EXHIBIT 99.1
SHARE EXCHANGE AND SETTLEMENT AGREEMENT
THIS SHARE EXCHANGE AND SETTLEMENT AGREEMENT (the "Agreement") is made this
30th day of June 2006 by and among Blonder Tongue Telephone, LLC, a New Jersey
limited liability company ("BTT"), Blonder Tongue Laboratories, Inc., a Delaware
corporation ("Blonder Tongue"), Resource Investment Group, LLC, a New Jersey
limited liability company ("RIG"), Broadstar South, LLC, a Delaware limited
liability company ("BSS"), H. Tyler Bell, an individual ("TB"), and Douglas
Bell, an individual ("DB"), for and on behalf of themselves and their past,
present and future officers, shareholders, employees, representatives,
licensees, parents, subsidiaries, predecessors in interest, affiliates, agents,
servants, successors and assigns. BTT, RIG, BSS, TB and DB are sometimes
referred to collectively herein as the "Bell Entities."
BACKGROUND
Pursuant to the terms of that certain Capital Contribution Agreement, dated
as of March 26, 2003, by and among Blonder Tongue, BTT and the other parties
signatory thereto, as amended by that certain Amendment to Capital Contribution
Agreement, dated as of September 11, 2003, Blonder Tongue transferred 500,000
shares of Blonder Tongue common stock (the "Blonder Shares") to BTT and BTT
transferred 49 shares of BTT membership shares, representing a 50% ownership
interest in BTT (the "BTT Shares") to Blonder Tongue.
On September 11, 2003, (i) RIG, BTT and Blonder Tongue entered into that
certain Amended and Restated Operating Agreement of BTT (the "BTT Operating
Agreement"), (ii) Blonder Tongue, TB and DB entered into a Joint Venture
Agreement (the "JV Agreement") pursuant to which the parties formed a joint
venture ("Joint Venture") related to the owing and operating telephone systems,
(iii) BTT and Blonder Tongue entered into that certain Royalty Agreement
("Royalty Agreement"), and (iv) BTT and Blonder Tongue entered into that certain
Stock Pledge Agreement ("Stock Pledge Agreement", collectively, the "Prior
Agreements").
Certain disputes and differences have arisen between and among certain of
the parties hereto under the Prior Agreements and in connection with the Joint
Venture. The parties now each desire to enter into this Agreement according to
the terms set forth herein, including, without limitation, the share exchange
between Blonder Tongue and BTT whereby Blonder Tongue transfers the BTT Shares
to BTT and BTT transfers the Blonder Shares to Blonder Tongue, the dissolution
of the Joint Venture, and the termination of the Prior Agreements, in order to
settle any and all differences between or among the parties arising out of the
operation of BTT, the Joint Venture, the Prior Agreements or otherwise, all as
more fully set forth below.
NOW THEREFORE, intend to be legally bound, the parties agree as follows:
1. Share Exchange.
(a) BTT Shares. In consideration of BTT's performance of the
obligations set forth in Section 1(b) below, Blonder Tongue hereby sells,
assigns and transfers to BTT, the BTT Shares. Blonder Tongue represents and
warrants that the BTT Shares are free and clear of any and all liens or
encumbrances granted, created or permitted by Blonder Tongue.
(b) Blonder Shares. In consideration of Blonder Tongue's performance
of the obligations set forth in Section 1(a) above, BTT hereby sells,
assigns and transfers to Blonder Tongue, the Blonder Shares, and agrees to
deliver to Blonder Tongue, such Blonder Shares duly endorsed or together
with an assignment separate from certificate, duly endorsed to Blonder
Tongue. BTT represents and warrants that the Blonder Shares are free and
clear of any and all liens and encumbrances granted, created or permitted,
by BTT, except for liens in favor of Blonder Tongue.
(c) Investment Intent. Each of BTT and Blonder Tongue hereby
represents to the other that it is acquiring the securities being acquired
by it hereunder for investment purposes only and not with a view to the
distribution or resale thereof.
(d) BTT Second Quarter Losses. BTT hereby acknowledges and agrees that
the losses incurred by BTT during the second calendar quarter of 2006 shall
not exceed $65,000 and that any loss in excess of such amount for the
second calendar quarter of 2006 shall be deducted from the Equipment Credit
(as defined below).
