Exhibit 10.1
 
SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 8, 2012, by
and between Tel-Instrument Electronics Corp., a New Jersey corporation with its
headquarters located at One Branca Road, East Rutherford, NJ 07073 (the
“Company”), and the subscriber identified on the signature page hereto (the
“Subscriber”).

WHEREAS, the Company and Subscriber are executing and delivering this Agreement
in reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2) and/or Regulation D (“Regulation D”) promulgated by
the United States Securities and Exchange Commission (the “Commission”) under
the Securities Act of 1933, as amended (the “Securities Act”); and

WHEREAS, the parties hereto desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Subscriber, and
Subscriber shall purchase, in the aggregate, that number of shares of common
stock, par value $.10 per share, of the Company (the “Common Stock”)  as is set
forth on the signature page hereto (the “Shares”) at an aggregate purchase price
(the “Purchase Price”) of Three and 35/100 United States Dollars (US$3.35) (the
“Securities”).

NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement, the Company and Subscriber hereby agree as follows:

1.           Purchase and Sale.   Upon the terms and subject to the conditions
set forth in this Agreement, the Company hereby agrees to sell, assign, transfer
and deliver to Subscriber, and Subscriber hereby agrees to purchase and accept
delivery from the Company, the Shares free of all liens, pledges, mortgages,
security interests, charges, restrictions, adverse claims or other encumbrances
of any kind or nature whatsoever (“Encumbrances”), for the consideration
specified herein (such consideration, on a per share basis, the “Share
Price”).  The Subscriber shall have the right to participate in any issuance by
the Company of any warrants occurring less than six months after the purchase
and sale of the Common Stock hereunder (other than an Exempt Issuance as defined
below), related to any prospective equity or indebtedness transaction, or a
combination thereof (a “Subsequent Financing”), in an amount that would allow
the Subscriber to maintain its percentage of beneficial ownership of the
then-outstanding shares of the Common Stock on a fully-diluted basis (the
“Participation Amount”), on the same terms, conditions and price provided for in
the Subsequent Financing. “Exempt Issuance” means the issuance of: (i) warrants
issued in the ordinary course of the business to an existing lender that is not
related to a subsequent financing.

2.           Subscriber Representations and Warranties.  Subscriber hereby
represents and warrants to and agrees with the Company that:

(a)           Standing of Subscriber.  If Subscriber is an entity, such
Subscriber is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation.  If Subscriber is a natural person,
such Subscriber is not a minor and has the legal capacity to enter into this
Agreement;
 
 
 

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(b)           Authorization and Power.  Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Shares.  The execution, delivery and performance of this Agreement by Subscriber
and, if Subscriber is an entity, the consummation by Subscriber of the
transactions contemplated hereby have been duly authorized by all necessary
company action, and no further consent or authorization of Subscriber, its board
of directors or similar governing body, or stockholders is required, as
applicable.  This Agreement has been duly authorized, executed and delivered by
Subscriber and constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of Subscriber, enforceable against Subscriber in
accordance with the terms thereof;

(c)           No Conflicts.  If Subscriber is an entity, the execution, delivery
and performance of this Agreement and the consummation by Subscriber of the
transactions contemplated hereby do not and will not result in a violation of
Subscriber’s charter documents, bylaws or other organizational documents, as
applicable;

(d)           Information on Subscriber.  Such Subscriber is an “accredited
investor,” as such term is defined in Rule 501(a) of Regulation D promulgated by
the Commission under the Securities Act and affirmed by Subscriber in the
completed Purchaser Questionnaire attached hereto as Exhibit A, is experienced
in investments and business matters, has made investments of a speculative
nature and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment.  Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a partial or complete loss thereof.  Subscriber is not required to be
registered as a broker-dealer under Section 15 of the Securities Exchange Act of
1934, as amended;

(e)           Purchase of Shares.  Subscriber will purchase the Shares for its
own account for investment and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof in violation of the
Securities Act or any applicable state securities law, and has no direct or
indirect arrangement or understandings with any other person or entity to
distribute or regarding the distribution of such Shares;

(f)           Compliance with Securities Act.   Subscriber understands and
agrees that the Shares are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities laws by reason of
their issuance in a transaction that does not require registration under the
Securities Act, and that such Shares must be held indefinitely unless a
subsequent disposition is registered under the Securities Act or any applicable
state securities laws or is exempt from such registration;
 
(g)           Legend.  The Shares shall bear the following or similar legend:
 
“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (REASONABLY ACCEPTABLE TO THE COMPANY), IN AN
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”
 
 
 

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(i)           Communication of Offer.  Subscriber has a preexisting personal or
business relationship with the Company or one or more of its directors, officers
or control persons, and the offer to sell the Shares was directly communicated
to Subscriber by the Company.  At no time was Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer;

(i)           No Governmental Endorsement. Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Shares or the
suitability of the investment in the Shares, nor have such authorities passed
upon or endorsed the merits of the offering of the Shares;

(j)           Receipt of Information.  Subscriber believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Shares.  Subscriber further represents that through its
representatives it has had an opportunity to ask questions and receive answers
from the Company; and

(k)           No Market Manipulation.  Subscriber and Subscriber’s affiliates
have not taken, and will not take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock, to facilitate the sale or resale
of the Shares or affect the price at which the Shares may be issued or resold.

