in Kind as a matter of applicable Law.

     (b) The approval by the shareholders of Axalto at the Axalto Shareholders Meeting of the
Axalto Shareholders Meeting Resolutions;

     (c) The approval, by the shareholders of Gemplus at the Gemplus Shareholders Meeting of the
Gemplus Shareholders Meeting Resolutions;

     (d) The representations made by Axalto in this Combination Agreement shall be true, accurate
and complete when made and on and as of the date of the Reiteration of the Gemplus Board
Recommendation (or, insofar as the Reiteration of the Gemplus Board Recommendation does not occur
as a result of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4, on and as
of the date of the Closing of the Contribution in Kind) as though such representations were made on
and as of such date, except where the failure of such representations to be true, accurate and
complete does not have and would not reasonably be expected to have, individually or in the
aggregate, an Axalto Material Adverse Effect;

     (e) Axalto shall have performed and complied in all material respects with its obligations
pursuant to Section 10.2 required by this Combination Agreement to be performed or complied with by
Axalto up through the date of Reiteration of the Gemplus Board Recommendation (or, insofar as the
Reiteration of the Gemplus Board Recommendation does not occur as a result of Gemplus’ having

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entered into a binding Agreement pursuant to Section 10.4, up through the date of the Closing
of the Contribution in Kind);

     (f) No Claim, including any action by or before any Governmental Entity, shall have been
instituted or threatened (and not subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to materially restrain, prohibit or invalidate the transactions contemplated by
this Combination Agreement, other than an action or proceeding instituted or threatened by S1 or
S2;

     (g) Axalto shall have received all consents, authorizations and approvals of Persons required
to be obtained by Axalto in order to consummate the transactions contemplated by this Combination
Agreement and such consents, authorizations and approvals shall be in full force and effect on the
date of the Reiteration of the Gemplus Board Recommendation (or, insofar as the Reiteration of the
Gemplus Board Recommendation does not occur as a result of Gemplus’ having entered into a binding
Agreement pursuant to Section 10.4, on the date of the Closing of the Contribution in Kind), except
where the failure to obtain such consents, authorizations and approvals shall not have,
individually or in the aggregate, a Gemalto Material Adverse Effect;

     (h) Axalto shall have delivered to each of S1 and S2 a certificate in the form attached hereto
as Exhibit 11.3(h), dated as of the date of the Reiteration of the Gemplus Board
Recommendation (or, insofar as the Reiteration of the Gemplus Board Recommendation does not occur
as a result of Gemplus’ having entered into a binding Agreement pursuant to Section 10.4, as of the
date of the Closing of the Contribution in Kind) and executed by an authorized representative of
Axalto, certifying to the fulfillment of the conditions set forth in Sections 11.3(b), 11.3(d),
11.3(e) and 11.3(g);

     (i) The Gemplus Distribution shall have been made and received by each of S1 and S2;

     (j) The Reiteration of the Gemplus Board Recommendation, except insofar as the lack thereof is
the consequence of Gemplus’ having entered into a letter of intent or similar document or any
Agreement pursuant to an Acquisition Proposal in accordance with Section 10.4(a); and

     (k) Since the date of execution of this Combination Agreement, there shall not have been any
event, occurrence, development or state of circumstances, which, individually or in the aggregate,
has had or would give rise to a Material Adverse Change as to Axalto.

ARTICLE XII

Termination

12.1 Termination

     This Combination Agreement may be terminated at any time prior to the Contribution in Kind
under any one or more of the following circumstances:

     (a) by the written mutual consent of the Parties;

     (b) by either Gemplus, if Gemplus, in connection with such termination, enters into a binding
Agreement with a third party pursuant to an Acquisition Proposal that is a Superior Offer, or
Axalto, if Axalto, in connection with such termination, enters into a binding Agreement with a
third party pursuant to an Acquisition Proposal that is a Superior Offer;

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     (c) by any relevant Party, by written notice of termination to the other Parties, if the
conditions precedent in Article XI have not been satisfied by October 31, 2006 or such other date
that shall be agreed upon in writing among the Parties, provided that this right of termination
shall be available only to the Party or Parties entitled to rely upon such conditions precedent and
shall not be available to any Party whose failure to fulfill any obligation under this Combination
Agreement has been the cause of, or resulted in, the failure of any of such conditions precedent to
have been satisfied by such date;

