Document:

EXHIBIT 10.14

                                   EXHIBIT A-1

            2000 PERFORMANCE GOALS AND PERFORMANCE BASED COMPENSATION

I.       FORMULA
<TABLE>
<CAPTION>
                                                                                               PERFORMANCE
                                                                                                  BASED
                                                                                          COMPENSATION FORMULA
<S>     <C>                                                                                      <C>
         A.       EARNINGS PER SHARE
                  For each $.01 increase................................................         $65,250

         B.       INCREASE IN COMMON STOCK PRICE
                  (i)      If the price of a share of Common Stock on 12/31/00 does not
                           exceed $11.56................................................         $     0
                  (ii)     If the price of a share of Common Stock on 12/31/00 exceeds
                           $11.56 but does not equal or exceed $15.00, for each $0.0625
                           increase in per share price of a share of Common Stock above
                           $11.56.......................................................         $ 7,500
                  (iii)    If the price of a share of Common Stock on 12/31/00 equals or
                           exceeds $15.00, for each $0.0625 increase in per share price
                           of a share of Common Stock above $11.56......................         $10,000
</TABLE>

II.      METHOD OF PAYMENT

         A.       CASH. The Performance Based Compensation determined for 2000
                  under the formula set forth in Section I above shall be paid
                  in cash if and to the extent such Compensation does not exceed
                  $500,000.

         B.       RESTRICTED STOCK. If the Performance Based Compensation
                  determined for 2000 under the formula set forth in Section I
                  above exceeds $500,000 (such excess amount being referred to
                  as the "Additional Amount"), the Executive shall be granted a
                  number of shares of restricted Class B Common Stock of the
                  Company (the "Shares") equal to the amount determined by
                  dividing (i) two times the Additional Amount, by (ii) the
                  closing price for the Class B Common Stock of the Company on
                  the American Stock Exchange as of the close of trading on
                  December 31, 2000. The value of any fractional shares shall be
                  paid in cash. The restrictions on the Shares shall lapse on
                  the first to occur of (i) October 15, 2015, (ii) termination
                  of the Executive's employment with the Company by reason of
                  Executive's disability or death, (iii) the Executive's
                  termination of employment with the Company for Good Reason,
                  (iv) the Company's termination of Executive's employment
                  without Cause, or (v) the occurrence of a Change in Control of
                  the Company ("Good Reason," "Cause", and "Change in Control"
                  to be defined in a manner consistent with the most recent
                  grant of Restricted Stock by the Company to the Executive).

Dated:  Effective as of January 1, 2000
                                                  /s/ PAUL MANLEY
                                                 -------------------------------
                                                 Paul Manley, Chairman
                                                 Compensation Committee

                                                 Acknowledged and Accepted:

                                                  /s/ ALBERT H. NAHMAD
                                                 -------------------------------
                                                 Albert H. NahmadEXHIBIT 10.25

AGREEMENT

for the exchange of the whole of the issued share capital of Impleo Limited

(1)      The persons listed in schedule 1

(2)      SmartDisk Corporation

Dated April 28, 2000

OSBORNE CLARKE OWA

BRISTOL OFFICE

50 Queen Charlotte Street, Bristol  BS1 4HE
Telephone 0117 917 3000 Facsimile 0117 917 3005

LONDON OFFICE

Hillgate House, 26 Old Bailey, London EC4M 7HW
Telephone 020 7809 1000 Facsimile 020 7809 1005

THAMES VALLEY OFFICE

Apex Plaza, Forbury Road, Reading RG1 1AX
Telephone 0118 925 2000 Facsimile 0118 925 0038

WEB SITE: www.osborneclarke.com

<PAGE>

                                    CONTENTS

<TABLE>
<S>                                                                                        <C>
1. Definitions and interpretation...........................................................1
2. Exchange................................................................................10
3. Consideration...........................................................................10
4. Completion..............................................................................11
5. Registration Rights Applying to that part of the Consideration Stock
   Allotted and Issued to Employee Shareholders and Non-Employee Shareholders..............14
6. Conditional Allotment and Issue (Employee Shareholders only)............................19
7. Release of guarantees...................................................................22
8. Post completion matters.................................................................22
9. Warranties..............................................................................22
10. Specific Indemnities...................................................................23
11. Covenant for Taxation..................................................................24
12. Purchaser's remedies...................................................................24
13. Limitations on liability...............................................................26
14. Conduct of Non-Tax Claims..............................................................29
15. General................................................................................30
16. Announcements..........................................................................32
17. Costs and expenses.....................................................................33
18. Notices................................................................................33
19. Governing law and jurisdiction.........................................................34
Schedule 1.................................................................................35
THE SHAREHOLDERS...........................................................................35
----------------
Schedule 2.................................................................................41
(Information concerning the Company).......................................................41
Schedule 3.................................................................................42
The Non-Tax Warranties.....................................................................42
1. CAPACITY................................................................................42
2. ARRANGEMENTS BETWEEN THE COMPANY AND SHAREHOLDER ASSOCIATES.............................42
3. OTHER INTERESTS OF ANY SHAREHOLDER ASSOCIATE............................................42
4. COMPANY.................................................................................42
5. SUBSIDIARIES............................................................................43
6. INSOLVENCY OF THE COMPANY...............................................................43
7. STATUTORY BOOKS AND DOCUMENTS FILED.....................................................44
8. ACCURACY AND ADEQUACY OF INFORMATION....................................................44
9. PREPARATION AND CONTENTS OF THE MANAGEMENT ACCOUNTS.....................................44
10. ACCOUNTING RECORDS.....................................................................45
11. EURO COMPLIANCE........................................................................45
12. EVENTS SINCE THE ACCOUNTS DATE.........................................................46
13. FINANCIAL COMMITMENTS AND BORROWINGS...................................................47
14. WORKING CAPITAL........................................................................48
15. INSURANCES.............................................................................48
16. CONTRACTS AND COMMITMENTS..............................................................49
17. TERMS OF TRADE.........................................................................50
18. PRODUCT LIABILITY......................................................................50
19. LICENCES AND CONSENTS..................................................................50
20. TRADING PARTNERS.......................................................................50
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                        <C>
21. COMPETITION AND TRADE REGULATION LAW...................................................51
22. COMPLIANCE WITH LAW....................................................................52
23. LITIGATION AND DISPUTES................................................................52
24. OWNERSHIP AND CONDITION OF ASSETS......................................................53
25. STOCK..................................................................................53
26. CHARGES AND ENCUMBRANCES OVER ASSETS...................................................53
27. INTELLECTUAL PROPERTY..................................................................54
28. Data Protection Act....................................................................56
29. DIRECTORS AND EMPLOYEES................................................................56
30. INDUSTRIAL RELATIONS...................................................................58
31. PENSIONS...............................................................................59
32. TITLE..................................................................................59
33. ENCUMBRANCES...........................................................................60
34. PLANNING MATTERS.......................................................................60
35. STATUTORY OBLIGATIONS..................................................................60
36. ADVERSE ORDERS.........................................................................60
37. LEASEHOLD PROPERTIES...................................................................61
38. ENVIRONMENTAL MATTERS..................................................................61
Schedule 4.................................................................................62
1. The Property............................................................................62
Schedule 5.................................................................................63
Tax Schedule...............................................................................63
2. Covenant for Taxation...................................................................66
3. Covenant to Shareholders................................................................67
4. Tax Warranties..........................................................................68
5. Limitations on liability................................................................73
6. Repayment...............................................................................75
7. Over-provision and Reliefs..............................................................75
8. NIC and PAYE............................................................................76
9. Claims Procedure........................................................................78
Schedule 6.................................................................................80
The Products...............................................................................80
Schedule7..................................................................................81
The Management Accounts....................................................................81
Schedule 8.................................................................................82
The Employment Contract....................................................................82
Agreement..................................................................................83
</TABLE>
<PAGE>

THIS AGREEMENT is made the 28th day of April 2000

BETWEEN:

(1)      THE PERSONS whose names and addresses are set out in part 1 of schedule
         1 ("THE SHAREHOLDERS"); and

(2)      SMARTDISK CORPORATION a corporation whose principal place of business
         is at 3506 Mercantile Avenue, Naples, Florida 34104-3310 USA ("THE
         PURCHASER").

BACKGROUND:

IT IS AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      In this Agreement, including the schedules and appendices, unless the
         context otherwise requires, the following words have the following
         meanings:

         "THE ACCOUNTS DATE"                31 March 2000;

         "THE ACT"                          the Companies Act 1985 (as amended);

         "THIS AGREEMENT"                   this Agreement (including any
                                            schedule or annexure to it);

         "AVERAGE                           CLOSING PRICE" US $30.3875 (thirty
                                            point three eight seven five US
                                            dollars) per share of the Purchasers
                                            common stock;

         "THE BOARD"                        in relation to the Company, its
                                            board of directors;

         "BUSINESS DAY"                     a day (other than a Saturday or a
                                            Sunday) on which clearing banks are
                                            open for business in the City of
                                            London;

         "CLAIM"                            a claim by the Purchaser against the
                                            Shareholders under the Covenant for
                                            Taxation or under the Warranties or
                                            indemnities contained in this
                                            Agreement and "NON-TAX CLAIM" means
                                            any claim which is not a Tax Claim;

         "THE COMPANY"

                                            Impleo Limited, details of which
                                            are set out in schedule 2;

         "COMPLETION"                       the completion of the exchange of
                                            the Shares for the Consideration
                                            Funds and

                                       1
<PAGE>

                                            Consideration Stock under this
                                            Agreement;

         "COMPUTER PROGRAMS"                all or any part of a set of
                                            instructions whose purpose is to
                                            cause a data processing machine to
                                            perform certain functions or
                                            operations whatever the form of the
                                            program (whether in source code or
                                            in human-readable form, or object
                                            code or machine readable form, and
                                            whether or not compiled or
                                            assembled);

         "CONDITIONAL                       ALLOTMENT DATES means each of 6
                                            October 2000, 6 April 2001, 6
                                            October 2001 and 6 April 2002 and
                                            "Conditional Allotment Date" means
                                            any one of them;

         "THE CONSIDERATION"                the consideration payable by the
                                            Purchaser to the Shareholders for
                                            the Shares under clause 3;

         "CONSIDERATION FUNDS"              means together: (i) $39,310.34
                                            (thirty nine thousand three hundred
                                            and ten dollars and thirty four
                                            cents) payable by the Purchaser to
                                            SCM Microsystems Ltd; and
                                            (ii)(pound)101,702.31 (one hundred
                                            and one thousand seven hundred and
                                            two pounds and thirty one pence)
                                            payable by the Purchaser to the
                                            remaining Shareholders for the
                                            Shares under clause 3;

         "CONSIDERATION STOCK"              new common stock par value US$0.001
                                            per share of the Purchaser
                                            calculated in accordance with
                                            clause 3, 4, 5, 6 and 13 and
                                            Schedule 1 of this Agreement and
                                            which shall not in any event exceed
                                            125,051 (one hundred twenty five
                                            thousand fifty one) Shares of new
                                            Common Stock which equates in value
                                            to US$3,800,000 (three million
                                            eight hundred thousand US Dollars)
                                            calculated by reference to the
                                            Average Closing Price;

         "COPYRIGHT"                        all copyright arising under English
                                            law (whether under the Copyright
                                            Designs and Patents Act 1988 or
                                            otherwise) in all original works,
                                            Computer Programs (in whatever
                                            form), customer lists, databases

                                       2
<PAGE>

                                            and any other work in which
                                            copyright subsists, together with
                                            all copyrights and/or rights of
                                            like nature arising (whether by
                                            operation of the registration or
                                            otherwise) in any other part of the
                                            world, and the right to apply for
                                            the same and the benefit of any and
                                            all licences in connection with the
                                            foregoing;

         "THE COVENANT FOR                  the covenant given by the
         TAXATION"                          Shareholders under paragraph 2 of
                                            schedule 5;

         "DANGEROUS SUBSTANCE"              any natural or artificial substance
                                            (whether in the form of a solid,
                                            liquid, gas or vapour) the
                                            generation, transportation,
                                            storage, treatment, use or disposal
                                            of which (whether alone or in
                                            combination with any other
                                            substance) gives rise to a risk of
                                            causing harm to human health,
                                            comfort or safety or harm to any
                                            other living organism or causing
                                            damage to the Environment;

         "DISCLOSED"                        fully and fairly disclosed to the
                                            Purchaser expressly for the purposes
                                            of this Agreement in the Disclosure
                                            Letter and "fully and fairly" means
                                            disclosed with sufficient
                                            particularity to enable the
                                            Purchaser to assess the full impact
                                            on the Company of the matter
                                            disclosed;

         "THE DISCLOSURE LETTER"            the letter of the same date as this
                                            Agreement in the agreed form from
                                            the Shareholders to the Purchaser,
                                            together with any attachments,
                                            disclosing matters that are
                                            exceptions to the Warranties;

         "DOCUMENTATION"                    all user manuals and other materials
                                            which accompany any unit of Software
                                            and all other technical, reference
                                            and/or other manuals or
                                            documentation, whether intended for
                                            internal or external use in relation
                                            to any Software;

         "EMPLOYEE SHARES"                  that part of the Consideration
                                            Stock held by the Employee
                                            Shareholders following Completion;

         "EMPLOYEE                          those Shareholders who are also an
         SHAREHOLDERS"                      employee, director or consultant of
                                            the

                                       3
<PAGE>

                                            Company and whose details are set
                                            out in Part 2 of Schedule 1 to this
                                            Agreement;;

         "THE ENVIRONMENT"                  the environment as defined in
                                            Section 1(2), Environmental
                                            Protection Act 1990;

         "ENVIRONMENTAL                     any permit, exemption, filing
         CONSENT"                           requirement, licence or
                                            registration from time to time
                                            necessary or desirable under
                                            Environmental Law;

         "ENVIRONMENTAL LAW"                any directive, treaty, code of
                                            practice, circular, guidance note
                                            and the like, in each case of any
                                            jurisdiction, in force or enacted
                                            relating or pertaining to a
                                            material extent to the Environment,
                                            any Dangerous Substance, human
                                            health, comfort, safety or the
                                            welfare of any other living
                                            organism;

         "ESCROW AGENT"                     a national bank organised
                                            under the laws of the United Kingdom
                                            or the United States of America to
                                            be appointed by the Purchaser as
                                            soon as reasonably practicable
                                            following Completion;

         "ESCROW AGREEMENT"                 the agreement in the agreed form
                                            between (1) the Purchaser, (2) the
                                            Shareholders and (3) the Escrow
                                            Agent;

         "GUARANTEE"                        any guarantee, suretyship,
                                            indemnity, bonding liability or
                                            similar contingent liability given
                                            or undertaken by a person to secure
                                            or support the obligations of any
                                            third party;

         "INTELLECTUAL PROPERTY"            all Patents, Copyrights, Marks,
                                            Know-How and Other IPR's;

         "KNOW-HOW"                         all rights anywhere in the world of
                                            the Company in and to all industrial
                                            and commercial trade secrets and
                                            confidential and secret research,
                                            developments, design, inventions,
                                            ideas, information, data, skills,
                                            products, processes, drawing and
                                            specifications;

         "THE LEASES"                       any leases (including underleases)
                                            under which the Properties are
                                            held, particulars of which are set
                                            out in schedule 4 and

                                       4
<PAGE>

                                            "LEASE" means any of them;

         "MANAGEMENT                        the unaudited management accounts
         ACCOUNTS"                          for the Company for the period from
                                            15 November 1999 to the Accounts
                                            Date and contained within Schedule
                                            7 of this Agreement;

         "MARKS"                            all trade marks, service marks and
                                            logos whether registered in the UK
                                            or elsewhere or unregistered
                                            (including applications for
                                            registration thereof) together with
                                            all rights of like nature arising
                                            (whether by operation of law,
                                            registration or otherwise) out of
                                            the same in any part of the world
                                            and the rights to apply for the
                                            same and the benefit of any and all
                                            licences in connection with the
                                            foregoing;

         "NASDAQ"                           the NASDAQ National Market,
                                            maintained by the NASDAQ Stock
                                            Market, Inc.;

         "NON-EMPLOYEE SHARES"              that part of the Consideration
                                            Stock held by the Non-Employee
                                            Shareholders following Completion;

         "NON-EMPLOYEE SHAREHOLDERS"        the Shareholders set out in Part 1
                                            of Schedule 1 to this Agreement not
                                            being Employee Shareholders;

         "NON-TAX WARRANTIES"               the representations referred to in
                                            clause 9 and set out in schedule 3;

         "NOTICE"                           includes any notice, demand,
                                            consent or other communication;

         "ORDINARY SHARES"                  ordinary shares of 50p each in the
                                            capital of the Company;

         "OPTION AGREEMENTS"                the option agreements dated 12
                                            November 1999 between SCM
                                            Microsystems Limited and each of
                                            the remaining Shareholders and
                                            Stuart Skinner;

         "OTHER IPR'S"                      all designs (registered or
                                            unregistered), utility models and
                                            all other intellectual or
                                            industrial property rights
                                            (including

                                       5
<PAGE>

                                            without limitation as to
                                            secrecy or confidence) arising
                                            (whether by operation of law,
                                            registration or otherwise) under
                                            English law or in any other part of
                                            the world to the extent that the
                                            same are not otherwise included
                                            within the definitions of
                                            Copyright, Marks, Patents and Know
                                            How and the right to apply for the
                                            same and the benefit of any and all
                                            licences in connection with the
                                            foregoing;

         "PATENTS"                          letters patent and the right to
                                            apply for letters patent in any part
                                            of the world and any similar rights
                                            situated in any country; and the
                                            benefit of any and all licences in
                                            connection with the foregoing;

         "PLANNING ACTS"                    the Town and Country Planning Act
                                            1990, the Planning (Listed
                                            Buildings and Conservation Areas)
                                            Act 1990, the Planning (Hazardous
                                            Substances) Act 1990, the Planning
                                            (Consequential Provisions) Act
                                            1990, the Planning and Compensation
                                            Act 1991 and all other statutes
                                            containing provisions relating to
                                            town and country planning;

         "THE POLICIES"                     all insurance policies maintained
                                            by the Company on the date of this
                                            Agreement and "POLICY" means any of
                                            them;

         "THE PRODUCTS"                     the products described in Schedule
                                            6 and all versions thereof and in
                                            each case including the Software
                                            comprised therein and all related
                                            packaging;

         "THE PROPERTIES"                   the properties particulars of which
                                            are set out in schedule 4 and "THE
                                            PROPERTY" means any of them;

         "SEC"                              the United States Securities and
                                            Exchange Commission;

         "SERVICE AGREEMENTS"               the service agreements in the
                                            agreed form between (the Company)
                                            and each of Grant Morgan, and John
                                            Boyne respectively;

         "SHAREHOLDER ASSOCIATE"            each of the Shareholders and any
                                            persons connected with any of them
                                            within the

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<PAGE>

                                            meaning of Section 839, ICTA;

         "SHAREHOLDERS' SOLICITORS"         Woodhouse Daughtrey of North Lodge,
                                            Templewood Lane, Franham Common,
                                            Bucks SL2 3HW;

         "THE SHARES"                       the ordinary shares constituting
                                            all the issued shares of the
                                            Company at Completion, as set out
                                            in schedule 1 and schedule 2 of
                                            this Agreement;

         "SOFTWARE"                         all or any of the Computer Programs
                                            and Documentation forming part of
                                            and all or any modification to any
                                            Computer Programs supplied by the
                                            Company as a stand alone product or
                                            embedded in hardware and whether
                                            supplied under a third party end
                                            user licence or not;

         "SUBSIDIARIES"                     any subsidiaries of the Company
                                            within the meaning of Sections 736
                                            and 736A, Companies Act 1985 and any
                                            subsidiary undertakings within the
                                            meaning of Sections 258 and 259,
                                            Companies Act 1985 from time to
                                            time, and "SUBSIDIARY" means
                                            any of them;

         "TAX WARRANTIES"                   the representations set out in
                                            paragraph 4 of schedule 5 (Tax
                                            Schedule) and each of them;

         "TRADING DAY"                      a day on which stock in the
                                            Purchaser can be traded on;

         "SHAREHOLDER'S ASSOCIATE"          each of the Shareholders and any
                                            persons connected with any of them
                                            within the meaning of Section 839,
                                            ICTA;

         "UNITED KINGDOM" OR "UK"           the United Kingdom of Great Britain
                                            and Northern Ireland;

         "UNITED STATES" OR US"             the United States of America;

         "WARRANTIES"                       the Non-Tax Warranties and the Tax
                                            Warranties, and "WARRANTY" means
                                            any one of them;

         "WORKING TIME                      the Working Time Regulations 1998
         REGULATIOS"                        (SI No 1833);

         "YEAR 2000 CONFORMITY"             in connection or in relation to any

                                       7
<PAGE>

                                            software neither performance nor
                                            functionality is affected by dates
                                            prior to, during and after the Year
                                            2000, in particular:

         Rule 1:                            No value for current date will
                                            cause any interruption in
                                            operation;

         Rule 2:                            Date-based functionality must
                                            behave consistently for dates prior
                                            to, during and after Year 2000;

         Rule 3:                            In all interfaces and data storage,
                                            the century in any date must be
                                            specified either explicitly or by
                                            unambiguous algorithms or
                                            inferencing rules;

         Rule 4:                            Year 2000 must be recognised as a
                                            leap year (all as defined by the
                                            British Standards Institution in
                                            Document DISC PD2000-1).