(e) Audit Rights. For a period of five (5) years following the date of
this Agreement, Blonder Tongue shall have the right, with respect to any
fiscal year, or part thereof, for any time period prior to and including
June 30, 2006 (the "Audit Period"), to require that BTT engage independent
certified public accountants registered and in good standing with the
Public Company Accounting Oversight Board and acceptable to Blonder Tongue
in its reasonable discretion (i) to prepare audited financial statements
for each fiscal year which includes any part of the Audit Period, prepared
in accordance with generally accepted accounting principals then in effect
in the United States, within sixty (60) days of the end of such fiscal year
and (ii) to issue an opinion thereon, and further provided, that Blonder
Tongue shall have the right to include such financial statements and
opinion (collectively, the "Financial Statements") in periodic or other
filings required to be filed by Blonder Tongue with the Securities Exchange
Commission. BTT shall be responsible for and shall pay costs up to $10,000
incurred in connection with any audit or the preparation of any Financial
Statements requested by Blonder Tongue for any time period within the Audit
Period. Any cost exceeding $10,000 related to such requested audit or
preparation of Financial Statements shall be paid by Blonder Tongue.
2. Brickell Bay Transfer. The parties hereby acknowledge, that immediately
prior to the execution of this Agreement, Blonder Tongue, BSS, DB and TB entered
into that certain Purchase and Transfer Agreement ("Transfer Agreement")
pursuant to which Blonder Tongue is transferring to BSS its fifty percent (50%)
ownership interest in the Service Agreement (as defined in the Transfer
Agreement) related to the telephone system at The Club at Brickell Bay (the
"Brickell Bay Interest") in exchange for the payment by BSS to Blonder Tongue in
the amount of One Hundred and Fifty Thousand Dollars ($150,000) (the "Brickell
Purchase Price"), pursuant to the terms and conditions contained in the Transfer
Agreement. The parties hereby acknowledge that any amount applied by Blonder
Tongue to offset the Brickell Purchase Price under Sections 3(e) and 6(b) below,
shall be deemed to be a payment in accordance with the terms of the Transfer
Agreement. BSS, BTT and Blonder Tongue hereby agree that, effective as of
January 1, 2007, the Brickell Purchase Price shall be deemed to be paid in full
pursuant to the terms of the Transfer Agreement, notwithstanding any balance of
the Brickell Purchase Price then due and owing to Blonder Tongue.
3. Equipment Purchase Credit. Blonder Tongue hereby grants BTT a
non-transferable equipment purchase credit in the aggregate amount of Four
Hundred Thousand Dollars ($400,000) (the "Equipment Credit"), subject to Section
1(d) above and pursuant to the following conditions:
(a) Calculation. The Equipment Credit will be calculated and applied
based upon the equipment pricing list attached hereto as Exhibit A. The
Equipment Credit can be applied solely to the actual purchase price of the
equipment ordered and cannot be used to credit any applicable taxes,
shipping costs, insurance or other fees related to such equipment order
(collectively, the "Taxes and Fees"). All Taxes and Fees related to any
purchase order must be paid, in cash, prior to Blonder Tongue shipping any
of the equipment ordered. At BTT's request, the Equipment Credit will be
applied by Blonder Tongue to purchase orders received from RIG, BSS,
Broadstar Communications, LLC, a Delaware limited liability company
("Broadstar Communications"), TB or DB (each, an "Authorized Designee").
(b) Telephony Products. Two-thirds (2/3rds) of the Equipment Credit
($270,000) shall be applicable solely to purchase orders for telephony
products which are in Blonder Tongue's inventory as of the date of any such
purchase order (the "Telephony Credit"). The Telephony Credit shall expire
on December 31, 2006 and any unused Telephony Credit on such date shall be
forfeited by BTT. Any purchase order for telephony products received by
Blonder Tongue after December 31, 2006 or exceeding the Telephony Credit
shall not be eligible for the Telephony Credit and the party placing such
purchase order shall be required to pay the purchase price and all
applicable Taxes and Fees for such telephony products pursuant to Blonder
Tongue's standard payment terms.
