ASSET PURCHASE AGREEMENT

Exhibit 10.22

Execution Version

ASSET PURCHASE AGREEMENT

between

SCM MICROSYSTEMS, INC.,

as the Seller

and

KUDELSKI S.A.,

as the Buyer

Dated as of April 5, 2006

TABLE OF CONTENTS

i

TABLE OF CONTENTS
(Continued)

ii

Exhibits

Asset Purchase Agreement Schedules

Disclosure Schedules

Disclosure Schedules attached hereto as Exhibit A .

iv

ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT, dated as of April 5, 2006 (this " Agreement "), between SCM Microsystems, Inc., a Delaware corporation (the " Seller "), and Kudelski S.A., a corporation organized under the laws of Switzerland (together with its Subsidiaries which will purchase the Transferred Assets and assume the Assumed Liabilities, the " Buyer ").

RECITALS

     A. The Seller is engaged in the business of designing, developing, manufacturing selling and supporting software, silicon and conditional access module products relating to digital television security solutions at various locations around the world (the " Business ").

     B. The Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, certain assets related to the Business, and, in connection therewith, the Buyer is willing to assume certain liabilities and obligations of the Seller and its Affiliates relating to the Business, all upon the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

     In consideration of the foregoing and the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I
PURCHASE AND SALE

     Section 1.1 Purchase and Sale of Assets . Upon the terms and subject to the conditions of this Agreement, including, without limitation, the schedules and exhibits hereto, at the Closing, the Seller shall, and shall cause its Subsidiaries to, sell, assign, transfer, convey and deliver to the Buyer all of the Seller’s or such Subsidiary’s right, title and interest as of the time of the Closing in, to and under the Transferred Assets, and the Buyer shall purchase, acquire, accept and pay for the Transferred Assets. " Transferred Assets " shall mean all of the Seller’s or any of its Subsidiaries’ right, title and interest in, to and under the following enumerated assets (except to the extent they are Excluded Assets) as they exist at the time of the Closing, as set forth in the schedules referenced below:

          (a) (i) all contracts, licenses, leases, customer and supplier agreements, purchase orders (including purchase orders for Business inventory components and product assembly) and other agreements listed on Schedule 1.1(a), and (ii) all other contracts, leases, customer and supplier agreements, purchase orders and other agreements to which the Seller or any of its Subsidiaries is a party or by which the Seller or any such Subsidiary is bound, in each case, that relate exclusively to, in the ordinary course of business out of the operation of, the Business (collectively, the " Contracts ");

          (b) the property known as 216 avenue du Serpolet, 13704 La Ciotat, France, together with the Seller’s or any of its Subsidiaries’ right, title and interest in, to and under all

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buildings, improvements and fixtures thereon and all appurtenances thereto (the " Real Property ");

          (c) all patents and patent applications, registered trademarks or service marks and applications to register any trademarks or service marks, copyrights, software and trade secrets, in each case, owned by the Seller or any of its Subsidiaries that are listed on Schedule 1.1(c) (the " Business Intellectual Property ");

          (d) all machinery, equipment, furniture, furnishings, parts, spare parts, vehicles and other tangible personal property owned by the Seller or any of its Subsidiaries (i) that is listed on Schedule 1.1(d) or (ii) that is used or held for use exclusively in the Business (collectively, the " Tangible Personal Property ");

          (e) all raw materials, work-in-progress, finished goods, supplies, packaging materials and other inventories owned by the Seller or any of its Subsidiaries that are listed in Schedule 1.1(e) (the " Inventory ");

          (f) subject to Section 1.5 hereof, all Permits used or held for use by Seller or any of its Subsidiaries exclusively in the Business that are listed on Schedule 1.1(f), to the extent that such Permits are transferable to the Buyer (the " Business Permits ");

          (g) all personnel records (to the extent permitted by applicable law) related to the Transferred Employees, customers’ and suppliers’ lists, sales and promotional literature and manuals owned by the Seller or any of its Subsidiaries, in each case, relating exclusively to the Business (the " Books and Records "); and

          (h) all prepaid expenses and security deposits relating exclusively to the Business that are listed on Schedule 1.1(h).