1.2      Words defined in paragraph 1 of schedule 5 (Tax Schedule) shall bear
         the same meaning in the entire Agreement.

1.3      In this Agreement, unless the context otherwise requires:

         (a)      words in the singular include the plural and vice versa and
                  words in one gender include any other gender;

         (b)      a reference to a statute or statutory provision includes:

                  (i)      any subordinate legislation (as defined in Section
                           21(1), Interpretation Act 1978) made under it;

                  (ii)     any repealed statute or statutory provision which it
                           re-enacts (with or without modification); and

                  (iii)    any statute or statutory provision which modifies,
                           consolidates, re-enacts or supersedes it;

         (c)      a reference to:

                  (i)      any party includes its successors in title and
                           permitted assigns;

                  (ii)     a "PERSON" includes any individual, firm, body
                           corporate, association or partnership, government or
                           state (whether or not having a separate legal
                           personality);

                                       8
<PAGE>

                  (iii)    clauses and schedules are to clauses and schedules of
                           this Agreement and references to sub-clauses and
                           paragraphs are references to sub-clauses and
                           paragraphs of the clause or schedule in which they
                           appear;

                  (iv)     any provision of this Agreement is to that provision
                           as amended in accordance with the terms of this
                           Agreement;

                  (v)      any document being "IN THE AGREED FORM" means in a
                           form which has been agreed by the parties on or
                           before the date of this Agreement and for
                           identification purposes signed by them or on their
                           behalf by their solicitors;

                  (vi)     "INDEMNIFY" and "INDEMNIFYING" any person against any
                           circumstance include, subject to the provisions of
                           clauses 10 and 13, indemnifying and keeping him
                           harmless from all actions, claims and proceedings
                           from time to time made against him and all loss or
                           damage and all payments, costs or expenses made or
                           incurred by that person as a consequence of or which
                           would not have arisen but for that circumstance; and

         (d)      except as set out in sub-clause 1.1, terms defined in the Act
                  have the meanings attributed to them by the Act;

         (e)      "STERLING" and the sign "(POUND)" mean pounds sterling in the
                  official currency of the United Kingdom and "DOLLAR" and the
                  sign "$" means US dollars in the official currency of the
                  United States;

         (f)      the table of contents and headings are for convenience only
                  and shall not affect the interpretation of this Agreement;

         (g)      general words shall not be given a restrictive meaning:

                  (i)      if they are introduced by the word "other" by reason
                           of the fact that they are preceded by words
                           indicating a particular class of act, matter or
                           thing; or

                  (ii)     by reason of the fact that they are followed by
                           particular examples intended to be embraced by those
                           general words;

         (h)      where any liability or obligation is undertaken by two or more
                  persons unless expressly stated, the liability of each of them
                  shall be joint and several; and

                  (i)      where any statement is qualified by the expression
                           "SO FAR AS THE SHAREHOLDERS ARE AWARE" or "TO THE
                           BEST OF

                                       9
<PAGE>

                           THE SHAREHOLDERS' KNOWLEDGE AND BELIEF" or
                           any similar expression it shall be deemed to include
                           an additional statement that it has been made after
                           due and careful enquiry by the Shareholders and in
                           the case of SCM Microsystems Limited such enquiry
                           shall only be made to Alan Jones, George Dundon,
                           Sharon Shelley, Janet Martin-Kerr, Colin Skilton and
                           Julie Davies.

2.       EXCHANGE

2.1      Subject to the terms of this Agreement, the Shareholders shall transfer
         to the Purchaser, with effect from Completion, the Shares with:

         (a)      full title guarantee (except for all charges and encumbrances
                  (whether monetary or not) and all other rights exercisable by
                  third parties which the Shareholders do not, and could not
                  reasonably be expected to, know about); and

         (b)      all rights attaching to or accruing to them (including all
                  dividends and distributions declared, paid or made on or after
                  that date).

2.2

         (a)      Each of the Shareholders waives all rights of pre-emption over
                  any of the Shares conferred on him or them, by the Articles of
                  Association of the Company or in any other way and undertakes
                  to take all steps necessary to waive any rights of pre-emption
                  over any of the Shares.

         (b)      George Dundon, Alan Jones and Grant Morgan in their capacity
                  as directors of the Company waive all rights of pre-emption
                  over any Shares conferred on the board of directors of the
                  Company.

2.3      The Purchaser shall not be obliged to complete the purchase unless the
         sale and purchase of all the Shares is completed simultaneously.

3.       CONSIDERATION

3.1      Subject to the provisions of this Agreement the consideration for the
         sale and purchase of the Shares shall be satisfied by the Purchaser as
         follows:

         (a)      the payment of $39,310.34 (thirty nine thousand three hundred
                  and ten dollars and thirty four cents) on Completion to SCM
                  Microsystems Limited representing part of the Consideration
                  Funds; and

         (b)      the payment of (pound)101,702.31 (one hundred and one thousand
                  seven hundred and two pounds and thirty one pence) on

                                       10
<PAGE>

                  completion to the Shareholders' Solicitors as agent for the
                  Shareholders, representing part of the Consideration Funds;
                  and

         (c)      as to $1,834,493.38 (one million and eight hundred and thirty
                  four thousand four hundred and ninety three dollars and thirty
                  eight cents) by the allotment and issue to the Non-Employee
                  Shareholders of 60,370 (sixty thousand three hundred and
                  seventy) shares of Consideration Stock on Completion in the
                  proportions set out in Part 1 of Schedule 1 subject to the
                  provisions relating to the Retained Stock set out in Clause
                  13; and

         (d)      as to $393,092.70 (three hundred and ninety three thousand and
                  ninety two dollars and seventy cents) by the allotment and
                  issue to the Employee Shareholders of 12,936 (twelve thousand
                  nine hundred and thirty six) shares of Consideration Stock on
                  Completion in the proportions set out in Part 2 of Schedule 1;
                  and

         (e)      as to $1,572,370.80 (one million five hundred and seventy two
                  thousand three hundred and seventy dollars and eighty cents)
                  by the conditional allotment and issue to each of the Employee
                  Shareholders of up to 51,744 (fifty one thousand seven hundred
                  and forty four) shares of Consideration Stock in the
                  proportions and in the manner set out in Part 3 and Part 4 of
                  Schedule 1 upon the conditions set out in clauses 6, having
                  been satisfied and subject to the provision of Clause 13 ("the
                  Deferred Consideration").

3.2      The receipt of the Consideration Funds by SCM Microsystems Limited and
         the Shareholders Solicitors shall be good receipt for the purposes of
         the Purchaser and the Purchaser shall not be required to enquire as to
         the division of that part of the Consideration Funds between the
         Shareholders by the Shareholders Solicitors.

3.3      The Consideration Stock shall rank in all respects pari passu with the
         common stock par value $0.001 per share in the capital of the Purchaser
         in issue immediately prior to the allotment and issue of the
         Consideration Stock.

4.       COMPLETION

4.1      Completion shall take place at the offices of Osborne Clark OWA,
         solicitors to the Purchaser, on the date of this Agreement

4.2      On Completion:

         (a)      the Shareholders shall deliver or shall procure the delivery
                  to the Purchaser:

                                       11
<PAGE>

                  (i)      stock transfer forms, duly completed and executed by
                           the registered holders or their lawful attorneys, in
                           favour of the Purchaser (or as it may direct) in
                           respect of the Shares together with the relevant
                           share certificates;

                  (ii)     letters of non-crystallisation dated not earlier than
                           the second business day immediately preceding
                           Completion from the holders of any outstanding
                           floating charges given by the Company;

                  (iii)    the certificate of incorporation, any certificates of
                           incorporation on change of name or re-registration,
                           the statutory books written up to date, share
                           certificate books, minute books, and the common seal
                           of the Company;

                  (iv)     the original version of the licence to occupy the
                           property granted to the Company by SCM Microsystems
                           Ltd;

                  (v)      all other papers and documents material to the
                           continuing operation of the business of the Company
                           which are in the possession of or under the control
                           of any of the Shareholders (to be delivered at the
                           Properties);

                  (vi)     letters of resignation in the agreed form from George
                           Dundon, John Boyne and Alan Jones;

                  (vii)    a statement of all overdraft and credit balances from
                           the Company's bankers and other lenders as at the
                           close of business on the day preceding Completion;

                  (viii)   the Disclosure Letter;

                  (ix)     a licence to occupy in an agreed form signed by the
                           Company, SCM Microsystems Ltd and SCM Microsystems
                           Group Ltd: and

                  (x)      the documents listed in Schedule 9 to this Agreement.

         (b)      The Shareholders shall repay all monies then owing by them to
                  the Company whether due and payable or not and the Company
                  shall repay all monies owing by the Company to any of the
                  Shareholders save that any monies payable by the Company to
                  SCM Microsystems Limited under the terms of a business sale
                  agreement between the Company and SCM Microsystems Limited
                  dated 12 November 1999 shall not be payable by the Company at
                  Completion and shall not be payable by the Company until such
                  monies become due and payable under the terms of the said
                  agreement.

                                       12
<PAGE>

         (c)      The Shareholders shall procure that as soon as reasonably
                  practicable following Completion and in any event no more than
                  7 days after Completion Grant Morgan & John Boyne enter into
                  the Service Agreements.

         (d)      The Shareholders shall procure that a board meeting of the
                  Company is held at which:

                  (i)      the stock transfer forms referred to in sub-clauses
                           (a)(i) are approved and (subject to them being
                           appropriately stamped) registered in the Company's
                           books;

                  (ii)     Daniel Reed and Mike Battaglia are appointed as
                           directors of the Company;

                  (iii)    Alan Jones, George Dundon and John Boyne cease to be
                           officers of the Company with immediate effect;

                  (iv)     the accounting reference date of the Company is
                           changed to 31 December;

                  (v)      Green & Peters are appointed as auditors of the
                           Company;

                  (vi)     new articles of association of the Company in an
                           agreed form are adopted by the Company ;

                  (vii)    the mandates given by the Company to its bankers are
                           revoked or revised as the Purchaser may require; and

                  (viii)   the execution and completion of the other documents
                           to be entered into by the Company under this
                           Agreement is approved.

         (e)      When the Shareholders have complied with the provisions of
                  sub-clauses (a)-(d) inclusive, the Purchaser shall: (i)
                  transfer by telegraphic transfer the Consideration Funds to
                  SCM Microsystems Ltd and to the Shareholders' Solicitor in the
                  proportions set out sub-Clause 3.1(a) and sub-Clause 3.1.(b);

                  (ii)     subject to sub-clause 4.3 below procure the allotment
                           subject to the provisions of this Agreement and issue
                           of the Consideration Stock to the Shareholders in the
                           proportions set out in schedule 1;

4.3      If any of the requirements of sub-clause 4.2 are not complied with on
         the date set for Completion under sub-clause 4.1, the Purchaser (in the

                                       13
<PAGE>

         case of the requirements of sub-clauses 4.2(a)-(d) inclusive) or the
         Purchaser (in the case of the requirements of sub-clause 4.2(e)) may:

         (a)      defer Completion with respect to some or all of the Shares to
                  a date not more than 28 days after that date (in which case
                  the provisions of this sub-clause shall also apply to
                  Completion as so deferred); or

         (b)      proceed to Completion so far as practicable (including, at the
                  Purchaser's option, completion of the purchase of some only of
                  the Shares) but without prejudice to any other rights which it
                  or they may have under this Agreement; or

         (c)      rescind this Agreement by notice in writing.

4.4      Subject to the provisions of clause 13, the Shareholders undertake to
         indemnify the Purchaser against any loss, expense or damage which it
         may suffer as a result of any document delivered to it under this
         clause being unauthorised, invalid or for any other reason ineffective.

4.5      The Purchaser and the Shareholders undertake to enter into the Escrow
         Agreement as soon as reasonably practicable following Completion and
         the Purchaser undertakes that when all of the Shareholders and the
         Purchaser have entered into the Escrow Agreement to deliver
         certificates in respect of the Retained Stock to the Escrow Agent to be
         held in the Escrow Account;

5.       REGISTRATION RIGHTS APPLYING TO THAT PART OF THE CONSIDERATION STOCK
         ALLOTTED AND ISSUED TO EMPLOYEE SHAREHOLDERS AND NON-EMPLOYEE
         SHAREHOLDERS.

5.1      Incidental (Piggyback) Registration.

         (a)      Subject to the limitations set forth in this Agreement, if the
                  Purchaser, at any time within one (1) year of the date hereof
                  proposes to file on its behalf and/or on behalf of any of its
                  security holders ("THE DEMANDING SECURITY HOLDERS") a
                  registration statement under the Securities Act of 1933 of the
                  US, as amended (the "Securities Act"), on any form (other than
                  a registration statement on US forms S-4 or S-8 or any
                  successor form for shares to be offered in a transaction of
                  the type referred to in Rule 145 under the Securities Act of
                  the US or to employees of the Purchaser pursuant to any
                  employee benefit plan, respectively) for the general
                  registration of shares to be sold for cash with respect to its
                  common stock or any other class of equity security (as defined
                  in Section 3(a)(11) of the Securities Exchange Act of 1934 of
                  the US) of the Purchaser, it will give written notice to the
                  Shareholders at least 15 days before the initial filing with
                  the US Securities and Exchange Commission of such registration
                  statement, which

                                       14
<PAGE>

                  notice shall set forth the intended method of disposition of
                  the shares proposed to be registered by the Purchaser. The
                  notice shall offer to include in such filing the aggregate
                  number of shares of Consideration Stock as have been properly
                  allocated and issued to the Shareholders pursuant to this
                  Agreement and as the Shareholders may request, subject,
                  however, to the provisions of this clause 5.1.

         (b)      Any of the Shareholders who desires to have up to 20% of his
                  or their Consideration Stock entitlement which have been
                  properly allotted and issued to him or them pursuant to this
                  Agreement registered under this clause 5, they shall advise
                  the Company in writing within 10 days after the date of
                  receipt of written notice from the Purchaser pursuant to
                  Clause 5.1(a), setting forth the amount of such Consideration
                  Stock for which registration is requested, not to exceed 20%
                  of the Consideration Stock properly allotted and issued to
                  such Shareholder under the terms of this Agreement (subject to
                  adjustment for stock splits, stock dividends and similar
                  reclassifications affecting the Common Stock). The Purchaser
                  shall thereupon include in such filing the number of shares
                  representing that part of Consideration Stock of each
                  Shareholder for which registration is so requested, subject to
                  the following provisions of this clause 5. In the event that
                  the proposed registration by the Purchaser is, in whole or in
                  part, an underwritten public offering of securities of the
                  Purchaser, the Purchaser shall not be required to include any
                  of the Consideration Stock as aforesaid in such underwriting
                  unless the Shareholders agree to accept the offering on the
                  same terms and conditions as the shares of common stock of the
                  Purchaser, if any, otherwise being sold through the
                  underwriters under such registration and provided further,
                  that:

         (A)      if the managing underwriter determines and advises the
                  Purchaser that the inclusion of all of the Consideration Stock
                  proposed to be included by the Shareholders in the
                  underwritten public offering and other issued and outstanding
                  shares of common stock of the Purchaser proposed to be
                  included therein by the persons other than the Shareholders,
                  the Purchaser and any shareholder who has exercised
                  registration rights with respect to such registration (the
                  "Other Shares") would jeopardise the success of the
                  Purchaser's offering, then

                  (i)      the Purchaser shall be required to include in the
                           offering (in addition to the number of shares to be
                           sold by the Purchaser and any Demanding Security
                           Holder) only that number of shares of the
                           Consideration Stock that the managing underwriter
                           believes will not jeopardise the success of the
                           Purchaser's offering; and

                                       15
<PAGE>

                  (ii)     the number of shares of the Consideration Stock and
                           Other Shares included in such underwritten public
                           offering shall be reduced pro rata based upon the
                           number of shares of the Consideration Stock and Other
                           Shares requested by the holders thereof to be
                           registered in such underwritten public offering
                           subject to the provisions of this agreement and an
                           Investor's Rights Agreement between the Purchaser
                           (1), Phoenix House Investments (2),, Toshiba
                           Corporation (3) and Fisher International Systems
                           Corporation (4) (together the "PRIOR HOLDERS")
                           requiring that such reduction in Other Shares
                           included in such offering not reduce the amount of
                           Other Shares owned by the Prior Holders included in
                           the Offering below 30% of the total amount of
                           securities included in the offering; and

                  (B)      in each case all of the Consideration Stock owned by
                           the Shareholders which are not included in the
                           underwritten public offering shall be subject to
                           customary underwriter "lock-up" arrangements and not
                           sold or otherwise transferred by the Shareholders for
                           a period, not to exceed ninety (90) calendar days,
                           which the managing underwriter reasonably determines
                           as necessary in order to effect the underwritten
                           public offering.

                  In the event the Purchaser chooses a registration form which
                  limits the size of the offering, either in terms of the number
                  of shares or dollar amount, the Purchaser shall not be
                  required to include in the offering (in addition to the number
                  of shares to be sold by the Purchaser and any demanding
                  security holder) any amount of the Consideration Stock which
                  would exceed such limits and the number of shares in the
                  Consideration Stock and Other Shares included in such
                  underwritten public offering shall be reduced pro rata based
                  upon the number of shares in the Consideration Stock and Other
                  Shares requested by the holders thereof to be registered in
                  such underwritten public offering.

5.2 UNDERWRITING DOCUMENTS AND OTHER LIMITATIONS.

                  (a)      Notwithstanding any provision of this Agreement to
                           the contrary, a Shareholder may not include any
                           shares of the Consideration Stock in any underwritten
                           offering required or contemplated under this
                           Agreement unless the Shareholder promptly executes
                           and delivers such form of underwriting agreement,
                           custody agreement, power of attorney and other
                           agreements and instruments as the underwriters of
                           such offering may reasonably require in connection
                           with the preparation and consummation of such
                           offering.

                  (b)      Notwithstanding any provision of this Agreement to
                           the contrary, in no event shall the Purchaser be
                           required to register

                                       16
<PAGE>

                           the sale of any shares of the Consideration Stock
                           held by the Escrow Agent but the Purchaser shall
                           register those shares of the Consideration Stock that
                           are released by the Escrow Agent under the terms of
                           the Escrow Agreement and this Agreement.

