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EXHIBIT 2.4
DAZZLE MULTIMEDIA, INC.
SECURED TRADE FACILITY
Fremont, California
$4,000,000 As of December 30, 1998
FOR VALUE RECEIVED, Dazzle Multimedia, Inc., a California corporation,
("DAZZLE") hereby absolutely and unconditionally promises to pay to the order of
SCM Microsystems, Inc., a Delaware corporation, ("SCM"), its successors and
assigns in immediately and available funds in lawful money of the United States
of America, the principal sum of up to Four Million Dollars ($4,000,000), or
such lesser principal amount as may be outstanding hereunder from time to time.
The outstanding balance(s) under this Secured Trade Facility (the "TRADE
FACILITY") shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 360 days) on the unpaid principal amount(s) on and
after the due date therefor at a rate of interest equal to Ten Percent (10%) per
annum. Amounts due hereunder shall be due and payable as provided in Section 2
below.
Capitalized terms used in the Trade Facility shall have the same
meanings as defined in that certain Note and Warrant Purchase Agreement dated as
of December 30, 1998 (the "AGREEMENT") between Dazzle and SCM, or in ANNEX A,
Definitions, attached to the Agreement, unless otherwise indicated. The
Agreement relates to a promissory note in the principal amount of $2,500,000
(the "NOTE") issued by Dazzle to the order of SCM.
1. The Trade Facility evidences the amount of trade credit actually
extended or potentially extended by SCM to Dazzle as of the date above for the
purchase of certain products that SCM provides to Dazzle from time to time in
the ordinary course of business. From time to time, at its sole option, SCM may
extend to Dazzle trade credit under the Trade Facility up to a total sum of
$4,000,000 principal amount. Dazzle's outstanding balances owed to SCM under the
Trade Facility and the dates when made shall appear on EXHIBIT A to the Trade
Facility, provided that SCM's failure to make any such notation shall not affect
Dazzle's obligation to repay the outstanding balance of the Trade Facility.
2. Amount(s) due under the Trade Facility shall be due and payable
on the earlier of: (i) in applicable part, at such times as SCM and the Company
may agree under their customary trade practices; (ii) in whole, thirty (30) days
afer the closing of a Change of Control; and (iii) in whole, on June 30, 1999.
Upon the occurrence of any Event of Default, the entire unpaid principal balance
of the Trade Facility and all of the unpaid interest accrued thereon may be
declared to be immediately due and payable. A Change of Control and an Event of
Default are each defined in ANNEX A, Definitions, to the Agreement. The
principal amount of the Trade Facility is subject to prepayment in whole or in
part at any time without penalty.
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Dazzle/SCM
Trade Facility
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3. CONVERSION OF THE TRADE FACILITY.
(a) OPTIONAL CONVERSION. SCM has the right, at its option,
at any time, to convert the outstanding principal amount of the Trade Facility
and interest thereon, in accordance with the provisions of this section, in
whole or in part: (i) into shares of any class of Company Preferred Stock (other
than Series A Preferred Stock (so long as Dazzle shall have not issued any
additional shares of Series A Preferred Stock other than pursuant to obligations
outstanding on the date hereof) or Series B Preferred Stock) issued by Company
after the date hereof (each an "EQUITY FINANCING"), or (ii) into shares of
Series B Preferred Stock. The Preferred Stock offered in an Equity Financing and
the Series B Preferred Stock each constitute "EQUITY SECURITIES". The number of
shares of Equity Securities to be issued upon such conversion shall be equal to
the quotient obtained by dividing (i) the portion of the Trade Facility plus
accrued interest to be converted by (ii) the "CONVERSION PRICE" of the Equity
Securities then in effect, rounded to the nearest whole share, and in connection
with any Equity Financing (other than in respect of the Series B Preferred
Stock), the issuance of such shares upon such conversion shall be upon the terms
and subject to the conditions applicable to such Equity Financing. If the
conversion is into shares of Series B Preferred Stock, then the initial
Conversion Price shall be $2.00 per share of Series B Preferred Stock.(1) If the
conversion is into Equity Securities offered in any Equity Financing, then the
initial Conversion Price shall be the price per share as determined in that
financing. Dazzle shall give SCM at least ten (10) days prior written notice of
any Equity Financing.
