BDR Blonder Tongue Laboratories Inc

Background of the Proposal; Reasons for Seeking Stockholder Approval

At the Special Meeting, stockholders will be presented with a proposal to approve the issuance of shares of our Common Stock if and when (i) the holders of certain outstanding warrants to purchase shares of our Common Stock exercise those warrants and (ii) the holders of certain of our subordinated convertible indebtedness elect to convert the indebtedness into shares of our Common Stock. The provisions of those warrants, and the provisions of the subordinated convertible indebtedness that permit the holders to convert the indebtedness into shares of our Common Stock under certain circumstances and on certain terms, including shares that may become issuable as a result of the pay-in-kind interest features of the convertible subordinated indebtedness, are described below. The Purchaser Warrants (as defined below) and the December Placement Agent Warrants (as defined below) are included as exhibits to our Current Report on Form 8-K, which we filed with the SEC on December 16, 2020. The Senior Subordinated Convertible Loan and Security Agreement (as amended to date, the “LSA”) is included as an exhibit to our Current Report on Form 8-K, which we filed with the SEC on April 9, 2020. The Third Amendment To Senior Subordinated Convertible Loan And Security Agreement and Joinder (the “LSA Third Amendment”) and the January Placement Agent Warrant (as defined below) are included as exhibits to our Current Report on Form 8-K, which we filed with the SEC on February 1, 2021. We encourage you to read each of those documents in its entirety.

On December 14, 2020, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”) pursuant to which the Purchasers purchased an aggregate of 1,428,571 shares of our Common Stock and warrants (the “Purchaser Warrants”) to purchase an aggregate of up to 714,286 additional shares of Common Stock at an exercise price of $1.25 per share. In connection with that transaction, we also agreed to issue to the placement agents and certain persons affiliated with the placement agents involved in that transaction, as additional compensation, certain fully-vested and contingent warrants to purchase an aggregate of up to 100,000 shares of our Common Stock and contingent warrants (collectively, the “December Placement Agent Warrants”) to purchase an aggregate of up to an additional 50,001 shares of our common stock at exercises prices of $0.70 per share (for the fully-vested warrants) and $1.25 per share (for the contingent warrants).

On January 28, 2021, we entered into the LSA Third Amendment with certain investors (the “Tranche C Parties”) and the existing parties to the LSA. Pursuant to the LSA Third Amendment, the parties agreed to increase the aggregate loan limit under the LSA from $1,500,000 to $1,600,000 and the Tranche C Parties agreed to provide us with a commitment for a $600,000 term loan facility, all of which was advanced to us on January 29, 2021 (the “Tranche C Loans”). Interest on the Tranche C Loans accrues at 12% per annum and is payable monthly in-kind, by the automatic increase of the principal amount of the loans on each monthly interest payment date, by the amount of the accrued interest payable at that time (“PIK Interest”). At our option, we may pay any interest due on the Tranche C Loans in cash on any interest payment date in lieu of PIK Interest. The Tranche C Parties have the option of converting the accreted principal balance of the Tranche C Loans attributable to each of them into shares of our Common Stock at a conversion price of $1.00.

In connection with Tranche C Loans, we also agreed to issue to an affiliate of the placement agents involved in that transaction, as additional compensation, fully-vested warrants to purchase up to 42,000 shares of our Common Stock (the “January Placement Agent Warrants,” and together with the December Placement Agent Warrants, the “Placement Agent Warrants”).

Because of the possible application of the NYSE American Private Placement Rule, as defined and described below, the Purchase Agreement, the Purchaser Warrants, the Placement Agent Warrants and the LSA Third Amendment each contain provisions that either limit or prohibit the exercise of the Purchaser Warrants and the Placement Agent Warrants or the conversion of the Tranche C Loans under the LSA unless and until we obtain the approval of our stockholders of the issuance of the shares of our Common Stock that are issuable upon the exercise of those warrants and the conversion of those loans.