5.3      FORM S-3 REGISTRATION.

         Subject always to the terms and limitations set forth in this
         Agreement, the Purchaser will file as promptly as possible after it is
         eligible to do so (and in no event later than 5 November, 2000) a
         registration statement on Form S-3 (the "Shelf Registration Statement")
         covering 100% of the Shares comprising the Consideration Stock (less
         any shares registered pursuant to said piggy back registration rights
         set forth in clause 5.1 above) of the shares of the Consideration Stock
         and thereafter shall use its best efforts to cause the Shelf
         Registration Statement to be declared effective as soon as practicable
         following such filing and to maintain such effectiveness until the one
         year anniversary of the date hereof; provided, however, that the
         Purchaser shall have the right to prohibit the sale of shares of the
         Consideration Stock pursuant to the Shelf Registration Statement, upon
         notice to the Shareholders (A) if in the opinion of counsel for the
         Purchaser, the Purchaser would thereby be required to disclose
         information not otherwise then required by law to be publicly
         disclosed, provided that the Purchaser shall use its best efforts to
         minimize the period of time in which it shall prohibit the sale of any
         shares of its common stock pursuant to this clause (A), which shall in
         no event exceed 45 days in any one-year period; or (B) during the
         period starting with the date 10 days prior to the Purchaser's estimate
         of the date of filing of, and ending on a date 90 days after the
         effective date of, a registration in which the Shareholders are
         entitled to participate in accordance with clause 5 hereof, or such
         longer post-effective periods as may be reasonably required by the
         underwriter or underwriters if such offering is underwritten.

         Subject to the terms of this Agreement if the Purchaser is not eligible
         to file an S-3 Registration Statement by November 5, 2000, the
         Shareholders may require the Purchaser to file an S-1 Registration
         Statement to register 100% of the Consideration Stock which has not
         already been registered.

5.4      CERTAIN REGISTRATION PROCEDURES.

         If the Purchaser is required by the provisions of this clause 5 to use
         its best efforts to effect the registration of any Consideration Stock
         under the Securities Act, the Purchaser will:

         (a)      prepare and file with the Securities and Exchange Commission
                  of the US (the "Commission") a registration statement with
                  respect to such Consideration Stock and such amendments and
                  supplements to such registration statement and the prospectus

                                       17
<PAGE>

                  used in connection therewith as may be necessary to keep such
                  registration statement effective until the earliest of (i) the
                  completion of the distribution of the registered securities,
                  and (ii) the three (3)month anniversary of the effective date
                  of the registration statement and to comply with the
                  provisions of the Securities Act with respect to the sale or
                  other disposition of all securities covered by such
                  registration statement;

         (b)      furnish to any selling security holders such number of copies
                  of a summary prospectus or other prospectus, including a
                  preliminary prospectus, in conformity with the requirements of
                  the Securities Act, and such other documents, as such selling
                  security holders may reasonably request;

         (c)      use its best efforts to register or qualify the securities
                  covered by such registration statement under such other
                  securities or "blue sky" laws of such jurisdictions within the
                  United States and Puerto Rico as each Shareholder shall
                  reasonably request (provided, however, that the Purchaser
                  shall not be obligated to qualify as a foreign corporation to
                  do business under the laws of any jurisdiction in which it is
                  not then qualified or to file any general consent to service
                  or process or to qualify as a broker or dealer in securities),
                  and do such other reasonable acts and things as may be
                  required of it to enable the Shareholders to consummate the
                  disposition in such jurisdiction of the securities covered by
                  such registration statement;

         (d)      take such other actions as are reasonably required in order to
                  expedite or facilitate the disposition of such common stock;
                  and

         (e)      promptly notify in writing the Shareholders and each
                  underwriter (if any) of the happening of any event, during the
                  period of distribution, as a result of which the registration
                  statement includes an untrue statement of a material fact or
                  omits to state any material fact required to be stated therein
                  or necessary to make the statements therein not misleading in
                  light of the circumstances then existing (in which case, the
                  Purchaser shall promptly provide the Shareholders and/or
                  underwriters, as appropriate, with revised or supplemental
                  prospectuses and if so requested by the Purchaser in writing,
                  the Shareholders shall promptly take action to cease making
                  any offers of the Consideration Stock until receipt and
                  distribution of such revised or supplemental prospectuses).

5.5      CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.

         The Purchaser's obligations under Clause 5.1 with respect to each
         Shareholder are also expressly conditioned upon such Shareholder
         furnishing to the Purchaser in writing such information concerning such
         Shareholder and such Shareholder's controlling persons and the

                                       18
<PAGE>

         terms of such Shareholder's proposed offering of Consideration Stock as
         the Purchaser or the managing underwriter (if any) shall reasonably
         request for inclusion in the applicable registration statement.

5.6      Expenses.

         All expenses incurred in complying with this clause 5, including,
         without limitation, all registration and filing fees (including all
         expenses incident to filing with the National Association of Securities
         Dealers, printing expenses, fees and disbursements of professional
         adviser instructed by the Purchaser, expenses of any special audits
         incident to or required by any such registration and expenses
         (including English solicitors' or US attorneys' fees) of complying with
         the securities or blue sky laws of any jurisdictions pursuant to this
         clause 5, except to the extent required to be paid by participating
         selling security holders by state securities or blue sky laws, shall be
         paid by the Purchaser, except that the Purchaser shall not be liable
         for any fees, discounts or commissions to any underwriter or any fees
         or disbursements of counsel for Shareholders in respect of the
         securities sold by Shareholders, which amounts shall be paid by the
         Shareholders.

6.       CONDITIONAL ALLOTMENT AND ISSUE (EMPLOYEE SHAREHOLDERS ONLY)

6.1      Subject to the provisions of sub-clause 6.2 and Clause 13, the
         Purchaser shall allot and issue to each Employee Shareholder the
         Deferred Consideration on each of the Conditional Allotment Dates in
         the proportions and in the manner set out in Part 3 and Part 4 of
         Schedule 1.

6.2      The obligations of the Purchaser to allot and issue the Deferred
         Consideration referred to in sub-clause 6.1 shall, in the case of each
         Employee Shareholder, be in all respects conditional upon:

         (a)      each Employee Shareholder having remained, throughout the
                  period prior to and including any Conditional Allotment Date,
                  a Service Provider to the Company. For the purpose of this
                  sub-clause an Employee Shareholder shall be deemed to be a
                  "Service Provider" to the Company for so long as such Employee
                  Shareholder serves as an employee of the Company or one or
                  more of the Company's holding or subsidiary corporations
                  PROVIDED THAT each Employee Shareholder shall not be prevented
                  from receiving Deferred Consideration under this sub-clause
                  6.2(a) by virtue only of:

                  (i)      such Employee Shareholder's death while a Service
                           Provider,

                                       19
<PAGE>

                  (ii)     termination of such Employee Shareholder's employment
                           arrangement with the Company without "Cause" (as
                           defined below),

                  (iii)    termination of such Employee Shareholder's employment
                           with the Company for "Just Cause" (as defined below),
                           or

                  (iv)     such Employee Shareholder's receipt of disability
                           insurance payments pursuant to any plan or scheme
                           sponsored by the Company and if upon such plan's or
                           scheme's or in the absence of any such plan or
                           scheme, determination that the Employee Shareholder
                           cannot perform each of the material duties of the
                           Employee Shareholder's employment with the Company.
                           For the purposes hereof, "JUST CAUSE" means (a) the
                           requirement by the Company that the Employee
                           Shareholder perform duties which are contrary to or
                           constitute a material diminution of the Employee
                           Shareholder's position (including status, offices,
                           titles and reporting requirements), authority, duties
                           or responsibilities as contemplated by the Employee
                           Shareholder's contract of employment with the
                           Company, excluding for this purpose an isolated,
                           insubstantial and inadvertent action not taken in bad
                           faith and which is remedied by the Company promptly
                           after receipt of notice thereof given by the Employee
                           Shareholder; (b) failure by the Company to comply
                           with any material provision of such Employee
                           Shareholder's contract of employment with the
                           Company, excluding for this purpose an isolated,
                           insubstantial and inadvertent action not taken in bad
                           faith and which is remedied by the Company promptly
                           after receipt of notice thereof given by the Employee
                           Shareholder; or the requirement by the Company that
                           the Employee Shareholder be based at any office or
                           location which is located more than 50 miles from the
                           office of the Company at Ashville Park, Wokingham.
                           For purposes of this Agreement, the term "CAUSE"
                           shall mean (i) the failure or refusal of the Employee
                           Shareholder to perform the duties or render the
                           services reasonably assigned to him from time to time
                           by or under direction of the Managing Director of the
                           Company (except during reasonable vacation periods or
                           sick leave); (ii) gross negligence or willful
                           misconduct by the Employee Shareholder in the
                           performance of his duties as an employee of the
                           Company, (iii) the conviction of the Employee
                           Shareholder of a criminal offence; (iv) the material
                           breach by the Employee Shareholder of any of

                                       20
<PAGE>

                           the provisions of his contract of employment with the
                           Company; (v) the breach by the Employee Shareholder
                           of his fiduciary duty or duty of trust to the
                           Company, including the commission by the Employee
                           Shareholder of an act of fraud or embezzlement
                           against the Company, (vi) use of illegal drugs, or
                           (vii) any other material breach by the Employee
                           Shareholder of any of the material terms or
                           provisions of this Agreement or any other agreement
                           between the Company and the Employee Shareholder
                           related to the Employee Shareholder's employment;

                           AND

                  (b)      the total Deferred Consideration exceeding in
                           monetary value the cumulative aggregate amount of all
                           or any Claim or Claims made in accordance with the
                           provisions of clause 13 (the value of all or any
                           Claim or Claims shall be determined by reference to
                           the Purchaser's estimate of the amount involved)
                           ("the Claim Threshold") on or before each of the
                           Conditional Allotment Dates so that where the total
                           Deferred Consideration does not exceed, in monetary
                           value, the Claim Threshold made on or before each of
                           the Conditional Allotment Dates the Purchaser shall
                           have no obligation to allot or issue any of the
                           Deferred Consideration. In the event that the total
                           Deferred Consideration does exceed, in monetary
                           value, the Claim Threshold, on or before each of the
                           Conditional Allotment Dates ("the Excess"), the
                           Purchaser shall allot and issue only that amount of
                           the Deferred Consideration which the Excess
                           represents in the form of Consideration Stock based
                           on the Average Closing Price.

                           The rights and remedies of the Purchaser in respect
                           of any breach of the Warranties or the Covenant for
                           Taxation or any indemnities contained in this
                           Agreement shall not be affected by the condition
                           contained in this sub-clause 6.2(b).

                           This condition shall be without prejudice to the
                           Purchaser's entitlement to set off the amount of any
                           Claim against any sum due from it to the Shareholders
                           under this Agreement or the Purchaser's entitlement
                           to set off or make offsets or deductions on account
                           of any Claim against any Retained Stock held in the
                           Escrow Account or against any future entitlement to
                           Deferred Consideration including all cancellation
                           rights of the Purchaser hereunder.

6.3      Upon the conditions set out in sub-clause 6.2(a) and 6.2(b) having been
         satisfied, the Purchaser shall allot and issue to the Employee

                                       21
<PAGE>

         Shareholders the Deferred Consideration, or that part of the Deferred
         Consideration to which they are entitled pursuant to sub-clause 6.2(b),
         upon each of the Conditional Dates of Allotment in the proportions and
         in the manner set out in Part 3 and Part 4 of Schedule 1.

7.       RELEASE OF GUARANTEES

7.1      The Shareholders shall on Completion procure the release of the Company
         from any Guarantee given by the Company in respect of any obligations
         of any Shareholder or Shareholder Associate and shall indemnify the
         Purchaser against all liability arising after Completion in respect of
         it.

8.       POST COMPLETION MATTERS

8.1      The Shareholders declare that for as long as they remain the registered
         holders of the Shares after Completion they will:

         (a)      hold the Shares and the dividends and any other moneys paid or
                  distributed in respect of them after Completion and all rights
                  arising out of or in connection with them in trust for the
                  Purchaser;

         (b)      deal with the Shares and all such dividends, distributions and
                  rights as the Purchaser may direct for the period between
                  Completion and the day on which the Purchaser or its nominee
                  is entered in the register of members of the Company as the
                  holder of the Shares.

8.2      The Shareholders irrevocably appoint the Purchaser as their attorney
         for the purpose of exercising any rights, privileges or duties
         attaching to the Shares including receiving notices of and attending
         and voting at all meetings of the members of the Company from
         Completion to the day on which the Purchaser or its nominee is entered
         in the register of members of the Company as the holder of the Shares.

8.3      For the purpose of clause 8.2, the Shareholders authorise:

         (a)      the Company to send copies of any notices in respect of their
                  share holdings to the Purchaser;

         (b)      the Purchaser to complete and return proxy cards, consents to
                  short notice and any other document required to be signed by
                  the Purchaser as a member.

9.       WARRANTIES

9.1      Subject to the provisions of this clause 9 the Shareholders jointly and
         severally warrant and represent to the Purchaser that, save as
         Disclosed

                                       22
<PAGE>

         in the Disclosure Letter, each of the Warranties is true and
         accurate in all respects and not misleading at the date of this
         Agreement.

9.2      The Shareholders acknowledge that they give the Warranties with the
         intention of inducing the Purchaser to enter into this Agreement and
         that the Purchaser does so in reliance on the Warranties.

9.3      Each of the Warranties is a separate and independent Warranty and shall
         not be limited by reference to any other Warranty or anything in this
         Agreement.

9.4      SCM Microsystems Ltd does not warrant and represent that the Warranty
         contained in paragraph 14 of Schedule 3 regarding the working capital
         of the Company is true and accurate in all respects and not misleading
         at the date of this Agreement.

10.      SPECIFIC INDEMNITIES

10.1     The Shareholders shall pay to the Purchaser or at its discretion to the
         Company an amount equal to all losses, claims, liabilities, damages,
         actions, demands suffered and all accompanying costs and expenses
         reasonably incurred by the Purchaser or the Company arising from any of
         the following matters:

         (a)      the Purchaser or the Company infringing any third party
                  Intellectual Property in the Products or the Company not being
                  authorised to licence the Products to end-users;

         (b)      any claim howsoever arising which would not have arisen had
                  the Company enjoyed a lawful right to occupy part only of the
                  Property with the written consent of the owner of the freehold
                  of the Property ("THE BUILDING INDEMNITY") (but for the
                  avoidance of doubt the Purchaser or the Company shall not be
                  entitled to claim or recover monies in respect of the same
                  fact or facts from SCM Microsystems Limited under both the
                  Building Indemnity and also under the provisions of an
                  agreement dated on the same day as this Agreement and being
                  between the Company, SCM Microsystems Limited and SCM
                  Microsystems Group Limited;

         (c)      any claim howsoever arising resulting from the transfer of
                  those employees of the Company whose employment was
                  transferred from SCM Microsystems Limited to the Company under
                  the Transfer of Undertakings (Protection of Employment)
                  Regulations 1981, pursuant to a business sale agreement dated
                  12 November 1999 between SCM Microsystems Limited and the
                  Company and without prejudice to the generality of the
                  foregoing any claim howsoever arising which would not have
                  arisen had the said employees of the Company each signed a
                  contract of employment with the Company on 12 November

                                       23
<PAGE>

                  1999 in the form annexed in schedule 8 of this Agreement ("THE
                  EMPLOYMENT INDEMNITY");

         (d)      any claim howsoever arising made by any third party or a
                  liquidator, receiver or trustee in bankruptcy against the
                  Purchaser or the Company in respect of the transfer of the
                  Datawise business from SCM Microsystems Ltd to the Company
                  pursuant to a Business Sale Agreement dated 12 November 1999
                  and the assignment of all intellectual property rights in the
                  Products and arising under the Insolvency Act 1986 ("THE
                  DATAWISE INDEMNITY");

         (e)      any stamp duty payable on the consideration passing in respect
                  of the transfer or assignment of all intellectual property
                  rights in the Products from SCM Microsystems Limited to the
                  Company;

         (f)      the Products not meeting Year 2000 Conformity;

         (g)      the Company failing to comply with the provisions of the Data
                  Protection Act;

         (h)      the Management Accounts not being true and accurate in all
                  material respects ("THE MANAGEMENT ACCOUNTS INDEMNITY"); and

         For the avoidance of doubt no Disclosed matter shall affect the
         indemnities contained in this clause.

10.2     Each undertaking contained in sub-clause 10.1 shall be construed as a
         separate and independent undertaking and are considered by the parties
         to be reasonable in all the circumstances.

11.      COVENANT FOR TAXATION

11.1     The Shareholders covenant to the Purchaser in the terms of the Covenant
         for Taxation as set out in schedule 5.

12.      PURCHASER'S REMEDIES

12.1     Each of the Shareholders undertake to disclose in writing to the
         Purchaser anything which is or may constitute a Claim or be
         inconsistent with the contents of the Disclosure Letter directly it
         comes to the notice of any of them either before, at the time of, or
         after Completion.

12.2     The rights and remedies of the Purchaser in respect of any breach of
         the Warranties or the Covenant for Taxation shall not be affected by
         Completion or by any investigation made, or which could have been made,
         by it or on its behalf into the affairs of the Company.

                                       24
<PAGE>

12.3     If any Claim is made, no Shareholder shall make any claim against the
         Company or any director or employee of the Company on whom he may have
         relied before agreeing to any terms of this Agreement or authorising
         any statement in the Disclosure Letter. This sub-clause shall not
         preclude any Shareholder from claiming against any other Shareholder
         under any right of contribution or indemnity to which he may be
         entitled.

12.4     In the event of a Claim, without prejudice to the right of the
         Purchaser to claim damages on any basis available to it or to any other
         right or remedy available to it, subject to the provisions of Section
         13.5 the Shareholders agree to pay on demand to the Purchaser a sum by
         way of damages as agreed between the Shareholders and the Purchaser or,
         in default of such agreement, as determined by order of a court of
         competent jurisdiction which is the higher of:

         (a)      an amount sufficient to put the Company into the position
                  which would have existed if the Warranties had been true and
                  accurate or not misleading when given or repeated;

         (b)      an amount equal to the resulting diminution in value of the
                  Shares;

         (c)      the amount by which the assets of the Company are less, or
                  less valuable, or its liabilities greater, than the values at
                  which the same were included in the Management Accounts or (if
                  the Purchaser so elects) than they would have been if the
                  Warranty concerned had been true and accurate and not
                  misleading; and

         (d)      the amount by which the profitability of the Company is less,
                  or its losses greater, than would have been in the case if the
                  Warranty concerned had been true and accurate and not
                  misleading, calculated on the same basis as if such reduction
                  in profitability or increase in losses were suffered as the
                  result of an actionable wrong done to the Company.

12.5     This clause applies if at any time the Purchaser makes any Claim
         against any Shareholder in circumstances where no disclosure has been
         made in the Disclosure Letter and (notwithstanding the express
         provisions of this Agreement) such Shareholder avoids or limits
         liability as a result of a court of competent jurisdiction holding that
         the Claim (or any part of it) should fail or the quantum recoverable
         should be reduced because the Purchaser has or is deemed to have
         knowledge of the matters which give rise to the breach of Warranty.
         Subject to the provisions of Clause 13.5, the Shareholders covenant to
         pay to the Purchaser on demand an amount equal to the amount which the
         Purchaser would have been entitled to recover from the Shareholders but
         for the Purchaser having or being deemed to have knowledge of the
         matters giving rise to the breach of Warranty.

                                       25
<PAGE>

12.6     Subject to the provisions of Clause 13.5 the Shareholders shall
         indemnify the Purchaser against all costs (including legal costs on an
         indemnity basis as defined in Rule 44.4(3) of the Civil Procedure Rules
         1998), expenses or other liabilities which the Purchaser may reasonably
         incur either before or after the commencement of any action in
         connection with:

         (a)      the settlement of any Non-Tax Claim;

         (b)      any legal proceedings in respect of any Non-Tax Claim in which
                  judgement is given for the Purchaser; or

         (c)      the enforcement of any such settlement or judgement.

