ActivIdentity (ACTI)

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In July 2005, the Company acquired Protocom Development Systems Pty. Ltd. (“Protocom”), a privately held Australian-based company, for initial consideration of $21.0 million and 1,650,000 shares of common stock. Concurrently with the closing of the Protocom acquisition, the Company entered into an employment agreement with Jason Hart, then Protocom’s Chief Executive Officer, who now serves as Chief Executive Officer of the Company and a member of the board of directors. Pursuant to the Protocom acquisition agreement, the Company agreed to issue an aggregate of up to 2,100,000 additional shares of common stock to the former Protocom shareholders, including Mr. Hart, if certain revenue targets were achieved by June 30, 2006. Based on the Company’s calculation of the qualifying revenues achieved during this earn-out arrangement, the Company notified the Protocom shareholder representative that none of the additional consideration had been earned and thus would not be paid. The Protocom shareholder representative has objected to certain items in the Company’s calculation and this matter may be referred to an independent auditor for resolution. If any portion of the earn-out is ultimately paid, Mr. Hart would receive approximately 68.7% of these additional payments.

Subsequent to the acquisition of Protocom, the Company paid in fiscal 2006 approximately $248,000 in rent to a company in which Mr. Hart is a major shareholder. These rent payments related to certain properties rented by the Company in Australia, which properties were acquired in connection with the Company’s acquisition of Protocom. The Company renewed the lease agreement for one of the buildings under lease for an additional three years during fiscal 2006 with a monthly rent of approximately $17,250, subject to inflationary increases.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is included under the caption “Certain Relationships and Related Transactions” in our Proxy Statement, to be filed in connection with our 2007 Annual Meeting of Stockholders, and is incorporated herein by reference.

Certain Relationships and Related Transactions

In July 2005, the Company acquired Protocom Development Systems Pty. Ltd. (“Protocom”), a privately held Australian-based company, for initial consideration of $21.0 million and 1,650,000 shares of common stock. Concurrently with the closing of the Protocom acquisition, the Company entered into an employment agreement with Protocom’s Chief Executive Officer, Jason Hart, pursuant to which Mr. Hart became ActivCard’s Senior Vice President, Sales and Marketing. Additionally, Mr. Hart was elected to the ActivCard board of directors. Pursuant to the Protocom acquisition agreement, the Company has agreed to issue an aggregate of up to 2,100,000 additional shares of common stock to the former Protocom shareholders, including Mr. Hart, if certain revenue targets are achieved by June 30, 2006.

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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is included under the caption “Certain Relationships and Related Transactions” in our Proxy Statement, to be filed in connection with our 2006 Annual Meeting of Stockholders, and is incorporated herein by reference.