Document:

EX-10.1

AMENDED AND RESTATED SETTLEMENT AGREEMENT

This AMENDED AND RESTATED SETTLEMENT AGREEMENT (this “Agreement”), dated as of this
8th day of April, 2009, is made by and among HIRSCH ELECTRONICS CORPORATION, a California
corporation (“Hirsch”), SECURE KEYBOARDS, LTD., a California limited partnership
(“Keyboards”), and SECURE NETWORKS, LTD., a California limited partnership
(“Networks” and, together with Hirsch and Keyboards, collectively, the “Parties”).

WHEREAS, the Parties previously entered into that certain settlement agreement (the “1994
Settlement Agreement”), dated as of November 14, 1994, which provides for, among other things,
agreements among the Parties concerning royalty payments from Hirsch to each of Keyboards and
Networks. A copy of the 1994 Settlement Agreement is attached as Exhibit A hereto. The
1994 Settlement Agreement included the following as background information:

	 	a)	 	Hirsch was founded in 1981 by Steve Hirsch, a young entrepreneur who had invented a
security technology, and Lawrence Midland (“Midland”), Howard Miller
(“Miller”), Robert Parsons (“Parsons”) and Luis Villalobos
(“Villalobos”), who provided the initial financing.

	 	i)	 	By late 1981, Steve Hirsch had begun preparation of a patent application, and
was seeking financing for Hirsch, which he had incorporated to exploit his invention.
After an unrelated private placement had failed to close, Villalobos and Miller
structured a financing (seed capital for Hirsch and an R&D partnership to fund
development of the technology) and rewrote the patent application.

	 	ii)	 	Keyboards, the R&D partnership, bought all the rights to the technology from
Steve Hirsch, and then granted an exclusive license to Hirsch, and an option to
purchase the technology under certain conditions. “Technology” was defined1
to include not just the original invention, but all associated and future developments
and products. Thus, Hirsch was the vehicle for exploiting the Technology, and
Keyboards, having provided the funds to develop the Technology, was to receive payments
through the year 2020 based on revenues from the broadly defined Technology. Keyboards
general partners deferred most of their upside potential until after the limited
partners received 125% of their pre-tax investment, which for someone in the 50%
bracket would be 2 1/2 times their after-tax investment; thereafter limited partners
receive approximately 20% of the royalties.

	 	iii)	 	Midland, Miller, Villalobos and GRFN (a California corporation formed for that
purpose) were the original general partners in Keyboards. Soon after Keyboards’
formation, Parsons became a general partner; GRFN was subsequently discontinued.

	 	iv)	 	Midland, Miller, Parsons and Villalobos provided seed capital to Hirsch and
provided guarantees with respect to obtaining the R&D financing. Midland and Parsons
subsequently raised $400,000 of capital from limited partners in Keyboards.

	 	b)	 	Hirsch met all of the conditions, and exercised its option and purchased the Technology
from Keyboards. The terms of purchase called for payments2 to Keyboards through
the year 2020.

	 	c)	 	In 1985 and 1986 additional capital was raised to “finance the development and
marketing of various new security systems product lines which will help drive the sales of
the Digital Scrambler.”3

	 	i)	 	Parsons raised $550,000 in equity by selling shares of Hirsch stock to private
investors.

	 	ii)	 	Midland and Parsons as general partners formed Networks, and raised $1,200,000
from limited partners, approximately half in 1985 and the balance in 1986.

	 	iii)	 	Two agreements were entered into between Hirsch and Networks: a written
agreement, relating to the 1985 portion of funding, which called for royalties through
the year 2005; and an oral agreement relating to the 1986 portion of funding.

	 	d)	 	Hirsch wished to avoid paying royalties on the same revenue to both Keyboards and
Networks. To that end, in 1986 Hirsch and Keyboards executed an agreement, which excluded
from Keyboards royalty base, those “products developed on funding from” Networks.

	 	e)	 	In 1994, a dispute arose among Keyboards, Hirsch and Networks as to the royalties that
have been paid and are to be paid. The parties contentions were generally as follows:

	 	i)	 	Keyboards contended: (a) that even though all current and past Hirsch revenues
fall within the definition of “Technology”, Hirsch had incorrectly excluded various
revenues from Keyboards royalties; (b) that Hirsch had not been paying royalties on
software at the correct and higher rate;4 (c) that the sole exception to
Keyboards royalties had effectively expired since Hirsch no longer sold “products
developed on funding from” Networks; and (d) that while Hirsch’s agreements with
Networks may in effect require Hirsch to pay royalties to both Keyboards and Networks,
they cannot relieve Hirsch of its royalty obligations to Keyboards.

	 	ii)	 	Networks contended: (a) that its agreements with Hirsch were intended to
provide royalties not just on the products that were directly developed from that
funding, but also on products that evolved from them; (b) that otherwise the limited
partners could not recoup, much less obtain a return on, their investment; (c) that its
1986 oral agreement with Hirsch had extended royalty payments to the year 2011; and (d)
that while Hirsch’s agreements with Keyboards may in effect require Hirsch to pay
royalties to both Keyboards and Networks, they cannot relieve Hirsch of its royalty
obligations to Networks.

	 	iii)	 	Hirsch contended: (a) that Hirsch never intended to pay royalties to both
Keyboards and Networks on the same products; (b) that paying 14% to 28% royalty to
Keyboards on software would seriously impair Hirsch’s margins on software sales; (c)
that Hirsch had interpreted its obligations to Keyboards and Networks not just based on
the language in the agreements, but also based on what it understood to be the intent
of those agreements, as well as what it believed to be equitable to the parties; (d)
that Hirsch had been computing the revenues for Networks royalties based on a
“remoteness dilution” basis;5 (e) that Hirsch may have understated its
royalty obligations to Keyboards, but if so, any error was in good faith; (f) that
Hirsch was forced into making difficult and- sometimes arbitrary decisions as to what
portion of revenues are subject to royalties to which of the partnerships, and (g) that
the royalty agreements hampered6 Hirsch’s ability to price and configure
products; and

	 	f)	 	Each of the parties agreed:

	 	i)	 	That litigation to resolve these issues would be expensive, time consuming,
distracting, and harmful to the business goals of the parties.

	 	ii)	 	That there was reasonable risk that if contested, some or all of the
contentions in its interest could have been rejected and that, some or all of the
contentions against its interest could have been upheld.

	 	iii)	 	That including all Hirsch revenues in the base for royalties, and apportioning
that base between Keyboards and Networks on fixed percentages, eliminates the
underlying factors that led to, and was a reasonable compromise for, their dispute.

	 	iv)	 	That rather than incur the risks of litigation, it was preferable to settle the
dispute as set forth in the 1994 Settlement Agreement;

