Las tecnologías en el proceso enseñanza aprendizaje

Gemalto Fin an cial st atem en ts

Note 25. Share-based compensation plan

Stock Option and Restricted Share Unit plans

In 2004, the General Meeting adopted a Global Equity Incentive Plan (GEIP) enabling the Board to grant options, RSU and/or share appreciation rights (‘Awards’) to eligible employees. A total number of 14 million shares have been made available for grant and issue under the GEIP. The Board of Gemalto N.V., in its meeting of April 2, 2004, approved the main terms and conditions of the 2004 option grant under the GEIP and authorized to grant options to buy or subscribe for 3,300,000 ordinary shares with an exercise price equal to the initial listing price. 3,196,000 stock options were granted in May 2004 at the IPO listing price, i.e. 14.80 Euro per share. 5,000 stock options were granted in December 2004 at the average market price of previous 5 trading days, i.e. 18.21 Euro per share. The vesting schedule differs, depending on the country of employment of the optionee, and varies from a 25% vesting per year over 4 years to a cliff vesting at the end of the 4-year period. The fair value of each grant is estimated on the date of grant using a stochastic option-pricing model.

For the stock options granted in May 2004, the following assumptions were used: no dividend, expected volatility of 25%, risk-free interest rate of 3%, and expected option life of 4.13 years. For the stock options granted in December 2004, the assumptions were: no dividend, expected volatility of 25%, risk-free interest rate of 3%, and expected option life of 3 years. In 2005, the Board of Gemalto N.V. approved the main terms and conditions of two grants: 15,000 stock options granted in June 2005 at the average market price of previous 5 trading days, i.e. 22.41 Euro per share and 685,000 stock options granted in September 2005 at the average market price of previous 5 trading days, i.e. 30.65 Euro per share. The vesting schedule differs, depending on the country of employment of the optionee, and varies from a 25% vesting per year over 4 years to a cliff vesting at the end of the 4-year period.

To estimate the fair value of the stock options granted in June 2005, the following assumptions were used: no dividend, expected volatility of 27%, risk-free interest rate of 3%, and expected option life of 4.5 years. For the stock options granted in September 2005, the assumptions were:

no dividend, expected volatility of 28%, risk-free interest rate of 2.8%, and expected option life of 4.12 years.

In 2006, the Board of Gemalto N.V. approved the main terms and conditions of the following grant: 1,600,000 stock options granted in June 2006 at the average market price of previous 5 trading days, i.e. 23.10 Euro per share. The vesting schedule differs, depending on the country of employment of the optionee, and varies from a full vesting after 18 months to a cliff vesting at the end of the 4 year period. To estimate the fair value of the stock options granted in June 2006, the following assumptions were used: no dividend, expected volatility of 36%, risk-free interest rate of 3.8%, and expected option life of 3.7 years.

In 2007, the Board of Gemalto N.V. approved the main terms and conditions of the following grant: 872,000 stock options granted in September 2007 at 20.83 Euro per share, i.e. the average market price during the 5 trading days prior to the grant. The vesting schedule depends on the country of employment of the optionee and varies from a 25% vesting per year over 4 years to a cliff vesting at the end of the 4-year period.

To estimate the fair value of the stock options granted in September 2007, the following assumptions were used: no dividend, and expected option life between 1.5 and 4.5 years depending on the vesting schedule, expected volatility of 28.5% stemming from an historic volatility of 35% and taking into account a negative volatility curve, and risk-free interest rate between 4.01% and 4.15% depending on the expected option life.

In September 2007, the Board of Gemalto N.V. also approved the main terms and conditions of the grant of 560,000 restricted share units. The vesting period ends on December 31, 2010. Vesting conditions are both service- based and market-based. If vesting conditions are met, restricted share units will be exchanged against Gemalto shares and the ratio of exchange will depend on the achievement of share price targets. The Gemalto shares resulting from the exchange, if any, will not be transferred to beneficiaries not employed in the US before the end of a 2-year period starting on grant date, and these beneficiaries are not allowed to trade those shares during the 2-year period starting on the date of the transfer. The beneficiaries employed in the US will not receive the shares before the