     (d) by Axalto, if any of Gemplus, S1 or S2 shall have breached, or failed to comply with, any
of its or their obligations under this Combination Agreement or any representation made by such
other Party shall have been incorrect when made or shall have since ceased to be true and correct,
provided in any case that with respect to any breach, failure or misrepresentation that is capable
of cure, such breach, failure or misrepresentation is not cured within thirty (30) days after
notice thereof; or

     (e) by any of Gemplus, S1 or S2, if Axalto shall have breached, or failed to comply with, any
of its obligations under this Combination Agreement or any representation made by Axalto shall have
been incorrect when made or shall have since ceased to be true and correct, provided in any case
that with respect to any breach, failure or misrepresentation that is capable of cure, such breach,
failure or misrepresentation is not cured within thirty (30) days after notice thereof.

12.2 Effect of Termination

     (a) In the event this Combination Agreement is terminated as provided in this Article XII,
this Combination Agreement shall forthwith become wholly void and of no effect with no liability on
the part of any Party, except that termination of this Combination Agreement shall be without
prejudice to any rights any Party may have hereunder against any other Party for a breach of this
Combination Agreement. The provisions of this Section 12.2 and Section 10.5 and Article XIV shall
survive the termination thereof.

     (b) The Parties agree that, in the event Gemplus enters into a binding Agreement pursuant to
Section 10.4 and terminates this Combination Agreement pursuant to Section 12.1(b), the Parties
shall not be relieved from the terms and conditions of this Combination Agreement other than
Section 1.2(b).

ARTICLE XIII

Definitions

13.1 Definitions

     As used herein, the following terms have the following meanings:

     “Acquisition Proposal” means any offer or proposal for, or indication of interest in,
(i) in the case of Axalto and Gemplus respectively, a merger, consolidation, share exchange,
business combination, reorganization, recapitalization, liquidation, dissolution, tender offer or
exchange offer or other similar transaction involving, or any purchase of, fifty percent (50%) or
more of the outstanding share capital of such Party or any Subsidiary of such Party or the assets
of such Party and its Subsidiaries, taken as a whole, and (ii) in the case of S1 and S2, any of the
S1 Shares or S2 Shares, respectively.

     “Affiliate” means, with respect to any Person, any other Person, directly or
indirectly, controlling, controlled by, or under common control with, such Person. For purposes of
this definition, the term “control” (including the correlative terms “controlling”,
“controlled by” and “under common control 

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with”) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

     “Agreement” means any concurrence of understanding and intention between two or more
Persons (or entities) with respect to their relative rights and/or obligations or with respect to a
thing done or to be done (whether oral or in recorded form and whether or not conditional,
executory, express, implied, in writing or meeting the requirements of contract), including without
limitation contracts, leases, promissory notes, easements, rights of way, covenants, commitments,
arrangements and understandings, including those related to the settlement of disputes or Claims.

     “AMF” shall have the meaning set forth in Section 1.2(b).

     “Antitrust Laws” shall have the meaning set forth in Section 1.5.

     “Avis de Dépôt” shall have the meaning set forth in Section 2.1(a).

     “Axalto” shall have the meaning set forth in the Preamble.

     “Axalto Application for Listing Form” shall have the meaning set forth in Section
2.4(b).

     “Axalto Audit Date” means December 31, 2004.

     “Axalto Balance Sheet” means Axalto’s consolidated balance sheet as of December 31,
2004.

     “Axalto Common Stock” means the common stock of Axalto, par value Eur 1.

     “Axalto Compensation and Benefit Plan” means (i) any employee welfare benefit and
employee pension benefit plan (including deferred compensation plans, incentive plans, bonus plans
or arrangements, stock option plans, stock purchase plans, stock award plans, golden parachute
agreements and severance pay plans,) (ii) any employment contracts, severance agreements or pay
plans, retention incentive agreements and noncompetition agreements, (it being understood that (ii)
shall apply only to contracts, agreements or pay plans with (A) Axalto’s Chief Executive Officer,
(B) Axalto’s Chief Operating Officer and (C) each of the members of Axalto’s senior management team
in a direct reporting relationship with Axalto’s Chief Executive Officer) and (iii) other similar
plans, agreements and arrangements that are currently in effect as of the date of this Combination
Agreement, or have been approved before this date but are not yet effective, for the benefit of any
director, officer, employee or former employee (or any of their beneficiaries) of Axalto or any of
its Subsidiaries, or with respect to which Axalto or any of its Subsidiaries may have any material
liability.