     Section 1.2 Excluded Assets . Notwithstanding anything contained in Section 1.1 to the contrary, neither the Seller nor any of its Subsidiaries is selling, assigning, transferring or conveying, and the Buyer is not purchasing or acquiring, any assets other than those specifically listed or described in Section 1.1 and, without limiting the generality of the foregoing, the term "Transferred Assets" shall expressly exclude the following assets of the Seller and its Subsidiaries, all of which shall be retained by the Seller or such Subsidiary (collectively, the " Excluded Assets "):

          (a) all of the cash and cash equivalents of the Seller and its Subsidiaries and all accounts receivable, notes receivable and other receivables due to the Seller or any of its Subsidiaries, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto;

          (b) the corporate books and records of internal corporate proceedings, accounting and financial records, tax records, work papers and books and records of the Seller and its Subsidiaries and any internal reports relating to the business activities of the Seller and its Subsidiaries, other than those expressly included as Transferred Assets pursuant to Section 1.1(g);

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          (c) all rights in the names and marks and any variation or derivation thereof listed in Schedule 1.2(c);

          (d) all of the bank accounts of the Seller and its Subsidiaries;

          (e) any interest in or right to any refund of or credit for taxes of any kind, whether or not relating to the Business, the Transferred Assets, or the Assumed Liabilities, for, or applicable to, any Pre-Closing Tax Period;

          (f) any insurance policies and rights, claims or causes of action thereunder, except those policies, rights, claims or causes of action governed by French law which will be automatically transferred to the Buyer;

          (g) all rights, claims and causes of action relating to any Excluded Asset or any Excluded Liability;

          (h) all rights of the Seller and its Subsidiaries under this Agreement and the Ancillary Agreements;

          (i) the capital stock owned by Seller and/or its Subsidiaries in each of Seller’s Subsidiaries;

          (j) (i) the Casing Patents and other intellectual property listed on Schedule 1.2(j) (collectively, the " Licensed Intellectual Property "), and with respect to which the parties will enter into the License Agreement, and (ii) any and all other intellectual property of the Seller that is not listed on, or referred to in, Schedule 1.1(c), including, without limitation, the items identified in Section 1.2(c);

          (k) all St@rKey Ò and mobile terrestrial receiver products comprised in the Inventory and any agreements relating thereto; and

          (l) any leased real property.

     Section 1.3 Assumed Liabilities . In connection with the purchase and sale of the Transferred Assets pursuant to this Agreement, at the Closing, the Buyer shall assume and pay, discharge, perform or otherwise satisfy when due all liabilities and obligations set forth on Schedule 1.3 (collectively, the " Assumed Liabilities "). Buyer further agrees to and shall indemnify, defend and hold Seller and Seller’s Affiliates harmless for and against any and all liabilities, burdens and obligations associated with such Assumed Liabilities and any claim, loss, liability, damage or injury suffered by Seller or any of Seller’s Affiliates relating to the Assumed Liabilities or arising out of any failure by Buyer to satisfy when due the liabilities, burdens and obligations under, pursuant to, or relating to the Assumed Liabilities.

     The Buyer’s obligations under this Section 1.3 shall not be subject to offset or reduction by reason of any actual or alleged breach of any representation, warranty or covenant or any other obligation unrelated to this Agreement and the Ancillary Agreements. The Buyer agrees to reimburse the Seller and its Affiliates, dollar for dollar, in the event that any Person offsets from any amount such Person otherwise owes to the Seller or any of its Affiliates an amount that is (or

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is part of) an Assumed Liability. The Seller will provide notice to the Buyer of any such offset for which the Seller or any of its Affiliates is entitled to be reimbursed by the Buyer pursuant to this Section 1.3 as soon as reasonably practicable after Seller receives the same and the Buyer shall pay the Seller or such Affiliate promptly following receipt of such notice.