Financial statements • Notes to the consolidated financial statements

Annual Report 2009

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4-year period starting on the grant date and are allowed to trade those shares immediately after the transfer. The fair value of this grant of restricted share units was estimated on the date of grant using a binomial model. The following assumptions were used: share price of 20.36 Euro, no dividend, risk-free interest rate of 4.17% and implicit volatility of 28.5% stemming from an historic volatility of 35% and taking into account a negative volatility curve. In addition, the fair value was discounted by 4% for each year of restriction on share trading. On September 25, 2008, the Board recognized that, according to the vesting conditions, 66% of the granted share units had vested on September 9, 2008. Under those conditions, 343,200 share units have been exchanged against Gemalto shares on September 27, 2009 and 26,400 share units will be exchanged against Gemalto shares no sooner than September 27, 2011. On November 13, 2009, the Board recognized that, according to the vesting conditions, an additional 84% of the granted share units had vested on November 6, 2009. Under those conditions, 436,800 share units have been exchanged against Gemalto shares on November 20, 2009 and 33,600 share units will be exchanged against Gemalto shares no sooner than November 20, 2011.

In 2008, the Board of Gemalto N.V. approved the main terms and conditions of the following grant: 1,410,000 stock options granted in September 2008 at 26.44 Euro per share, i.e. the average market price during the 5 trading days prior to the grant. The vesting schedule depends on the country of employment of the optionee and varies from a 25% vesting per year over 4 years to a cliff vesting at the end of the 4-year period. 1,399,000 stock options have actually been granted out of the 1,410,000 approved. The following assumptions were used to estimate September 2008 stock options grant: share price of 26.30 Euro, no dividend, expected option life between of 1.5 and 4.5 years depending on the vesting schedule, expected volatility between 30% and 39% stemming from an historic volatility of 40% and taking into account a negative volatility curve, and risk-free interest rate between 4.02% and 4.17% depending on the expected option life.

In October 2009, the Board of Gemalto N.V. also approved the main terms and conditions of the grant of 611,500 restricted share units. The vesting period ends on October 2, 2012. Vesting conditions are both service-based and performance-based. If vesting conditions are met, restricted

share units will be exchanged against Gemalto shares and the ratio of exchange will depend on the achievement of adjusted EBIT margin targets. The Gemalto shares resulting from the exchange, if any, will not be transferred to beneficiaries not employed in the US before the end of a 2-year period starting on the date of the exchange, and these beneficiaries are not allowed to trade those shares during the 2-year period starting on the date of the transfer. The beneficiaries employed in the US will not receive the shares before the 4-year period starting on the grant date and are allowed to trade those shares immediately after the transfer. The fair value of this grant of restricted share units was estimated on the date of grant using the following assumptions: share price of 30.71 Euro, dividend of 0.20 Euro per share, one-year risk-free interest rate of 0.69%, two-year risk-free interest rate of 1.27%, three-year risk-free interest rate of 1.67%. The fair value was discounted by 7.50%, the average borrowing rate for a 2-year personal loan, for each year of trading restriction.

For the stock options granted in 2004, 2005 and 2006, volatility was determined by calculating the historical volatility of the Company’s share price returns over the last 360 market days prior to grant date, when enough historical data were available. For the stock options and the restricted share units granted in 2007, and for the stock options granted in 2008, the historical volatility of the Company’s share price returns over the last 360 market days prior to the grant date was adjusted to take into account a negative volatility curve. Pursuant to the undertaking under article 3.3(a) of the Combination agreement between Gemalto N.V. and Gemplus International S.A. signed on December 6, 2005, Gemalto guarantees to the Gemplus 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 public exchange offer (i.e. 25 Gemplus shares for 2 Gemalto shares).

The following table summarizes information with respect to Gemplus stock options outstanding as of December 31, 2008 and 2009. The initial numbers and exercise prices of the options for Gemplus International S.A. and Gemplus S.A. shares granted to Gemplus stock options holders have been adjusted for the 0.26 Euro distribution of available reserves to the Gemplus shareholders on June 2, 2006, and converted at the ratio of the public exchange offer (i.e. 25 Gemplus shares for 2 Gemalto shares).

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