(c) Video and Data Products. One-third (1/3rd) of the Equipment Credit
($130,000) shall be applicable to purchase orders for video or data
products or additional telephony products after the Telephony Credit is
exhausted or has expired (the "Video/Data Credit"). Blonder Tongue and BTT
shall mutually agree upon the allocation of the Video/Data Credit to be
applied to purchase orders for video products and data products. The
Video/Data Credit shall expire on December 31, 2006 and any unused
Video/Data Credit on such date shall be forfeited by BTT. Any purchase
order for video, data or telephony products received by Blonder Tongue
after December 31, 2006 or exceeding the Video/Data Credit shall not be
eligible for the Video/Data Credit and the party placing such purchase
order shall be required to pay the purchase price and all applicable Taxes
and Fees for such video, data or telephony products pursuant to Blonder
Tongue's standard payment terms.
(d) Leasing. At BTT's election, BTT, or its Authorized Designee, shall
have the right to lease, through a third-party leasing company selected by
BTT ("Leasing Company"), some or all of the telephony, video or data
products otherwise eligible to be ordered by BTT under the Equipment Credit
(the "Leased Equipment"). In such event, subject to the provisions of
Section 3(e)(2) below, within fifteen (15) days following receipt by
Blonder Tongue from the Leasing Company of full payment for the Leased
Equipment (the "Lease Payment"), Blonder Tongue shall pay to BTT, or its
Authorized Designee, an amount equal to the Lease Payment received by
Blonder Tongue, minus any applicable Taxes and Fees, up to the Telephony
Credit or Video/Data Credit, as applicable.
(e) Brickell Purchase Price.
(1) Until such time as the Brickell Purchase Price is paid in
full by BSS to Blonder Tongue, for each purchase order received by
Blonder Tongue and otherwise eligible for the Equipment Credit, BTT,
or its Authorized Designee, as applicable, shall pre-pay to Blonder
Tongue (i) an amount equal to forty percent (40%) of the total
purchase price of the equipment ordered pursuant to such purchase
order (each, a "40% Payment") and (ii) all applicable Taxes and Fees.
Blonder Tongue shall have no obligation to ship any equipment ordered
under any such purchase order to BTT, or its Authorized Designee, as
applicable, until receipt of the 40% Payment and all applicable Taxes
and Fees related to such purchase order. Blonder Tongue shall have the
right to apply each such 40% Payment to offset the balance of the
Brickell Purchase Price then owing to Blonder Tongue.
(2) In the event BTT elects to lease some or all of the
telephony, video or data products as provided in Section 3(d) above,
until such time as the Brickell Purchase Price is paid in full by BSS
to Blonder Tongue, Blonder Tongue shall have the right to withhold
forty percent (40%) of each Net Lease Payment received from the
Leasing Company (the "40% Holdback"), and shall, notwithstanding the
provisions of Section 3(d) above, be obligated, within fifteen (15)
days following receipt by Blonder Tongue from the Leasing Company of
the Lease Payment, to pay to BTT, or its Authorized Designee, an
amount equal to sixty percent (60%) the Net Lease Payment received by
Blonder Tongue, up to the Telephony Credit or Video/Data Credit, as
applicable. Blonder Tongue shall have the right to apply each such 40%
Holdback to offset the balance of the Brickell Purchase Price then
owing to Blonder Tongue. The term "Net Lease Payment" shall mean the
Lease Payment minus all applicable Taxes and Fees.
(f) Use of Equipment. In no event shall BTT, or any Authorized
Designee, have the right to resell any or all of the telephony, video or
data products received from Blonder Tongue under the Equipment Credit,
provided, however, if any such equipment is installed in a telephony, video
or data system owned by BTT or an Authorized Designee and is subsequently
sold, such sale shall not violate this provision.
4. Intellectual Property License Agreement. BTT and Blonder Tongue are
parties to that certain Intellectual Property License Agreement dated as of
March 26, 2003 ("License Agreement") pursuant to which Blonder Tongue granted
BTT a non-exclusive, revocable-at-will license ("License") to use certain of
Blonder Tongue's intellectual property, including, without limitation, the names
"Blonder," "Blonder Tongue," or "BT" (the "Intellectual Property"). BTT hereby
acknowledges and agrees that this Section 4 shall be deemed to be a notice from
Blonder Tongue of revocation of the License pursuant to Section 2(a) of the
License Agreement, properly delivered in accordance with Section 8 of the
License Agreement, and that BTT shall cease using the Intellectual Property in
strict accordance with the terms and conditions of the License Agreement,
including the obligation to change its name within seventy-five (75) days from
the date of this notice, provided, however, in no event shall BTT use any of the
Intellectual Property beyond ninety (90) days from the date of this Agreement.