WHEREAS, on December 10, 2008, Parsons and Midland, as two of the four general partners of
Keyboards, delivered a letter of understanding to SCM Microsystems, Inc. (“SCM”), as
amended and restated on January 30, 2009 (the “Keyboards Letter of Understanding”), which
was intended to clarify the interpretation of the 1994 Settlement Agreement following the proposed
merger (the “Merger”) of SCM and Hirsch contemplated by the Agreement and Plan of Merger,
dated December 10, 2008, by and among Hirsch, SCM, and the other parties named therein (the
“Merger Agreement”). A copy of the Keyboards Letter of Understanding, which was not signed
by the other two general partners of Keyboards, is attached as Exhibit B hereto;

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

WHEREAS, Messrs. Parsons and Midland, as the two general partners of Networks, delivered a
letter of understanding to SCM that was substantially similar to the Keyboards Letter of
Understanding and was also amended and restated on January 30, 2009 (the “Networks Letter of
Understanding” and, collectively with the Keyboards Letter of Understanding, the “Letters
of Understanding”). A copy of the Networks Letter of Understanding is attached as Exhibit
C hereto;

WHEREAS, Keyboards and two of its general partners has initiated litigation in Los Angeles
Superior Court (Case No. SC102226), against Hirsch, SCM and certain officers and directors of SCM
alleging claims arising out of the 1994 Settlement Agreement, the Keyboards Letter of Understanding
and the Merger;

WHEREAS, concurrently with the execution of this Agreement, SCM, Hirsch, Keyboards, and
Networks, are entering into a settlement agreement (the “2009 Settlement Agreement,” in
substantially the form attached as Exhibit D hereto) to settle and resolve any and all
claims, disputes, issues or matters that exist or could exist between them with respect to the
Keyboards Claim, so as to avoid the cost and expense of further proceedings;

WHEREAS, the Parties desire to simplify and clarify the royalty arrangement provided for by
the 1994 Settlement Agreement, and to replace and supersede such royalty arrangement with a new,
definitive installment payment schedule as set forth herein;

WHEREAS, the Parties desire to amend and restate the 1994 Settlement Agreement in its entirety
with this Agreement, which will supersede and replace the 1994 Settlement Agreement in all
respects;

WHEREAS, the Parties further desire for this Agreement to supersede and replace the Letters of
Understanding, and for the Letters of Understanding to terminate and be of no further force or
effect as of the Effective Time of the Merger (as such term is defined in the Merger Agreement, the
“Effective Time”); and

WHEREAS, Section 9 of the 1994 Settlement Agreement provides that the 1994 Settlement
Agreement may not be amended unless such amendment is executed in writing by all of the Parties
thereto, including all four of the general partners of Keyboards and the two general partners of
Networks.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, representations,
warranties, covenants and agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment; Effective Time; Term. This Agreement amends and restates in its
entirety the 1994 Settlement Agreement. This Agreement shall be effective and binding on the
Parties hereto as of the date hereof, except that Sections 2 and 3 of this
Agreement shall automatically and immediately become effective at, and not before, the Effective
Time. Notwithstanding any other provision of this Agreement, if the Merger Agreement is terminated
prior to its Effective Time, this Agreement shall terminate, shall have no force or effect, and
shall be null and void. In addition, effective as of the Effective Time, the Letters of
Understanding shall terminate and be of no further force or effect.

2. Payments to Keyboards and Networks. In full satisfaction of any and all
obligations of Hirsch under the 1994 Settlement Agreement, including without limitation, in lieu of
any and all payments, royalty or otherwise, based on the revenue, Technology (as defined above) or
assets of Hirsch thereunder, Hirsch agrees to and shall make certain payments to Keyboards and
Networks as follows:

a. Initial Payment Period. For the period from January 1, 2009 to December 31, 2009
(the “Initial Payment Period”), Hirsch shall pay Keyboards and Networks, collectively, an
aggregate amount equal to (i) Nine Hundred and Eighty-Six Thousand Dollars ($986,000) less
(ii) the amount of any payments that Hirsch makes to Keyboards or Networks prior to the Effective
Time under or in connection the 1994 Settlement Agreement with respect to the period of January 1,
2009 to December 31, 2009 (the “Initial Payment”).

b. Subsequent Payment Periods. For the period from January 1, 2010 to December 31,
2010, Hirsch shall pay Keyboards and Networks, collectively, an aggregate amount equal to (i) Nine
Hundred and Eighty-Six Thousand Dollars ($986,000), multiplied by (ii) an inflation
rate equal to one (1) plus the Consumer Price Index Inflation Percentage, if positive, for the
prior calendar year (in this case, the period from January 1, 2009 to December 31, 2009), and,
subject to Section 3 hereof, for each calendar year period thereafter until and including
the calendar year period of January 1, 2020 to December 31, 2020 (such payment periods, together
with the Initial Payment Period, the “Payment Periods”), Hirsch shall pay Keyboards and
Networks, collectively, an aggregate amount equal to (i) the aggregate payment amount for the prior
Payment Period, multiplied by (ii) an inflation rate equal to one (1) plus the
Consumer Price Index Inflation Percentage, if positive, for the prior calendar year, plus
(iii) for the January 1, 2020 to December 31, 2020 Payment Period only, an amount equal to $126,492
(such payments, together with the Initial Payment, the “Periodic Payments”). As used
herein, the “Consumer Price Index Inflation Percentage” means the annual Consumer Price
Index-All Urban Consumers, U.S. City Average, All Items, Not Seasonally Adjusted, published by the
United States Department of Labor, Bureau of Labor Statistics and published on the website
http://www.bls.gov/CPI for the applicable calendar year/Payment Period.7 For
illustrative purposes only, a sample calculation of the Periodic Payments due for each Payment
Period is set forth on Schedule I attached hereto.

c. Payment Dates. The Periodic Payments required by Hirsch hereunder for any Payment
Period shall be made quarterly in equal amounts and shall be due and payable on April 30, July 31,
October 31 of such Payment Period and January 31 of the following Payment Period (or, if any such
dates do not fall on a Business Day, on the next Business Day thereafter); provided,
however, that if the Effective Time occurs after April 30, 2009, the Initial Payment shall
be paid in its entirety in three equal amounts on July 31, 2009, October 31, 2009, and January 31,
2010. Unless Hirsch shall elect to exercise the Lumpsum Option, the last Periodic Payment by
Hirsch shall be made on January 31, 2021. As used herein, “Business Day” means any day
that is not a Saturday, Sunday, or other day on which national banks or banks in Santa Ana,
California or Germany are authorized or required to close.

d. Division of Payments Between Keyboards and Networks. The aggregate Periodic
Payments made by Hirsch hereunder shall be apportioned between Keyboards and Networks in accordance
with the following table, and the final payment to Networks on January 31, 2012 shall satisfy the
complete obligation of Hirsch to Networks:

	 	 	 	 	 
	Payment Period

	 	Networks Percentage of

Periodic Payment
	 	Keyboards Percentage of

Periodic Payment
	 

	 	 
	 	 
	January 1, 2009 to

December 31, 2009

	 	18.9711%

	 	81.0289%

	 

	 	 
	 	 
	January 1, 2010 to

December 31, 2010

	 	16.4919%

	 	83.5081%

	 

	 	 
	 	 
	January 1, 2011 to

December 31, 2011

	 	13.9834%

	 	86.0166%

	 

	 	 
	 	 
	January 1, 2012 to

December 31, 2012 and

for each Payment Period

thereafter*

	 	0.00%

	 	100.00%

	 

	 	 
	 	 

• Keyboards shall receive 100% of any Periodic Payment for any “Payment Period” after December 31,
2011.