     “Axalto Executive Officers” means its Chief Executive Officer; Chief Financial
Officer; General Counsel and Company Secretary; and Director of Strategic Development and the
Terminals Division and their successors.

     “Axalto Group” means Axalto and its Subsidiaries.

     “Axalto Material Adverse Effect” means a Material Adverse Effect in respect of Axalto.

     “Axalto Reports” means each annual report, registration statement, report, proxy
statement or information statement prepared by Axalto since the Axalto Audit Date, each in the form
(including exhibits, annexes and any amendments thereto) filed with or provided to the AMF.

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     “Axalto Returns” shall have the meaning set forth in Section 5.12.

     “Axalto Shareholders Meeting” shall have the meaning set forth in Section 1.1.

     “Axalto Shareholders Meeting Resolutions” shall have the meaning set forth in Section
1.1.

     “Axalto Subsidiary” means a Subsidiary of Axalto.

     “Best Efforts” means, as to a Party, an undertaking by such Party to perform or
satisfy an obligation or duty or otherwise act in a manner reasonably calculated to obtain the
intended result by action or expenditure not disproportionate or unduly burdensome in the
circumstances, which means, among other things, that such Party shall not be required to (i) expend
funds other than for payment of the reasonable and customary costs and expenses of employees,
counsel, consultants, representatives or agents of such Party in connection with the performance or
satisfaction of such obligation or duty or other action, (ii) take any action that would be
expected to result in a Gemalto Material Adverse Effect, (iii) institute litigation or arbitration
as a part of its Best Efforts or (iv) do anything which could contravene fiduciary duties of
directors under applicable Laws.

     “Business Day” means a day, other than Saturday, Sunday or any other day on which
commercial banks in Paris, France are authorized or required by Law to close.

     “Claims” means all demands, claims, actions or causes of action, assessments, suits,
proceedings (including litigation and arbitration proceedings), demands, judgments, losses,
obligations, damages (including without limitation diminution in value), liabilities, reasonable
costs and expenses, including without limitation interest, penalties and reasonable attorneys’ fees
and disbursements.

     “Closing of the Contribution in Kind” shall have the meaning set forth in Section 2.5.

     “Combination” shall have the meaning set forth in Recital E.

     “Combination Agreement” shall have the meaning set forth in the Preamble.

     “Commencement of Executive Period” shall have the meaning set forth in Section 1.3.

     “Completion of the Contribution in Kind” means the issuance by Axalto of the
Consideration Shares in the Contribution in Kind.

     “Completion of the Offer” means the date of the first settlement of the French Offer.

     “Confidential Material” shall have the meaning set forth in Section 14.1.

     “Confidentiality Agreement” shall have the meaning set forth in Section 14.5.

     “Consideration Shares” shall have the meaning set forth in Section 2.3.

     “Contract” means any material Agreement, contract, lease, note, bond, mortgage,
indenture, consensual obligation, promise, understanding, arrangement, commitment or undertaking
which is legally binding, and including any amendment, modification, side letter, supplement or
other material Agreement or change with respect to the foregoing provided that the foregoing shall
not include approvals of a Governmental Entity.

-32-

 

     “Contribution in Kind” shall have the meaning set forth in Section 2.2(b).

     “Contribution Agreements” shall have the meaning set forth in Section 2.2(b).

     “Contribution Shares” shall have the meaning set forth in Recital D.

     “December Gemplus Board Meeting” shall have the meaning set forth in Section 1.2(a).

     “EC Antitrust Act” shall have the meaning set forth in Section 1.5.

     “Encumbrance” means any mortgage, lien, pledge, encumbrance, third party interest,
deed of trust, option, encroachment, reservation, order, decree, judgment, condition, restriction,
charge, Claim or equity of any kind.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Exchange Ratio” shall have the meaning set forth in Recital E.

