Exhibit 99.1
Letter Agreement between Circuit Research Labs, Inc.
and Harman Acquisition Corp. dated as of March 27, 2003.
[Circuit Research Labs, Inc. letterhead]
March 27, 2003
Xx. Xxxxx Xxxxxxxx
CFO
Xxxxxx International Industries, Inc.
8500 Balboa BI.
Northridge, CA. 91329
Dear Xxxxx,
I am writing to confirm our mutual understanding with respect to a proposed
restructuring of the outstanding debt of Circuit Research Labs, Inc. ("CRLI")
held by Harman Acquisition Corp. ("HAC"), a wholly owned subsidiary of Xxxxxx
International Industries, Inc. ("Harman"). The principal terms of the proposed
restructuring are as follows:
1. CRLI will issue common stock for cash consideration in an amount equal to
$1.5 million prior to April 30, 2003.
2. CRLI will make a cash principal payment on its outstanding debt owed to HAC
in an amount of $1 million prior to April 30, 2003.
3. HAC will agree to exchange $3.5 million principal amount of the debt owed
to HAC by CRLI and CRL Systems, Inc., and its outstanding warrant to purchase
shares of CRLI common stock, for a number of shares of CRLI common stock such
that HAC will own 19% of the then-outstanding shares of CRLI common stock on a
fully-diluted basis after giving effect to the issuance of equity securities by
CRLI referred to in paragraph 1 above. The shares of CRLI common stock issued
to HAC would be subject to (i) a registration rights agreement with terms
similar to the registration rights granted to HAC in the warrant, including
multiple demand rights, and (ii) anti-dilution protection for issuances of
equity securities following the restructuring.
4. On April 15, 2003 unpaid interest will be equal to $578,650. This unpaid
interest shall be added to the total principal due (after receipt of the $1
million in principal and conversion of $3.5 million of debt to equity) of
$3,982,000 for a total amount due of $4,560,650.
5. HAC will agree that the remaining $4,560,650 of debt owed to it by CRLI
will be evidenced by a new note that (i) renews and extends (but does not
extinguish) the current indebtedness owing HAC and (ii) reduces the interest
rate to a floating rate equal to the prime rate in effect from time to time plus
1.5%, payable monthly in arrears. This debt would continue to be secured on the
same terms. Mandatory principal payments would be made as follows, and
otherwise as required by the definitive agreements referred to below:
Orban
0000 Xxxxxxxx Xx. Xxx Xxxxxxx, XX XXX 00000
Tel 0(000)000-0000 Fax 0(000)000-0000
xxx.xxxxx.xxx
CRL Systems Inc.
0000 X. Xxxx Xxxxx Xxxxx, XX XXX 00000
Tel 0(000)000-0000 Fax 0(000)000-0000
xxx.xxxxxxxxxx.xxx
DLI-5752097v5
Circuit Research Labs, Inc.
Debt Restructure Agreement
Page 2.
Applicable Anniversary of Restructuring Amount
--------------------------------------- ----------
First $ 250,000
Second $ 250,000
Third $ 500,000
Fourth $ 500,000
Fifth Remaining Balance Plus any remaining
interest.
6. In connection with the amendment of the existing debt as contemplated by
paragraph 4, HAC will agree to permit CRLI to retain the cash raised by the sale
of its common stock as contemplated by paragraph 1, in excess of the payment to
HAC as contemplated by paragraph 2.
7. CRLI and HAC each agree that the foregoing terms of the proposed
restructuring do not constitute a legal obligation on either party to complete
the proposed restructuring and that the legal obligations of the parties hereto
with respect to the proposed restructuring will arise only upon the execution of
definitive agreements having such terms as are acceptable to the parties hereto,
which terms will include, without limitation, a condition that CRLI complete a
capital transaction as contemplated by paragraph 1 within the time period set
forth therein. CRLI and HAC also acknowledge and agree that any definitive
agreements will be subject to the prior approval to the Boards of Directors of
each of CRLI and HAC.
8. If payment set forth in paragraph 2 is not received prior to April 30,
2003, this letter shall be null and void.
Please acknowledge this agreement-in-principle by signing as indicated below.
CIRCUIT RESEARCH LABS, INC.
XXXXX / CRL SYSTEMS, INC.
By: /s/ X. Xxxxxx Xxxxxxxxxxx
-------------------------
X. Xxxxxx Xxxxxxxxxxx
President, CEO, Chairman
Accepted this date:
HARMAN ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxxx
------------------
Xxxxx Xxxxxxxx, Secretary
Orban
0000 Xxxxxxxx Xx. Xxx Xxxxxxx, XX XXX 00000
Tel 0(000)000-0000 Fax 0(000)000-0000
xxx.xxxxx.xxx
CRL Systems Inc.
0000 X. Xxxx Xxxxx Xxxxx, XX XXX 00000
Tel 0(000)000-0000 Fax 0(000)000-0000
xxx.xxxxxxxxxx.xxx
DLI-5752097v5