3. Hirsch Buyout Option. Notwithstanding Section 2 hereof, at any time
on or after January 1, 2012, upon ten (10) days prior written notice (the “Lumpsum Notice”)
to Keyboards, Hirsch, and only Hirsch or its successors or assigns, shall have the option (the
“Lumpsum Option”) to elect, in its sole discretion, to make a lumpsum payment (the
“Lumpsum Payment”) to Keyboards in lieu of any and all future Periodic Payments due
Keyboards (and any unpaid portion thereof) as described in Section 2 hereof. The Lumpsum
Payment shall be in an aggregate amount equal to the net present value of any remaining Periodic
Payments (including the net present value of any unpaid portion thereof), calculated assuming (a)
an inflation rate per annum of Four Percent (4%) substituted in lieu of applying the Consumer Price
Index Inflation Percentage for each applicable Payment Period, and (b) a discount rate equal to
Nine Percent (9%) per annum, in each case adjusted proportionally for any portion of a full
calendar year. Any Lumpsum Payment shall be allocated solely to Keyboards and no amount shall be
payable to Networks. Following the payment of the Lumpsum Payment by Hirsch, all of Hirsch’s
obligations to Keyboards hereunder shall be deemed satisfied in full. For illustrative purposes
only, sample calculations of the Lumpsum Payment for each calendar year is set forth on
Schedule II attached hereto.

4. Consent to the Merger. Each of Keyboards and Networks and each of their respective
general partners hereby acknowledges, agrees and consents to Hirsch’s entry into the Merger
Agreement and to the consummation of the transactions contemplated thereby, including the Merger
and hereby waives any right to notice, review or comment that may exist or have existed under the
1994 Settlement Agreement in connection with the execution, delivery and performance of the Merger
Agreement, the Merger Documents or the consummation of the transactions contemplated thereby. Each
of Keyboards and Networks and each of their respective general partners hereby waives any and all
rights that they may have under Chapter 13 of the California Corporations Code with respect to the
Merger, the Merger Agreement, the Merger Documents or the other transactions contemplated thereby,
and agrees to exchange any and all shares of Hirsch common stock held by such parties for the
merger consideration, consisting of a combination of cash, shares of SCM common stock and warrants
to purchase shares of SCM common stock, as described in the Merger Agreement.

5. Authorization.

a. Keyboards and each of its general partners represents and warrants that (i) it has full
power and authority to execute and deliver this Agreement and to perform its obligations hereunder,
(ii) the execution, delivery and performance of this Agreement by Keyboards and each of its general
partners has been duly and validly authorized, and no other actions or proceedings by or on the
part of Keyboards or any of its general partners is necessary to authorize the execution, delivery
or performance of this Agreement, (iii) this Agreement has been duly executed and delivered by
Keyboards and each of its general partners and (iv) this Agreement constitutes the legal, valid and
binding obligations of Keyboards and each of its general partners, enforceable against Keyboards
and each of its general partners in accordance with its respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar Law now or hereafter in
effect relating to creditors’ rights generally and subject to general principles of equity.

b. Networks and each of its general partners represents and warrants that (i) it has full
power and authority to execute and deliver this Agreement and to perform its obligations hereunder,
(ii) the execution, delivery and performance by Networks and each of its general partners of this
Agreement has been duly and validly authorized, and no other actions or proceedings by or on the
part of Networks or any of its general partners is necessary to authorize the execution, delivery
or performance of this Agreement, (iii) this Agreement has been duly executed and delivered by
Networks and each of its general partners and (iv) this Agreement constitutes the legal, valid and
binding obligations of Networks and each of its general partners, enforceable against Networks and
each of its general partners in accordance with its respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar Law now or hereafter in
effect relating to creditors’ rights generally and subject to general principles of equity.

c. Hirsch represents and warrants that (i) it has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, (ii) the execution, delivery and
performance by Hirsch of this Agreement has been duly and validly authorized, and no other actions
or proceedings by or on the part of Hirsch is necessary to authorize the execution, delivery or
performance of this Agreement, (iii) this Agreement has been duly executed and delivered by Hirsch,
and (iv) this Agreement constitutes the legal, valid and binding obligations of Hirsch, enforceable
against Hirsch in accordance with its respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar Law now or hereafter in effect
relating to creditors’ rights generally and subject to general principles of equity.

6. Notice; Delivery.

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

	 	 	 	 	 
	Hirsch Electronics Corporation
	 	copy:
	President
	 	SCM Microsystems, Inc.
	1900-B Carnegie Ave.,
	 	Oskar-Messter-Straße 13,
	Santa Ana, CA 92705
	 	85737, Ismaning Germany
	Facsimile: 949.250.7372
	 	Attention:  Felix Marx
	E-mail:
	 	Facsimile:  +49.89.9595.5170
	lmidland@hirschelectronics.com
	 	E-mail:  FMarx@scmmicro.de
	Secure Keyboards, Ltd.
	 	copy:
	c/o Robert J. Parsons
	 	Lawrence W. Midland
	110 Newport Center Drive
	 	1805 Jamaica Road
	Suite 200
	 	Costa Mesa, CA 92626
	Newport Beach, CA 92660
	 	Facsimile:  949.250.7372
	Facsimile: 949.729.3196
	 	E-mail:
	E-mail: parsons600@aol.com
	 	lmidland@hirschelectronics.com
	copy:
	 	copy:
	Howard Miller
	 	Luis Villalobos
	13555 Bayliss Road
	 	4220 Park Newport, #410
	Los Angeles, CA 90049
	 	Newport Beach, CA 92660
	Facsimile: 213.481.1554
	 	Facsimile:
	E-mail: hmiller@girardikeese.com
	 	E-mail:  luvil@roadrunner.com
	 
	 	 	 	 
	Secure Networks, Ltd.
	 	copy:
	c/o Robert J. Parsons
	 	Lawrence W. Midland
	110 Newport Center Drive
	 	1805 Jamaica Road
	Suite 200
	 	Costa Mesa, CA 92626
	Newport Beach, CA 92660
	 	Facsimile:  949.250.7372
	Facsimile: 949.729.3196
	 	E-mail:
	E-mail: parsons600@aol.com
	 	lmidland@hirschelectronics.com

b. As of the date hereof, the payment instructions for all payments due to Keyboards and
Networks under this Agreement are set forth on Schedule III attached hereto. Keyboards and
Networks, and their respective successors and assigns may hereafter designate such other payment
instructions by providing written notice thereof (i) at least fifteen (15) Business Days before a
payment date, or (ii) within three (3) Business Days of receiving the Lumpsum Notice.