     “Executive Period” shall have the meaning set forth in Section 1.3.

     “Foreign Investment Laws” means any applicable foreign investment Laws of the United
States, the European Union or any of its Members States, or any other competent jurisdiction,
including without limitation Article L 151-3 of the French Monetary and Finance Code and Section
721 of the United States Defense Production Act of 1950.

     “French Offer” shall have the meaning set forth in Section 3.1.

     “GAAP” means generally accepted accounting principles in the United States.

     “Gemalto Common Stock” means the common stock of Gemalto, par value Eur 1.

     “Gemalto Material Adverse Effect” means a Material Adverse Effect in respect of
Gemalto.

     “Gemalto Offering” means an offering of newly issued shares of Gemalto Common Stock.

     “Gemplus” shall have the meaning set forth in the Preamble.

     “Gemplus Audit Date” means December 31, 2004.

     “Gemplus Balance Sheet” means Gemplus’ consolidated balance sheet as of December 31,
2004.

     “Gemplus Board Recommendation” shall have the meaning set forth in Section 1.2(a).

     “Gemplus Common Stock” means the common stock of Gemplus.

     “Gemplus Compensation and Benefit Plan” means (i) any employee welfare benefit and
employee pension benefit plan (including deferred compensation plans, incentive plans, bonus plans
or arrangements, stock option plans, stock purchase plans, stock award plans, golden parachute
agreements and severance pay plans,) (ii) any employment contracts, severance agreements or pay
plans, retention incentive agreements and noncompetition agreements, (it being understood that (ii)
shall apply only to

-33-

 

contracts, agreements or pay plans with (A) Gemplus’ Chief Executive Officer, (B) Gemplus’
Chief Operating Officer and (C) each of the members of Gemplus’ senior management team in a direct
reporting relationship with Gemplus’ Chief Executive Officer) and (iii) other similar plans,
agreements and arrangements that are currently in effect as of the date of this Combination
Agreement, or have been approved before this date but are not yet effective, for the benefit of any
director, officer, employee or former employee (or any of their beneficiaries) of Gemplus or any of
its Subsidiaries, or with respect to which Gemplus or any of its Subsidiaries may have any material
liability.

     “Gemplus Distribution” shall have the meaning set forth in Section 2.1(a).

     “Gemplus Executive Officers” means its Chief Executive Officer; Chief Financial
Officer; General Counsel; and Director of Strategy and their successors.

     “Gemplus French Subsidiary” means Gemplus S.A., a company incorporated under the laws
of the Republic of France and a subsidiary of Gemplus.

     “Gemplus Group” means Gemplus and its Subsidiaries.

     “Gemplus Material Adverse Effect” means a Material Adverse Effect in respect of
Gemplus.

     “Gemplus Reports” means each annual report, registration statement, report, proxy
statement or information statement prepared by Gemplus since the Gemplus Audit Date, each in the
form (including exhibits, annexes and any amendments thereto) filed with or provided to the AMF and
the SEC.

     “Gemplus Returns” shall have the meaning set forth in Section 6.12.

     “Gemplus Shareholders Meeting” shall have the meaning set forth in Section 1.2(c).

     “Gemplus Shareholders Meeting Resolutions” shall have the meaning set forth in Section
1.2(c).

     “Gemplus Subsidiary” means a Subsidiary of Gemplus.

     “Governmental Entity” means any national, regional or local governmental authority,
any transgovernmental authority or any court, administrative or regulatory agency or commission or
other governmental authority or agency, national or international.

     “HSR Act” shall have the meaning set forth in Section 1.5.

     “IFRS” means the International Financial Reporting Standards.

     “Intellectual Property” means material trademarks, service marks, brand names,
certification marks, trade dress and other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any such registration
or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction;
material patents, applications for patents, and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential information and rights in
any jurisdiction to limit the use or disclosure thereof by any Person; writings and other works
whether copyrightable or not, in any jurisdiction; registrations or applications for registration
of material copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar
material intellectual property or proprietary rights.

-34-

 

     “Knowledge” means, with respect to a particular person and the matter in question,
such person’s actual knowledge of such matter.

