LIMITED GUARANTEE

LIMITED GUARANTEE

This LIMITED GUARANTEE is dated as of the 8th day of April, 2009 (this “ Guarantee ”) by SCM Microsystems, Inc., a Delaware corporation (“ Guarantor ”), in favor of Secure Keyboards, Ltd., a California limited partnership (“ Keyboards ”), and Secure Networks, Ltd., a California limited partnership (“ Networks ” and, together with Keyboards, the “ Guaranteed Parties ” and, each of them, a “ Guaranteed Party ”).

1.  Guarantee . In connection with the entry into (a) that certain Settlement Agreement dated as of the date hereof, a copy of which is attached hereto as Exhibit A (the “ 2009 Settlement Agreement ”), by and among Keyboards, Networks, Luis Villalobos, an individual, Howard B. Miller, an individual, Lawrence W. Midland, an individual, Robert J. Parsons, an individual, Hirsch Electronics Corporation, a California corporation (“ Hirsch ”), Felix Marx, an individual, and Guarantor, and (b) that certain Amended and Restated Settlement Agreement dated as of the date hereof, a copy of which is attached hereto as Exhibit B (the “ Amendment and Restatement ”), by and among Keyboards, Networks and Hirsch, Guarantor hereby unconditionally guarantees to each of Keyboards and Networks, on the terms and conditions set forth herein, the payment when due by Hirsch of the Periodic Payments (as such term is defined in the Amendment and Restatement) under and in accordance with the terms and conditions of the Amendment and Restatement (the “ Obligation ”). Prior to taking any action to enforce this Guarantee against Guarantor, a Guaranteed Party shall first deliver a written notice to Hirsch at the address set forth in Section 6(a) of the Amendment and Restatement, with a copy to Guarantor, with such written notice setting forth (i) the alleged event of default of the Obligation by Hirsch, and (ii) the amount, if any, being demanded. A Guaranteed Party shall allow Hirsch at least ten (10) Business Days from delivery of the written notice to cure any such default (such period, the “ Notice Period ”). If Hirsch fails to cure such default within the Notice Period, a Guaranteed Party shall provide at least five (5) Business Days written notice to Guarantor of the intent of the Guaranteed Party to take any such action to enforce its rights under this Guarantee (such period, the “ Additional Notice Period ”) and, if the Guarantor fails to cure such default within the Additional Notice Period, the Guaranteed Party may thereafter take any action to which it is entitled to enforce its rights under this Guarantee. The obligations of Guarantor under this Guarantee at any time may be satisfied by either the direct payment of the amount then due by Guarantor to Keyboards and Networks, as the case may be, pursuant to the terms of the Amendment and Restatement, or by causing Hirsch to make such payments. In no event shall this Guarantee be construed to impose upon Guarantor any obligations greater than, in addition to, or other than, the obligations expressly assumed by Guarantor hereunder. In addition, nothing herein shall limit the ability of Guarantor to assert any defense or right of set-off, deduction or counterclaim that Hirsch is entitled to assert in connection with the Obligation. This Guarantee is subject to the continued effectiveness and performance by Keyboards and Networks and each of their respective general partners of the 2009 Settlement Agreement and Amendment and Restatement, and shall not be effective, and this Guarantee may not be enforced against Guarantor, until, and not before, the later of (i) the Effective Time (as such term is defined in the Agreement and Plan of Merger, dated December 10, 2008, by and among Guarantor, Hirsch, and two wholly-owned subsidiaries of Guarantor (the “ Merger Agreement ”)) and (ii) the effectiveness of the Obligations of Hirsch under the Amendment and Restatement.

2.  No Assignment . Neither Guarantor, nor the Guaranteed Parties, may assign any of their respective rights, interests or obligations hereunder to any other person (except by operation of law) without the prior written consent of the Guaranteed Parties (in the case of an assignment by Guarantor) or Guarantor (in the case of an assignment by the Guaranteed Parties); provided , however , that Guarantor may assign all or a portion of its obligations hereunder to an affiliate of Guarantor, provided , that no such transfer shall relieve Guarantor of any liability or obligation hereunder except to the extent actually performed or satisfied by the assignee.