7. Miscellaneous.

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

b. Further Assurances. Each party hereby covenants and agrees to execute and deliver
such further and other instruments, agreements and writings and do and perform, and cause to be
done and performed, such further and other acts and things that may be necessary or desirable in
order to give full effect to this Agreement and every part of it.

c. Severability. In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any court of competent jurisdiction, the same
shall be deemed severable from the remainder of the Agreement and shall in no way affect, impair or
invalidate any other covenant, condition or other provision herein contained. If such condition,
covenant or other provision shall be deemed invalid due to its scope or breadth, such covenant,
condition or other provision shall be deemed valid to the extent of the scope or breadth permitted
by law.

d. Entire Agreement. This Agreement, and the 2009 Settlement Agreement, sets forth
the entire agreement between and among the parties to these agreements with respect to the subject
matter hereof and supersedes any and all prior agreements relating thereto, including without
limitation the 1994 Settlement Agreement and the Letters of Understanding; there are no other
understandings or agreements between or among the Parties with respect to the subject matter hereof
except as set forth herein. No term, condition or provision of the Agreement may be modified,
waived, or changed in any way except in writing, executed with the same formalities hereof, by the
Party to be charged with any such modification, waiver, or change.

e. Governing Law. This Agreement will be construed pursuant to the laws of the State
of California (without regard to conflicts of law principles). For purposes of any disputes
arising out of or pertaining to this Agreement, the Parties consent to non-exclusive personal
jurisdiction in the federal and state courts located in the County of Los Angeles, State of
California.

f. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and the same instrument.
Facsimile and .pdf copies of this Agreement shall have the same force and effect as an original.

[Remainder of Page Intentionally Left Blank]IN WITNESS WHEREOF, this AMENDED AND
RESTATED SETTLEMENT AGREEMENT is to be effective as of the date first set forth above.

	 
	HIRSCH ELECTRONICS CORPORATION

	 
	By: /s/ Lawrence W. Midland

	 

	Lawrence W. Midland,

President

	SECURE NETWORKS, LTD.

A California limited partnership

By: /s/ Robert J. Parsons

	 

	Robert J. Parsons,

Managing and General Partner

	By: /s/ Lawrence W. Midland

	 

	Lawrence W. Midland,

General Partner

	SECURE KEYBOARDS, LTD.

A California limited partnership

By: /s/ Robert J. Parsons

	 

	Robert J. Parsons,

Managing and General Partner

	By: /s/ Lawrence W. Midland

	 

	Lawrence W. Midland,

General Partner

	By: /s/ Howard Miller

	 

	Howard Miller,

General Partner

	By: /s/ Luis Villalobos

	 

	Luis Villalobos,

General Partner

1The 1986 agreement between Hirsch and
Keyboards, recapping the original agreement, included the following: “the
‘Technology’ means the patent and patent applications and all associated
knowhow, software, trademarks and tradenames and all future developments,
patent applications, patents, knowhow, software, trademarks and tradenames.”

2These payments for the purchase are generally
referred to herein as “royalties” for simplicity; but their actual nature was
installment payments for the sale of the technology.

3From the 1986 agreement between Hirsch and
Keyboards.

4The Purchase and Sale of Technology agreement
between Hirsch and Keyboards, calls for royalties of 14% to 28% for license and
sub-license revenues, and 4.25% on all other revenues.

5Which meant that as a product evolved and
became more remote from a product directly “developed on funding from”
Networks, Hirsch diluted its share of revenues in computing Networks royalties;
and that whenever a subsequent product (such as SAM) departed sufficiently from
a product “developed on funding from” Networks, then Hirsch no longer deemed it
subject to royalties to Networks.

6For example, if Hirsch incorporates a keypad
into a product “developed on funding from” Networks, then Hirsch would have to
pay royalties to both Keyboards and Networks; or if Hirsch throws-in software
to close a major sale, there is no clear way to decide how much of the revenue
to impute to the software.

7For example, for the January 1, 2008 to
December 31, 2008 calendar year, the Consumer Price Index Inflation Percentage
would be equal to 3.8% and is found at the following websites:
http://www.bls.gov/cpi/cpid08av.pdf and

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data—tool=latest—numbers&ser
ies—id=CUUR0000SA0&output—view=pct—12mths.EX-10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is dated as of December 10, 2008, by and
between Hirsch Electronics Corporation, a California corporation (the “Company”), SCM
Microsystems, Inc., a Delaware corporation (“Parent”) and Mr. Larry Midland (the
“Employee”).

WHEREAS, Parent, the Company and certain other parties thereto have entered into that certain
Agreement and Plan of Merger dated as of December 10, 2008 (the “Merger Agreement”),
pursuant to which, among other things, through a two-step merger the Company will become a
wholly-owned subsidiary of Parent and be transformed into a new Delaware limited liability company
(together as used herein, the “Merger”).

WHEREAS, as an inducement for and a condition to Parent agreeing to enter into the Merger
Agreement and in consideration of the transactions contemplated by the Merger Agreement,
concurrently with the execution of the Merger Agreement, Employee and the Company have agreed to
enter into this Agreement which will set forth the terms of Employee’s employment by the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, representations,
warranties, covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and
Employee agree as follows:

1. Effective Date. This Agreement shall automatically and immediately become
effective at, and not before, the Effective Time, as such term is defined in the Merger Agreement.
Notwithstanding any other provision of this Agreement, if the Merger Agreement is terminated, this
Agreement shall not become effective, shall have no force or effect, and shall be null and void.

2. Employment; Employment Period; Position; Duties.

a. The Company hereby agrees to employ Employee, and Employee hereby accepts such employment
with the Company, in each case, on the terms and subject to the conditions hereinafter set forth.
Subject to any earlier termination of Employee’s employment as provided herein, Employee’s
employment hereunder shall be for an initial term commencing at the Effective Time and ending on
the third (3rd) anniversary of the Effective Time (the “Employment Period”). Beginning on
the third (3rd) anniversary and continuing on each anniversary thereafter, the employment agreement
shall automatically extend for a period of one (1) year, subject to any termination of Employee’s
employment as provided herein.

b. Employee shall serve as the Company’s President as well as Executive Vice President at the
Parent, being part of the Executive Management Team of the Parent, and shall report directly to the
Parent’s CEO (the “Reporting Officer”). Employee shall also serve in such other capacities
as may be requested from time to time by the Reporting Officer and/or the Board of Directors of the
Parent (the “Board”) or a duly authorized committee thereof. Employee shall perform such
duties as are customarily associated with his position and as reasonably required by the Reporting
Officer. Employee shall also render such other services for the Parent or the Company and each of
its subsidiaries and affiliated entities as the Parent or the Company may from time to time request
that are generally commensurate with such Employee’s titles. Employee agrees to serve the Parent
and the Company faithfully and perform such duties and services using his best efforts and
abilities. Employee agrees to devote his full-time attention and energies exclusively to the
business of the Parent and the Company and the performance of his duties and services, and to act
at all times in the best interests of the Parent and the Company. Employee agrees to conduct
himself at all times in a business-like and professional manner as appropriate for a person in
Employee’s position and to represent the Parent and the Company in all respects in a manner that
comports with sound business judgment in the highest ethical standards. Employee will be subject
to and abide by the policies and procedures of the Parent and the Company, as adopted and revised
by the Parent or the Company, as the case may be, from time to time. Employee shall be subject to
the direction of the Parent and the Company, who shall retain full control over the means and
methods by which Employee performs his duties and the above services and of the place(s) at which
all such duties and services are rendered. Employee’s principal place of employment shall be at
the Company’s offices in Santa Ana, California.