     Section 1.4 Excluded Liabilities . Notwithstanding any other provision of this Agreement to the contrary, the Buyer is not assuming, and the Seller and its Subsidiaries, as applicable, shall pay, perform or otherwise satisfy when due, all liabilities and obligations of Seller and its Subsidiaries that are not Assumed Liabilities, including those set forth on Schedule 1.4 (the " Excluded Liabilities "). Seller agrees to and shall indemnify, defend and hold Buyer and Buyer’s Affiliates harmless for and against the obligation of Seller to pay and/or reimburse the Buyer for the Seller’s Portion of the Transferred Employee Liabilities and the Seller’s Portion of the Korean Rebates (each as defined in Schedule 1.4) and any claim, loss, liability, damage or injury suffered by Buyer or any of Buyer’s Affiliates relating to the Seller’s Portion of the Transferred Employee Liabilities and the Seller’s Portion of the Korean Rebates or arising out of any failure by Seller to satisfy when due the Seller’s Portion of the Transferred Employee Liabilities and the Seller’s Portion of the Korean Rebate.

     Section 1.5 Consents to Certain Assignments .

          (a) Notwithstanding anything in this Agreement or any Ancillary Agreement to the contrary, this Agreement and the Ancillary Agreements shall not constitute an agreement to sell, transfer or assign any asset, agreement, Permit, claim or right or any benefit arising thereunder or resulting therefrom if an assignment or attempted assignment thereof, without the consent of a Person, would constitute a breach or other contravention under any agreement or applicable law to which the Seller or any of its Subsidiaries is a party or by which it is bound. The Seller shall endeavor to obtain the consents or waivers listed on Schedule 1.5, which has been mutually agreed to by Seller and Buyer; provided that in no event shall Seller or any of its Subsidiaries be required to make any payment to any Person or otherwise expend any amount in order for such Person to agree to grant any such consent or waiver. The Buyer agrees that neither the Seller nor any of its Affiliates shall have any liability to the Buyer arising out of or relating to the failure to obtain any consent or waiver that may be required in connection with the transactions contemplated by this Agreement or the Ancillary Agreements or because of any circumstances resulting therefrom. The Buyer further agrees that no representation or warranty of the Seller herein shall be breached or deemed breached and, except as set forth in Section 6.3(d), no condition shall be deemed not satisfied, as a result of (i) the failure to obtain any consent or waiver or any circumstances resulting therefrom, (ii) any suit, action, proceeding or investigation commenced or threatened by or on behalf of any Person arising out of or relating to the failure to obtain any such consent or waiver or any circumstances resulting therefrom, or (iii) any termination of a Contract that is a Transferred Asset by a third party to such Contract in the event such Contract grants such third party the right to terminate as a result of Seller or any of its Subsidiaries entering into the transactions contemplated by this Agreement or the Ancillary Agreements, or otherwise.

     (b) Without prejudice to the provisions of Sections 6.3 (d), if any such consent or waiver is not obtained on or prior to Closing and, as a result thereof, the Buyer shall be prevented by a third party from receiving the rights and benefits with respect to such Transferred

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Asset intended to be transferred hereunder, or if any transfer or assignment or attempted transfer or assignment would adversely affect the rights of the Seller or any of its Subsidiaries thereunder so that the Buyer would not in fact receive all such rights or the Seller or any of its Subsidiaries would forfeit or otherwise lose the benefit of rights that the Seller or any of its Subsidiaries is entitled to retain, the Seller and the Buyer shall cooperate in any lawful and commercially reasonable arrangement, as the Seller and the Buyer shall agree, under which the Buyer would, to the extent practicable, obtain the economic claims, rights and benefits under such asset and assume the liabilities, economic burdens and obligations with respect thereto in accordance with this Agreement, including, without limitation, by subcontracting, sublicensing or subleasing to the Buyer; provided that all reasonable out-of-pocket expenses of such cooperation and related actions shall be paid by the Buyer. The Seller shall pay to the Buyer when received all monies received by the Seller or any of its Subsidiaries with respect to any such Transferred Asset or any claim or right or any benefit arising thereunder and the Buyer shall indemnify and promptly pay the Seller and its Affiliates for all liabilities, economic burdens and obligations of the Seller or any of its Affiliates associated with such Transferred Asset or any claim or right or any benefit arising thereunder.