3.  Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if delivered by facsimile, upon written confirmation of receipt by facsimile; (b) on the first (1st) Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier under circumstances in which such courier guarantees next-day delivery (except in the case of overseas delivery, in which case notice shall be deemed duly given on the fourth (4th) Business Day following the date of dispatch if delivered utilizing an expedited service by a recognized international courier under circumstances in which such courier guarantees such delivery); or (c) on the earlier of confirmed receipt or the fifth (5th) Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid (except in the case of overseas delivery, in which case notice shall be deemed duly given on confirmed receipt if delivered by registered or certified mail, return receipt requested, postage prepaid). As used herein, “ Business Day ” means any day that is not a Saturday, Sunday, or other day on which national banks or banks in Santa Ana, California or Germany are authorized or required to close. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. In addition, when giving any notice hereunder, a party shall also send a courtesy copy of such notice via e-mail to the party(ies) to receive such notice at the e-mail addresses set forth below; provided , however , that the failure to send, or the recipient’s failure to receive, such courtesy copy via e-mail shall not invalidate or otherwise adversely effect in any way the validity of such notice hereunder:

if to Guarantor, to it at:

SCM Microsystems, Inc.

Oskar-Messter-Straße 13,

85737, Ismaning Germany

Attention: Felix Marx

Fax: +49.89.9595.5170

E-mail: FMarx@scmmicro.de

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

Gibson, Dunn & Crutcher LLP

555 Mission Street, Suite 3000

San Francisco, California 94105

Attention: Michael L. Reed

Fax: 415.374.8459

E-mail: MReed@gibsondunn.com

if to Keyboards, to it at:

Secure Keyboards, Ltd.

c/o Robert J. Parsons

110 Newport Center Drive

Suite 200

Newport Beach, CA 92660

Fax: 949.729.3196

E-mail: parsons600@aol.com

with copies (which shall not constitute notice) to:

Lawrence W. Midland

1805 Jamaica Road

Costa Mesa, CA 92626

Fax: 949.250.7372

E-mail: lmidland@hirschelectronics.com

Howard Miller

13555 Bayliss Road

Los Angeles, CA 90049

Fax: 213.481.1554

E-mail: hmiller@girardikeese.com

Luis Villalobos

4220 Park Newport, #410

Newport Beach, CA 92660

Fax: N/A

E-mail: luvil@roadrunner.com

if to Networks, to it at:

Secure Networks, Ltd.

c/o Robert J. Parsons

110 Newport Center Drive

Suite 200

Newport Beach, CA 92660

Fax: 949.729.3196

E-mail: parsons600@aol.com

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

Lawrence W. Midland

1805 Jamaica Road

Costa Mesa, CA 92626

Fax: 949.250.7372

E-mail: lmidland@hirschelectronics.com

4.  Survival of Guarantee . This Guarantee shall survive and remain in full force and effect and be binding on Guarantor only for the period of Hirsch’s obligations set forth in Section 2 of the Amendment and Restatement or until the Obligation is paid or satisfied in full, at which time this Guarantee shall terminate and Guarantor shall have no further obligation to Keyboards or Networks or any other person under this Guarantee.

5.  Governing Law . This Guarantee and all disputes or controversies arising out of or relating to this Guarantee or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of California.

6.  Entire Agreement . This Guarantee constitutes the entire agreement between the parties to this agreement with respect to the subject matter hereof and supersedes all prior agreements, whether written or oral, with respect to the subject matter contained in this Guarantee. This Guarantee and any provision hereof may only be amended by an instrument in writing signed by Guarantor, Keyboards and Networks.

7.  Counterparts . This Guarantee may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. Facsimile and .pdf copies of this Guarantee shall have the same force and effect as an original.

8.  No Presumption Against Drafting Party . Each of the parties hereto acknowledges that it has been represented by counsel in connection with this Guarantee and the transactions contemplated by this Guarantee. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Guarantee against the drafting party has no application and is expressly waived.

[ The remainder of this page is intentionally left blank .]

IN WITNESS WHEREOF, each of Guarantor, Keyboards and Networks have caused this Limited Guarantee to be executed as of the date first written above by its officer thereunto duly authorized.

SCM MICROSYSTEMS, INC.