3. Compensation; Benefits.

a. Base Salary. As compensation for services rendered to the Parent and the Company,
Employee shall be entitled to a base salary at the annual rate of $250,000 (two hundred and fifty
thousand dollars), payable by the Company in accordance with the regular payroll practices of the
Company for its employees. Employee shall be eligible to such merit increases in Employee’s base
salary, if any, as may be determined from time to time in the sole discretion of the Board.
Employee’s annual base salary rate, as in effect from time to time, is hereinafter referred to as
the “Base Salary.”

b. Bonus. Employee shall be eligible to receive an annual target based variable
bonus, of up to 80% of the Employee’s annual base salary, based upon the achievement of personal
performance targets established by the Parent’s Board of Directors in consultation with Employee,
and the overall success of the Company. Any bonus would be subject to the terms and conditions of
the Parent’s MBO Bonus Program, as the same may be amended from time to time, and the Employee’s
continuing employment. The achievement of the performance and other target would be determined and
any resulting bonus would be payable on a quarterly basis (up to a maximum bonus of 10% of the
Employee’s annual base salary per quarter as well as up to a maximum of 40% at year end). A copy
of the Parent’s MBO Bonus Program as currently in effect is attached hereto as Exhibit A.

c. Stock Options. Upon the Effective Time, the Employee shall be eligible to
participate in Parent’s Stock Option Plan. It is anticipated that the Employee will receive a
one-time grant of a non-qualified stock option to purchase 40,000 (forty thousand) shares of the
Parent’s common stock, subject to the terms and conditions of the Parent’s Stock Option Plan. Any
such grant is subject to approval by the Parent’s Board of Directors. A copy of the Parent’s Stock
Option Plan as currently in effect is attached hereto as Exhibit B.

d. Other Employee Benefits. Employee shall be eligible to receive or participate in
any incentive, retirement, vacation, sick or family leave, reimbursement for travel and
entertainment expenses, health and insurance or other benefits of the Company, as in effect from
time to time, on the same basis as other employees of the Company occupying positions with
responsibility and salary comparable to that of Employee, but in any event not materially inferior
to the benefits the Employee enjoyed as an employee of the Company prior to the Merger. The
Company may at any time and from time to time change, amend, modify or completely eliminate any
such plans, programs and benefits available to its employees and Employee’s participation in any
such plans, programs and benefits shall not affect such right of the Company; Employee agrees and
acknowledges that he shall have no vested rights under or to participate in any such plans,
programs and benefits except as expressly provided under the terms thereof.

4. Termination of Employment. Employee’s employment with the Company or any of its
subsidiaries or affiliated entities may be terminated by Company at any time and for any or no
reason. Employee will be required to give the Company three (3) months advance written notice of
any resignation of Employee’s employment. Notwithstanding any other provision of this Agreement,
the provisions of this Section 4 shall exclusively govern Employee’s rights upon termination of
employment with the Company and any of its subsidiaries or affiliates entities for Cause, death or
Disability or any other reason.

a. By the Company For Cause; Resignation by Employee. Employee’s employment may be
terminated by the Company for Cause at any time. For purposes of this Agreement, “Cause”
shall mean: (i) unsatisfactory performance in any material respect of Employee’s duties, services
or responsibilities (as generally described in this Agreement) as reasonably determined by the
Board, provided that the Company has given Employee written notice specifying the unsatisfactory
performance of his duties and responsibilities and a reasonable opportunity to cure, and Executive
has failed to cure such deficiencies; (ii) a material breach by Employee of any of his obligations
hereunder which remains uncured after the lapse of thirty (30) days following the date that the
Company has given Employee written notice thereof; (iii) a breach by Employee of his duty not to
engage in any transaction that represents, directly or indirectly, self-dealing with the Company or
any of its subsidiaries or affiliated entities which has not been approved by a majority of the
disinterested directors of the Board or of the terms of his employment; (iv) any act of intentional
dishonesty, willful misconduct, embezzlement, intentional fraud or similar conduct involving the
Company or any of its subsidiaries or affiliated entities; (v) the conviction or the plea of nolo
contendere or the equivalent in respect of a felony involving moral turpitude; or (vi) intentional,
malicious infliction of any damage of a material nature to any property of the Company or any of
its subsidiaries or affiliated entities. If Employee’s employment is terminated by the Company for
Cause or by Employee for any reason, Employee shall be entitled to receive following the date of
such termination: (A) the Base Salary through the date of termination; (B) reimbursement for any
unreimbursed business expenses properly incurred by Employee in accordance with Company policy
prior to the date of Employee’s termination; and (C) any earned but unpaid benefits, if any,
through the date of termination in accordance with the applicable employee benefit plan of the
Company (the amounts described in clauses (A) through (C) of this Section 4(a), reduced by any
amounts owed by Employee to the Company, being referred to as the “Accrued Rights”). In
addition, except as may otherwise be expressly provided in any plan, agreement or other instrument
that governs the terms of any stock option or other incentive compensation, all unvested stock
options and other incentive compensation shall immediately be cancelled and forfeited. Following
such termination of Employee’s employment by the Company for Cause or by Employee for any reason,
except as set forth in this Section 4(a), Employee shall have no further rights to any compensation
or benefits from the Company or any of its subsidiaries or affiliated entities under this Agreement
or otherwise.

b. Disability or Death. Employee’s employment shall terminate upon Employee’s death
and may be terminated by the Company if Employee becomes (in the good faith judgment of the Board)
physically or mentally incapacitated and is therefore unable for a period of three (3) consecutive
months or for an aggregate of six (6) months in any twelve (12) consecutive month period to perform
Employee’s duties (such incapacity is hereinafter referred to as “Disability”). Upon
termination of Employee’s employment hereunder by reason of his Disability or death, Employee or
Employee’s estate (as the case may be) shall be entitled to receive the Accrued Rights following
the date of such termination. Employee’s rights with respect to any stock option or other
incentive compensation shall be determined by the terms of any plan, agreement or other instrument
that governs the terms of any such stock options or other incentive compensation. Following
Employee’s termination of employment due to death or Disability, except as set forth in this
Section 4(b), Employee shall have no further rights to any compensation or benefits from the
Company or any of its subsidiaries or affiliated entities under this Agreement or otherwise.