12.7     Any amount paid by the Shareholders to the Purchaser in respect of any
         of the provisions of this Agreement shall be treated as paid to the
         Purchaser by way of pro rata reduction in the Consideration.

13.      LIMITATIONS ON LIABILITY

13.1     To provide a source of indemnification to the Purchaser pursuant to any
         Claims, the Shareholders agree that

         (a)      certificates for 12,708(twelve thousand seven hundred and
                  eight) shares of Consideration Stock being 20% of the
                  aggregate of the value of the Consideration Stock and the
                  Consideration Funds issued to the Non-Employee Shareholders
                  pursuant to clause 3 ("THE RETAINED STOCK") shall be deposited
                  with the Escrow Agent in an escrow account ("THE ESCROW
                  ACCOUNT") pursuant to the Escrow Agreement following
                  Completion;

         (b)      for the avoidance of doubt, this sub-clause 13.1 shall not
                  affect the Purchaser's right to cancel all of the Deferred
                  Consideration outstanding from time to time in the event that
                  any Claim arises and which cancellation rights are provided
                  for in accordance with this Agreement;

         (c)      For the purpose of interpretation of this sub-clause 13.1 the
                  parties have assumed that in the case of sub-Clause
                  13.1(b)(ii) the Deferred Consideration being subject to a
                  conditional right of allotment was so allotted and issued and
                  in all cases by reference to the Average Closing Price. In the
                  case of the Employee Shareholders the Purchaser shall have the
                  right by way of set-off, deduction, off-set, cancellation or
                  otherwise for the period of one year following the date of
                  this Agreement to:

                  (i)      irrevocably and unconditionally cancel any Deferred
                           Consideration allotted and issued to Employee
                           Shareholders pursuant to Clause 3 and 6; and/or

                                       26
<PAGE>

                  (ii)     irrevocably and unconditionally determine, cancel,
                           extinguish or determine any conditional right of
                           allotment of Deferred Consideration.

                  in either case to a total aggregate value of $413,840 (four
                  hundred and thirteen thousand eight hundred and forty dollars
                  ("the Set-Off Amount").

13.2     The Retained Stock shall be held in the Escrow Account on such terms as
         are set forth in the Escrow Agreement for a period of one year from the
         date of Completion ("THE HOLD PERIOD"). Any dividends and distributions
         with respect to such Retained Stock while held in the Escrow Account
         shall also be retained in the Escrow Account until the expiration of
         the Hold Period. Any offsets or deductions made from Retained Stock
         held in the Escrow Account on account of any Claim shall be made on the
         last business day of the Hold Period, or at such other time as set
         forth in the Escrow Agreement and shall be based upon the Average
         Closing Price. All Retained Stock subject to such offset or deduction
         shall be cancelled by the Purchaser and the remaining Retained Stock
         together with any dividends paid or distributions made with respect to
         such Retained Stock shall be then delivered to the Shareholders in
         accordance with their respective interests. For the avoidance of doubt,
         no offset or reduction in the Retained Stock allocated to SCM
         Microsystems Limited shall be made in respect of any Claim for which
         SCM Microsystems Limited is not liable to any extent under this
         Agreement.

13.3     Subject to the provisions of this clause 13, the cancellation by the
         Purchaser of any Retained Stock contained in the Escrow Account or the
         exercise of any cancellation or set-off rights in respect of the
         Set-Off Amount shall not prejudice its right to recover any further sum
         due to it for that or any other Claim not satisfied by the Escrow
         Account or the Set-Off Amount.

13.4     The liability of the Shareholders under the Covenant for Taxation shall
         be reduced if and to the extent that the loss shall have been recovered
         under the Warranties (and vice versa).

13.5     In the absence of fraud, dishonesty or wilful non-disclosure on the
         part of any of the Shareholders, their agents or advisors and subject
         to the remaining provisions of this clause 13:

         (a)      the Purchaser shall not have any claim under the Warranties in
                  respect of any matter if, and to the extent that, it is fully
                  and fairly Disclosed;

         (b)      the Shareholders shall not be liable for any Claim or any
                  claim under any indemnity in this Agreement unless they have

                                       27
<PAGE>

                  received written notice from the Purchaser giving reasonable
                  details of the Claim and, if practicable, the Purchaser's
                  estimate of the amount involved on or before the expiration of
                  one (1) year from Completion or, in the case of any claim or
                  Claim relating to Taxation, not later than six (6) years from
                  Completion;

         (c)      the aggregate liability of the Shareholders in respect of any
                  indemnity in this Agreement (for the avoidance of doubt
                  including, in the absence of fraud, the indemnity in clause
                  4.4) and the Non-Tax Warranties shall not exceed(pound)506,337
                  (five hundred and six thousand three hundred and thirty-seven
                  pounds) representing the value at Completion of the Retained
                  Stock and the Set-Off Amount and in relation to the Management
                  Accounts Indemnity no claim shall be made by the Purchaser if
                  the value of the claim is estimated by the Purchaser to be
                  less than(pound)15,000, but if the value of a claim made by
                  the Purchaser is estimated to exceed(pound)15,000 then the
                  Shareholders shall be liable for the whole of such claim and
                  not merely the excess;

         (d)      the aggregate liability of the Purchaser in respect of any
                  indemnity or liability in or under this Agreement shall not
                  exceed (pound)506,337 (five hundred and six thousand three
                  hundred and thirty seven pounds).

13.6     The limitations on liability contained in clause 13.5 shall not apply
         to any Claims relating to fraud or the Tax Warranties or any Claim
         under the Covenant for Taxation (together the "MAJOR CLAIMS") and for
         the avoidance of doubt SCM Microsystems Limited shall be severally
         liable and the remaining Shareholders shall be jointly and severally
         liable for the Major Claims but in any event no such Shareholder shall
         be liable for such Major Claims for an amount exceeding that part of
         the maximum aggregate Consideration payableto the said Shareholder
         under the terms of this Agreement assuming in the case of any Employee
         Shareholder that they are fully entitled to the Deferred Consideration.

13.7     The limitations on liability contained in clause 13.5 shall not apply
         to any Claims relating to the Employment Indemnity and for the
         avoidance of doubt all of the Shareholders with the exception of SCM
         Microsystems Limited (which shall not be liable to any extent in
         relation to the Employment Indemnity) shall be jointly and severally
         liable for any Claims under the Employment Indemnity but no such
         Shareholder shall be liable for such Claim for an amount exceeding that
         part of the maximum aggregate Consideration payable to the said
         Shareholder under the terms of this Agreement assuming for the purpose
         of this sub-clause 17.7. that in the case of any Employee Shareholder
         that they are fully entitled to the Deferred Consideration.

                                       28
<PAGE>

13.8     If the Shareholders make any payment to the Purchaser or the Company in
         relation to any Non-Tax Claim and the Purchaser or the Company
         subsequently receives from a third party any amount referable to, or
         any benefit which would not have been received but for the
         circumstances giving rise to, the subject matter of that Claim, the
         Purchaser shall, once it or the Company has received such amount or
         benefit, immediately repay or procure the repayment to the Shareholders
         of either:

         (a)      the amount of such receipt (after deducting an amount equal to
                  the reasonable costs of the Purchaser or the Company incurred
                  in recovering such receipt and any Taxation payable on it); or
                  if lesser

         (b)      the amount paid by the Shareholders.

14.      CONDUCT OF NON-TAX CLAIMS

14.1     The Purchaser shall notify the Shareholders in writing of:

         (a)      any claim made against it by a third party which may give rise
                  to a Non-Tax Claim; and

         (b)      any claim the Company is entitled to bring against a third
                  party which claim is based on circumstances which may give
                  rise to a Non-Tax Claim.

14.2     The Purchaser shall procure that the conduct, negotiation, settlement
         or litigation of the claim by or against such third party is, so far as
         is reasonably practicable, carried out in accordance with the wishes of
         the Shareholders and at their cost subject to their giving timely
         instructions to the Purchaser and providing reasonable security for any
         costs and expenses which might be incurred by the Purchaser or the
         Company.

14.3     Subject to the provisions of clause 13.5(b) the Purchaser shall not be
         liable for any delay in giving any notice under sub-clause 14.1 and
         shall not by reason of such delay be precluded from bringing any such
         Non-Tax Claim against the Shareholders.

14.4     The Purchaser shall provide and shall procure that the Company provides
         to the Shareholders and the Shareholders' professional advisers
         reasonable access to premises and personnel and to any relevant assets,
         documents and records within their power, possession or control for the
         purpose of investigating any Non-Tax Claim and enabling the
         Shareholders to take the action referred to in sub-clauses 14.2 and
         shall allow the Shareholders and their advisers to take copies of any
         relevant documents or records at their expense.

                                       29
<PAGE>

15.      GENERAL

15.1     ENTIRE AGREEMENT AND CONFLICTS

         (a)      This Agreement sets out the entire agreement and understanding
                  between the parties in respect of the subject matter of this
                  Agreement.

         (b)      The Purchaser acknowledges that it has entered into this
                  Agreement in reliance only upon the representations,
                  warranties and promises specifically contained or incorporated
                  in this Agreement and, save as expressly set out in this
                  Agreement, the Shareholders shall have no liability in respect
                  of any other representation, warranty or promise made prior to
                  the date of this Agreement unless it was made fraudulently.

15.2     CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

         The Contracts (Rights of Third Parties) Act 1999 does not apply to this
         Agreement.

15.3     ASSIGNMENT

         (a)      This Agreement shall be binding upon and enure for the benefit
                  of the successors in title of the parties but, except as set
                  out in sub-clause (b), shall not be assignable by any party
                  without the prior written consent of the other.

         (b)      The Purchaser may assign the benefit of this Agreement
                  (including, without limitation, the Warranties) to any member
                  of the same group of Companies as the Purchaser being a
                  successor in title or any subsequent purchaser of the Shares.

15.4     VARIATION

         No purported variation of this Agreement shall be effective unless it
         is in writing and signed by or on behalf of each of the parties.

15.5     EFFECT OF COMPLETION

         Except to the extent already performed, all the provisions of this
         Agreement shall, so far as they are capable of being performed or
         observed, continue in full force and effect notwithstanding Completion.

15.6     INVALIDITY

         To the extent that any provision of this Agreement is found by any
         court or competent authority to be invalid, unlawful or unenforceable
         in any jurisdiction, that provision shall be deemed not to be a part of
         this Agreement, it shall not affect the enforceability of the remainder
         of

                                       30
<PAGE>

         this Agreement nor shall it affect the validity, lawfulness or
         enforceability of that provision in any other jurisdiction.

15.7     RELEASES AND WAIVERS

         (a)      The rights, powers and remedies conferred on the Purchaser by
                  this Agreement and remedies available to it are cumulative and
                  are additional to any right, power or remedy which it may have
                  under general law or otherwise.

         (b)      The Purchaser may, in whole or in part, release, compound,
                  compromise, waive or postpone, in its absolute discretion, any
                  liability owed to it or right granted to it in this Agreement
                  by any other party or parties without in any way prejudicing
                  or affecting its rights in respect of that or any other
                  liability or right not so released, compounded, compromised,
                  waived or postponed.

         (c)      No single or partial exercise, or failure or delay in
                  exercising any right, power or remedy by the Purchaser shall
                  constitute a waiver by it of, or impair or preclude any
                  further exercise of, that or any right, power or remedy
                  arising under this Agreement or otherwise.

15.8     FURTHER ASSURANCE

         After Completion, each party shall execute such documents and take such
         steps as the other party may reasonably require to fulfil the
         provisions of and to give to each party the full benefit of this
         Agreement.

15.9     COUNTERPARTS

         (a)      This Agreement may be executed in any number of counterparts
                  and by the parties on separate counterparts, but shall not be
                  effective until each party has executed at least one
                  counterpart.

         (b)      Each counterpart, when executed, shall be an original of this
                  Agreement and all counterparts shall together constitute one
                  instrument.

15.10    TERMINATION

         Without prejudice to any remedy available to any party arising out of
         any outstanding breach of this Agreement on the part of any other
         party, if this Agreement is terminated in accordance with its terms,
         the following shall occur:

         (a)      the restrictions contained in sub-clause 15.11
                  (Confidentiality) and clause 16 (Announcements) shall continue
                  to apply; and

                                       31
<PAGE>

         (b)      except as referred to in sub-clause (a), all obligations of
                  the Purchaser under this Agreement shall cease.

15.11    CONFIDENTIALITY

         (a)      Except as referred to in sub-clause (b), each party shall
                  treat as strictly confidential all information received or
                  obtained as a result of entering into or performing this
                  Agreement which relates to the provisions or subject matter of
                  this Agreement, to any other party or the negotiations
                  relating to this Agreement.

         (b)      Any party may disclose information which would otherwise be
                  confidential if and to the extent:

                  (i)      it is required to do so by law or any securities
                           exchange or regulatory or governmental body to which
                           it is subject wherever situated;

                  (ii)     it considers it necessary to disclose the information
                           to its professional advisers, auditors and bankers
                           provided that it does so on a confidential basis;

                  (iii)    the information has come into the public domain
                           through no fault of that party; or

                  (iv)     each party to whom it relates has given its consent
                           in writing.

15.12    SET-OFF

         In addition to all rights and remedies that the Purchaser may have, the
         Purchaser shall be entitled to set off the amount of any Claim against
         any sum due from it to the Shareholders under this Agreement.or any
         other agreement in the agreed form. This contractual right of set off
         shall extend to the Purchaser the right to cancel all or any of the
         Consideration Stock, the Retained Stock subject to the provisions of
         Clause 13 or the Deferred Consideration and in the case of any such
         Deferred Consideration not issued or allotted hereunder the right to
         cancel or extinguish conditional rights of allotment.

16.      ANNOUNCEMENTS

16.1     Except as referred to in sub-clause 16.2, no announcement concerning
         the terms of this Agreement shall be made by or on behalf of any of the
         parties without the prior written consent of the others, such consent
         not to be unreasonably withheld or delayed.

16.2     Any announcement or circular required to be made or issued by any party
         by law or under the regulations of the SEC or other regulatory body may
         be made or issued by that party without consent if it has first sought
         consent and given the other parties a reasonable opportunity to

                                       32
<PAGE>

         comment on the subject matter and form of the announcement or circular
         (given the time scale within which it is required to be released or
         despatched).

17.      COSTS AND EXPENSES

17.1     The Purchaser shall contribute to the reasonable professional costs
         incurred by the Company in the preparation, execution and
         implementation of this Agreement up to a maximum aggregate of
         (pound)50,000.

17.2     Except as set out in sub-clause 17.1, sub-clause 17.3 and sub-clause
         15.10 (Termination) each party shall bear its own costs and expenses
         incurred in the preparation, execution and implementation of this
         Agreement.

17.3     The Purchaser shall pay all stamp and other transfer duties and
         registration fees applicable to any document to which it is a party and
         which arise as a result of or in consequence of this Agreement.

18.      NOTICES

18.1     Any notice to a party under this Agreement shall be in writing signed
         by or on behalf of the party giving it and shall, unless delivered to a
         party personally, be left at, or sent by prepaid first class post,
         prepaid recorded delivery or facsimile to the address of the party as
         set out on page 1 and in schedule 1 of this Agreement or as otherwise
         notified in writing from time to time.

18.2     Except as referred to in sub-clauses 18.3 and 18.4, a notice shall be
         deemed to have been served:

         (a)      at the time of delivery if delivered personally:

                  (i)      48 hours after posting in the case of an address in
                           the United Kingdom and 96 hours after posting for any
                           other address;

                  (ii)     2 hours after transmission if served by facsimile on
                           a business day prior to 3pm or in any other case at
                           10 am on the business day after the date of despatch.

18.3     If the deemed time of service is not during normal business hours in
         the country of receipt, the notice shall be deemed served at or, in the
         case of faxes, two hours after the opening of business on the next
         business day of that country.

18.4     The deemed service provisions set out in sub-clause 18.2 do not apply
         to:

                                       33
<PAGE>

         (a)      a notice served by post, if there is a national or local
                  suspension, curtailment or disruption of postal services which
                  affects the collection of the notice or is such that the
                  notice cannot reasonably be expected to be delivered within 48
                  hours or 96 hours (as appropriate) after posting; and

         (b)      a notice served by facsimile, if, before the time at which the
                  notice would otherwise be deemed to have been served, the
                  receiving party informs the sending party that the notice has
                  been received in a form which is unclear in any material
                  respect, and, if it informs the sending party by telephone, it
                  also despatches a confirmatory facsimile within two hours.

18.5     In proving service it will be sufficient to prove:

         (a)      in the case of personal service, that it was handed to the
                  party or delivered to or left in an appropriate place for
                  receipt of letters at its address;

         (b)      in the case of a letter sent by post, that the letter was
                  properly addressed, stamped and posted;

         (c)      in the case of facsimile, that it was properly addressed and
                  despatched to the number of the party.

18.6     A party shall not attempt to prevent or delay the service on it of a
         notice connected with this Agreement.

19.      GOVERNING LAW AND JURISDICTION

19.1     This Agreement shall be governed by and construed in accordance with
         English law.

19.2     Each of the parties irrevocably submits for all purposes in connection
         with this Agreement to the non-exclusive jurisdiction of the courts of
         England.

THIS AGREEMENT has been executed and delivered as a deed on the date appearing
at the head of page 1.