By: /s/ Dr. Manfred Mueller
Dr. Manfred Mueller
Executive Vice President Strategic Sales &
Business Development

Accepted and Agreed to:

Exhibit A
2009 Settlement Agreement

SETTLEMENT AGREEMENT

This Settlement Agreement (the “ Settlement Agreement ”) is hereby entered into this 8th day of April, 2009 (the “ Effective Date ”) between and among Secure Keyboards, Ltd., a California Limited Partnership (“ Secure Keyboards ”); Secure Networks, Ltd., a California Limited Partnership (“ Secure Networks ”); Luis Villalobos, an individual (“ Villalobos ”); Howard B. Miller, an individual (“ Miller ”); Lawrence W. Midland, an individual (“ Midland ”); Robert J. Parsons, an individual (“ Parsons ”); Hirsch Electronics Corporation, a California corporation (“ Hirsch ”); SCM Microsystems, Inc., a Delaware corporation (“ SCM ”); and Felix Marx, an individual (“ Marx ”) (each a “ Party ” and collectively the “ Parties ”). Secure Keyboards, Villalobos and Miller are also sometimes collectively referred to herein as “ Plaintiffs ,” and each as a “ Plaintiff .” SCM, Hirsch and Marx are also sometimes collectively referred to herein as “ Defendants ,” and each as a “ Defendant .”

RECITALS

WHEREAS, on November 14, 1994, Hirsch, Secure Keyboards and Secure Networks entered into a settlement agreement (the “ 1994 Settlement Agreement ”), whereby Hirsch agreed to make certain payments to Secure Keyboards and Secure Networks, as set forth in the 1994 Settlement Agreement; and

WHEREAS, on December 10, 2008, SCM, Hirsch and two-wholly-owned subsidiaries of SCM entered into an Agreement and Plan of Merger (the “ Merger Agreement ”), pursuant to which Hirsch will become a new Delaware limited liability company and a wholly-owned subsidiary of SCM through a two-step merger (the “ Merger ”); and

WHEREAS, in connection with or as a result of the Merger and the other transactions contemplated by the Merger Agreement, SCM, Hirsch, certain subsidiaries of Hirsch and/or certain officers, directors and shareholders of Hirsch and/or its subsidiaries entered into or will enter into Ancillary Agreements (as defined in the Merger Agreement) and certain other agreements and understandings and deliver or will deliver certain certificates, documents or other instruments (any and all such Ancillary Agreements, agreements, certificates, documents or other instruments together, the “ Merger Documents ”); and

WHEREAS, on December 10, 2008, Parsons and Midland, as two of the four general partners of Secure Keyboards, delivered a letter of understanding to SCM, as such letter was amended and restated on January 30, 2009 (the “ Keyboards Letter of Understanding ”), which letter was intended to clarify the interpretation of the 1994 Settlement Agreement following the Merger; and

WHEREAS, the obligation of SCM to complete the Merger is subject to Miller’s and Villalobos’s agreement to become parties to and be bound by the Keyboards Letter of Understanding and to consent to the Merger; and

WHEREAS, Miller and Villalobos objected to, and indicated that they will not become parties to and be bound by, the Keyboards Letter of Understanding; and

WHEREAS, a dispute has arisen among the Parties regarding what the revenue base subject to the royalty arrangement under the 1994 Settlement Agreement would be following the Merger; and

WHEREAS, on March 18, 2009, Plaintiffs commenced an action against Defendants in the Superior Court of the State of California in and for the County of Los Angeles entitled Secure Keyboards, Ltd., Luis Villalobos, and Howard B. Miller v. SCM Microsystems, Inc., Felix Marx, and Hirsch Electronics, Corporation, et al. , Case No. SC102226 (the “ Action ”); and

WHEREAS, the Complaint filed in the Action (the “ Complaint ”) asserts a cause of action against Hirsch for alleged breach of the 1994 Settlement Agreement, and causes of action against SCM and Marx for alleged interference with the 1994 Settlement Agreement and the relationship between Hirsch and Secure Keyboards; and

WHEREAS the summons and Complaint in the Action have not been served on any Defendant, but Defendants nonetheless dispute all of the allegations set forth in the Complaint; and

WHEREAS, the Parties have independently concluded, with the benefit of advice of counsel, that their respective self-interests would be best served by compromising, settling, and concluding all disputes currently or potentially existing between them, including but not limited to all disputes alleged or referred to in the Action, by entering into this Settlement Agreement and the releases contained herein, and by ultimately dismissing the Action with prejudice, all on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, the undersigned Parties to this Settlement Agreement hereby agree, for good and valuable consideration, receipt of which is hereby acknowledged, as follows:

1.  Incorporation of Recitals. The above Recitals are incorporated herein by reference.

2.  Settlement Terms.

(a)  Dismissal of the Action without Prejudice. Within five (5) calendar days after the Effective Date, Plaintiffs shall cause the Action to be dismissed without prejudice in its entirety, and in no event shall Plaintiffs cause the Complaint to be served on any Defendant.