c. By the Company Without Cause. Employee’s employment may be terminated by the
Company at any time without Cause. If Employee’s employment is terminated by the Company without
Cause (other than by reason of death or Disability), Employee shall be entitled to receive: (i) the
Accrued Rights following the date of such termination; and (ii) subject to Employee’s execution
(within thirty (30) days following the date of termination) and non-revocation of a release of
claims in favor of the Company in a form provided by the Company (which release excludes from its
scope claims under any continuing right under any benefit or stock option plan or agreement), a
payment equal to the amount of Employee’s then current Base Salary that would have been payable
over a six (6) month period following the date of such termination, payable monthly in accordance
with the Company’s normal payment schedule and practices beginning on the next regular payroll
distribution after the date that the release of claims becomes irrevocable, and all previously
granted unvested options shall cease vesting upon the date of such termination. Following
Employee’s termination of employment by the Company without Cause (other than by reason of
Employee’s death or Disability), except as set forth in this Section 4(c), Employee shall have no
further rights to any compensation or benefits from the Company or any of its subsidiaries or
affiliated entities under this Agreement or otherwise.

d. By the Employee For Good Reason. Employee’s employment may be terminated by the
Employee for Good Reason (as hereinafter defined). For purposes of this Agreement, “Good Reason”
shall mean the occurrence of any of the following without the Employee’s prior written consent: (i)
a material reduction of Employee’s duties, position, job titles, or responsibilities; (ii) a
reduction of Employee’s base salary or total compensation package; (iii) Employee being forced to
relocate; or (iv) the Company requires Employee to perform illegal or fraudulent acts. However,
none of the foregoing events or conditions shall constitute Good Reason unless: (x) the Employee
delivers to the Parent a written notice identifying in reasonable detail the act or acts
constituting “Good Reason” and his intention to so terminate his employment (a “Notice of Good
Reason”), within fifteen (15) days following the Employee’s knowledge of the circumstances
constituting “Good Reason;” (y) the Parent or the Company, as the case may be, does not reverse or
otherwise cure the event or condition within fifteen (15) days after the date that the Notice of
Good Reason is delivered; and (z) the Employee resigns his employment no earlier than five (5) and
no later than fifteen (15) days following the expiration of that cure period. If the Employee
terminates his employment for Good Reason(other than by reason of death or Disability), Employee
shall be entitled to receive: (i) the Accrued Rights following the date of such termination; and
(ii) subject to Employee’s execution (within thirty (30) days following the date of termination)
and non-revocation of a release of claims in favor of the Company in a form provided by the Company
(which release excludes from its scope claims under any continuing right under any benefit or stock
option plan or agreement), a payment equal to the amount of Employee’s then current Base Salary
that would have been payable over a three (3) month period following the date of such termination,
payable monthly in accordance with the Company’s normal payment schedule and practices beginning on
the next regular payroll distribution after the date that the release of claims becomes
irrevocable, and all previously granted unvested options shall cease vesting upon the date of such
termination. Following Employee’s termination of employment by the Employee for Good Reason(other
than by reason of death or Disability), except as set forth in this Section 4(d), Employee shall
have no further rights to any compensation or benefits from the Company or any of its subsidiaries
or affiliated entities under this Agreement or otherwise.

e. Company Property. Upon any termination of Employee’s employment with the Company
or any of its subsidiaries or affiliated entities, or earlier upon request, Employee shall promptly
return to the Company all property of the Company or any of its subsidiaries or affiliated entities
in Employee’s possession and deliver to the Company all copies of all correspondence, documents,
data and other materials belonging to or containing proprietary information of the Company or any
of its subsidiaries or affiliated entities.

f. Section 409A Provisions.

(i) A termination of employment shall not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of any amounts or benefits upon or following
a termination of employment unless such termination is also a “separation from service” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and,
for purposes of any such provision of this Agreement, references to a “termination,” “termination
of employment” or like terms shall mean “separation from service.” If Employee is deemed on the
date of termination to be a “specified employee” within the meaning of that term under Section
409A(a)(2)(B) of the Code, then with regard to any payment or the provision of any benefit that is
considered deferred compensation under Section 409A of the Code payable on account of a “separation
from service,” such payment or benefit shall be made or provided at the date which is the earlier
of (A) the expiration of the six (6)-month period measured from the date of such “separation from
service” of Employee, and (B) the date of Employee’s death (the “Delay Period”). Upon the
expiration of the Delay Period, all payments and benefits delayed pursuant to this paragraph
(whether they would have otherwise been payable in a single sum or in installments in the absence
of such delay) shall be paid or reimbursed to Employee in a lump sum as soon as administratively
practicable, and any remaining payments and benefits due under this Agreement shall be paid or
provided in accordance with the normal payment dates specified for them herein.

(ii) With regard to any provision herein that provides for reimbursement of costs and expenses
or in-kind benefits, except as permitted by Section 409A of the Code, (A) the right to
reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, (B) the amount of expenses eligible for reimbursement, or in-kind benefits, provided
during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year, provided that the foregoing clause (B) shall
not be violated without regard to expenses reimbursed under any arrangement covered by Section
105(b) of the Code solely because such expenses are subject to a limit related to the period the
arrangement is in effect and (C) such payments shall be made on or before the last day of
Employee’s taxable year following the taxable year in which the expense occurred.

5. Restrictive Covenants.

a. Confidentiality. Employee acknowledges that Employee has signed and agrees to be
bound by all of the terms and conditions of that certain Non-Disclosure Proprietary Information and
Inventions Agreement (the “Proprietary Information Agreement”), attached as Exhibit
C to this Agreement, which agreement shall remain in full force and effect at all times during
and after the Employment Period, and the terms of which shall apply with respect to the Company and
its subsidiaries and affiliated entities. Notwithstanding anything to the contrary contained
herein or in the Proprietary Information Agreement, neither this Agreement or the Proprietary
Information Agreement shall affect any of Employee’s pre-existing obligations under any
non-disclosure, non-competition or proprietary information and inventions agreement or similar
agreement between Employee and the Company or any of its subsidiaries or affiliated entities.

b. Agreement Not to Compete/Non-Solicitation. Employee agrees that during the
Employment Period, Employee shall not, directly or indirectly:

(i) acquire or hold any interest in, manage, operate, join, control, or engage or participate
in any capacity in the financing, ownership, management, operation or control of, be or become an
officer, director, stockholder, owner, co-owner, partner, trustee, consultant, or advisor to,
contract or permit Employee’s name or likeness to be used by, or be employed by, render or perform
services for or connected in any manner with, any third party, firm, company, entity, person,
business or other enterprise which is engaged in any line of business in which the Company or any
of its Subsidiaries or affiliated entities or any of their respective successors or assigns is
engaged or proposes to be engaged during the Employment Period; provided, however, that such
restriction shall not apply to any ownership as a passive investment of less than 1% of the
outstanding shares of the capital stock of a publicly-held corporation if (A) such shares are
actively traded on the New York Stock Exchange or the Nasdaq Global Market or similar market or
exchange and (B) Employee is not otherwise associated directly or indirectly with such corporation
or any affiliate of such corporation;