                                       34
<PAGE>

                                   SCHEDULE 1

                                THE SHAREHOLDERS

                                     PART 1

                          THE NON-EMPLOYEE SHAREHOLDERS

<TABLE>
<CAPTION>
NAME                      ADDRESS                   NO. OF SHARES IN THE          CONSIDERATION STOCK ISSUED AT
                                                                 COMPANY                             COMPLETION
<S>                       <C>                                      <C>                             <C>
Dierdre Giese             13 Larch Avenue,                         2,000
                          Wokingham
                          RG41 1EJ                                                                 2,156 shares

Deborah Norford Jones     943 Manor Way, Los                      20,000
                          Altos, CA90424 USA                                                      21,561 shares

Alan Jones                943 Manor Way,                           9,200
                          Los Altos,
                          CA90424 USA                                                              9,918

Derek Cook                5, Bird Mews,                            1,000
                          Wokingham,
                          Berks RG40 1DZ                                                           1,078 shares

George Dundon             35 Marsh Court,                         1,000
                          Lychpit,
</TABLE>

                                       35
<PAGE>

<TABLE>
<S>                       <C>                                     <C>                              <C>

                          Basingstoke,
                          Hampshire RG24 8UY                                                       1,078 shares

SCM Microsystems Limited  Shuttle House,                          22,800
                          Ashville Way,
                          Ashville Park,
                          Wokingham, Berks RG41 2PL                                               24,579 shares
                                                                          --------------------------------------

TOTAL                                                                                             60,370 shares
                                                                          --------------------------------------
</TABLE>

                                     PART 2

                            THE EMPLOYEE SHAREHOLDERS
<TABLE>
<CAPTION>
                                                                                            CONSIDERATION STOCK
NAME                      ADDRESS                          NO. OF SHARES                   ISSUED AT COMPLETION
<S>                       <C>                              <C>                                     <C>
David Atkinson            4 Green Finch Close,                     8,000                           1,725 shares
                          Heathfield Park,
                          Crowthorne,
                          Berks RG45 6TZ

John Boyne                17 The Hatches,                          6,000                           1,294 shares
                          Frimley Green,
                          Camberley, Surrey
                          GU14 6HE

Anne Cowen                8 Ashbury Drive,                         4,000                             862 shares
                          Tilehurst, Reading,
                          Berks RG31 5LJ

Stephen Darragh           113 Juniper Birch                        3,000                             647 shares
                          Hill, Bracknell,
                          RG142 7ZF

Esther Flawn              36 Carnation Drive,                     10,000                            2,156shares
                          Winkfield Road RG42 7QT

Donna Kirby               35 Leyland Gardens,                      2,000                             431 shares
                          Shinfield, Reading,
                          Berks RG2 9AN
</TABLE>

                                       36
<PAGE>

<TABLE>
<S>                       <C>                                    <C>                               <C>
Grant Morgan              7 Coulsden Rise,                        15,000                           3,234 shares
                          Coulsden, Surrey
                          CR5 2SE

Tiel Holdstock            43 Gipsey Lane,                          8,000                           1,725 shares
                          Wokingham, Berks RG40 2BN

Carl Hayesmore            22 Hill Brow,                            2,000                             431 shares
                          Reading, Berks RG2 8JD

Christopher Higginson     2 Hazelbank,                             2,000                             431 shares
                          Finchampstead, Berks
                          RG40 4XD
                                                                          --------------------------------------
TOTAL                                                                                             12,936 shares
                                                                          --------------------------------------
</TABLE>

                                       37
<PAGE>

                                     PART 3

                              EMPLOYEE SHAREHOLDERS

<TABLE>
<CAPTION>
CONDITIONAL ALLOTMENT DATE         % OF DEFERRED CONSIDERATION              PERCENTAGE
                                     AVAILABLE FOR ALLOTMENT
                                     CALCULATED PURSUANT TO
                                           CLAUSE 6
<S>                               <C>
06/10/2000                        30%

06/04/2001                        16.7%                               As set out in Part 4 of
                                                                      Schedule 1 Column 3

06/10/2001                        16.7%

06/04/2002                        16.6%
</TABLE>

                                       38
<PAGE>

                                     PART 4

          THE PROPORTIONS OF CONSIDERATION STOCK FOR WHICH THE EMPLOYEE

              SHAREHOLDERS HAVE THE CONDITIONAL RIGHT TO SUBSCRIBE

NAME                      ADDRESS                         PERCENTAGE OF DEFERRED
                                                 CONSIDERATION AVAILABLE TO EACH
                                                  EMPLOYEE SHAREHOLDER UPON EACH
                                                           CONDITIONAL ALLOTMENT

David Atkinson            4 Green  Finch  Close,                           13.33
                          Heathfield Park,
                          Crowthorne, Berks
                          RG45 6TZ

John Boyne                17 The Hatches,                                     10
                          Frimley Green,
                          Camberley, Surrey
                          GU14 6HE

Anne Cowen                8 Ashbury Drive,                                 6.675
                          Tilehurst, Reading,
                          Berks RG31 5LJ

Stephen Darragh           113 Juniper Birch                                    5
                          Hill, Bracknell,
                          RG142 7ZF

Esther Flawn              36 Carnation Drive,                             16.675
                          Winkfield Road RG42 7QT

Donna Kirby               35 Leyland Gardens,                               3.33
                          Shinfield, Reading,
                          Berks RG2 9AN

Grant Morgan              7 Coulsden Rise,                                    25
                          Coulsden, Surrey CR5 2SE

Tiel Holdstock            43 Gipsey Lane,                                  13.33

                                       39
<PAGE>

                          Wokingham, Berks RG40 2BN

Carl Hayesmore            22 Hill Brow,                                     3.33
                          Reading, Berks RG2 8JD

Christopher Higginson     2 Hazelbank,                                      3.33
                          Finchampstead,
                          Berks RG40 4XD

                                       -----------------------------------------
TOTAL                                                                        100
                                       -----------------------------------------

                                       40
<PAGE>

                                   SCHEDULE 2

                      (Information concerning the Company)

REGISTERED NUMBER                                 3786531

DATE OF INCORPORATION                             10 June 1999

PLACE OF INCORPORATION                            Cardiff

ADDRESS OF REGISTERED OFFICE                      Woodhouse Daughtrey, North
                                                  Lodge, Templewood Lane,
                                                  Farnham Common, Slough,
                                                  Berkshire SL2 3HW

CLASS OF COMPANY                                  Private

AUTHORISED SHARE CAPITAL                          (pound)5,000,000

ISSUED SHARE CAPITAL                              (pound)58,000

LOAN CAPITAL                                      There is no loan capital

DIRECTORS

FULL NAME                     USUAL RESIDENTIAL ADDRESS         NATIONALITY

Grant Morgan                  7 Coulsdon Rise,                  British
                              Coulsdon, Surrey CR5 2SE

Alan Jones                    943 Manor Way, Los Altos,         British
                              CA90424 USA

George Dundon                 35 March Court, Basingstoke,      British
                              Hants RG26 8HY

SECRETARY

FULL NAME                     USUAL RESIDENTIAL ADDRESS

Brian Daughtrey

ACCOUNTING REFERENCE DATE                         30 April

TAX RESIDENCE                                     England and Wales

                                       41
<PAGE>

                                   SCHEDULE 3

                             The Non-Tax Warranties

THE SHAREHOLDERS

1.       CAPACITY

1.1      Each Shareholder has the requisite power and authority to enter into
         and perform this Agreement.

1.2      No Shareholder is bankrupt, has proposed a voluntary arrangement or has
         made or proposed any arrangement or composition with his creditors or
         any class of his creditors.

1.3      This Agreement constitutes and imposes valid legal and binding
         obligations on each Shareholder fully enforceable in accordance with
         its terms.

2.       ARRANGEMENTS BETWEEN THE COMPANY AND SHAREHOLDER ASSOCIATES

         There are no contracts, arrangements or liabilities, actual or
         contingent, outstanding or remaining in whole or in part to be
         performed between the Company and any Shareholder Associate.

3.       OTHER INTERESTS OF ANY SHAREHOLDER ASSOCIATE

         No Shareholder other than SCM Microsystems Limited has or intends to
         acquire any interest, direct or indirect, in any business which has a
         close trading relationship with or which competes or is likely to
         compete with any business now carried on by the Company and, so far as
         the Shareholders are aware, no Shareholder Associate has or intends to
         do so.

SHARE CAPITAL

4.       COMPANY

4.1      The Shares constitute the entire issued and allotted share capital of
         the Company and are fully paid or credited as fully paid.

4.2      Apart from this Agreement, there is no agreement, arrangement or
         commitment outstanding which calls for the allotment, issue or transfer
         of, or accords to any person the right to call for the allotment, issue
         or transfer of, any share or loan capital of the Company.

4.3      None of the Shares was, or represents assets which were, the subject of
         a transfer at an undervalue, within the meaning of Sections 238 or 339,
         Insolvency Act 1986, within the past 5 years.

4.4      The Company has not at any time:

                                       42
<PAGE>

         (a)      reduced its share capital;

         (b)      redeemed any share capital;

         (c)      purchased any of its shares; or

         (d)      forfeited any of its shares.

5.       SUBSIDIARIES

5.1      There are no Subsidiaries of the Company.

5.2      The Company does not have, and has never had, a participating interest
         (as defined in Section 260 of the Act) in any undertaking nor has it
         agreed to acquire such an interest.

5.3      The Company does not hold or is not liable on any share or relevant
         security.

CORPORATE MATTERS

6.       INSOLVENCY OF THE COMPANY

6.1      No order has been made, no resolution has been passed, no petition
         presented, no meeting convened for the winding up of the Company or for
         a provisional liquidator to be appointed in respect of the Company

6.2      No administration order has been made and no petition for one has been
         presented in respect of the Company.

6.3      No receiver or administrative receiver has been appointed in respect of
         the Company or any of its assets.

6.4      The Company is not insolvent, has failed or is unable to pay, or has no
         reasonable prospect of being unable to pay, any of its debts as they
         fall due, as those expressions are defined in Section 123, Insolvency
         Act 1986.

6.5      No voluntary arrangement has been proposed under Section 1, Insolvency
         Act 1986 in respect of the Company and the Company has not made or
         proposed any arrangement or composition with its creditors or any class
         of them.

6.6      No distress, execution or other process has been levied on the
         Company's assets or action taken to repossess goods in the possession
         of the Company.

6.7      No unsatisfied judgement is outstanding against the Company and no
         demand has been served on the Company under Section 123(1)(a),
         Insolvency Act 1986.

                                       43
<PAGE>

6.8      No event analogous to any referred to in sub-paragraphs 6.1 to 6.7 has
         occurred anywhere in the world.

7.       STATUTORY BOOKS AND DOCUMENTS FILED

7.1      The statutory books, including all registers and minute books, of the
         Company have been properly kept and contain an accurate and complete
         record of the matters with which those books should deal.

7.2      All documents which should have been delivered by the Company to the
         Registrar of Companies are complete and accurate and have been properly
         so delivered.

7.3      A copy of the memorandum and articles of association of the Company is
         contained in the Disclosure Letter and has embodied in it or annexed to
         it a copy of each resolution as referred to in Section 380, Companies
         Act 1985, and is accurate and complete in all respects.

7.4      Since the Accounts Date the members of the Company in general meeting,
         or of any class of them, have not passed any resolution other than
         resolutions relating to the ordinary business of annual general
         meetings.

INFORMATION

8.       ACCURACY AND ADEQUACY OF INFORMATION

8.1      The information contained in schedules 1, 2 and 4 to this Agreement is
         accurate and complete.

8.2      The information contained in the Disclosure Letter and all written
         information supplied to the Purchaser or its advisers by or on behalf
         of the Shareholders or any of their advisers or by the Company is
         complete and accurate and is not misleading because of any omission or
         ambiguity or for any other reason and where the information is
         expressed as an opinion, it is truly and honestly held and not given
         casually, recklessly or without due regard for its accuracy.

8.3      So far as the Shareholders with the exception of SCM Microsystems Ltd
         are aware, there is no fact or circumstance relating to the business
         and affairs of the Company which, if Disclosed to the Purchaser or any
         of its advisers, might reasonably be expected to influence the decision
         of the Purchaser to purchase the Shares on the terms contained in this
         Agreement and which has not been so Disclosed.

MANAGEMENT ACCOUNTS

9.       PREPARATION AND CONTENTS OF THE MANAGEMENT ACCOUNTS

         (a)      The Management Accounts:

                                       44
<PAGE>

                  (i)      contain full provision or reserve for all liabilities
                           and for all capital and revenue commitments of the
                           Company as at the Accounts Date;

                  (ii)     disclose all the assets of the Company as at the
                           Accounts Date and none of the values placed in the
                           Accounts on any of those assets was in excess of its
                           market value at the Accounts Date;

                  (iii)    make full provision for bad and doubtful debts;

                  (iv)     do not include any figure which is referable to the
                           value of an intangible asset; and

                  (v)      make full provision for depreciation of the fixed
                           assets of the Company having regard to their original
                           cost and life.

10.      ACCOUNTING RECORDS

10.1     The accounting records of the Company comply with the requirements of
         Sections 221 and 222 of the Act, do not contain or reflect any material
         inaccuracy or discrepancy and present and reflect in accordance with
         generally accepted accounting principles and standards the financial
         position of and all transactions entered into by the Company or to
         which it has been a party.

10.2     All relevant financial books and records of the Company are in its
         possession or otherwise under its direct control.

10.3     Where any of the records of the Company are kept on computer, the
         Company:

         (a)      is the owner of all hardware and all software necessary to
                  enable it to use the records as they have been used in its
                  business to the date of this Agreement and to Completion;

         (b)      does not share any hardware or software relating to the
                  records with any person; and

         (c)      maintains adequate back up records and support in the event of
                  any fault or failure of such computer hardware and software.

11.      EURO COMPLIANCE

11.1     The products, systems and services are "Euro Compliant" and are capable
         of satisfying the legal requirements applicable to the common currency
         adopted or to be adopted by the relevant participating member states of
         the European Union and known as the "Euro" as set out in the European
         Commission Regulation number 1103.97 ("THE REGULATION"). For the
         purposes of this warranty "Euro Compliant"

                                       45
<PAGE>

         shall mean the ability of the systems to perform using the Euro and to
         allow any currency recognised by the systems, including but not limited
         to the Euro and all other currencies belonging to and adopted by full
         member states of the European Union, to be converted to other
         currencies, and in particular (but without limitation) to:

         (a)      perform all monetary functions in Euros;

         (b)      process multiple currencies and in particular the dual
                  currencies during the transition phase set out in the
                  Regulation of countries adopting the Euro;

         (c)      recognise the industry standard keyboard configurations or
                  key-strokes and screen layouts for the Euro symbol;

         (d)      correctly implement the conversion and rounding requirements
                  (including the triangulation rule) set out in the Regulation;
                  and

         (e)      interface with other Euro Compliant products.

11.2     Neither the Company nor the Shareholders have any knowledge that the
         introduction of the Euro will or may cause any agreement, arrangement
         or obligation to which the Company is a party to terminate or to be
         capable of termination or will or may alter the terms of or excuse or
         discharge performance of such an agreement.

12.      EVENTS SINCE THE ACCOUNTS DATE

12.1     Since the Accounts Date there has been no material change in:

         (a)      the financial or trading position or prospects of the Company;

         (b)      the value or state of assets or amount or nature of
                  liabilities as compared with the position disclosed in the
                  Management Accounts.

12.2     The Company has since the Accounts Date carried on its business in the
         ordinary course and without interruption, so as to maintain it as a
         going concern and paid its creditors in the ordinary course and within
         the credit periods agreed with such creditors.

12.3     Since the Accounts Date no supplier of the Company has ceased or
         restricted supplies or threatened so to do, there has been no loss or
         material curtailment of the business transacted by the Company with any
         customer which at any time represented 10 per cent or more of the
         turnover of the Company and the Shareholders are not aware of any
         circumstances likely to give rise to any of the above.

12.4     Since the Accounts Date the Company has not:

         (a)      incurred or committed to incur:

                                       46
<PAGE>

                  (i)      material capital expenditure exceeding(pound)5,000;
                           or

                  (ii)     any liability whether actual or contingent except for
                           full value or in the ordinary course of business;

         (b)      acquired or agreed to acquire:

                  (i)      any asset for a consideration higher than its market
                           value at the time of acquisition or otherwise than in
                           the ordinary course of business; or

                  (ii)     any business or substantial part of it or any share
                           or shares in a body corporate;

         (c)      disposed of or agreed to dispose of, any of the assets of the
                  Company, except in the ordinary course of business and for
                  full value;

         (d)      repaid wholly or in part any loan except upon the due date or
                  dates for repayment;

         (e)      issued or allotted share or loan capital, increased its
                  authorised share capital, purchased or redeemed any shares,
                  reduced or re-organised its share capital or agreed to do so;
                  or

         (f)      declared or paid any distribution of profit.

12.5     None of the debts included in the Management Accounts or any of the
         debts subsequently arising have been the subject of factoring by the
         Company and the Shareholders are not aware of any circumstances which
         could result in any presently outstanding debt in excess of
         (pound)1,000 not being paid in full.

FINANCIAL

13.      FINANCIAL COMMITMENTS AND BORROWINGS

13.1     Complete and accurate details of all overdraft, loan and other
         financial facilities available to the Company and the amounts
         outstanding under them at the close of business on the day preceding
         the date of this Agreement are set out in the Disclosure Letter and
         none of the Shareholders or the Company has done anything, or omitted
         to do anything, as a result of which the continuance of any of those
         facilities might be affected or prejudiced.

13.2     The Company is not a party to, and has not agreed to enter into, any
         lending, or purported lending, agreement or arrangement (other than
         agreements to give credit in the ordinary course of its business).

13.3     The Company is not exceeding any borrowing limit imposed upon it by its
         bankers, other lenders, its articles of association or otherwise nor

                                       47
<PAGE>

         has the Company entered into any commitment or arrangement which might
         lead it so to do.

13.4     No overdraft or other financial facilities available to the Company are
         dependent upon the guarantee of or security provided by any other
         person.

13.5     No event has occurred or been alleged which is or, with the passing of
         any time or the giving of any notice, certificate, declaration or
         demand, would become an event of default under, or breach of, any of
         the terms of any loan capital, borrowing, debenture or financial
         facility of the Company or which would entitle any person to call for
         repayment prior to normal maturity.

13.6     The Company is not, or has agreed to become, bound by any guarantee,
         indemnity, surety or similar commitment.

13.7     The Company has no credit cards in issue in its own name or that of any
         officer or employee of the Company or any person connected with any
         officer or employee.

13.8     The Company has not received any grants, allowances, loans or financial
         aid of any kind from any government departmental or other board, body,
         agency or authority which may become liable to be refunded or repaid in
         whole or in part.

13.9     The Company has not engaged in financing of a type which is not
         required, or has not been, shown or reflected in the Management
         Accounts.

14.      WORKING CAPITAL

         Having regard to existing bank and other facilities available to it,
         the Company has sufficient working capital for the purposes of
         continuing to carry on its business, in its present form and at its
         present level of turnover, for the period of 12 months after
         Completion.

15.      INSURANCES

15.1     The Company maintains, and at all material times has maintained,
         adequate insurance cover against all risks normally insured against by
         companies carrying on a similar business, for the full replacement or
         reinstatement value of its business and assets, and in particular has
         maintained product liability, professional indemnity insurance and all
         insurance required by statute and insured against loss of profits for a
         period of not less than 6 months and for loss of rent for a period of
         not less than 3 years.

15.2     The Policies are valid and enforceable and all premiums due have been
         paid. There are no outstanding claims or circumstances likely to give
         rise to a claim under the Policies or which would be required to be

                                       48
<PAGE>

         notified to the insurers and nothing has been done or omitted to be
         done which has made or could make any Policy void or voidable or as a
         result of which the renewal of any Policy might be refused or the
         premiums due in respect of them may be liable to be increased.

15.3     There are no claims outstanding or threatened, or so far as the
         Shareholders are aware, pending, against the Company which are not
         fully covered by insurance.

TRADING AND CONTRACTS

16.      CONTRACTS AND COMMITMENTS

16.1     All contracts, agreements, transactions, obligations, commitments,
         understandings or arrangements requiring in relation to its discharge
         any payment in excess of (pound)5,000 to which the Company is a party
         are Disclosed in the Disclosure Letter.

16.2     The Company is not a party to any agreement, arrangement or commitment
         which:

         (a)      has or is expected to have material consequences in terms of
                  expenditure or revenue;

         (b)      relates to matters outside the ordinary business of the
                  Company or was not entered into on arms' length terms;

         (c)      can be terminated in the event of any change in the underlying
                  ownership or control of the Company or would be materially
                  affected by such change;

         (d)      cannot readily be fulfilled or performed by it on time; or

         (e)      cannot be terminated, without giving rise to any liabilities
                  on the Company, by the Company giving 3 months' notice or
                  less.

16.3      The Company:

         (a)      has no outstanding bid, tender, sale or service proposal which
                  is material in relation to its business or which, if accepted,
                  would be likely to result in a loss;

         (b)      or shareholders are not aware of any actual, potential or
                  alleged breach, invalidity, grounds for termination, grounds
                  for rescission, grounds for avoidance or grounds for
                  repudiation of, any contract to which the Company is a party;
                  or

         (c)      has not granted any power of attorney or other such authority
                  (whether express or implied) which is still outstanding.

                                       49
<PAGE>

17.      TERMS OF TRADE

         The Company has not given any guarantee or warranty (other than any
         implied by law) or made any representation in respect of any product or
         services sold or supplied by it nor has it accepted any liability to
         service, maintain, repair or otherwise do or refrain from doing
         anything in relation to such goods or services after they have been
         sold or supplied by it except for those contained in its standard
         conditions of trading, complete and accurate copies of which are
         contained in the Disclosure Letter.

18.      PRODUCT LIABILITY

         So far as the Shareholders are aware the Company has not manufactured,
         sold or provided any product or service which does not in every respect
         comply with all applicable laws, regulations or standards or which is
         defective or dangerous or not in accordance with any representation or
         warranty, express or implied, given in respect of it.