     Section 1.6 Consideration . In full consideration for the sale, assignment, transfer, conveyance and delivery of the Transferred Assets to the Buyer, at the Closing, the Buyer shall (a) pay to the Seller an aggregate amount equal to Eleven Million United States Dollars (US$11,000,000) (the " Purchase Price ") and (b) assume the Assumed Liabilities. The Purchase Price shall be payable as follows:

          (i) on the Closing Date, Buyer shall pay to Seller by wire transfer to a bank account designated in writing by the Seller, in immediately available funds in United States dollars, the sum of Nine Million United States Dollars (US$9,000,000), and

          (ii) on the later of (A) the Closing Date and (B) the date two (2) weeks after the date of the completion, in all material respects and consistent with reasonable engineering standards, of the tests outlined in Section 7 of the procedures relating to the Casper Chip that are attached as Schedule 1.6 and the release for production of the Casper Chip, Buyer shall pay to Seller by wire transfer to a bank account designated in writing by the Seller, in immediately available funds in United States dollars, an amount equal to (1) the sum of Two Million United States Dollars (US$2,000,000) minus (2) the aggregate amount of all reasonable and documented out-of-pocket third party expenses for coding, synthesis, simulation, verification, layout or mask changes that are actually incurred by Buyer after the Closing Date and directly applicable to a respin/redesign resulting in the re-manufacturing of engineering sample ASIC’s required to complete, after the Closing Date, any of the procedures set forth on Schedule 1.6 that were not completed prior to the Closing Date, and to enable a product that has substantially the same functionality as WorldCam.

     Section 1.7 Allocation of Purchase Price . The Purchase Price shall be allocated among the Transferred Assets in a manner to be finally agreed upon by the parties at or prior to Closing, which shall be substantially as set forth in Schedule 1.7. Buyer and Seller shall report the purchase and sale of the Transferred Assets in accordance with such allocation for all tax purposes in all relevant jurisdictions (including, without limitation, the filing of the forms

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prescribed under Section 1060 of the Internal Revenue Code of 1986 and Treasury Regulations promulgated thereunder).

     Section 1.8 Closing .

          (a) The sale and purchase of the Transferred Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the " Closing ") to be held at the offices of Gibson, Dunn & Crutcher LLP, Paris, France, on the third Business Day following the satisfaction or, to the extent permitted by applicable law, waiver of all conditions to the obligations of the parties set forth in Article VI (other than such conditions as may, by their terms, only be satisfied at the Closing or on the Closing Date), or at such other place or at such other time or on such other date as the Seller and the Buyer mutually may agree in writing. The day on which the Closing takes place is referred to as the " Closing Date ".

          (b) At the Closing, the Seller shall deliver or cause to be delivered to the Buyer the following documents:

               (i) duly executed originals of each of the Ancillary Agreements;

               (ii) a duly executed certificate of the secretary of the Seller in customary form;

               (iii) a duly executed certificate of an executive officer of the Seller pursuant to Section 6.3(a); and

               (iv) copies of the settlement agreements entered into with, or written objections received from, any Excluded Employee as of the Closing Date.

          (c) At the Closing, the Buyer shall deliver or cause to be delivered to the Seller the following documents:

               (i) duly executed originals of each of the Ancillary Agreements;

               (ii) a duly executed certificate of the secretary of the Buyer in customary form; and

               (iii) a duly executed certificate of an executive officer of the Buyer pursuant to Section 6.2(a).

     Section 1.9 Transfer of Business Employees .

          (a) Schedule 1.9 contains a list (divided into Singapore, France and Germany) of the individuals employed by the Seller or its Subsidiaries immediately prior to the Closing Date whose duties relate primarily to the operations of the Business, regardless of the company payroll on which such individuals are listed, and whose employment contracts are governed by Singapore, French or German law, respectively, hereinafter referred to as the " Singapore Business Employees, " " French Business Employees " and " German Business Employees, " respectively, and, together, the " Business Employees") . Each of the Business Employees is

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intended to be transferred to the Buyer in accordance with the process and procedures set forth on Schedule 1.9. Schedule 1.9 also contains a list of four employees whose employment contracts are governed by German law and who could claim that their respective duties relate primarily to the operations of the Business and that they are assigned to the Business, but with respect to whom the Buyer has indicated that it does not wish to retain (the " Excluded GBEs "). To the extent that any Business Employee or Excluded GBE is actually transferred to the Buyer as of the Closing Date, such Business Employee or Excluded GBE shall be referred to as a " Transferred Employee ." To the extent that any Business Employee or Excluded GBE effectively objects to being transferred to the Buyer as of the Closing Date in accordance with applicable law and is not in fact transferred to the Buyer as of the Closing Date, such Business Employee or Excluded GBE shall be referred to as an " Excluded Employee ."