5. Termination of Agreements. Each of the parties hereby agrees to the
termination, as of the date hereof, of each of the Prior Agreements to which it
is a party without any further action required on the part of any party; and
each of the Prior Agreements, and all of the terms and conditions contained in
each such Prior Agreement shall, as of the date hereof, be of no further force
or effect, including, without limitation, any provision containing a restrictive
covenant or obligation which, by its terms, would otherwise survive termination
of such Prior Agreement, provided, however, the provisions of Section 6,
Confidentiality, of the JV Agreement, and the provisions of Section 7,
Confidentiality, of the Royalty Agreement (together, the "Surviving Provisions")
shall survive such termination and shall continue in full force and effect in
accordance with their respective terms.
6. Additional Agreements.
(a) Dissolution of Joint Venture. The Joint Venture among Blonder
Tongue, on the one hand, and TB and DB, on the other hand, is hereby
dissolved.
(b) Right of First Refusal. For a period of three (3) years from the
date hereof, BTT hereby agrees to provide Blonder Tongue the reasonable
opportunity to quote on any requirements of BTT or its customers for
telephony equipment at the same time as quotations are solicited from other
vendors and to meet any pricing offered to BTT by other vendors for
equipment of comparable quality and performance.
(c) Current Open Invoices. The parties hereto acknowledge and agree
that, as of the date of this Agreement, there are unpaid invoices owing to
Blonder Tongue by Broadstar Communications, an affiliate of BTT, in the
amount of Fifty One Thousand Dollars ($51,000) (the "Account Receivable").
BTT hereby agrees to pay, in full, the Account Receivable, within ten (10)
days following the execution of this Agreement (the "AR Payment"). Blonder
Tongue shall (i) apply the Account Receivable against the Equipment Credit
as follows: $47,000 against the Telephony Credit and $4,000 against the
Video/Data Credit and (ii) apply the AR Payment to offset the balance of
the Brickell Purchase Price due and owing to Blonder Tongue. Upon receipt
of the AR Payment, Blonder Tongue will ship the telephony equipment
previously ordered by Broadstar Communications under purchase orders open
as of the date of this Agreement, up to $34,000 (the "Open Orders"). The
full purchase price of the Open Orders, excluding Taxes and Fees, shall
apply to the Telephony Credit and Broadstar Communications shall not be
required to pre-pay the 40% Payment related to such Open Orders.
Notwithstanding any other provision of this Agreement, Blonder Tongue shall
have no obligation to ship any equipment ordered under any purchase order
from BTT or any Authorized Designee until Blonder Tongue has received
payment of the Account Receivable.
(d) Clayton Park. The parties hereby acknowledge that the agreement
between BSS and the owner of that certain property commonly known as
Clayton Park (the "Clayton Park ROE Agreement"), pursuant to which the
owner had granted BSS the right to install and operate a telephone system
("System") on such property, has previously been terminated and that in
connection with such termination, BSS uninstalled and removed from the
property certain telephony equipment valued at Fourteen Thousand Dollars
($14,000) (the "Clayton Park Equipment"), and that the System was a JV Deal
(as defined in the JV Agreement). Blonder Tongue and BTT hereby agree that
(i) BSS shall retain, and is hereby granted ownership of, all of the
Clayton Park Equipment and (ii) Blonder Tongue shall apply one half of the
value of the Clayton Park Equipment ($7,000) against the Telephony Credit.
(e) Provident Media. The parties hereby acknowledge that, pursuant to
that certain Local Service Affiliate Agreement between BTT and Provident
Media - Providence on the Park, a Texas limited liability company
("Provident Media"), dated as of May 20, 2005 (the "LSA"), BTT is obligated
to refund to Provident Media an amount equal to Forty Thousand, Six Hundred
and Seventy-Seven Dollars ($40,677), representing 110% of the original
purchase price of the equipment purchased in connection with the LSA (the
"Provident Media Equipment"), minus (A) all commissions and (B) any and all
T1 penalty charges (the "Refund Amount"). Blonder Tongue and BTT hereby
agree that (i) Blonder Tongue shall pay to Provident Media, on behalf of
BTT, the Refund Amount, (ii) Blonder Tongue shall indemnify BTT for any
damages or losses incurred by BTT related to any claim by Provident Media
against BTT in connection with the refund of purchase price required
pursuant to the LSA, (iii) Blonder Tongue shall have the right to receive
and take ownership to the Provident Media Equipment, and (iv) BTT shall
order such Provident Media Equipment pursuant to a purchase order at the
prices listed in Exhibit A, attached hereto, and such shall apply against
the Telephony Credit pursuant to the provisions of Section 3 above.