We are submitting this proposal for stockholder approval in order to comply with certain provisions of the NYSE American’s rules applicable to us and to satisfy contractual obligations we have to the purchasers under the Purchase Agreement and to the Tranche C Parties under the LSA Third Amendment. Our Common Stock is listed on the NYSE American, which makes us subject to a variety of rules and requirements set forth in the NYSE American Company Guide (the “Company Guide”). Section 713(a) of the Company Guide requires listed companies to obtain stockholder approval in connection with an issuance or potential issuance of shares of common stock equal to 20% or more of the outstanding common stock of a listed company, for less than the greater of book or market value of the issuing company’s stock (the “Private Placement Rule”). Based on (i) the exercise terms of the Purchaser Warrants, (ii) the exercise terms of the Placement Agent Warrants, (iii) the conversion terms of the LSA as they apply to the Tranche C Loans and (iv) our assumptions, for purposes of determining compliance with the Private Placement Rule, that the Purchaser Warrants and the Placement Agent Warrants will be exercised in full for shares of our Common Stock, and that the amounts outstanding under the Tranche C Loans (including PIK Interest amounts) will be converted in full into shares of our Common Stock, we believe that the number of shares of Common Stock issuable upon the full exercise of the Purchaser Warrants and the Placement Agent Warrants and the number of shares of Common Stock issuable upon conversion of all amounts outstanding under the Tranche C Loans, when combined with the shares of our Common Stock that were issued to the purchasers pursuant to the Purchase Agreement, would equal 20% or more of our issued and outstanding shares. Because of the price per share provided in the Purchase Agreement and the exercise terms of the Purchaser Warrants and the December Placement Agent Warrants, the issuance of our securities in connection with that transaction may be deemed to have been at a price less than the market value of our Common Stock. Similarly, because of the conversion terms of the LSA, including the price at which outstanding amounts under the Tranche C Loans may be converted into shares of our Common Stock and the price at which the January Placement Agent Warrants may be exercised, the shares of our Common Stock issuable in connection with conversions of Tranche C Loans under the LSA, as amended by the LSA Third Amendment, and the exercise of the January Placement Agent Warrants, may be deemed to involve an issuance at a price less than the market value of our Common Stock. As a result, we are seeking stockholder approval for purposes of complying with our obligations under Section 713(a) of the Company Guide.

For purposes of the Private Placement Rule, approval of this proposal will constitute approval of (i) the issuance of the maximum number of shares of our Common Stock that we are obligated to issue upon exercise of the Purchaser Warrants and the December Placement Agent Warrants (including pursuant to any adjustments to the number of shares issuable as provided in the Purchaser Warrants and the December Placement Agent Warrants), (ii) the issuance of the maximum number of shares that we are obligated to issue upon conversion of amounts outstanding under the Tranche C Loans (including pursuant to any adjustments to the number of shares issuable as provided in the LSA), (iii) the issuance of the maximum number of shares of our Common Stock that we are obligated to issue upon exercise of the January Placement Agent Warrants (including pursuant to any adjustments to the number of shares issuable as provided in the January Placement Agent Warrants) and (iv) any additional shares issuable under the Purchase Agreement pursuant to the terms thereof. Under the terms of the Purchase Agreement and the LSA Third Amendment, we have agreed to submit this proposal for stockholder approval at the Special Meeting.

Certain Consequences if the Proposal is Approved

If this proposal is approved by our stockholders (i) the holders of the Purchaser Warrants will be able, at their option, to exercise those warrants and receive shares of our Common Stock, (ii) the holders of the December Placement Agent Warrants will be able, at their option, to exercise those warrants and receive shares of our Common Stock, (iii) the Tranche C Parties will be able to convert the Tranche C Loans and receive shares of our Common Stock and (iv) the holders of the January Placement Agent Warrants will be able, at their option, to exercise those warrants and receive shares of our Common Stock, in each case, on the terms and subject to the other conditions included in the Purchaser Warrants, the Placement Agent Warrants and the LSA, including the LSA Third Amendment. Changes in the number of shares of Common Stock (through additional issuances of shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock, stock buybacks and other events, if any, and changes attributable to sales of our Common Stock by the stockholders identified above as to shares that are not subject to the stockholder approval being sought hereby, if any) between January 31, 2021 and the date of the Special Meeting and the time at which indebtedness is converted and/or PIK Interest has been paid, may change the ownership percentages indicated the shareholder beneficial ownership table presented below.

The effects of any exercises of the Purchaser Warrants and/or the Placement Agent Warrants, and the conversion of the Tranche C Loans (as well as other subordinated convertible indebtedness outstanding under the LSA), will be to substantially dilute the ownership of existing stockholders and may result in certain of our stockholders having an increased influence over us, particularly with respect to matters requiring a vote of stockholders, including the election of directors, changes to our certificate of incorporation and mergers or similar combination transactions. As of January 31, 2021, we had 11,593,105 shares of our Common Stock issued and outstanding. The aggregate number of shares issuable upon exercise of the Purchaser Warrants is 714,286, not taking into account any additional shares that may be issuable under certain circumstances as provided in the Purchaser Warrants. The aggregate number of shares issuable upon exercise of the Placement Agent Warrants is 192,001, not taking into account any additional shares that may be issuable under certain circumstances as provided in the Placement Agent Warrants. The aggregate number of shares issuable to the Tranche C Parties upon conversion of the Tranche C Loans (assuming that we make all interest payments due on such loan amounts as PIK Interest) is 779,248, not taking into account any additional shares that may be issuable under certain circumstances as provided in the LSA. Certain of the holders of these securities are subject to beneficial ownership blocker provisions that prohibits us from permitting any exercise of warrants and/or effecting any conversion of outstanding convertible indebtedness to the extent the exercises or conversion would result in such investors beneficially owning in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to such exercise and/or conversion. These blocker provisions may be increased to 9.99% or otherwise modified or eliminated under certain circumstances.