19.      LICENCES AND CONSENTS

19.1     Complete and accurate details of all licences, consents, permissions,
         authorisations and approvals required by the Company for the carrying
         on of its business are contained in the Disclosure Letter and all of
         them have been obtained by the Company and are in full force and
         effect.

19.2     So far as the Shareholders are aware, all reports, returns and
         information required by law or as a condition of any licence, consent,
         permission, authorisation or approval to be made or given to any person
         or authority in connection with the business of the Company have been
         made or given to the appropriate person or authority and there are no
         circumstances which indicate that any licence, consent, permission,
         authorisation or approval might not be renewed in whole or in part or
         is likely to be revoked, suspended or cancelled or which may confer a
         right of revocation, suspension or cancellation.

20.      TRADING PARTNERS

20.1     The Company does not act or carry on business in partnership with any
         other person or is a member of any corporate or unincorporated body,
         undertaking or association.

20.2     The Company is not a party to any joint venture agreement or
         arrangement or any agreement or arrangement under which it is to
         participate with any other person in any business.

20.3     The Company is not a party to any agency, distributorship, licence or
         management agreement or is a party to any contract or arrangement which
         restricts its freedom to carry on its business in such manner as it

                                       50
<PAGE>

         may think fit in any part of the world.

20.4     The Company has no branch, agency, place of business or establishment
         outside the United Kingdom.

21.      COMPETITION AND TRADE REGULATION LAW

21.1     The Company is not and has not been a party to, is not, has not been
         concerned in any agreement or arrangement, or is not conducting or has
         not conducted itself, whether by omission or otherwise, in a manner
         which:

         (a)      contravenes, is invalidated in whole or in part by or has
                  been, or should have been, registered under the Restrictive
                  Trade Practices Acts 1976 and 1977;

         (b)      contravenes the provisions of the Resale the Purchasers Act
                  1976, the Trade Description Acts 1968 and 1972, the Fair
                  Trading Act 1973 or any secondary legislation made under
                  either of those Acts;

         (c)      infringes Articles 81 or 82 of the EC Treaty or any regulation
                  or directive made under it or any other anti-trust or similar
                  legislation in any jurisdiction in which the Company has
                  assets or carries on or intends to carry on business or where
                  its activities may have any effect; or

         (d)      infringes Chapter 1 or Chapter 2 of the Competition Act 1998
                  or any secondary legislation made under it.

21.2     The Company has not:

         (a)      given an undertaking to, or is subject to, any order of or
                  investigation by, or has received any request for information
                  from;

         (b)      received, nor so far as the Shareholders are aware, is it
                  likely to receive any process, notice or communication, formal
                  or informal by or on behalf of;

         (c)      been or is a party to, or is or has been concerned in, any
                  agreement or arrangement in respect of which an application
                  for negative clearance and/or exemption has been made to

         the Office of Fair Trading, the Competition Commission, the Secretary
         of State, the European Commission or any other governmental or other
         authority, department, board, body or agency of any country having
         jurisdiction in anti-trust or similar matters in relation to its
         business.

                                       51
<PAGE>

22.      COMPLIANCE WITH LAW

22.1     The Company has not committed or is liable for, and no claim has been
         or, so far as the Shareholders are aware, will be made that the Company
         has committed or is liable for, any criminal, illegal, unlawful or
         unauthorised act or breach of any obligation or duty whether imposed by
         or pursuant to statute, contract or otherwise.

22.2     The Company has not received notification that any investigation or
         inquiry is being, or has been, conducted by, or received any request
         for information from any governmental or other authority, department,
         board, body or agency in respect of the affairs of the Company and, so
         far as the Shareholders are aware, there are no circumstances which
         would give rise to such investigation, inquiry or request.

22.3     None of the activities, contracts or rights of the Company is ultra
         vires, unauthorised, invalid or unenforceable or in breach of any
         contract or covenant and all documents in the enforcement of which the
         Company may be interested are valid.

23.      LITIGATION AND DISPUTES

23.1     Except for actions to recover any debt incurred in the ordinary course
         of the business owed to the Company where each individual debt and its
         costs outstanding amounts to less than (pound)1,000:

         (a)      The Company is not nor is any person for whose acts the
                  Company may be liable engaged in any litigation, arbitration,
                  administrative or criminal proceedings, whether as plaintiff,
                  defendant or otherwise;

         (b)      no litigation, arbitration, administrative or criminal
                  proceedings by or against the Company or any person for whose
                  acts the Company may be liable are threatened or expected and,
                  as far as the Shareholders are aware, none are pending; and

         (c)      there are no facts or circumstances likely to give rise to any
                  litigation, arbitration, administrative or criminal
                  proceedings against the Company or any person for whose acts
                  the Company may be liable.

23.2     The Company is not subject to any order or judgement given by any court
         or governmental or other authority, department, board, body or agency
         or has not been a party to any undertaking or assurance given to any
         court or governmental or other authority, department, board, body or
         agency which is still in force, nor are there any facts or
         circumstances likely to give rise to the Company becoming subject to
         such an order or judgement or to be a party to any such undertaking or
         assurance.

                                       52
<PAGE>

ASSETS

24.      OWNERSHIP AND CONDITION OF ASSETS

24.1     Each of the assets included in the Management Accounts or acquired by
         the Company since the Accounts Date (other than the Properties and
         current assets subsequently disposed of or realised in the ordinary
         course of business) is owned both legally and beneficially by the
         Company free from any third party rights and, if capable of possession,
         is in the possession of the Company.

24.2     Each item of plant and machinery, vehicle and office equipment used by
         the Company is:

         (a)      in good repair and condition, regularly maintained and
                  certified safe and without risk to health when used;

         (b)      capable and will remain capable of doing the work for which it
                  was designed or purchased until the time when (on the basis of
                  depreciation adopted in the Management Accounts) it will have
                  been written down to a nil value;

         (c)      not surplus to requirements; and

         (d)      not expected to require replacement or additions within 6
                  months of Completion.

24.3     The Company has not acquired, or agreed to acquire, any asset on terms
         that title to that asset does not pass until full payment is made or
         all indebtedness incurred in connection with the acquisition is
         discharged.

24.4     The assets owned by the Company, together with all assets held under
         hire purchase, lease or rental agreements which are contained in the
         Disclosure Letter, comprise all assets necessary for the continuation
         of the business of the Company as it is currently carried on.

25.      STOCK

         At Completion, other than where provision has been made in the
         Management Accounts, no more than 5% of the stocks of materials of the
         Company is redundant, obsolete, obsolescent or defective.

26.      CHARGES AND ENCUMBRANCES OVER ASSETS

26.1     No option, right to acquire, mortgage, charge, pledge, lien (other than
         a lien arising by operation of law in the ordinary course of trading)
         or other form of security or encumbrance or equity on, over or
         affecting the shares or the whole or any part of the undertaking or
         assets of the Company is outstanding and, apart from this Agreement,
         there is no

                                       53
<PAGE>

         agreement or commitment to give or create any of them and no claim has
         been made by any person to be entitled to any of them.

26.2     No floating charge created by the Company has crystallised and there
         are no circumstances likely to cause such a floating charge to
         crystallise.

26.3     The Company has not received notice from any person intimating that it
         will enforce any security which it may hold over the assets of the
         Company, and there are no circumstances likely to give rise to such a
         notice.

26.4     All charges in favour of the Company have, if required, been registered
         in accordance with the provisions of the Companies Act 1985, Part XII.

27.      INTELLECTUAL PROPERTY

27.1     The Company is the sole legal owner with full title guarantee of the
         Intellectual Property used in connection with its business and has
         absolute unencumbered title to such Intellectual Property and such
         Intellectual Property is not subject to any outstanding rights of any
         third party nor does the Intellectual Property infringe any third
         party's Intellectual Property rights or rights in know how of any
         nature whatsoever or to any option or agreement for licence or purchase
         in favour of any person nor do any circumstances exist whereby any
         person may claim entitlement to such Intellectual Property in
         competition with the Company and without prejudice to the generality of
         the foregoing no employee of the Company is entitled to any award or
         compensation in respect thereof whether under the Patents Act 1977 or
         otherwise.

27.2     All Marks and Patents (if any) used by the Company in the course of its
         business are registered in the name of the Company as proprietor.

27.3     As regards all Marks owned by the Company, the Company has paid all
         renewal and other fees or expenses which may be necessary to ensure the
         continuance in force of the registrations of the said Marks.

27.4     All Know-How used by the Company in connection with its business is its
         sole property and the Company has neither disclosed to nor licensed any
         third party to use such Know-How.

27.5     None of the operations of the Company infringe any industrial property
         rights or intellectual property rights of any third party and the
         Company is not liable to make any payment of any royalty or fee in
         respect of the same.

27.6     The Company does not use on its letterheads, business cards, circulars,
         advertisements, brochures, sales literature or vehicles or otherwise
         carry on business under a name other than its corporate name.

                                       54
<PAGE>

27.7     None of the Intellectual Property used by the Company in its business
         has been assigned or is being used, claimed, opposed or attacked by any
         person nor so far as the Shareholders are aware are the Company's
         rights thereto being infringed.

27.8     The Company has not entered into any agreement which restricts the
         disclosure or use by the Company of any Know-how or technical
         information or other Intellectual Property and there has not been any
         infringement by any third party of any of the rights in confidential
         information or other Intellectual Property held by the Company.

27.9     The Company owns all Intellectual Property with full title guarantee.

27.10    The Intellectual Property is free from encumbrances and /or any third
         party interests.

27.11    The Company has quiet enjoyment of all Intellectual Property at the
         date hereof.

27.12    No part of any of the Intellectual Property has except in the ordinary
         course of business been licensed, transferred, assigned, charged or
         otherwise encumbered or dealt with.

27.13    There is no third party Software licensed to the Company which the
         Company needs for its business.

27.14    No part of any of the Software is manufactured, supplied or licensed by
         the Company under any licence, consent or permission from any third
         party.

27.15    In respect of any part of any Intellectual Property written, developed
         or originated by an employee or director of the Company:

         (a)      all such Intellectual Property was written, developed or
                  originated by such employee in the course of his employment by
                  the Company; and

         (b)      the contract of employment between the Company and such
                  employee provides for the Company to own all rights in and to
                  such Software; and

         (c)      if sub-paragraphs 28.15(a) and (b) do not both apply, such
                  employee has expressly assigned as beneficial owner to the
                  Company all Intellectual Property.

27.16    None of the processes employed, or products or services dealt in, by
         the Company infringes any rights of any third party relating to
         intellectual property nor makes the Company liable to pay a fee or
         royalty and no claims have been made, threatened or so far as the
         Shareholders are aware are pending, in relation to any Intellectual
         Property against the Company.

                                       55
<PAGE>

28.      DATA PROTECTION ACT

28.1     The Company has complied in all respects with the provisions of the
         Data Protection Act 1984 (as amended) and the Data Protection Act 1998
         ("DPA") and the principles contained in the DPA.

28.2     Except as registered under the DPA, the Company has not held or
         processed any personal data or is exempt from registering under the DPA
         under one of the exemptions contained in the DPA.

28.3     Insofar as personal data are subject to registration:

         (a)      the Company has at all times maintained full and accurate
                  registration under the DPA and has operated wholly within the
                  terms of such registrations;

         (b)      all personal data are accurate and up to date;

         (c)      personal data have not been used by the Company for an
                  unspecified or unlawful purpose nor has there been any
                  disclosure thereof outside the terms of the Company's
                  registration.

28.4     The Company has not been served with any notice under the DPA nor are
         there any circumstances which might give rise to the Company being
         served with such a notice in the future

EMPLOYMENT

29.      DIRECTORS AND EMPLOYEES

29.1     Complete and accurate details of the terms and conditions of employment
         of all employees of the Company, including the date of commencement of
         their continuous period of employment and any arrangements or
         assurances (whether or not legally binding) in relation to their
         employment, are contained in the Disclosure Letter.

29.2     The Company has maintained up-to-date, adequate and suitable records
         regarding the service and terms and conditions of employment of each of
         its employees.

29.3     The Company has maintained up-to-date adequate and suitable records for
         the purposes of the Working Time Regulations and has complied with all
         other obligations to its workers (as "workers" is defined in Regulation
         2 of the Working Time Regulations) and there are no claims capable of
         arising or pending or threatened by any officer or employee or former
         officer or employee or the Health and Safety Executive or any local
         authority Environmental Health Department or any trade union or
         employee representative related to the Working Time Regulations.

                                       56
<PAGE>

29.4     The Company is not a party to any consultancy agreement, any agreement
         for management services or any contract of services.

29.5     Since the Accounts Date there has been:

         (a)      no material alteration in the terms of employment or any
                  material change in the number of employees employed by the
                  Company; or

         (b)      no material increase in any fees, remuneration or benefits
                  paid or payable to any officer or employee of the Company, nor
                  are any negotiations for any such increase current.

29.6     No officer or employee of the Company is remunerated on a
         profit-sharing, bonus or commission basis.

29.7     Other than salary for the current month and accrued holiday pay, no
         amount is owing to any present or former officer or employee of the
         Company.

29.8     There is no share option or share incentive scheme in operation by or
         in relation to the Company for any of its officers or employees nor is
         the introduction of such a scheme been proposed.

29.9     The Company has at all relevant times complied with all its obligations
         under statute and otherwise concerning the health and safety at work of
         its employees and there are no claims capable of arising or pending or
         threatened by any employee or third party in respect of any accident or
         injury which are not fully covered by insurance.

29.10    Save as provided for or taken into account in the Management Accounts:

         (a)      no claim or liability to make any payment of any kind to any
                  person who is or has been an officer or employee has been
                  received or incurred by the Company whether under the
                  Employment Rights Act 1996, Sex Discrimination Act 1975, the
                  Race Relations Act 1976 and the Disability Discrimination Act
                  1995 or otherwise; and

         (b)      no gratuitous payment of a material amount has been made or
                  promised by the Company in connection with the actual or
                  proposed termination or suspension of employment or variation
                  of any contract of employment of any present or former officer
                  or employee.

29.11    No officer or employee of the Company has given notice or is under
         notice of dismissal nor are there any service contracts between the
         Company and its officers or employees which cannot be terminated by the
         Company by 12 weeks notice or less without giving rise to a claim

                                       57
<PAGE>

         for damages or compensation (other than a statutory redundancy
         payment).

29.12    The Company has not, in contravention of the Act:

         (a)      entered into any arrangement involving the acquisition of
                  non-cash assets from or disposal to;

         (b)      granted any loan or quasi-loan to or entered into any
                  guarantee or credit transaction with; or

         (c)      provided any security in connection with any loan, quasi-loan
                  or credit transaction to or with

         any director or person connected with a director within the meaning of
         the Act.

30.      INDUSTRIAL RELATIONS

30.1     The Company is not a party to any contract, agreement or arrangement
         with any trade union or other body or organisation representing any of
         its employees.

30.2     The Company has in relation to its officers and employees and former
         officers and employees complied with all conditions of service, customs
         and practices and, where relevant, all collective agreements,
         recognition agreements workforce agreements and relevant agreements for
         the time being.

30.3     Within the last 12 months, the Company has not:

         (a)      given notice of any redundancies to the Secretary of State,
                  started consultations with any appropriate representatives or
                  failed to comply with any obligation under the provisions of
                  Chapter II Trade Union and Labour Relations (consolidation)
                  Act 1992;

         (b)      been a party to any relevant transfer as defined in the
                  Transfer of Undertakings (Protection of Employment)
                  Regulations 1981 or has failed to comply with any duty to
                  inform and consult any appropriate representative under the
                  Regulations.

30.4     No dispute has arisen between the Company and a material number or
         category of its employees nor are there any present circumstances known
         to the Shareholders which are likely to give rise to any such dispute.

30.5     No training schemes, arrangements or proposals exist nor have there
         been any such schemes, arrangements or proposals in the past in respect
         of which a levy may become payable by the Company under the Industrial
         Training Act 1982.

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<PAGE>

31.      PENSIONS

31.1     Except as disclosed in the Disclosure Letter, the Company does not have
         any plans, schemes or arrangements in relation to death, disability or
         retirement of its employees or any of them.

31.2     In relation to each plan, scheme or arrangement disclosed in the
         Disclosure Letter:

         (a)      complete and accurate details:

                  (i)      of it (including, where appropriate, copies of all
                           trust deeds and rules together with copies of all
                           amending deeds and resolution and the latest
                           actuarial reports);

                           and

                  (ii)     of the basis on which the Company makes, or is liable
                           to make, contributions to it

                           are contained in the Disclosure Letter.

         (b)      all contributions which are payable by the Company in respect
                  of any such plans, schemes or arrangements referred to above
                  and all contributions due from the employees of the Company as
                  members of such plans, schemes or arrangements have been duly
                  made and the Company has fulfilled all its obligations under
                  each of them.

PROPERTIES.

32.      TITLE

32.1     The Property comprises all the properties presently owned, occupied,
         held, controlled or otherwise used by the Company.

32.2     The Company occupies the Property under a licence to occupy contained
         in a Business Sale Agreement dated 12 November 1999 between SCM
         Microsystems Ltd (1) and Impleo Limited (2), the original of which is
         in the possession of the Company.

32.3     So far as the Shareholders are aware, no person is in adverse
         possession of any Property or has acquired or is acquiring any rights
         or overriding interests (as defined by Section 70, Land Registration
         Act 1925) adversely affecting any Property.

32.4     So far as the Shareholders are aware the Company has not had occasion
         to make any claim or complaint in relation to any neighbouring property
         or its use or occupation and there are no disputes, claims, actions,
         demands or complaints in respect of any Property which are ongoing nor
         are any disputes, claims, actions,

                                       59
<PAGE>

         demands or complaints anticipated and no notices materially affecting
         any Property have been given or received and not complied with.

33.      ENCUMBRANCES

33.1     So far as the Shareholders are aware the Property is not subject to any
         restrictive covenant, reservation, stipulation, easement, profits a
         prendre, wayleave, licence, grant, restriction, overriding interest,
         agreement for sale, estate contract, option, right of pre-emption or
         other similar agreement or right vested in third parties.

33.2     Where sub-paragraphs 33.1 has been Disclosed against in the Disclosure
         Letter, the obligations and liabilities imposed and arising under the
         Disclosed matter have been fully observed and performed and any
         payments in respect of it which are due and payable have been duly
         paid.

34.      PLANNING MATTERS

34.1     The use of each Property is a lawful and permitted use for the purposes
         of the Planning Acts.

34.2     So far as the Shareholders are aware, building regulation consents have
         been obtained with respect to all development, alterations and
         improvements to the Property.

34.3     So far as the Shareholders are aware, all claims and liabilities under
         the Planning Acts or any other legislation have been discharged and no
         claim or liability, actual or contingent, is outstanding.

35.      STATUTORY OBLIGATIONS

35.1     So far as the Shareholders are aware, the Company has complied with and
         is continuing to comply with all applicable statutory and by-law
         requirements with respect to the Property, and in particular with the
         requirements as to fire precautions under the Fire Precautions Act 1971
         and under the Public Health Acts, the Offices, Shops and Railway
         Premises Act 1963, the Health and Safety at Work Act 1974, the
         Factories Act 1961 and the Shops Acts 1950 to 1956.

36.      ADVERSE ORDERS

36.1     So far as the Shareholders are aware, there are no compulsory purchase
         notices, orders or resolutions affecting the Property and there are no
         circumstances likely to lead to any being made.

36.2     So far as the Shareholders are aware, there are no closing, demolition
         or clearance orders, enforcement notices or stop notices affecting the
         Property and there are no circumstances likely to lead to any being
         made.

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<PAGE>

37.      LEASEHOLD PROPERTIES

37.1     The Company has not in the past been the tenant of or guarantor of any
         leasehold premises not listed in schedule 4 in respect of which any
         obligations or liabilities could still accrue to the Company.