(b) MANDATORY CONVERSION UPON EXERCISE OF THE WARRANT. The
then-outstanding principal amount of the Trade Facility, including interest
thereon or in respect thereof, shall be automatically converted in full into
Equity Securities upon the SCM's exercise of the Warrant and shall be effective
immediately prior to the exercise of the Warrant. The class of Equity Securities
into which the Trade Facility is to be converted shall be designated by SCM, and
the Conversion Price in respect of such conversion shall be the Conversion Price
applicable to such class of Equity Securities. Notwithstanding the foregoing,
the aggregate amount of the Company Trade Facility required to be so
automatically converted shall not exceed $2,000,000 and any outstanding balance
(including interest) in excess of such amount shall continue to be due and
payable after the date of such conversion.
4. MECHANICS AND EFFECT OF CONVERSION. Dazzle shall give SCM at
least ten (10) days prior written notice of an Equity Financing. No fractional
shares of Dazzle's capital stock will be
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(1) The Series B Certificate of Designation to be filed prior to funding of
the Note referenced in the Agreement.
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Dazzle/SCM
Trade Facility
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issued upon conversion of the Trade Facility. In lieu of any fractional share to
which SCM would otherwise be entitled, Dazzle will pay to SCM in cash the amount
of the unconverted principal and interest balance of the Trade Facility that
would otherwise be converted into such fractional share. Upon conversion of the
Trade Facility pursuant to this section, SCM shall surrender this Trade Facility
at the principal offices of Dazzle or any transfer agent of Dazzle and shall
give written notice by registered or certified mail, postage prepaid, to Dazzle
at its principal corporate office, of the election to convert the same pursuant
to this section, and shall state therein the amount of the unpaid principal
amount of the Trade Facility to be converted and the name or names in which the
certificate or certificates for shares of Equity Securities are to be issued. At
its expense, Dazzle will, as soon as practicable thereafter, issue and deliver
to SCM or such holder, at such principal office, a certificate or certificates
for the number of shares to which SCM or such holder is entitled upon such
conversion and a modification of the Trade Facility in respect of that portion
of such which is not so converted. Upon the conversion of the Trade Facility,
Dazzle will be forever released from all of its obligations and liabilities
under the Trade Facility with regard to that portion of the principal amount and
accrued interest being converted including without limitation the obligation to
pay such portion of the principal amount and accrued interest. The conversion
shall be deemed to have been made immediately prior to the close of business on
the date of the surrender of the Trade Facility, and the Person or Persons
entitled to receive the shares of Equity Securities upon such conversion shall
be treated for all purposes as the record holder or holders of such Equity
Securities as of such date.
5. The Trade Facility is secured by the security interests in and
liens on the assets of Dazzle granted pursuant to the Security Agreement and the
Intellectual Property Supplement to the Security Agreement that are attached as
EXHIBITS B and C to the Agreement.
6. No delay or omission on the part of SCM or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or any
other right of SCM or of such holder, nor shall any delay, omission or waiver of
any one occasion be deemed a bar to or waiver of the same or any other right or
any other occasion. Dazzle and every endorser and guarantor of the Trade
Facility regardless of the time, order or place of signing hereby waives
presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the additional or
release of any other party or person or entity primarily or secondarily liable.
7. The Trade Facility may not be changed, modified or terminated
orally, but only by an agreement in writing signed by the party to be charged.
The Trade Facility shall be binding upon the heirs, executors, administrators,
successors and assigns of Dazzle and inure to the benefit of SCM and its
permitted successors, endorsees and assigns. If any term or provision of the
Trade Facility
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Dazzle/SCM
Trade Facility
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shall be held invalid, illegal or unenforceable the validity, legality and
enforceability of all other terms and provisions hereof shall in no way be
affected thereby.
8. Each party shall be responsible for its own fees and expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the negotiation and execution of the Trade Facility.
9. THE TRADE FACILITY SHALL FOR ALL PURPOSES BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
IN WITNESS WHEREOF, the undersigned has caused the Trade Facility to be
executed and to take effect as of the date first hereinabove written.
/s/ ANDREW WARNER
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DAZZLE MULTIMEDIA, INC.
a California corporation
AGREED TO AND ACCEPTED:
SCM MICROSYSTEMS, INC.
By: /s/ JOHN G. NIEDERMAIER
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John G. Niedermaier, Vice President,
Finance, Chief Financial Officer
Address: 131 Albright Way
Los Gatos, CA 95032
Tel. (408) 370-4888
Fax: (408) 364-8444
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EXHIBIT A
TO
SECURED TRADE FACILITY
AMOUNT OF
OUTSTANDING BALANCE
OF TRADE CREDIT OWED
SCM TO DAZZLE DATE MADE DATE PAID
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$
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TOTAL $
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