UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 25, 2010
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TEL-INSTRUMENT ELECTRONICS CORP
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(Exact name of registrant as specified in its charter)
New Jersey 33-18978 22-1441806
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
728 Garden St
Carlstadt, New Jersey 07072 (201) 933-1600
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(Address of principal (Registrant's telephone number,
executive offices) including area code)
Not Applicable
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17CFR 240. 14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17CFR 240. 14e-4(c))
Section 2 - Financial Information
Item 2.03. Creation of a Direct Financial Obligation
As of February 22, 2010 the Company received funding for $250,000 in
exchange for issuing Subordinated Notes to two Executive Officers in the amount
of $125,000. These notes are subordinate to the bank credit agreement discussed
below. The notes becomes due April 1, 2011 with an interest rate of 1% per
month, payable on a monthly basis within 14 days of the end of each month. The
holders signed a modification to these notes that interest will only be paid to
the extent that these payments are allowed pursuant to the terms of the
Company's Credit Agreement with its bank. This modification is being made to
conform to Section 7.18 of the revised Credit Agreement between Bank of America
and Tel Instrument Electronics Corp. This Modification Agreement precludes the
payment of monthly interest to either Holder unless the Company's ratio of Net
Cash Flow to Debt Service expense exceeds a 1.2 ratio as defined in the Credit
Agreement. The Holders agree that the Company's failure to pay the monthly
interest amounts pursuant to the terms of the February 22, 2010 Subordinated
Notes will not constitute an event of default on the Notes if the Company is
precluded from making these payments pursuant to the limitations included in the
revised Credit Agreement. Copies of the subordinated notes are attached as
Exhibits 10.1 and 10.2, and the Modification Agreement as Exhibit 10.3 and are
incorporated herein by reference.
The Notes also included default and acceleration provisions.
As of March 1, 2010 the Company signed the Third Loan Modification
Agreement with Bank of America. The Company has a line of credit which expires
October 30, 2010. The agreement includes a borrowing base calculation tied to
accounts receivable and inventories with a maximum availability of $1,000,000.
Interest on any outstanding balances is payable monthly at an annual interest
rate that is two percentage points (2%) above the Bank's Prime rate. The line is
collateralized by substantially all of the assets of the Company. The credit
facility requires the Company to maintain certain financial covenants. A copy of
the Third Loan Modification Agreement is attached as Exhibit 10.4 and
incorporated herein by reference.
Section 9 - Financial Statements and Exhibits
Item 9.01. Exhibits
10.1 Subordinated Note between the Company and Harold K. Fletcher
10.2 Subordinated Note between the Company and Jeffrey C. O'Hara
10.3 Modification to Subordinated Notes
10.4 Third Loan Modification with Bank of America
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
TEL-INSTRUMENT ELECTRONICS CORP
Date: March 25, 2010 By: /s/ Harold K. Fletcher
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Harold K. Fletcher
CEO
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