Modification Agreement to Subordinated Notes between Tel-Instrument Electronics Corp. and Note Holders

Summary

This agreement modifies the terms of $125,000 subordinated notes held by Harold K. Fletcher and Jeffrey C. O'Hara with Tel-Instrument Electronics Corp. The modification states that interest on the notes will only be paid if allowed under the company's revised Credit Agreement with Bank of America, specifically requiring a minimum cash flow to debt service ratio. If the company cannot pay interest due to these restrictions, it will not be considered a default under the notes.

EX-10.3 4 telinstrumentexhib103-032510.txt MODIFICATION TO SUBORDINATED NOTES EXHIBIT 10.3 March 4, 2010 MODIFICATION TO FEBRUARY 22, 2010 SUBORDINATED NOTE This modification to the $125,000 subordinated note agreements each individually executed by Harold K. Fletcher and Jeffrey C. O'Hara ("Holder's) on February 22, 2010 modifies the terms for payment of interest on the notes. The Holders' hereby agree that interest will only be paid on these notes to the extent that these payments are allowed pursuant to the terms of Tel-Instrument Electronics Corp's revised Credit Agreement dated March 4, 2010. 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 precludes the payment of monthly interest to either Holder unless Tel's ratio of Net cash Flow to Debt service expense exceeds a 1.2 ratio as defined in the Credit Agreement. The Holder's agree that the Company's failure to pay the monthly interest amounts pursuant to the terms of the February 22, 2010 Subordinated Note will not constitute an event of default on this Note if the Company is precluded from making these payments pursuant to the limitations included in the revised Credit Agreement. IN WITNESS WHEREOF, Tel-Instrument Electronics Corp. has caused this Note modification to be executed in its corporate name by the signature of its Chief Accounting Officer. Holder Tel-Instrument Electronics Corp. By: /s/ Harold K. Fletcher By: /s/ Joseph P. Macaluso ------------------------------- ------------------------------- Harold K. Fletcher Joseph P. Macaluso Chief Accounting Officer Holder By: /s/ Jeffrey C. O'Hara ------------------------------- Jeffrey C. O'Hara