(ii) encourage, induce, recruit, hire, solicit or attempt to solicit or induce, or take any
other action which is intended to induce or encourage, or has the effect of inducing or
encouraging, any person who is a full-time, part-time or temporary employee or contractor of the
Company or any of its subsidiaries or affiliated entities or who was an employee or contractor of
the Company or any of its subsidiaries or affiliated entities at any time during prior six-month
period, or encourage or otherwise cause any such employee or contractor to terminate or alter his
or her employment or other relationship, whether such employment is pursuant to a written
agreement, for a predetermined period, or is at-will, with the Company or any of its subsidiaries
or affiliated entities, or to accept employment with or perform services for any third party, firm,
company, entity, person, business or other enterprise; or

(iii) interfere or attempt to interfere with existing relationships that may exist between the
Company or any of its subsidiaries or affiliated entities, or any of their respective successors or
assigns, and any of their respective customers, suppliers, consultants, clients, licensees,
licensors, landlords or other business relations, or approach, contact, solicit, induce, request,
advise, recruit or otherwise encourage any existing or prospective customers, suppliers,
consultants, clients, licensees, licensors, landlords, strategic partners or vendors, or other
business relations of the Company or any of its subsidiaries or affiliated entities to cease doing
business or withdraw, curtail or cancel or otherwise alter their business dealings or relationship
with the Company or any of its subsidiaries or affiliated entities (including by making any
negative or disparaging statements or communications about the Company or any of its subsidiaries
or affiliated entities), including on behalf of or to move such business or relationship to, any
third party, firm, company, entity, person, business or other enterprise; provided, however, that
notwithstanding the foregoing, for purposes of this Agreement, the placement of general
advertisements which may be targeted to a particular geographic or technical area but which are not
targeted directly or indirectly towards employees of the Company or any of its subsidiaries or
affiliated entities or any of their respective successors or assigns is engaged shall not be deemed
to be a solicitation under this Agreement.

(iv) Exceptions to this clause can only be approved by prior written approval of the Parent’s
Board of Director’s

c. During the Employment Period and following any termination of this Agreement, Employee
agrees not to make any public statements (whether written or oral and whether to the media, any
third party or otherwise), that are detrimental, prejudicial, disparaging, libelous, slanderous or
damaging to, or would otherwise reflect negatively on the reputation of, the Company or any of its
subsidiaries or affiliated entities or any of their respective members, officers, employees,
representatives, counsel, affiliates, successors, assigns, products or businesses. Employee
further agrees that he will not act in any manner that might interfere with the business or
disparage the reputation of the Company or any of its subsidiaries or affiliated entities or any of
their respective members, officers, employees, representatives, counsel or affiliates. Nothing set
forth in this Section 5(c) shall prohibit or limit in any way Employee’s right to
accurately and honestly respond as required or to cooperate with any valid government, court or
regulatory order or request.

d. Remedies. Employee acknowledges that in the event of breach or threatened breach
by Employee of any of the terms of this Section 5, the Company and its subsidiaries and affiliated
entities would suffer significant and irreparable harm that can not be satisfactorily compensated
in monetary terms, and that the remedies at law available to the Company and its subsidiaries and
affiliated entities will otherwise be inadequate and, therefore, the Company and its subsidiaries
and affiliated entities shall be entitled, notwithstanding the provisions of Section 10(e), to
specific performance of this Agreement by Employee, including the immediate ex parte issuance of a
temporary, preliminary and final injunction enjoining Employee from any such violation or
threatened violation of this Section 5, and to exercise such remedies cumulatively or in
conjunction with any and all other rights and remedies provided by law or in equity and under this
Agreement. Employee hereby acknowledges and agrees that the Company shall not be required to post
bond as a condition to obtaining or exercising any such remedies, and Employee hereby waives any
such requirement or condition and the Employee agrees that he or she shall not plead adequacy of
any relief at law available to the Company or its successors or assigns (as applicable) (including
monetary damages) as a defense to any petition, claim or motion for preliminary or final injunctive
relief to enforce any provision of this Agreement. Notwithstanding anything herein to the
contrary, the Company may terminate the payment of any amount or benefits payable to Employee under
this Agreement in the event of a breach of any of the covenants set forth in this Section 5.

(i) In the event that the Employee or the Company or its successors or assigns (as applicable)
should contest the enforceability of any provision of this Agreement in any court of competent
jurisdiction, then any time period associated with any such challenged provision shall be deemed
suspended at the time of filing the action in which such enforceability is contested. In the event
that the enforceability of any such provision is upheld by such court of competent jurisdiction,
all periods of appeal having expired thereon, then the remaining portion of any such time period
shall automatically thereafter once again become effective. For purposes of this Agreement, the
remaining portion of any such time period shall be the difference between the full stated time
period in this Agreement relating to any such provision, less any time that Employee complied with
such provision prior to the filing of the aforesaid action and less any time that Employee was
restrained by temporary restraining order, permanent injunction or similar order issued by any
court of competent jurisdiction from violating any such provision during the pendency of such
action or proceeding.

(ii) The rights and remedies of Company hereunder are not exclusive of or limited by any other
rights or remedies that Company may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative (and not alternative), and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. Without limiting the generality of the
foregoing, the rights and remedies of Company hereunder, and the obligations and liabilities of
Employee hereunder, are in addition to their respective rights, remedies, obligations and
liabilities under the law of unfair competition, misappropriation of trade secrets and the like.
This Agreement does not limit Employee’s obligations or the rights of Company (or any affiliate of
Company) under the terms of any other agreement between Employee and Company or any affiliate of
Company.

(iii) If Company, any of its Subsidiaries or affiliated entities or their respective
successors or assigns (as applicable) successfully, in whole or part, asserts an action at law or
in equity to enforce any of the terms of this Agreement, then Company, its Subsidiaries or
affiliated entities or its successors or assigns (as applicable), shall be entitled to recover from
Employee all reasonable attorneys’ fees, costs, and necessary disbursements in addition to any
other relief to which it may be entitled. If Employee, his heirs or assigns, successfully, in
whole or part, assert an action at law or in equity to enforce any of the terms of this Agreement,
then Employee, his heirs or assigns shall be entitled to recover from Company, any of its
Subsidiaries or affiliated entities or their respective successors or assigns (as applicable) all
reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to
which Employee may be entitled.

6. Company Options. Employee acknowledges and agrees that at the Effective Time, any
and all Company Options held by Employee as of the Effective Time will automatically and without
any action by Employee be terminated in accordance with the terms and conditions of the Merger
Agreement, notwithstanding anything to the contrary that may be set forth in any plan, agreement or
other instrument that otherwise governs the terms of such Company Options.