(b)  Dismissal of the Action with Prejudice. Within five (5) calendar days after the “ Effective Time ,” as such term is defined in the Merger Agreement, Plaintiffs shall cause the Action to be dismissed with prejudice in its entirety, and in no event shall Plaintiffs cause the Complaint to be served on any Defendant.

(c)  Amendment and Restatement of the 1994 Settlement Agreement. Upon entry into this Settlement Agreement, Secure Keyboards, Secure Networks, Villalobos, Miller, Midland, Parsons and Hirsch shall execute an Amended and Restated 1994 Settlement Agreement (the “ Amendment and Restatement ”), in substantially the form attached hereto as Exhibit A . The Amendment and Restatement shall become effective and binding on the Effective Date hereof, provided that sections 2 and 3 thereof shall not become effective until the Effective Time; provided , further , that in the event of the termination of the Merger Agreement prior to the Effective Time, the Amendment and Restatement shall be null and void.

(d)  Presence in California Insufficient to Create Personal Jurisdiction. No Party shall at any time attempt to construe, offer or use the presence in the State of California, at any time and for any purpose whatsoever, of SCM or Marx or any of their respective Associates (as defined below), as a basis for asserting that any federal, state or local court within the State of California has or may exercise personal jurisdiction over Marx or any of his Associates.

(e)  Guaranty of Periodic Payments Under Amendment and Restatement. Upon entry into this Settlement Agreement and the execution of the Amendment and Restatement, SCM shall enter into a Limited Guarantee of the payment obligations of Hirsch under the Amendment and Restatement in substantially the form attached hereto as Exhibit B . The Limited Guarantee shall not become effective until the Effective Time.

(f)  Waiver of Closing Condition . Upon the entry into this Settlement Agreement and the execution of the Amendment and Restatement, SCM shall execute and deliver to Hirsch a written waiver to the closing conditions to the Merger set forth on Schedule 7.3(c) of the Merger Agreement (other than the consent of the landlord), subject to the continued effectiveness and performance by Keyboards and Networks and each of their respective general partners and Hirsch of this Settlement Agreement and the Amendment and Restatement, with such waiver to become effective immediately prior to the Effective Time of the Merger.

(g)  Tolling of Statute of Limitations. In the event this Settlement Agreement is terminated prior to the Effective Time and the releases in Section 8 do not become effective, and only in that event, the Parties agree that the statute of limitations for any claims previously alleged in the Action is tolled for the period between the original filing date of the Action and the date of any termination of this Settlement Agreement.

3.  No Admission of Fault or Liability . This Settlement Agreement is a compromise of disputed claims, and nothing contained in this Settlement Agreement shall be construed to be an admission of fault or liability on the part of any Party hereto, all such fault or liability being expressly denied by each and every Party hereto.

4.  No Assignment of Claims . Each Party represents and warrants to the other Parties that it has not hypothecated or otherwise encumbered or assigned any claim or cause of action released herein arising out of, from, or in connection with the Action, or any other matter which is being released as part of this Settlement Agreement.

5.  No Other Legal Proceedings . Each Party represents and warrants to the other Parties that no legal proceeding other than the Complaint in the Action has been filed by it against any other Party in any forum arising out of, from, or in connection with any of the matters underlying the Action.

6.  Authority to Enter Into Settlement Agreement . Each Party represents and warrants to the other Parties that it has the power and authority to enter into, execute, deliver and perform this Settlement Agreement, and that there are no other persons or entities whose consent to this Settlement Agreement or whose joinder herein is necessary to make effective the provisions of this Settlement Agreement.

7.  Reliance on Independent Legal Advice . Each Party represents and warrants to the other Parties:

(a) That it has received advice from his or its own respective, independent legal counsel prior to its execution of this Settlement Agreement;

(b) That the legal nature and effect of this Settlement Agreement has been explained to it by its respective counsel;

(c) That it fully understands the terms and provisions of this Settlement Agreement and the nature and effect thereof;

(d) That it is relying solely on the advice of its own legal counsel in executing this Settlement Agreement;

(e) That it has not relied upon any representation or statement of any other Party or counsel for any other Party not contained in this Settlement Agreement;

(f) That it has carefully read this Settlement Agreement, knows the contents thereof, and is executing the same freely and voluntarily; and

(g) That it is aware that it or its respective attorneys may hereafter discover facts different from or in addition to the facts that they now know or believe to be true with respect to the matters underlying the Action, but that its intention is to fully and finally release the claims released herein to the full extent of the releases contained in this Settlement Agreement.