Certain Consequences if the Proposal is Not Approved

If this proposal is not approved by our stockholders (i) the holders of the Purchaser Warrants will only be able exercise those warrants and receive shares of our Common Stock if and to the extent the shares to be received upon exercise, when combined with the shares of our Common Stock issued pursuant to the Purchase Agreement, would not cause the issuance of an amount of shares that would represent 20% or more of the issued and outstanding Common Stock, (ii) the holders of the Placement Agent Warrants will not be able to exercise those warrants and receive shares of our Common Stock and (iii) the Tranche C Parties will not be able to convert any amounts outstanding under the LSA and receive shares of our Common Stock. In addition, if this proposal is not approved at this Special Meeting, we are obligated to again solicit stockholder approval of this, or a substantially equivalent proposal, at one or more future stockholder meetings.

Recommendation of the Board of Directors

Our Board of Directors recommends that stockholders vote FOR approval of the Proposal, authorizing the issuance of the maximum number of shares of our Common Stock that may be issuable in connection with the exercise of the Purchaser Warrants and the Placement Agent Warrants and upon conversions of amounts outstanding under the LSA (including pursuant to any adjustments to the number of shares issuable as provided in the Purchaser Warrants, the Placement Agent Warrants and the LSA) and any additional shares issuable under the Purchase Agreement pursuant to the terms thereof.

Proxies received by the Board of Directors will be voted FOR approval of the Proposal, unless stockholders specify in their proxies a contrary choice.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of January 31, 2021 by (i) each person who is known by us to beneficially own more than five percent of our Common Stock, (ii) each of our Directors, (iii) each of our executive officers, and (iv) all our executive officers and Directors as a group. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares that they beneficially own, subject to community property laws where applicable.

STOCKHOLDER PROPOSALS

Stockholder Proposals for Inclusion in the Proxy Statement for the 2021 Annual Meeting of Stockholders

Any stockholder who, in accordance with Securities Exchange Act Rule 14a-8, wished to present a proposal for inclusion in the proxy materials to be distributed in connection with our 2021 Annual Meeting of Stockholders must have submitted the proposal to us in proper form, to the attention of our Chief Financial Officer at our principal executive office, One Jake Brown Road, Old Bridge, New Jersey 08857, on or before January 12, 2021 and must have complied in all other respects with applicable SEC rules, including Securities Exchange Act Rule 14a-8. If the date of our 2021 Annual Meeting of Stockholders is changed by more than 30 days from the date of our 2020 Annual Meeting of Stockholders, then the deadline for receipt of the proposal would be a reasonable time before we begin to print and send our proxy materials for the 2021 Annual Meeting of Stockholders.

Director Nominations for the 2021 Annual Meeting of Stockholders

Our Bylaws require advanced notice of any stockholder proposal for nomination of candidates for election as a director. To be properly made, any stockholder proposal for nomination of candidates for election as a director must meet the timing, procedural and substantive requirements provided in our Bylaws. Any proposal must be delivered to our Corporate Secretary at our principal executive office, One Jake Brown Road, Old Bridge, New Jersey 08857. To be timely, a stockholder's notice must be delivered to, or mailed and received at, our principal executive offices not less than 60 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. The notice must also provide the information specified in our Bylaws, and we may require that any nominee furnish such other information as may reasonably be required in order for us to determine the eligibility of such proposed nominee to serve as a director.

Other Proposals for the 2021 Annual Meeting of Stockholders

Our Bylaws also require advanced notice of any stockholder proposal for business to be proposed for action at our annual meetings other than nomination of candidates for elections as a director. Notice of any such stockholder proposal must be received by our Corporate Secretary at our principal executive office, One Jake Brown Road, Old Bridge, New Jersey 08857 not less than 60 days before the date on which we first sent our proxy materials for our annual meeting of stockholders for the previous year (in this case, our 2020 annual meeting); provided, however, that if during the prior year we did not hold an annual meeting, or if the date of the meeting has changed more than 30 days from the prior year, then notice must be delivered to, or mailed and received, not less than 60 days before the date on which we publicly announced as the date we expect to first send proxy materials for the annual meeting of stockholders for the current year. In addition to meeting the submission deadline, the stockholder must also have complied with all applicable procedural and substantive requirements set forth in our Bylaws.