ENVIRONMENT

38.      ENVIRONMENTAL MATTERS

38.1     In relation to its business, the Company holds and has since its
         incorporation always held all Environmental Consents.

38.2     Complete and accurate details of all Environmental Consents held by the
         Company are contained in the Disclosure Letter and are valid and
         subsisting.

38.3     The Company has not received any notification that any Environmental
         Consent it holds is or is likely to be modified, restricted or
         withdrawn and no works or other upgrading or investment are or will be
         necessary to secure compliance with or to maintain any such
         Environmental Consent.

38.4     The Company has not breached the terms, conditions or provisions of any
         Environmental Consent.

38.5     The Company has not received any notification or informal indication
         that further Environmental Consents will be required under
         Environmental Law in order for it to continue its present business.

38.6     The Company (and each of its officers, employees and agents in the
         course of its business) has complied with all applicable Environmental
         Laws and has never received any notification under Environmental Law
         requiring it to take or omit to take any action.

38.7     The Company has not been threatened with any investigation or enquiry
         by any organisation, or received any complaint, in connection with the
         Environment.

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<PAGE>

                                   SCHEDULE 4

1.       THE PROPERTY

ADDRESS OF PROPERTY                         DATE AND PARTIES TO THE TERM
                                            CURRENT RENTAL RENT REVIEWS
                                            LEASE OF THE PROPERTY

Unit 200,  Ashville  Park,  Ashville  Way,  Clement  Properties Limited 18 years
Molly Millars Lane, Wokingham               (1) and Shuttle Technology
                                            Group Limited (2) dated 8
                                            September 1998

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<PAGE>

                                   SCHEDULE 5

                                  Tax Schedule

Definitions and interpretation

1.1      In this Schedule, unless the context otherwise requires, the following
         words have the following meanings:

         "CLAIM FOR TAXATION"           any notice, demand, assessment, letter
                                        or other document issued or action taken
                                        by any Tax Authority or any person
                                        (including the Company) indicating that
                                        any person is or may be placed or sought
                                        to be placed under either a Liability to
                                        Taxation or a claim for Taxation to
                                        which paragraph 3 may apply;

         "ICTA"                         the Income and Corporation Taxes Act
                                        1988;

         "LIABILITY TO TAXATION"        (a)       any liability to make a
                                                  payment of or in respect of
                                                  Taxation regardless of whether
                                                  such Taxation is chargeable or
                                                  attributable directly or
                                                  primarily to the Company or to
                                                  any other person;

                                        (b)       the loss of any Relief which
                                                  would (were it not for the
                                                  loss) have been available to
                                                  the Company and which has been
                                                  treated as an asset in
                                                  preparing the Accounts or
                                                  taken into account in
                                                  computing (and so reducing) or
                                                  obviating any provision for
                                                  deferred taxation which
                                                  appears in the Accounts (or
                                                  which, but for the
                                                  availability or presumed
                                                  availability of such Relief
                                                  prior to its loss, would have
                                                  appeared in the Accounts);

                                        (c)       the setting off against any
                                                  liability to Taxation or
                                                  against Profits earned,
                                                  accrued or received on or
                                                  before Completion of any
                                                  Relief which arises in respect
                                                  of any period after Completion
                                                  or in

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<PAGE>

                                                  respect of any Transaction
                                                  effected on or after
                                                  Completion in
                                                  circumstances where, but
                                                  for the setting off, the
                                                  Company would have had a
                                                  liability to Taxation in
                                                  respect of which the
                                                  Purchaser (ignoring any
                                                  limitations on liability
                                                  contained herein) would
                                                  have been able to make a
                                                  claim against the
                                                  Shareholders under the
                                                  Covenant for Taxation; and

                                        (d)       any liability to make a
                                                  payment by way of indemnity or
                                                  damages, or any other payment
                                                  pursuant to a contract or
                                                  arrangement, in each case
                                                  arising out of or in
                                                  connection with Taxation

                                        and references to a Liability to
                                        Taxation shall include the
                                        settlement of a Claim for Taxation;

         "PROFITS"                      income, profits and gains, the value of
                                        any supply and any other consideration,
                                        value or receipt used or charged for
                                        Taxation purposes and references to
                                        "PROFITS EARNED, ACCRUED OR received"
                                        include Profits deemed to have been
                                        earned, accrued or received for Taxation
                                        purposes;

         "PURCHASER'S RELIEF"           a Relief falling within the
                                        definition of Liability to Taxation;

         "RELIEF"                       any relief, loss, allowance, exemption,
                                        set-off, deduction or credit in
                                        computing or against Profits or Taxation
                                        or any right to repayment of Taxation
                                        and references to the "LOSS OF ANY
                                        Relief" include the loss, reduction,
                                        counteraction, disallowance, setting-off
                                        against Profits, crediting against a
                                        liability to make an actual payment of
                                        Taxation or failure to obtain a Relief
                                        and "LOSE" and "LOST" shall be construed
                                        accordingly;

          "TAXATION"                    all forms of taxation and statutory,
                                        governmental, supra governmental, state,
                                        provincial, local governmental or

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<PAGE>

                                        municipal impositions, duties,
                                        contributions and levies (including
                                        withholdings and deductions), whether of
                                        the United Kingdom or elsewhere in the
                                        world, whenever imposed and however
                                        arising and all penalties, fines,
                                        charges, costs and interest, together
                                        with the cost of removing any charge or
                                        other encumbrance, relating thereto and
                                        "TAX" shall be construed accordingly;

         "TAX AUTHORITY"                any taxing or other
                                        authority, body or official competent to
                                        administer, impose or collect any
                                        Taxation;

         "TAX CLAIM"                    a claim by the Purchaser against
                                        the Shareholders under the Covenant for
                                        Taxation or that any of the Taxation
                                        Warranties is untrue or inaccurate in
                                        any respect or is misleading or, as the
                                        case may be, a claim by the Shareholders
                                        against the Purchaser under the covenant
                                        in paragraph 3;

         "TCGA"                         the Taxation of Chargeable Gains Act
                                        1992;

         "TMA"                          the Taxes Management Act 1970;

         "TRANSACTION"                  any transaction, deed, act, event,
                                        omission, payment or receipt of whatever
                                        nature and whether actual or deemed for
                                        Tax purposes and references to "ANY
                                        TRANSACTION EFFECTED ON OR BEFORE
                                        COMPLETION" include the combined result
                                        of two or more Transactions, the first
                                        of which shall have taken place or
                                        commenced (or be deemed to have taken
                                        place or commenced) on or before
                                        Completion;

         "VATA"                         the Value Added Tax Act 1994; and

         "SHAREHOLDERS ASSOCIATE"       any Shareholder and any other person
                                        with whom such Shareholder is either
                                        associated (within the meaning of
                                        section 417 ICTA) or connected (within
                                        the meaning of Section 839 ICTA).

1.2      In this Schedule:
                                       65
<PAGE>

         (a)      a reference to any law shall include any statute, law,
                  regulation, notice, directive or similar provision relating to
                  Taxation, whether of the United Kingdom or elsewhere; and

         (b)      references to the VATA shall include all law relating to value
                  added tax in the United Kingdom and any value added, turnover,
                  sales, purchase or similar tax of any other jurisdiction and
                  references to value added tax shall be construed accordingly.

2.       COVENANT FOR TAXATION

2.1      Subject to Section 13.6 the Shareholders jointly and severally shall
         pay to the Purchaser an amount equal to any Liability to Taxation of
         the Company, save as fully provided for in the Management Accounts:

         (a)      arising directly or indirectly from any Transaction effected
                  on or before Completion;

         (b)      in respect of, or by reference to, any Profits earned, accrued
                  or received on or before Completion;

         (c)      which would not have arisen but for the failure by any person
                  who is or has been a Shareholders Associate to discharge a
                  Liability to Taxation which falls upon such Shareholders
                  Associate:

                  (i)      arising directly or indirectly from any Transaction
                           effected or deemed to have been effected at any time
                           by such Shareholders Associate; or

                  (ii)     in respect of any Profits earned, accrued or received
                           at any time by such Shareholders Associate; or

         (d)      arising directly or indirectly from the transfer of the Shares
                  by the Shareholders to the Purchaser or the allotment and
                  issuance to the Shareholders by the Purchaser of the
                  Consideration Stock either on Completion or at any time
                  thereafter (but for the avoidance of doubt any liability of
                  the Shareholders pursuant to this sub-clause 2.1 (d) of this
                  schedule 5 shall not include a liability to pay stamp duty on
                  the stock transfer forms executed by the Shareholders pursuant
                  to clause 4.2 of this Agreement)

         together with all costs and expenses reasonably and properly incurred
         by the Purchaser or the Company in connection with any such Liability
         to Taxation or Claim for Taxation or in bringing any claim or defending
         any action under the provisions of this Schedule.

2.2      Where the Shareholders become liable to make any payment under the
         Covenant for Taxation, the due date for the making of that payment

                                       66
<PAGE>

         shall be:

         (a)      in a case that involves an actual payment of Taxation by the
                  Company, the date that is the last date on which the Company
                  is liable to pay to the appropriate Tax Authority the Taxation
                  in question in order to avoid incurring a liability to
                  interest or penalties or, if later, five days following a
                  written demand from the Purchaser;

         (b)      in the case of the loss of any Relief, the date falling five
                  days following the date when the Shareholders have been
                  notified by the Purchaser that the auditors for the time being
                  of the Company have certified, at the request of the
                  Purchaser, that the Shareholders have a liability for a
                  determinable amount in respect of the loss of such Relief
                  under the Covenant for Taxation; or

         (c)      in any other case, the date falling five days following the
                  date on which the Shareholders receive a written demand for
                  such amount from the Purchaser.

2.3      In a case of a loss of any Relief, the amount that is to be treated
         under the Covenant for Taxation as a Liability to Taxation shall:

         (a)      be the amount of that Relief, if the Relief that was the
                  subject of the loss was either a deduction from or offset
                  against Taxation or a right to a repayment of Taxation;

         (b)      be the amount of Taxation which has been saved in consequence
                  of the setting off where the Relief that was the subject of
                  the loss was a deduction from or offset against gross Profits,
                  and the Relief was the subject of a setting off; and

         (c)      in any other case where the Relief that was the subject of the
                  loss was a deduction from or offset against gross Profits, be
                  the amount of Taxation which would, on the basis of the rates
                  of Taxation current at the date of the loss, have been saved
                  but for the loss.

2.4      If, in respect of or in connection with any Claim, or otherwise in
         connection with any payment made under this Agreement, any amount
         payable to the Purchaser by the Shareholders is subject to Taxation,
         the amount to be paid to the Purchaser by the Shareholders shall be
         such amount as will ensure that the net amount received by the
         Purchaser after such Taxation has been taken into account is equal to
         the full amount which would be payable to the Purchaser had the amount
         not been subject to Taxation.

3.       COVENANT TO SHAREHOLDERS

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<PAGE>

3.1      The Purchaser hereby covenants with the Shareholders to pay to the
         Shareholders an amount equal to any Taxation which is assessed on the
         Shareholders or on any Shareholders Associate pursuant to either
         section 767A or section 767AA, ICTA by reason of Taxation assessed on
         or primarily or directly attributable to the Purchaser or the Company
         for any accounting period remaining unpaid provided that this covenant
         shall not apply to any Taxation in respect of which the Purchaser is
         entitled to bring a Tax Claim against the Shareholders or would have
         been so entitled but for paragraphs 5 (Limitations), 6 (Repayment) and
         7 (Over-provision and Reliefs) below or clause o of the Agreement
         (Limitations).

3.2      The Shareholders hereby covenant that they shall make no claim under
         paragraph 3.1 above to the extent that they have recovered the Taxation
         in question under section 767B(2), ICTA and that to the extent that it
         recovers any amount under paragraph 3.1 they shall not seek to recover
         payment under section 767B(2).

3.3      The provisions of paragraphs 2.2 (date of payment), 2.4 (grossing up),
         6 (repayment) and 9 (Claims Procedure) shall apply to this covenant as
         if references to the "PURCHASER" were to the "SHAREHOLDERS" (and vice
         versa), references to the "THE COMPANY" were also to the "SHAREHOLDERS"
         and references to "COVENANT FOR TAXATION" were to the "COVENANT UNDER
         PARAGRAPH 3".

4.       TAX WARRANTIES

         EVENTS SINCE THE ACCOUNTS DATE

4.1      Since the Accounts Date:

         (a)      no transaction has occurred, either in circumstances where the
                  consideration actually received or receivable (if any) was
                  less than the consideration which could be deemed to have been
                  received for Tax purposes or which will give rise to a
                  Liability to Taxation on the Company calculated by reference
                  to deemed as opposed to actual Profits;

         (b)      no transaction has occurred which will result in the Company
                  becoming liable to pay or bear a Liability to Taxation
                  directly or primarily chargeable against or attributable to
                  another person

         (c)      no disposal has taken place or other event occurred which
                  will, or may have, the effect of crystallising a Liability to
                  Taxation which would have been included in the provision for
                  deferred taxation contained in the Accounts if such disposal
                  or other event had been planned or predicted at the Accounts
                  Date;

                                       68
<PAGE>

         (d)      the Company has not been a party to any transaction for which
                  any Tax clearance provided for by statute has been, or could
                  have been, obtained; and

         (e)      no accounting period or period of account by reference to
                  which Taxation is measured of the Company has ended within the
                  meaning of Section 12, ICTA (basis of, and periods for,
                  assessment).

         STAMP DUTY

4.2      All documents which are required to be stamped or in respect of which
         any form of Taxation is due and which are in the possession of the
         Company, or by virtue of which the Company has any right, have been
         duly and sufficiently stamped or the Taxation on such documents has
         been paid and no such document has been executed and retained outside
         the United Kingdom in circumstances in which a liability to stamp duty
         would arise if such document were to be brought into the United
         Kingdom.

         RECORDS AND COMPLIANCE

4.3      The Company has duly complied with all requirements imposed on it by
         law and in particular:

         (a)      the Company has paid all Taxation for which it is liable and
                  made all withholdings and deductions in respect, or on
                  account, of any Taxation from any payments made by it which it
                  is obliged or entitled to make and has paid to the appropriate
                  Tax Authority all amounts so withheld or deducted;

         (b)      the Company will not be liable to pay any Tax the due date for
                  payment of which will arise in the 30 days following
                  Completion;

         (c)      the Company has properly prepared and punctually submitted all
                  notices, returns and applications for clearances or consents
                  required for Tax purposes and provided complete and accurate
                  information to any Tax Authority and all such notices,
                  returns, applications and information remain complete and
                  accurate and in compiling the same the Company has not taken
                  the benefit of any doubt, such that the relevant Tax Authority
                  may discover information of which it was not reasonably aware
                  and thereby make an enquiry into or dispute the Tax affairs of
                  the Company;

         (d)      the Company has kept and maintained complete and accurate
                  records, invoices and other documents and information of
                  whatever nature appropriate or requisite for Tax purposes and
                  has sufficient such records, invoices and other documents and

                                       69
<PAGE>

                  information relating to past events to calculate its liability
                  to Taxation or the relief from Taxation which would arise on
                  any disposal or on the realisation of any assets owned at
                  Completion;

         (e)      there are no disputes, unsettled or outstanding assessments or
                  appeals in respect of Taxation and the Company has not within
                  the last six years been subject to any enquiry, investigation
                  or other dispute with any Tax Authority and there are no
                  circumstances which may give rise to such an enquiry or
                  dispute;

         (f)      the Company has not within the last six years been liable or
                  will in respect of any Transaction occurring on or before
                  Completion become liable to pay any interest, penalty, fine or
                  sum of a similar nature in respect of Taxation nor, in
                  relation to value added tax, has received any penalty
                  liability notice, surcharge liability notice or other written
                  notice or warning under the VATA; and

         (g)      the Company has duly submitted all claims and elections which
                  have been assumed to have been made for the purposes of the
                  Accounts.

4.4      The Company has at all times been resident for Tax purposes in the
         jurisdiction identified as the Tax Residence in Schedule 2 and the
         Company has not during the past six years paid and is not liable to pay
         Tax in any other jurisdiction.

4.5      The Company has not within the last six years received any audit, visit
         or inspection from any Tax Authority and no such audit, visit or
         inspection to take place on or after Completion has been arranged or
         requested.

4.6      The amount of Tax chargeable on the Company or subject to withholding
         or deduction by the Company during any accounting period ending on or
         within the last six years has not to any material extent depended on
         any concession, agreement, dispensation or other formal or informal
         arrangement with any Tax Authority.

4.7      The Company is not liable to pay corporation tax by instalments
         pursuant to Section 59E, TMA, or any regulations made thereunder.

         VAT

4.8      The Company:

         (a)      is registered for the purpose of, and has complied in all
                  respects with, the VATA and is not subject to any conditions
                  imposed or agreed with any Tax Authority; and

                                       70
<PAGE>

         (b)      is not, and has not within the last three years been a member
                  of a group for value added tax purposes under Section 43, VATA
                  (groups of companies).

4.9      All supplies made by the Company are taxable supplies, and all input
         tax for which the Company has claimed credit has been paid by the
         Company, in respect of supplies made to it relating to goods or
         services used or to be used for the purpose of the business of the
         Company.

4.10     The Company has not made, nor will prior to Completion make, any
         election to waive exemption under paragraph 2, Schedule 10, VATA
         (election to waive exemption).

4.11     The Disclosure Letter contains full details of all assets owned by the
         Company to which the provisions of Part XV, Value Added Tax Regulations
         1995 (the Capital Goods Scheme) may apply, including the date of
         acquisition, the cost of the asset, the amount of the input tax for
         which credit has been claimed and the adjustment period relating to
         that asset.

         CUSTOMS DUTIES

4.12     The Company has made all necessary returns in relation to the
         collection and payment of customs duties, excise duties and other Taxes
         having an equivalent effect and has provided to any relevant Tax
         Authority all necessary information, returns and documentation and paid
         all amounts due in relation to the same and within the prescribed time
         limits.

4.13     Details of all bonds, recognisance and guarantees given to any relevant
         Tax Authority by or in relation to the Company are set out in the
         Disclosure Letter.

         BALANCE SHEET VALUES

4.14     No Liability to Taxation will arise or be incurred on a disposal by the
         Company of any of its assets for:

         (a)      in the case of each asset owned at the Accounts Date, a
                  consideration equal to the value attributed to that asset in
                  preparing the Management Accounts; and

         (b)      in the case of each asset acquired since the Accounts Date, a
                  consideration equal to the consideration given for the
                  acquisition.

4.15     The Company has not at any time in respect of any asset owned at the
         date hereof made, nor will prior to Completion make, any claim under
         Sections 152 to 158 (inclusive), TCGA (replacement of business assets)
         and there is no proposal or plan to make any such claim either in the
         claims and elections assumed to have been made for the

                                       71
<PAGE>

         purposes of the Management Accounts or otherwise.

         CLOSE COMPANY

4.16     The Company is not, nor has it at any time within the last six years
         been, either a close company within the meaning of Section 414, ICTA
         (close companies) or a close investment holding company for the
         purposes of Section 13A, ICTA (close investment-holding companies).

4.17     The Company has not at any time made any loan or advance or payment or
         given any consideration or effected any transaction falling within
         Sections 419 to 422 (inclusive), ICTA (loans to participators etc).

         GROUP TRANSACTIONS

4.18     Within the last six years the Company has not been a member of a group
         of companies within the meaning of Section 170 TCGA (groups of
         companies).

         DEDUCTIBLE EXPENSES.

4.19     The Company has not since the Accounts Date made or provided and is not
         under any obligation currently or for the future to make any payment of
         an income or revenue nature which, or to provide a benefit the cost of
         which, will be prevented from being deductible for Tax purposes,
         whether as a deduction in computing the profits of a trade or as an
         expense of management or as a charge on income.