          (b) To the extent an Excluded Liability relates to any Transferred Employee (a " Transferred Employee Liability "), the Seller agrees to and shall indemnify, defend and hold Buyer and its Affiliates harmless for and against any and all liabilities, burdens and obligations associated with such Transferred Employee Liability and any claim, loss, liability, damage or injury suffered by Buyer or any of its Affiliates relating to such Transferred Employee Liability or arising out of any failure by Seller or its Subsidiaries to satisfy when due the Transferred Employee Liability. To the extent that the Buyer is required to make and makes a payment to a Transferred Employee or any Governmental Authority that constitutes a Transferred Employee Liability, the Seller shall promptly reimburse the Buyer for any such amount actually paid by Buyer or its Affiliates.

ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER

     Except as set forth in and subject to the Disclosure Schedules attached hereto as Exhibit A (collectively, the " Disclosure Schedules "), the Seller hereby represents and warrants to the Buyer as follows:

     Section 2.1 Organization . The Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all necessary corporate power and authority to own, lease and/or operate the Transferred Assets and to carry on the Business as it is now being conducted.

     Section 2.2 Authority . The Seller has full corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Seller of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by the Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. This Agreement has been, and upon their execution each of the Ancillary Agreements to which the Seller will be a party will have been, duly executed by the Seller. This Agreement constitutes, and upon their execution and delivery each of the Ancillary Agreements to which the Seller will be a party will constitute, the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms,

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except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

     Section 2.3 No Conflict; Required Filings and Consents .

          (a) The execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which the Seller will be a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (i) conflict with or violate the certificate of incorporation or bylaws of the Seller; (ii) conflict with or violate any law applicable to the Seller, the Business or any of the Transferred Assets or by which the Seller, the Business or any of the Transferred Assets may be bound or affected; or (iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or require any consent of any Person pursuant to, any Contract; except, in the case of clause (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or that arise as a result of any facts or circumstances relating to the Buyer or any of its Affiliates.

          (b) The Seller or one of its Subsidiaries has consulted with the works council for its branch in France and obtained the works council’s opinion with respect to the transactions contemplated by this Agreement prior to the execution of this Agreement by Seller. Unless otherwise provided herein, the Seller is not required to file, seek or obtain any notice, authorization, approval, order, permit, consent or clearance of or with any United States or non-United States national, supranational, federal, state, provincial, local or similar governmental, regulatory or administrative authority, branch, agency or commission or any judicial or arbitral body (a " Governmental Authority ") in connection with the execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which the Seller will be a party or the consummation of the transactions contemplated hereby or thereby, except for (i) filings made or consents, approvals or authorizations obtained on or prior to the Closing, (ii) any filings required to be made under any applicable antitrust or merger control laws, (iii) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (iv) as may be necessary as a result of any facts or circumstances relating to the Buyer or any of its Affiliates.

     Section 2.4 Absence of Certain Changes or Events . Since January 1, 2006, there has not occurred any Material Adverse Effect. The Buyer acknowledges that there may be disruption to the operation of the Business solely as a result of (i) the announcement by the Seller of its intention to sell the Business, (ii) the execution of this Agreement or the Ancillary Agreements, including, without limitation, as a result of the identity of the Buyer, and (iii) the consummation of the transactions contemplated hereby, and the Buyer agrees that any such disruptions do not and shall not constitute a breach of this Section 2.4 or a Material Adverse Effect.

     Section 2.5 Compliance with Law; Permits . To the Knowledge of the Seller, the Business is being conducted in material compliance with all applicable laws, except as would

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not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Seller or its Subsidiaries are in possession of all permits, licenses, franchises, approvals, certificates, consents, waivers, concessions, exemptions, orders, registrations, notices or other authorizations of any Governmental Authority necessary for it to own, lease and operate the Transferred Assets and to conduct the Business as currently conducted (the " Permits "), except where the failure to have, or the suspension or cancellation of, any of the Permits would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     Section 2.6 Litigation . As of the date hereof, there is no action, suit, arbitration or proceeding by or before any Governmental Authority in connection with the Business pending, or to the Knowledge of the Seller, threatened in writing that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would affect the legality, validity or enforceability of this Agreement or any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

     Section 2.7 Employee Plans . Except for employee compensation and benefit plans required under applicable law, Schedule 2.7 of the Disclosure Schedules sets forth all material employee benefit and compensation plans, contracts, policies, programs and arrangements sponsored, maintained or contributed to by the Seller or its Subsidiaries in connection with the Business in effect as of the date hereof, including all pension, profit sharing, savings and thrift, bonus, stock bonus, stock option or other cash or equity-based incentive or deferred compensation, severance pay and medical and life insurance plans in which any of the Business Employees or their dependents participate.