8.  Releases of Claims and Waivers of Cal. Civ. Code § 1542.

(a)  SCM Releasors’ Release of Secure Releasees. Upon the Effective Time, SCM and Marx, on behalf of themselves and each of their respective Associates (which for the avoidance of any doubt, does not include Hirsch or Midland or any person or entity claiming through either of them) (collectively, the “ SCM Releasors ”), do hereby remise, release, waive, acquit, and forever discharge Secure Keyboards, Secure Networks, Villalobos, Miller, Midland and Parsons and each of their respective Associates (collectively, the “ Secure Releasees ”), of and from any and all claims, debts, demands, actions, causes of action, suits, dues, sums of money, accounts, reckonings, bonds, covenants, contracts, controversies, agreements, promises, judgments, acts, omissions, variances, damages, executions, and liabilities, both in law and equity, federal and state, known or unknown, suspected or unsuspected (collectively, “ Claims ”), which have arisen, are arising, or may in the future arise, directly or indirectly, out of, from, or in connection with any of the matters alleged in or referred to in the Action; provided , however , that the SCM Releasors explicitly do not release the Secure Releasees of and from any and all Claims which have arisen, are arising, or may in the future arise, directly or indirectly, out of, from, or in connection with (i) the Merger, the Merger Agreement or the Merger Documents, (ii) the business of Hirsch or the Secure Releasees’ business relationship with Hirsch, (iii) the obligations of the Secure Releasees under the Amendment and Restatement or Limited Guarantee, (iv) any breach or noncompliance by any Secure Releasee of this Settlement Agreement, or(v) any matter not alleged in or referred to in the Action.

(b)  Hirsch Releasors’ Release of Secure Releasees. Upon the Effective Time, Hirsch, on behalf of itself and its Associates (which for the avoidance of any doubt, does not include SCM or Marx or any person or entity claiming through either of them) (collectively, the “ Hirsch Releasors ”), do hereby remise, release, waive, acquit, and forever discharge the Secure Releasees of and from any and all Claims which have arisen, are arising, or may in the future arise, directly or indirectly, out of, from, or in connection with any of the matters alleged in or referred to in the Action; provided , however , that the Hirsch Releasors explicitly do not release the Secure Releasees of and from any and all Claims which have arisen, are arising, or may in the future arise, directly or indirectly, out of, from, or in connection with (i) the Merger, the Merger Agreement or the Merger Documents, (ii) the business of Hirsch or the Secure Releasees’ business relationship with Hirsch, (iii) the obligations of the Secure Releasees under the Amendment and Restatement or Limited Guarantee, (iv) any breach or noncompliance by any Secure Releasee of this Settlement Agreement, or (v) any matter not alleged in or referred to in the Action.

(c)  Secure Releasors’ Release of SCM/Hirsch Releasees. Upon the Effective Time, Secure Keyboards, Secure Networks, Villalobos, Miller, Midland and Parsons, on behalf of themselves and each of their respective Associates (which for the avoidance of any doubt, does not include SCM or Hirsch) (collectively, the “ Secure Releasors ”), do hereby remise, release, waive, acquit, and forever discharge SCM, Marx and Hirsch and each of their respective Associates (collectively, the “ SCM/Hirsch Releasees ”) of and from any and all Claims which have arisen, are arising, or may in the future arise, directly or indirectly, out of, from, or in connection with any matter whatsoever, including but not limited to the 1994 Settlement Agreement, the Merger, the Merger Agreement, the Merger Documents, any of the matters alleged in or referred to in the Action, or any other matter at any time up to the Effective Time; provided , however , that this release shall not release Hirsch from any of its obligations under the Amendment and Restatement, SCM from any of its obligations under the Limited Guarantee or any breach or noncompliance by any SCM/Hirsch Releasee of this Settlement Agreement.

(d)  Hirsch Releasors’ Release of SCM Releasees. Upon the Effective Time, the Hirsch Releasors do hereby remise, release, waive, acquit, and forever discharge SCM and Marx, and each of their respective Associates (which for the avoidance of any doubt, does not include Hirsch or Midland or any person or entity claiming through either of them) (collectively, the “ SCM Releasees ”) of and from any and all Claims which have arisen, are