4.20     The accounting treatment adopted by the Company in its accounts in
         relation to any loan relationship as defined in Section 81, Finance Act
         1996 (meaning of "LOANS RELATIONSHIPS" etc.) will be treated as an
         authorised accounting method for the purposes of Section 85, Finance
         Act 1996 (authorised accounting methods).

4.21     The Company has not been a party to a loan relationship treated as
         being for an unallowable purpose within the meaning of Paragraph 13
         Schedule 9, Finance Act 1996 (loan relationships for unallowable
         purposes).

         DIVIDENDS AND DISTRIBUTIONS

4.22     The Company has not at any time purchased, repaid or redeemed or agreed
         to purchase, repay or redeem its share capital, or capitalised or
         agreed to capitalise in the form of redeemable shares or debentures any
         profits or reserves, or otherwise issued any share capital or other
         security as paid up otherwise than by the receipt of new consideration
         within the meaning of Section 254, ICTA (interpretation of Part VI).

4.23     The Company has not at any time been a party to or otherwise involved
         in any transaction to which Sections 213 to 218 (inclusive), ICTA

                                       72
<PAGE>

         (exempt distributions etc.) applied.

         INHERITANCE TAX AND GIFTS

4.24     No circumstances exist under which any power within Section 212,
         Inheritance Tax Act 1984 (powers to raise tax) could be exercised in
         relation to, and there is no Inland Revenue charge (within the meaning
         of Section 237, Inheritance Tax Act 1984 (imposition of charge))
         attaching to, or which may attach to any shares or securities in or
         over any assets of the Company.

4.25     The Company is not liable and there are no circumstances in existence
         as a result of which it may become liable to be assessed to Tax as
         donor or donee of any gift or transfer or transferee of value.

         ANTI-AVOIDANCE

4.26     The Company has not:

         (a)      entered into, or been party to, any scheme or arrangement
                  designed for the purpose of avoiding Taxation, such that a
                  Liability to Taxation may arise after Completion as a result
                  of or in consequence of such a scheme or arrangement; or

         (b)      acquired or disposed of any asset, or entered into any
                  Transaction whatsoever, otherwise than by way of a bargain at
                  arms length.

5.       LIMITATIONS ON LIABILITY

5.1      The liability of the Shareholders under the Covenant for Taxation shall
         be reduced if and to the extent that the Liability to Taxation shall
         have been recovered under the Warranties or under any other part of the
         Covenant for Taxation (and vice versa).

5.2      The Shareholders shall not be liable to the Purchaser for a Tax Claim
         in respect of any Liability to Taxation:

         (a)      to the extent that provision or reserve in respect of that
                  Liability to Taxation was included in the Accounts;

         (b)      to the extent that the Liability to Taxation arises or is
                  increased as a result only of:

                  (i)      any increase in rates of Taxation;

                  (ii)     any change in law or in the published practice
                           thereof;

                  (iii)    any change in the bases upon which the accounts of
                           the Company are prepared or any change in accounting
                           practice or principles except in either case in order
                           to

                                       73
<PAGE>

                           comply with generally accepted accounting principles;
                           or

                  (iv)     any change in the date to which the Company makes up
                           its accounts,

                  made in any such case after Completion with retrospective
                  effect; or

(c)               which arises under sub-paragraphs (a) to (d) of paragraph 2 of
                  this Schedule to the extent that the Purchaser falls to be
                  indemnified for the Liability to Taxation pursuant to
                  paragraph 8 of this Schedule.

5.3      The Shareholders shall not be liable to the Purchaser under the
         Covenant for Taxation in respect of a Liability to Taxation:

         (a)      to the extent that such Liability to Taxation is upon income,
                  profits or gains which were actually earned, accrued or
                  received by the Company since the Accounts Date in the
                  ordinary and normal course of the business of the Company;

         (b)      to the extent that there is available to the Company to
                  relieve or mitigate such Liability to Taxation any Relief
                  which is not a Purchaser's Relief;

         (c)      to the extent that such Liability to Taxation would not have
                  arisen but for a voluntary act or omission carried out or
                  effected by the Company at any time after Completion, other
                  than any act or omission carried out or effected:

                  (i)      under a legally binding commitment created on or
                           before Completion;

                  (ii)     in order to comply with any law or in order to comply
                           with generally accepted accounting principles;

                  (iii)    in the ordinary and normal course of the business
                           carried on by the Company; or

                  (iv)     at the request of or with the consent of the
                           Shareholders;

         (d)      to the extent that such Liability to Taxation would not have
                  arisen or would have been reduced but for a failure or
                  omission on the part of the Company or the Purchaser after
                  Completion to make any claim or election, the making or
                  claiming of which was taken into account in computing the
                  provision or reserve for Taxation in the Management Accounts
                  but only to the extent that the relevant claim or election was
                  identified in a disclosure specifically made against the Tax
                  Warranty in paragraph 4.3(g) of this schedule.

                                       74
<PAGE>

5.4      SCM Microsystems Limited shall not be liable for any Tax Claim to the
         extent that such liability is a liability to PAYE or National
         Insurance.

6.       REPAYMENT

         If the Shareholders shall make any payment to the Purchaser in relation
         to any Tax Claim and the Purchaser or the Company subsequently receives
         from any Tax Authority or any person any amount referable to the
         subject matter of that Tax Claim, the Purchaser shall, once it or the
         Company has received such amount, repay (after deducting the costs and
         expenses of the Purchaser incurred in recovering such amount and any
         Taxation payable on it or on any interest) to the Shareholders either:

         (a)      a sum equal to such amount; or

         (b)      if lesser a sum equal to the Tax Claim paid by the
                  Shareholders to the Purchaser,

         together with any interest paid to the Purchaser or the Company in
         respect of such sum.

7.       OVER-PROVISION AND RELIEFS

7.1      If the auditors for the time being of the Company shall certify (at the
         request and expense of the Shareholders) that any provision for
         Taxation in the Management Accounts (excluding any provision for
         deferred taxation) has proved to be an over-provision, then the amount
         of such over-provision shall be dealt with in accordance with paragraph
         7.3 below.

7.2      If the auditors for the time being of the Company shall certify (at the
         request and expense of the Shareholders) that any Liability to Taxation
         which has resulted in a payment having been made or becoming due from
         the Shareholders under the Covenant for Taxation will give rise to a
         Relief for the Company (other than a Purchaser's Relief) which would
         not otherwise have arisen, then as and when such Relief reduces a
         liability to make an actual payment of Tax (other than a liability for
         which the Purchaser would be entitled to bring a Tax Claim), the amount
         of that reduction shall be dealt with in accordance with paragraph 7.3
         below.

7.3      Where it is provided under paragraphs 7.1 or 7.2 that any amount ("THE
         RELEVANT AMOUNT") is to be dealt with in accordance with this
         sub-clause:

         (a)      the relevant amount shall first be set-off against any payment
                  then due from the Shareholders under the Covenant for
                  Taxation;

                                       75
<PAGE>

         (b)      to the extent that there is an excess, a refund shall be made
                  to the Shareholders of any previous payment made by the
                  Shareholders under the Covenant for Taxation (to the extent
                  not previously refunded under this paragraph 7) up to the
                  amount of such excess; and

         (c)      to the extent that the excess referred to in paragraph 7.3(b)
                  above is not exhausted under that paragraph, the remainder of
                  the excess shall be carried forward and set off against any
                  future payment or payments which become due from the
                  Shareholders under the Covenant for Taxation.

7.4      Where any certification referred to in paragraphs 7.1 or 7.2 has been
         made, the Shareholders or the Purchaser or the Company may request the
         auditors to review such certification in the light of all relevant
         circumstances, including any facts which have become known only since
         such certification, and to certify whether such certification remains
         correct or whether the certified amount should be amended.

7.5      If the auditors certify under paragraph 7.4 that an amount previously
         certified should be amended, that amended amount shall be substituted
         for the purposes of paragraph 7.3 as the relevant amount in respect of
         the certification in question in place of the amount originally
         certified, and such adjusting payment (if any) as may be required shall
         be made as soon as practicable by the Shareholders or (as the case may
         be) to the Shareholders to give effect to the revised certification.

8.       NIC AND PAYE

8.1      The Shareholders agree that as between themselves, the Company and the
         Purchaser, neither the Company nor the Purchaser shall be liable for
         any income tax or Primary Class 1 National Insurance Contributions to
         which any Shareholder may be subject by reason of the right to receive,
         acquisition, holding, variation in terms, release of restrictions or
         disposal of the Shares or the Consideration Stock (in this paragraph
         together referred to as "the Shares") and, without limitation, any
         event relevant for the purposes of section 203FB, ICTA with respect to
         the Shares.

8.2      Each Shareholder shall severally indemnify the Company and the
         Purchaser to the extent that either of them is or may be liable to pay
         or account for any Tax in respect of:

         (a)      any PAYE income tax liability which arises under Chapter V of
                  Part V of ICTA and the PAYE regulations referred to therein,
                  as each may be amended from time to time; and

         (b)      any Primary Class 1 National Insurance Contributions which may
                  be payable by the Company or the Purchaser under the

                                       76
<PAGE>

                  modified PAYE system as it applies under Schedule 1 of the
                  Social Security (Contributions) Regulations 1979

         (together in this paragraph referred to as "the PAYE liability") and
         which in each case becomes due by reason of the right to receive,
         acquisition, holding, variation in terms, release of restrictions or
         disposal of any Shares by such Shareholder or any event relevant for
         the purposes of section 203FB, ICTA with respect to the Shares.

8.3      The Company shall notify each Shareholder of the amount which, on the
         basis of the best estimate that can reasonably be made, is the amount
         of income likely to be chargeable to the PAYE liability.

8.4      Subject to sub-paragraph 8.6 below:

         (a)      Each Shareholder appoints the Purchaser as its agent for the
                  sale of such number of Shares as may be required to be sold to
                  satisfy the PAYE liability and, after satisfying the same, the
                  Purchaser shall remit any balance of Shares remaining to the
                  Shareholder.

         (b)      In order to enable the Purchaser to effect the sale envisaged
                  in this clause each Shareholder agrees that he will, within 14
                  days of a demand by the Purchaser:

                  (i)      deposit with the Purchaser share certificates which
                           the Shareholder has a good right to deposit and
                           transfer, free from any option, lien, charge or
                           encumbrance in sufficient quantities to enable the
                           Purchaser to satisfy the PAYE liability;

                  (ii)     at the same time, submit to the Purchaser such other
                           documents as the Purchaser may require (duly executed
                           and signed by the Shareholder) to enable the
                           Purchaser to sell the Shares.

         (c)      Where the share certificates have not yet been issued, the
                  Shareholder agrees that the Purchaser may retain sufficient
                  Shares with a view to selling them to cover any contingent
                  PAYE liability.

8.5      The Purchaser will hold any dividends paid on the Shares between the
         time that it notifies the Shareholder of the PAYE liability and the
         actual sale for the account of the Shareholder and may add the same to
         the proceeds of sale referred to in sub-paragraph 8.4 above.

8.6      Each Shareholder and the Purchaser may, at the complete discretion of
         the Purchaser, agree alternative arrangements for the Shareholder to
         satisfy the PAYE liability, including but not limited to a loan
         arrangement on terms to be agreed between the Shareholder and the

                                       77
<PAGE>

         Purchaser. The provisions of this paragraph shall be without prejudice
         to any rights that the Purchaser may have to cancel shares pursuant to
         the Agreement.

9.       CLAIMS PROCEDURE

9.1      Upon the Purchaser becoming aware of a Claim for Taxation which may
         result in a Tax Claim (which for the purposes of this paragraph 9 shall
         include any claim in respect of the indemnity contained in paragraph 8
         above) the Purchaser shall give written notice of that Claim for
         Taxation to the Shareholders or, as the case may be, shall procure that
         the Company forthwith give written notice of that Claim for Taxation to
         the Shareholders, and the Purchaser shall, subject always to the terms
         of this paragraph 9, the Shareholders agreeing to indemnify and secure
         the Purchaser and/or the Company to its reasonable satisfaction against
         all losses, costs, damages and expenses, including interest on overdue
         Tax, which may be incurred, further procure that the Company take such
         action and give such information and assistance in connection with the
         affairs of the Company as the Shareholders may reasonably and promptly
         by written notice request to avoid, resist, appeal or compromise the
         Claim for Taxation.

9.2      The Purchaser shall not be obliged to procure that the Company appeals
         against any tax assessment if, the Shareholders having been given
         written notice of the receipt of that Claim for Taxation in accordance
         with paragraph 9.1 above, the Company has not within 21 days (or, if
         there is a statutory time limit of not more than 30 days, within 14
         days) thereafter received instructions in writing from the
         Shareholders, in accordance with the preceding provisions of this
         paragraph 9, to make that appeal.

9.3      The Purchaser shall procure that the Shareholders are promptly provided
         with copies of any correspondence from the Tax Authority, copies of any
         correspondence from the Purchaser to the Tax Authority prior to its
         submission to the Tax Authority, and shall be given a reasonable
         opportunity to comment thereon prior to submission and account shall be
         taken of its reasonable comments.

9.4      The Purchaser shall not be obliged to procure that the Company take any
         action under paragraph 9.1 above which involves contesting any matter
         with any Tax Authority (excluding the authority or body demanding the
         Tax in question) or any court or tribunal unless the Shareholders
         furnishes the Company with the written opinion of leading tax counsel
         to the effect that the appeal in question will, on the balance of
         probabilities, succeed. Such tax counsel shall be instructed by the
         Shareholders at the Shareholders expense but the Shareholders shall
         promptly provide the Purchaser with a copy of such instructions and
         give the Purchaser or its representative a reasonable opportunity to

                                       78
<PAGE>

         attend any conference with Counsel.

9.5      The Purchaser shall not be required to take any action or procure that
         the Company take any action under this paragraph 9 if it reasonably
         determines that such action would have an adverse effect on the amount
         of tax payable by the Purchaser or the Company in respect of a period
         after Completion.

                                       79
<PAGE>

                                   SCHEDULE 6

                                  THE PRODUCTS

<PAGE>

                                    SCHEDULE7

                             THE MANAGEMENT ACCOUNTS

<PAGE>

                                   SCHEDULE 8

                             THE EMPLOYMENT CONTRACT

<PAGE>

                                   SCHEDULE 9

                                   (DOCUMENTS)

1.       The signed Service Agreements of each of the employees of the Company.

2.       A contract relating to the purchase of shares in the Company held by Mr
         Skinner signed by Mr Skinner and the Company, and a special resolution
         of the Company dated prior to the date of the contract approving the
         purchase.

3.       A letter regarding the Company's bank overdraft signed by SmartDisk
         Corp. and SCM Microsystems Limited "(SCM").

4.       Form 403a signed by a director of SCM.

5.       A quote for insurance for the Company relating to its occupation of the
         Property and acknowledging the Company's current legal position as
         occupier of the property under a licence not authorised by the tenant's
         lease.

6.       The deed of waiver of its options over the Shares signed by the
         Director and the Secretary of SCM.

7.       The licence to occupy the Property executed by SCM.

8.       The deed regarding transfers of domain names executed by SCM.

9.       A written resolution of the Company adopting new articles of
         association.

10.      Board minutes of SCM appointing a company secretary to replace Brian
         Haughtrey.

11.      Board minutes of SCM approving the transaction, this Agreement and all
         related documents to be executed by SCM and authorising the Director
         and Secretary of SCM to execute those documents on SCM's behalf.

12.      Letters of resignation of John Boyne, George Dundon and Alan Jones as
         directors of the Company.

13.      Replies to request for information and supplemental request for
         information signed by Grant Morgan.

14.      Minutes of a board meeting of the Company in the form set out in the
         Agreement.

<PAGE>

15.      Powers of Attorney appointing Grant Morgan as attorney for:

         David Atkinson;

         John Boyne;

         Anne Cowan;

         Stephen Darragh;

         Esther Flawn;

         Deirdre Giese;

         Donna Kirby;

         Tiel Holdstock;

         Carl Hayesmore;

         Christopher Higginson;

         Derek Cook; and

         George Dundon.

16.      Forms 288b signed by George Dundon, Alan Jones and John Boyne.

17.      Bank statement for both accounts of the Company (no.s 4095447 and
         11308971) dated the working day immediately prior to completion.

18.      Stock transfer forms signed by:

         David Atkinson;

         John Boyne;

         Anne Cowan;

         Stephen Darragh;

         Esther Flawn;

         Deirdre Giese;

         Donna Kirby;

         Tiel Holdstock;

         Carl Hayesmore;

         Christopher Higginson;

<PAGE>

         Derek Cook;

         George Dundon;

         Alan Jones;

         Deborah Norford-Jones;

         SCM Microsystems Ltd; and

         Grant Morgan.

19.      Share certificates from:

         David Atkinson;

         John Boyne;

         Anne Cowan;

         Stephen Darragh;

         Esther Flawn;

         Deirdre Giese;

         Donna Kirby;

         Tiel Holdstock;

         Carl Hayesmore;

         Christopher Higginson;

         Derek Cook;

         George Dundon;

         Alan Jones;

         Deborah Norford-Jones;

         SCM Microsystems Ltd; and

         Grant Morgan.

20.      The tax deed of covenant in the agreed form executed by the
         Shareholders.

<PAGE>

<TABLE>
<S>                                                                    <C>
EXECUTED (but not delivered until dated) as a DEED by David Atkinson   )
acting through his lawfully appointed attorney Grant  Morgan           ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by John Boyne       )
acting through his lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by ANNE COWAN       )
acting through her lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by STEPHEN DARRAGH  )
acting through his lawfully appointed attorney Grant Morgan            )  /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by ESTHER FLAWN     )
acting through her lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by DIERDRE GIESE    )
acting through her lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by DONNA KIRBY      )
acting through her lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )
</TABLE>

<PAGE>
<TABLE>
<S>                                                                    <C>
EXECUTED (but not delivered until dated) as a DEED by                  )
DEBORAH NORFORD JONES                                                  )
acting through her lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000:                    )

EXECUTED (but not delivered until dated) as a DEED by TIEL HOLDSTOCK   )
acting through his lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by CARL HAYESMORE   )
acting through his lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by                  )
CHRISTOPHER HIGGINSON acting through his lawfully appointed attorney   ) /s/ Grant Morgan
Grant Morgan pursuant to a power of attorney dated 4 April 2000        )

EXECUTED (but not delivered until dated) as a DEED by DEREK COOK       )
acting through his lawfully appointed attorney Grant  Morgan           ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by GEORGE DUNDON    )
acting through his lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )
</TABLE>

<PAGE>

<TABLE>
<S>                                                                    <C>
EXECUTED (but not delivered until dated) as a DEED by ALAN JONES       )
acting through his lawfully appointed attorney Grant Morgan            ) /s/ Grant Morgan
pursuant to a power of attorney dated 4 April 2000                     )

EXECUTED (but not delivered until dated) as a DEED by                  )
GRANT MORGAN                                                           ) /s/ Grant Morgan
in the presence of:                                                    )
</TABLE>

SIGNATURE OF WITNESS: /s/ Paul Curren

NAME:        Paul Curren

ADDRESS:     26 Old Bailey
             London G64N
OCCUPATION:  Solicitor

EXECUTED as a DEED (but not                          )
delivered until the date                             )
appearing at the head of                             )
page 1) by SCM MICROSYSTEMS LIMITED                  ) /s/ Robert Schneider
acting by its director Robert Schneider              )

and its secretary Jayne Stancomb:                    ) /s/ Jayne Stancomb

                                             Director

                                             Secretary

EXECUTED as a DEED (but not                  )
delivered until the date                     )
appearing at the head of                     )
page 1) by SMARTDISK                         )
CORPORATION                                  )
acting by:                                   ) /s/ Michael S. Battaglia

                                             Officer Chief Executive Officer and
                                                     President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}]]