     Section 2.8 Labor and Employment Matters . Other than amounts that are or will become Assumed Liabilities, including, without limitation, accrued vacation and RTT Days (as defined in Schedule 1.9), the Seller has paid or has caused its Subsidiaries to pay, as the case may be, all salaries, reimbursement of expenses and other compensation and compensation related obligations to which the Transferred Employees are entitled pursuant to applicable law and their employment contracts that have become due and payable as of the date hereof, and the related social security charges and taxes that have become due and payable as of the date hereof, and will pay such amounts that become due and payable prior to the Closing Date. No written employment contract of any of the Transferred Employees contains materially more favorable clauses, including as regards severance indemnities, than those provided by applicable law or any applicable collective bargaining agreements. Except as would not reasonably be expected to have a Material Adverse Effect, (i) neither the Seller nor any of its Subsidiaries is in breach of, or default under, any employment agreement with a Transferred Employee and (ii) all such employment agreements are in full force and effect and are valid and binding on the Seller and/or its Subsidiaries (as the case may be) and, to the Knowledge of the Seller, the applicable employee.

     Section 2.9 Property .

          (a) The Seller or one of its Subsidiaries is the sole owner of, and has valid title to, the Real Property, which title is recorded on the relevant land registry (C onservation des Hypothèques ). Other than Permitted Encumbrances, the preemptive right provided by Article L. 211-1 of the French Code de l’Urbanisme and any other exception that is recorded on

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the registry of the Conservation des Hypothèques or would not reasonably be expected to have a Material Adverse Effect, the Real Property is (i) free and clear of any charges, claims, attachment, mortgages, leases, liens, pledges or security interests or restrictions of any kind, (ii) free of any specific planning and zoning ( urbanisme ) measure or regulation which might materially affect the value of the Real Property and (iii) not affected by any easement, contractual preemptive right, option or similar right in favor of a third party, and Seller has not received any written notice of any claim in this regard or that the Real Property is subject to any administrative or court action. The Real Property has been maintained in the ordinary course of Seller’s or its Subsidiary’s business. To the Knowledge of Seller, the Real Property does not qualify as a classified installation (" installation classée" ) for environmental purposes.

          (b) Schedule 1.1(d) of the Disclosure Schedules lists each piece of Tangible Personal Property owned by the Seller or one of its Subsidiaries that is material to, and used exclusively in, the Business. The Seller or one if its Subsidiaries has good and marketable title to all Tangible Personal Property, free and clear of all charges, claims, mortgages, leases, liens, options, pledges or security interests or other restrictions of any kind, other than Permitted Encumbrances and any such exceptions that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (c) Subject to Section 2.4 and the fact that (i) the Business has not heretofore been conducted by the Seller and its Subsidiaries separate and distinct from the other businesses of the Seller and its Subsidiaries, (ii) the Buyer is only purchasing segregated assets from the Seller, rather than a complete and separate company with all of its administration and operational functions, information technology, accounting and other systems and infrastructure, (iii) the Buyer does not intend to take and/or retain all of the employees of Seller and its Subsidiaries involved in the Business, (iv) the intellectual property listed on Schedule 1.2(c) is an Excluded Asset, (v) certain Permits, Contracts and other agreements and items may not be transferable or assignable by the Seller to the Buyer, (vi) the Transferred Assets do not constitute all of the assets, properties, agreements and other items that the Seller and its Subsidiaries used prior to the Closing in the conduct of the Business, and (vii) the Buyer intends to conduct a portion of the Business through the CAM Agreements and may instruct the Seller to transfer certain of the Contracts to third parties, and assuming that (1) the Buyer has all of the necessary administration and operational functions, information technology systems, infrastructure and employees in place at Closing and (2) no customer, employee, supplier or other Person terminates or modifies its business or other relationship with the Business and there is no other change with respect to the Business or the industry in which the Business operates, the Transferred Assets, taken together with the Licensed Intellectual Property, are sufficient to enable the Buyer to continue to operate the Business after the Closing Date, in all material respects, in the same manner in which it was conducted by the Seller prior to the Closing Date.