7. Mutual General Release.
(a) Subject to any claims arising out of or from a breach of this
Agreement, Blonder Tongue does hereby irrevocably and unconditionally
remise, release and forever discharge each of the Bell Entities and their
respective predecessors, successors, past and present affiliates, divisions
and subsidiaries, stockholders, partners, directors, officers, agents and
employees, from any and all manner of action, causes of action, suits,
debts, accounts, contracts, agreements, controversies, judgments, damages,
claims, liabilities, and demands of any nature whatsoever whether known,
unknown, fixed or contingent (collectively, the "Blonder Tongue Claims"),
which Blonder Tongue, or any one claiming through, by or on behalf of
Blonder Tongue, ever had, now has, or hereafter can, may or will have, for,
upon or by reason of (i) Blonder Tongue's purchase, ownership, or sale and
transfer of the BTT Shares, (ii) the Joint Venture, or (iii) any or all of
the Prior Agreements, excluding Blonder Tongue Claims related to, or
arising under, any Surviving Provision of any Prior Agreement.
(b) Subject to any claims arising out of or from a breach of this
Agreement, each of the Bell Entities does hereby irrevocably and
unconditionally remise, release and forever discharge Blonder Tongue and
its predecessors, successors, past and present affiliates, divisions and
subsidiaries, stockholders, partners, directors, officers, agents and
employees, from any and all manner of action, causes of action, suits,
debts, accounts, contracts, agreements, controversies, judgments, damages,
claims, liabilities, and demands of any nature whatsoever whether known,
unknown, fixed or contingent (collectively, the "Bell Claims"), which any
Bell Entity, or any one claiming through, by or on behalf of a Bell Entity,
ever had, now has, or hereafter can, may or will have, for, upon or by
reason of (i) the purchase, ownership, or sale and transfer of the Blonder
Shares, (ii) the Joint Venture, or (iii) any or all of the Prior
Agreements, excluding Bell Claims related to, or arising under, any
Surviving Provision of any Prior Agreement.
8. General Provisions. Each party to this Agreement agrees to perform any
further acts and execute and deliver any documents that may be reasonably
necessary to carry out the provisions of this Agreement. Time is of the essence
as to the performance of all obligations under this Agreement. The provisions of
this Agreement may be waived, altered, amended, or repealed, in whole or in
part, only on the written consent of all parties to this Agreement. This
Agreement shall be binding upon and shall inure to the benefit of any and all
successors and assigns of the parties hereto. This Agreement constitutes the
entire agreement and understanding of the parties on the subject matter hereof
and supersedes any and all prior and contemporaneous agreements and
understandings of the parties. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of New Jersey. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SIGNATURES FOLLOW ON THE NEXT PAGE.
IN WITNESS WHEREOF, the undersigned have executed this Share Exchange and
Settlement Agreement on the date first above written.
Blonder Tongue Laboratories, Inc. Blonder Tongue Telephone, LLC
By: /s/ Eric S. Skolnik By: /s/ Douglas Bell, under POA
Eric S. Skolnik, Senior Vice President, H. Tyler Bell, Managing Member,
Chief Financial Officer acting by and through his
Attorney-in-Fact, Douglas Bell,
under Power of Attorney
Dated June 12, 2006
Resource Investment Group, LLC Broadstar South, LLC
By: /s/ Douglas Bell By: /s/ Douglas Bell
Douglas Bell, Manager Douglas Bell, Manager
/s/ Douglas Bell /s/ Douglas Bell, under POA
Douglas Bell, individually H. Tyler Bell, individually,
acting by and through his
Attorney-in-Fact, Douglas Bell,
under Power of Attorney
dated June 12, 2006
Blonder Tongue Laboratories (BDRL)
Filed: 7 Jul 06, 12:00am