     “Law” means a national, regional, local or international law, statute, ordinance,
rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement,
license, custom (as such term may be construed under Luxembourg law and only as applied to Gemplus)
or permit of any Governmental Entity as given interpretation by prevailing doctrine (as such term
may be construed under Luxembourg law and only as applied to Gemplus).

     “Lock-Up Period” shall have the meaning set forth in Section 9.1(a).

     “Material Adverse Change” means, with respect to Axalto or Gemplus, as the case may
be, a material adverse change in the financial condition, properties, business or results of
operations of such Party and its respective subsidiaries taken as a whole, excluding any change,
event, occurrence, development or state of circumstances to the extent relating to (i) global
economic or industry conditions generally; (ii) changes in global financial markets, interest
rates, exchange rates or business conditions generally; (iii) any generally applicable change in
Law, rule or regulation or IFRS or interpretation of any thereof; (iv) the announcement of the
Combination; (v) any actions taken, or expenses incurred, by the Parties or their Affiliates after
the execution of, and pursuant to, this Combination Agreement and any ancillary agreements or
documents in accordance with their terms and conditions or in relation to the implementation of the
Combination; and/or (vi) acts of terrorism or war (whether or not declared) but in the case of
(iii) and (vi), only to the extent that such change, event, occurrence, development or state of
circumstances does not disproportionately affect such Party, being Axalto or Gemplus as the case
may be, as compared to the other, in each case including such Party’ respective subsidiaries taken
as a whole (it being understood that any such effect will be taken into account for purposes of
this definition only to the extent of such disproportion).

     “Material Adverse Effect” means a material adverse effect on the financial condition,
properties, business or results of operations of a Person and its subsidiaries, taken as a whole,
but shall exclude any material adverse effect arising out of any change or development relating to:
(i) global economic or industry conditions generally; (ii) changes in global financial markets or
business conditions generally; (iii) any generally applicable change in Law, rule or regulation or
GAAP or IFRS or interpretation of any thereof; (iv) the announcement of the Combination; (v) any
actions taken, or expenses incurred, by the Parties or their Affiliates after the execution of, and
pursuant to, this Combination Agreement and any ancillary agreements or documents in accordance
with their terms and conditions or in relation to the implementation of the Combination; (vi)
stockholder litigation arising in connection with this Combination Agreement and/or (vii) acts of
terrorism or war (whether or not declared) and their consequences on any of the conditions or other
matters covered by clauses (i), (ii) and (iii) above.

     “Offer” shall have the meaning set forth in Section 3.1.

     “Party” or “Parties” shall have the meanings set forth in the Preamble.

     “Person” means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization, including any
Governmental Entity.

     “Registrar” means HSBC, Direction des Titre, in its capacity as Teneur de comptes
nominatifs.

-35-

 

     “Reiteration of the Gemplus Board Recommendation” shall have the meaning set forth in
Section 1.2(b).

     “Representatives” shall have the meaning set forth in Section 10.5.

     “S1” shall have the meaning set forth in the Preamble.

     “S1 Contribution” shall have the meaning set forth in Section 2.2(a).

     “S1 Contribution Agreement” shall have the meaning set forth in Section 2.2(a).

     “S1 Shares” shall have the meaning set forth in Recital C.

     “S1 Transfer Instruction” shall have the meaning set forth in Section 2.2(c).

     “S2” shall have the meaning set forth in the Preamble.

     “S2 Contribution” shall have the meaning set forth in Section 2.2(b).

     “S2 Contribution Agreement” shall have the meaning set forth in Section 2.2(b).

     “S2 Shares” shall have the meaning set forth in Recital D.

     “S2 Transfer Instruction” shall have the meaning set forth in Section 2.2(c).

     “SAIT Dividend” means the dividend due and payable by SAIT, Axalto’s Chinese joint
venture, to the minority shareholder of SAIT in the ordinary course of its operations in the
maximum aggregate amount of US$1,900,000.

     “SEC” means the United States Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

     “Securities Laws” shall have the meaning set forth in Section 5.4(a).

     “Side Letter Confidentiality Agreement” shall have the meaning set forth in
Section 14.5.