7. Indemnification. The Articles of Incorporation or the Operating Agreement of the
Company, as the case may be, shall provide for indemnification of the Employee to the maximum
extent permitted by law. The Company shall maintain a Directors’ and Officers’ insurance policy
that is reasonably acceptable to the Parent, with such amounts of coverage that is customary given
the size and business of the Company, and a premium that is commercially reasonable, for so long as
the Parent maintains such insurance for the benefit of the officers of the Parent.

8. Notices. All notices and other communications hereunder shall be in writing and
shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile,
upon written confirmation of receipt by facsimile, (b) on the first (1st) Business Day following
the date of dispatch if delivered utilizing a recognized courier under circumstances in which such
courier guarantees next-day delivery (except in the case of overseas delivery, in which case notice
shall be deemed duly given on the third (3rd) Business Day following the date of dispatch if
delivered utilizing a recognized international courier under circumstances in which such courier
guarantees such delivery) or (c) on the earlier of confirmed receipt or the fifth Business Day
following the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid (except in the case of overseas delivery, in which case notice shall be
deemed duly given on confirmed receipt if delivered by registered or certified mail, return receipt
requested, postage prepaid). All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by the party to
receive such notice:

(i) If to Parent, to:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	SCM Microsystems, Inc.
Oskar-Messter-Straße 13,
85737, Ismaning Germany
Attention: Felix Marx
Facsimile: +49.89.9595.5170
with a copy (which shall not constitute notice) to:
	 	 	 	 	 	 
	 	 	 	 	Gibson, Dunn & Crutcher LLP
555 Mission Street, Suite 3000
San Francisco, California 94105
Attention: Michael L. Reed
Facsimile: 415.374.8459

	 	(ii)	 	If to the Company:

Hirsch Electronics Corporation

1900-B Carnegie Ave.

Santa Ana, CA 92705

Attention: Secretary

Facsimile: 949.250.7372

(iii) if to Employee, to the address of Employee set forth on the signature page hereto.

9. Taxation. The Company may withhold from any payments made to Employee under the
Agreement any and all federal, state, city, foreign or other applicable taxes as shall be required
pursuant to any applicable law, governmental regulation or ruling.

10. Survival. Sections 1, 4, 5, 6, 7, 8, 9 and 10 of this Agreement shall survive and
remain in full force and effect following any termination of this Agreement or Employees employment
with the Company.

11. Miscellaneous.

a. Entire Agreement. Except as expressly set forth in Section 5(a), this Agreement,
together with the Proprietary Information Agreement, constitutes the entire agreement, and
supersede all prior written agreements, arrangements, communications and understandings and all
prior and contemporaneous oral agreements, arrangements, communications and understandings among
the parties with respect to the subject matter hereof and thereof..

b. Amendment; Waiver. This Agreement may not be amended, modified or supplemented in
any manner, whether by course of conduct or otherwise, except by an instrument in writing
specifically designated as an amendment hereto, signed on behalf of each of the parties hereto and
Parent. Any agreement on the part of a party to any waiver shall be valid only if set forth in a
written instrument executed and delivered by such party. No failure or delay of any party in
exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or discontinuance of steps to
enforce such right or power, or any course of conduct, preclude any other or further exercise
thereof or the exercise of any other right or power.

c. Binding Effect; Assignment. The rights and obligations of this Agreement shall
bind and inure to the benefit of any successor of the Company by reorganization, merger or
consolidation, or any assignee of all or substantially all of the Company’s business and
properties. The Company may assign its rights and delegate its obligations hereunder to any of its
affiliates without the consent of Employee, provided that Company remains ultimately liable for all
of Company’s obligations hereunder. Employee’s rights or obligations under this Agreement may not
be assigned by Employee.

d. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws and public policy (other than conflict of laws principles) of the State of California
applicable to contracts executed and to be wholly performed within such state.

e. Dispute Resolution And Binding Arbitration. Employee and the Company agree that in
the event a dispute arises concerning or relating to this Agreement, or to Employee’s employment
with the Company, or any termination therefrom, all such disputes shall be submitted to binding
arbitration before an arbitrator experienced in employment law. Said arbitration will be conducted
in accordance with the rules applicable to employment disputes of Judicial Arbitration and
Mediation Services (“JAMS”). The Company will be responsible for paying any filing fees
and costs of the arbitration proceeding itself (for example, arbitrators’ fees, conference room,
transcripts), but each party shall be responsible for its own attorneys’ fees. The Company and
Employee agree that this promise to arbitrate covers any disputes that the Company may have against
Employee, or that Employee may have against the Company and all of its affiliated entities and
their directors, officers and Employees, arising out of or relating to this Agreement, the
employment relationship or termination of employment, including any claims concerning the validity,
interpretation, effect or violation of this Agreement; violation of any federal, state, or local
law; any tort; and any other aspect of Employee’s compensation or employment. The Company and
Employee further agree that arbitration as provided in this Section 11(e) shall be the exclusive
and binding remedy for any such dispute and will be used instead of any court action, which is
hereby expressly waived, except for any request by either party hereto for temporary or preliminary
injunctive relief pending arbitration in accordance with applicable law, or an administrative claim
with an administrative agency. The Federal Arbitration Act shall govern the interpretation and
enforcement of such arbitration proceeding. The arbitrator shall apply the substantive law (and
the law of remedies, if applicable) of the State of California, or federal law, if California law
is preempted. The arbitration shall be conducted in Los Angeles, California, unless otherwise
mutually agreed.

THE COMPANY AND EMPLOYEE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE
WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR
FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

f. Severability. Whenever possible, each provision or portion of any provision of
this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law. Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction and subject to this paragraph, be ineffective to the
extent of such invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that any other provisions of this
Agreement invalid, illegal or unenforceable in any other jurisdiction. Notwithstanding the
foregoing, if any provision of this Agreement should be deemed invalid, illegal or unenforceable
because its scope or duration is considered excessive, such provision shall be modified so that the
scope of the provision is reduced only to the minimum extent necessary to render the modified
provision valid, legal and enforceable.

g. Employee Acknowledgment. Employee acknowledges that he has had the opportunity to
consult legal counsel in regard to this Agreement, that he has read and understands this Agreement,
that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily
and based on his own judgment and not on any representations, warranties or promises other than
those contained in this Agreement.

h. Further Assurances. Each of the parties agrees to execute, acknowledge, deliver
and perform, and cause to be executed, acknowledged, delivered and performed, at any time and from
time to time, as the case may be, all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably necessary to carry out the
provisions or intent of this Agreement.

i. Counterparts. This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same instrument and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other party. This
Agreement may be executed by facsimile signature and a facsimile signature shall constitute an
original for all purposes.

[Signature page follows]

IN WITNESS WHEREOF, the parties have duly executed this Agreement, or caused this
Agreement to be duly executed, as of the day and year first above written.

	 	 	 
	SCM MICROSYSTEMS, INC.
	By:
	 	/s/ Felix Marx

	 	 	 

	 	 	Felix Marx

CEO & Director

	 	 	EMPLOYEE

 /s/ Larry Midland

	 	 	Larry Midland

Address:

1805 Jamaica Road

Costa Mesa, CA 92626

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