Item 1.01 Entry into a Material Definitive Agreement
Convertible
Debt Financing
On
April 8, 2020, Blonder Tongue Laboratories, Inc. (the “Company”) and its wholly-owned subsidiary, R. L. Drake Holdings,
LLC (“RLD”), entered into a Senior Subordinated Convertible Loan and Security Agreement (the “Subordinated Loan
Agreement”) with Livewire Ventures, LLC, MidAtlantic IRA, LLC FBO Steven L. Shea IRA, Carol M. Pallé and Robert J.
Pallé, Anthony J. Bruno and Stephen K. Necessary, as lenders (collectively, the “Lenders”) and Robert J. Pallé,
as Agent for the Lenders (in such capacity, the “Agent”).
Pursuant
to the Subordinated Loan Agreement, the Lenders have agreed to provide the Company with a term loan facility (the “Subordinated
Loan Facility”). In connection with the execution of the Subordinated Loan Agreement, the Lenders committed, in the aggregate,
to provide $800,000 in loans. In connection with the execution of the Subordinated Loan Agreement, the Lenders advanced $600,000
under the Subordinated Loan Facility; the remaining $200,000 of the original commitment will be advanced at a later date. The
terms of the Loan Agreement permit additional loans of $700,000 to be made under the Subordinated Loan Facility up to a maximum
aggregate amount of $1,500,000, subject to the agreement of the Company and the Lenders. Neither the Lenders nor any other persons
are obligated to provide loans in excess of the original $800,000 commitment.
Interest
on loans under the Subordinated Loan Facility will accrue 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 the Company’s option, the Company may pay interest in cash on any interest payment
date in lieu of the PIK Interest. The Subordinated Loan Agreement has a three-year term, and the accreted principal balance of
the loans made under the Subordinated Loan Facility (by virtue of the PIK Interest) plus any other accrued unpaid interest, is
due and payable in full at maturity.
The
Lenders have the option of converting the principal balance of the loan held by each of them, in whole (unless otherwise agreed
by the Company), into shares of the Company’s common stock at a conversion price to be determined based on the volume weighted
average trading price of the Company’s common stock on the NYSE American during the five trading days preceding the date
of the Subordinated Loan Agreement. A different conversion price may apply to amounts loaned under the Subordinated Debt Facility
following the date of the $800,000 original commitment. The conversion right is restricted to an aggregate amount of shares of
common stock that would not result in the Company’s non-compliance with NYSE American rules requiring stockholder approval
of issuances or potential issuances of shares in excess of the percentage limits specified therein or in an amount that may be
deemed to constitute a change of control under such rules. These restrictions will terminate if the requisite stockholder approval
is obtained, which is expected to occur on June 11, 2020 at the Company’s annual meeting of stockholders.
The obligations of the Company and RLD under the Subordinated Loan Agreement are secured by substantially all of the Company’s
and RLD’s assets, and in connection with the execution of the Subordinated Loan Agreement, the parties entered into a Patent
and Trademark Security Agreement dated as of April 8, 2020 and RLD executed a Continuing Guaranty, also dated as of April 8, 2020,
for the benefit of the Lenders.
On
April 8, 2020, the Company, RLD, the Company’s subsidiary, Blonder Tongue Far East, LLC (“Far East”), the Agent
and MidCap Business Credit LLC (“MidCap”) entered into a Subordination Agreement (the “Subordination Agreement”).
Pursuant to the Subordination Agreement, the parties have acknowledged and agreed that the rights of the Lenders under the Subordinated
Loan Agreement are subordinate to the rights of MidCap under the Loan and Security Agreement dated as of October 25, 2019 by and
between the Company, RLD and MidCap (the “MidCap Agreement”). Further, under the Subordination Agreement, notwithstanding
the terms of the Subordinated Loan Agreement with respect to payments of interest, the Company is precluded from making (and the
Lenders are precluded from accepting) cash payments of interest in lieu of PIK Interest, in the absence of the prior written consent
of MidCap or unless the Company is able to meet certain predefined conditions precedent to the making of any such payments of
interest (or principal), as more fully described in the Subordination Agreement.
The
Lenders are either directors or executive officers of the Company, or affiliates of such persons. Mr. Shea currently serves as
the Chairman of the Board of the Company, Messrs. Pallé, Bruno and Necessary currently serves as Directors of the Company,
and Mr. Grauch (affiliated with Livewire Ventures, LLC) currently serves as the President and Chief Executive Officer of the Company.
The Subordinated Loan Agreement and transactions contemplated thereby were approved by the members of the Board of Directors who
are not parties to, and have no personal interest in, the Subordinated Loan Agreement and related transactions.
The
foregoing summaries of the Subordinated Loan Agreement, the Subordination Agreement, the Guaranty and the Patent and Trademark
Security Agreement are not complete and are qualified in their entirety by reference to the full text of each of the Loan Agreement,
the Subordination Agreement, the Guaranty and the Patent and Trademark Security Agreement, which are attached hereto as Exhibits
10.1, 10.3, 10.4 and 10.5, respectively, and incorporated herein by reference.
Amendment
of Existing Credit Facility with MidCap Business Credit
On
April 8, 2020, the Company. RLD and Far East entered into a Consent and Amendment to Loan Agreement and Loan Documents (the “MidCap
Amendment”) with MidCap. The MidCap Amendment amends the original MidCap Agreement to remove a $400,000 availability block,
which by the terms of the MidCap Amendment will be re-imposed at the rate of $6,666.66 per month commencing on June 1, 2020. Removal
of the block is subject to certain conditions, including the Company securing additional debt or equity financing of at least
$500,000. The financing pursuant to the Subordinated Loan Facility described above meets the requirements for removal of the block.
The
foregoing summary of the MidCap Amendment is not complete and is qualified in its entirety by reference to the full text of each
of the MidCap Amendment, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.