     “Subsidiary” means, with respect to any Person, any corporation or other entity of
which a majority of the securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar functions are
directly or indirectly beneficially owned by such Person.

     “Superior Offer” means a written, unsolicited, bona fide and binding offer for fifty
percent (50%) or more of the outstanding share capital of Axalto or Gemplus, as applicable, or any
Subsidiary of such Party or the assets of such Party and its Subsidiaries, taken as a whole, which
proposal has not been made in, or involving any, breach of this Combination Agreement or any other
Agreement among one or more of the Parties, provided that the Board of such Party has determined by
formal resolution that it has received evidence satisfactory, and in good faith with its financial
and outside legal advisors that such proposal, if consummated in accordance with its terms, would
result in a transaction more favorable,

-36-

 

including from an industrial and corporate interest perspective, to such Party, its shareholders
and other applicable constituencies, than the transactions contemplated by this Combination
Agreement.

     “Tax” or “Taxes” means any national, regional, local or international taxes,
charges, levies, imposts, duties, other assessments or similar charges of any kind whatsoever,
including any interest, penalties and addition imposed thereon or with respect thereto.

     “US Offer” shall have the meaning set forth in Section 3.2.

ARTICLE XIV

Miscellaneous

14.1 Press Release

     The Parties shall issue a joint press release on the date of execution of this Combination
Agreement substantially in the form attached hereto as Exhibit 14.1.

14.2 Costs and Expenses

     Any and all legal and other costs and expenses incurred in connection with this Combination
Agreement and the transactions contemplated hereby, whether such transactions contemplated hereby
are consummated or not, shall be paid by the party incurring such costs and expenses unless
expressly otherwise agreed upon by the Parties.

14.3 Successors and Assigns

     This Combination Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and assignees; provided, however, that no Party will assign its rights
or delegate any or all of its obligation under this Combination Agreement without the prior written
consent of the other Parties.

14.4 Third Party Beneficiaries

     This Combination Agreement is not intended to confer upon any Person that is not a Party, or
its successors or assignees, any rights or remedies hereunder.

14.5 Entire Agreement

     This Combination Agreement, including the exhibits hereto, the Contribution Agreements, the
Confidentiality Agreement, dated November 13, 2005 (the “Confidentiality Agreement”), and
the Side Letter Confidentiality Agreement (the “Side Letter Confidentiality Agreement”),
dated November 14, 2005, contain the entire agreement among the Parties with respect to the subject
matter hereof and there are no Agreements, understandings, representations or warranties between
the Parties other than those set forth or referred to herein, and the Parties’ sole remedy shall
lie in contract.

14.6 Severability

     The invalidity or unenforceability of any provision of this Combination Agreement, in whole or
in part, shall not effect the validity or enforceability of the other provisions thereof. In such
event, the

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Parties shall, to the extent possible, substitute for such invalid or unenforceable provision
a valid or enforceable provision corresponding to the purpose thereof.

14.7 Amendments and Waivers

     This Combination Agreement may not be modified or amended except by an instrument in writing
duly signed by each of the Parties. Any Party may, only by an instrument in writing, waive
compliance by another Party with any term or provision of this Combination Agreement on the part of
such Party to be performed or complied with; provided, however, that the waiver by any Party of a
breach of any term or provision of this Combination Agreement shall not be construed as a waiver of
any subsequent breach.

14.8 Notices

     Any notice or communication that is required or that may be given in connection with this
Combination Agreement shall be in writing and shall be delivered personally, telecopied or sent by
certified, registered or express mail or any similar courier or overnight delivery service, postage
prepaid, and shall be deemed given when so received if delivered personally or by telecopy or, if
mailed, three (3) calendar days after the date of mailing, as follows:

If to Axalto:

Axalto Holding N.V.

Joop Geesinkweg 541-542

1096 AX Amsterdam

Netherlands

Facsimile: +31 20 562 0686

Attention:           General Counsel

with a copy (which shall not constitute notice) to:

Willkie Farr & Gallagher LLP

21-23 rue de la Ville l’Evêque

Paris 75008

France

Facsimile: +33 1 40 06 96 06

Attention :            Laurent Faugérolas

                    
        Stéphane Sabatier

If to Gemplus:

Gemplus International S.A.