     Section 2.10 Intellectual Property . The Seller or one of its Subsidiaries holds sole title to the Business Intellectual Property, free from any encumbrance, lien, pledge or security interest, other than any such exceptions that would not, individually or in the aggregate, be expected to be material. The patents and trademarks that are included in the Business Intellectual Property have been validly registered and maintained in force in favor of the Seller or its Subsidiaries, except as would not, individually or in the aggregate, reasonably be expected to have an adverse and material effect on the use of such patents or trademarks in the Business.

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The Seller or its Subsidiaries has paid all due and payable related fees related to the Business Intellectual Property, except as would not, individually or in the aggregate, be expected to have a Material Adverse Effect. To the Knowledge of the Seller, no written claim has been asserted or threatened that the use or exploitation by the Seller or any of its Subsidiaries of any Business Intellectual Property infringes the intellectual property of any third party. Neither Seller nor any of its Subsidiaries owns any patent, trademark, trade name or copyright that is used in, and is material to, the Business, other than the Business Intellectual Property, the License Intellectual Property and the items listed on Schedule 1.2(c).

     Section 2.11 Taxes . The Seller has filed or caused to be filed all tax and social security charge or similar tax returns relating to the Business which have become due and payable (taking into account valid extensions of time to file) prior to the date hereof, except as would not reasonably be expected to have a Material Adverse Effect, and the Seller has paid or caused to be paid all taxes and related charges due and payable therein, in each case, to the extent the Buyer would reasonably be expected to incur liability for the Seller’s failure to file such returns or pay such taxes (subject to Section 5.2 below).

     Section 2.12 Material Contracts .

          (a) Schedule 2.12 of the Disclosure Schedules lists each of the following written Contracts (such Contracts described in this Section 2.12 being " Material Contracts ") to which the Seller or any of its Subsidiaries is a party or bound: (i) all Contracts that provide for payment or receipt by the Seller or any of its Subsidiaries in connection with the Business of more than US$300,000 per year; (ii) all Contracts that limit or purport to limit the ability of the Business to compete in any line of business or with any Person or in any geographic area or during any period of time; (iii) all joint venture, partnership or similar Contracts; and (iv) any other Contract that is believed by the Seller to be material to the Business, taken as a whole. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each Material Contract is valid and binding on the Seller and its Subsidiaries (as the case may be) and, to the Knowledge of the Seller, the counterparties thereto, and is in full force and effect. Except as requested by Buyer or as otherwise contemplated by this Agreement or the Schedules hereto, to the Knowledge of Seller, as of the date hereof, no customer, supplier, employee or other Person who is a counter-party to a Material Contract has informed the Seller that it intends to terminate or modify its business relationship with the Business, the result of which would reasonably be expected to have a Material Adverse Effect. Neither the Seller nor any of its Subsidiaries is in breach of, or default under, any Material Contract to which it is a party, except for such breaches or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (b) Seller has made available to Buyer copies of the South Korean supply agreements between SCM Microsystems (Asia) Pte Ltd and (i) CJ Cablenet dated May 20, 2004, (ii) Korean Digital Cable Media Center Co., Ltd. dated June 1, 2005, and (iii) Qrix Networks, Inc. dated March 17, 2005 (together, the " Korean Contracts "), which agreements are included in the definition of "Contracts" pursuant to Section 1.1(a) and constitute "Transferred Assets" hereunder. The Korean Contracts are governed by Singapore law and none of the Korean Contracts contain specific prohibitions against the assignment of the rights and benefits of Seller and its Subsidiaries under such supply agreements nor any express requirement that Seller shall

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obtain the prior consent of the relevant contract counter-party to such agreement. To the knowledge of Seller and subject to an exception relating to the performance of personal services, which Seller does not believe is applicable to the Korean Contracts, Singapore common law gener