46a avenue JF Kennedy

2nd Floor

L-1855 Luxemburg

Luxemburg

Facsimile: + 41 22 54 45 020

Attention:            General Counsel

-38-

 

with a copy (which shall not constitute notice) to:

Hogan & Hartson mnp

69 avenue Franklin D. Roosevelt

Paris 75008

France

Facsimile: +33 1 55 73 23 10

Attention:            William J. Curtin III

          
               
  Jean-Marc Franceschi

If to S1:

TPG Advisors III, Inc.

301 Commerce Street, Suite 3300

Fort Worth, TX 76102

USA

Facsimile: +1 817 850 4080

Attention:           David Spuria

with
a copy (which shall not constitute notice) to:

Cleary Gottlieb Steen & Hamilton LLP

City Place House

55 Basinghall Street

London EC2V 5EH

England

Facsimile: + 44 20 7600 1698

Attention:            Simon Jay

If to S2:

Dr. Johannes Fritz

Seedamm-Vermögensverwaltungs GmbH

Günther-Quandt-Haus

Seedammweg 55

61352 Bad Homburg

Germany

Facsimile: + 49 6172 404-403

with a copy (which shall not constitute notice) to:

Dr. Claus-Michael Denk

Seedamm-Vermögensverwaltungs GmbH

Günther-Quandt-Haus

Seedammweg 55

-39-

 

61352 Bad Homburg

Germany

Facsimile: + 49 6172 404-403

     Any Party may change its address for notices specified above by notice to the other Parties in
accordance with this Section 14.8.

14.9 Governing Law

     This Combination Agreement shall be governed by and construed in accordance with the laws of
the Republic of France.

14.10 Dispute Resolution

     Any and all disputes arising out of or in connection with this Combination Agreement shall be
finally settled under the then-prevailing Rules of Arbitration of the International Chamber of
Commerce by three arbitrators appointed in accordance with the Rules. The venue of the arbitration
shall be Geneva (Switzerland) and the language shall be English. The arbitrators shall not act in
amiable composition.

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     IN WITNESS WHEREOF, this Combination Agreement has been executed in seven (7) original copies
in Amsterdam, The Netherlands, by or on behalf of each of the Parties as of the day first above
written.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Axalto Holding N.V.	 	 	 	T3 Partners, L.P.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	TPG Advisors III, Inc., its General Partner
	 	 
	By:

	 	/s/ Olivier Piou	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name: Olivier Piou	 	 	 	 	 	 	 	 	 	 
	 

	 	Title: Chief Executive Officer
	 	 	 	 	 	By:
	 	/s/ Geoffrey Fink *	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Name: David Spuria	 	 
	 

	 	 	 	 	 	 	 	 	 	Title: Authorized Representative	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Gemplus International S.A.	 	 	 	TPG Giant, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	TPG Advisors III, Inc., its Managing Member	 
	By:

	 	/s/ Alex J. Mandl	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name: Alex J. Mandl	 	 	 	 	 	 	 	 	 	 
	 

	 	Title: Chief Executive Officer
	 	 	 	 	 	By:
	 	/s/ Geoffrey Fink *	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Name: David Spuria	 	 
	 

	 	 	 	 	 	 	 	 	 	Title: Authorized Representative	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Acton 1. Beteiligungs GmbH	 	 	 	TPG Partners III, L.P.	 	 
	Acton 3. Beteiligungs GmbH	 	 	 	 	 	 	 	 	 	 
	Johanna Quandt	 	 	 	By:	 	TPG Advisors III,
Inc., its General Partner	 	 
	Stefan Quandt	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Dr. Johannes Fritz
 

Dr. Johannes Fritz

Attorney-in-Fact
	 	 	 	 	 	By:
	 	/s/ Geoffrey Fink *
 

Name: David Spuria

Title: Authorized Representative
	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	* Attorney-in-Fact	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Acton 2. Beteiligungs GmbH	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Dr. Johannes Fritz
 

Dr. Johannes Fritz
	 	 	 	 	 	 	 	 
	 	 
	 

	 	Managing Director	 	 	 	 	 	 	 	 	 	 

-41-

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