3.           Company Representations and Warranties.  The Company represents and
warrants to, and agrees with, Subscriber that:

(a)           Due Incorporation.  The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;

(b)           Authority; Enforceability.  This Agreement has been duly
authorized, executed and delivered by the Company and is the valid and binding
agreement of the Company, enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally, or principles of
equity.  The Company has full corporate power and authority necessary to enter
into and deliver this Agreement and to perform its obligations thereunder;

(c)           Capitalization and Additional Issuances.  The Company has
authorized four million (4,000,000) shares of the Common Stock.  As of the date
hereof, there are 2,795,549 shares of the Common Stock issued and
outstanding.  All of the outstanding shares of the Common Stock are duly
authorized and validly issued, fully paid and non-assessable and are not (and
will not be) subject to preemptive or similar rights affecting the Common
Stock.  As of the date hereof, except as described on Schedule 3(c) hereto,
there are no (i) contracts to which the Company is a party obligating the
Company to accelerate the vesting of any company equity award as a result of the
transactions contemplated by this Agreement (whether alone or upon the
occurrence of any additional or subsequent events), (ii) outstanding securities
of the Company convertible into or exchangeable for shares of the Common Stock,
(iii) outstanding options, warrants or other agreements or commitments to
acquire from the Company, or obligations of the Company to issue, shares of
capital stock of (or securities convertible into or exchangeable for shares of
capital stock of) the Company or (iv) restricted shares, restricted stock units,
stock appreciation rights, performance shares, profit participation rights,
contingent value rights, “phantom” stock or similar securities or rights that
are derivative of, or provide economic benefits based, directly or indirectly,
on the value or price of, any shares of capital stock of the Company, in each
case that have been issued by the Company (the items in clauses (i), (ii) and
(iii), together with the capital stock of the Company, being referred to
collectively as “Company Securities”).  There are no outstanding contracts
requiring the Company to repurchase, redeem or otherwise acquire any Company
Securities and the Company is not a party to any voting agreement with respect
to any Company Securities;
 
 
 

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(d)           SEC Filings; Financial Statements; Absence of Undisclosed
Liabilities.

                                           (i)           SEC Filings.  The
Company has filed with the SEC all registration statements, prospectuses,
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated by reference) required to be filed or
furnished by it with the SEC since March 31, 2012 (the “Company SEC Documents”)
and such Company SEC Documents when filed were true, correct and complete in all
material respects.  As of their respective filing dates (or, if amended or
superseded by a subsequent filing, as of the date of the last such amendment or
superseding filing prior to the date hereof), each of the Company SEC Documents
complied in all material respects with the applicable requirements of the
Sarbanes-Oxley Act of 2002 (including the rules and regulations promulgated
thereunder) and the Exchange Act, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents and did not, at the time it
was filed (or, if amended, at the time (and taking into account the content) of
such amendment), contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading;

                                           (ii)           Financial
Statements.  Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Documents: (i)
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto as of their respective dates; (ii)
was prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and, in the case of
unaudited interim financial statements, as may be permitted by the SEC for
Quarterly Reports on Form 10-Q); and (iii) fairly presented in all material
respects the consolidated financial position of the Company at the respective
dates thereof and the consolidated results of the Company’s operations and cash
flows for the periods indicated therein, subject, in the case of unaudited
interim financial statements, to normal and year-end audit adjustments as
permitted by GAAP and the applicable rules and regulations of the SEC.  As of
the date hereof, BDO, USA, LLP has not resigned or been dismissed as independent
public accountants of the Company as a result of or in connection with any
disagreements with the Company on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure;

                                           (iii)           No Undisclosed
Liabilities.  Neither the Company nor any of its subsidiaries has any liability,
indebtedness or obligation of any kind (whether accrued, absolute, contingent,
matured, unmatured or otherwise, and whether or not required to be recorded or
reflected on a balance sheet under GAAP) (“Liability”) except for Liabilities
that (a) are reflected or recorded on the Company’s most recent balance sheet
included in the Company SEC Documents (including in the notes thereto but only
to the extent it is reasonably apparent that the disclosure in such notes is of
a Liability required to be reflected on a balance sheet prepared in accordance
with GAAP) contained in the Company SEC Documents or (b) are current Liabilities
(within the meaning of GAAP) which were incurred since the date of such balance
sheet in the ordinary course of business consistent with past practice;
 
 
 

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(e)           Consents.  No consent, approval, authorization or order of any
court, governmental agency or body having jurisdiction over the Company or of
any other person is required for the execution by the Company of this Agreement
and compliance and performance by the Company of its obligations hereunder,
including, without limitation, the issuance of Shares and sale of the Shares;

(f)           No Violation or Conflict.  Neither the issuance and sale of the
Shares nor the performance of the Company’s obligations under this Agreement
will:

(i)           violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (a) the charter
or bylaws of the Company or (b) any decree, judgment, order or determination
applicable to the Company of any court, governmental agency or body having
jurisdiction over the Company or over the properties or assets of the Company or
(c) any contract, agreement, instrument or undertaking to which the Company or
any subsidiary is a party; or

(ii)           result in the creation or imposition of any lien, charge or
encumbrance upon the Shares except in favor of Subscriber as described herein;

(g)           The Shares.  Upon issuance, the Shares:

(i)           shall be free and clear of any security interests, liens, claims
or other Encumbrances, subject only to restrictions upon transfer under the
Securities Act and any applicable state securities laws;

(ii)           shall have been duly and validly issued, fully paid and
non-assessable; and

(iii)           will not subject the holders thereof to personal liability by
reason of being such holders;

(h)           Litigation.  There is no pending or, to the knowledge of the
Company, threatened action, suit, proceeding or investigation before or by any
court, governmental agency or body having jurisdiction over the Company
including, without limitation, any such that would affect the execution by the
Company or the complete and timely performance by the Company of its obligations
under this Agreement.  Except as disclosed in Company SEC Documents, the Company
has not, since March 31, 2012, been a party to any material litigation,
arbitration or other proceeding;

(i)           No General Solicitation.  Neither the Company, nor any of its
affiliates, nor any person or entity acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or sale
of the Shares;

(j)           Investment Company. The Company is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended; and

(k)           Listing and Maintenance Requirements.  The Company is, except as
disclosed on Schedule 3(k) hereto, in compliance with the listing and
maintenance requirements for continued listing or quotation of the Company
Common Stock on the trading market on which the Company Common Stock is
currently listed or quoted.  The issuance and sale of the Shares under this
Agreement does not contravene the rules and regulations of the trading market on
which the Company Common Stock is currently listed or quoted, and no approval of
the stockholders of the Company is required for the Company to issue and deliver
to the Subscribers the Shares contemplated by this Agreement.
 
 
 

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4.           Broker’s Commission/Finder’s Fee.  Each party hereto represents to
the other that there are no parties entitled to receive fees, commissions,
finder’s fees, due diligence fees or similar payments in connection with the
consummation of the transactions contemplated hereby.  Each party hereto agrees
to indemnify the other against and hold the other harmless from any and all
liabilities to any persons claiming brokerage commissions or similar fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of the indemnifying party’s actions.

5.           Covenants Regarding Indemnification.  Each party hereto agrees to
indemnify, hold harmless, reimburse and defend the other party and the other
party’s officers, directors, agents, counsel, affiliates, members, managers,
control persons, and principal shareholders, as applicable, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the indemnified party or any
such person which results, arises out of or is based upon (i) any breach of any
representation or warranty by the indemnifying party in this Agreement or (ii)
any breach or default in performance by the indemnifying party of any covenant
or undertaking to be performed by the indemnifying party.

6.           Rule 144.  Pursuant to Rule 144 and subject to Section 7 hereof,
each Subscriber acknowledges that before a Subscriber may sell any restricted
securities in the marketplace, such Subscriber must hold them for at least six
months.  The holding period begins when the securities were purchased and fully
paid for by such subscriber.

7.           Reporting Status.  Until the date on which the Investors shall have
sold all of the Registrable Securities (as defined below), the Company shall use
its reasonable best efforts to timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act.

8.           Miscellaneous.

 (a)           Notices.  All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery or facsimile, addressed as set
forth on the signature pages hereto or to such other address as such party shall
have specified most recently by written notice.  Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated on the signature page hereto (if delivered on a business day
during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.
 
 
 

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(b)           Entire Agreement; Assignment.  This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties
hereto.  Neither the Company nor Subscriber has relied on any representations
not contained or referred to in this Agreement and the documents delivered
herewith.

(c)           Counterparts/Execution.  This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.  This
Agreement may be executed by facsimile transmission, PDF, electronic signature
or other similar electronic means with the same force and effect as if such
signature page were an original thereof.

(d)           Law Governing this Agreement.  This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey without
regard to principles of conflicts of laws. Any action brought by either party
hereto against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New Jersey or in the
federal courts located in the state of New Jersey.  The parties to this
Agreement hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens.  The parties hereto
agree to submit to the in personam jurisdiction of such courts and hereby
irrevocably waive trial by jury. The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs.

(e)           Severability. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.  Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any suit, action or proceeding in connection with this Agreement
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.

(f)           Captions.  The captions of the various sections and paragraphs of
this Agreement have been inserted only for the purposes of convenience; such
captions are not a part of this Agreement and shall not be deemed in any manner
to modify, explain, enlarge or restrict any of the provisions of this Agreement.

[Remainder of Page Intentionally Left Blank]

 
 

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

TEL-INSTRUMENTS ELECTRONICS CORP.
a New Jersey corporation

By:           [s] Jeffrey O’Hara                                
Name: Jeffrey O’Hara
Title:   President and Chief Executive Officer

Address:  One Branca Road
East Rutherford, NJ 07073
Facsimile No.:  (201) 933-7340

Dated: November 8, 2012
 

SUBSCRIBER
 
Name of Subscriber:
[Subscriber]
     
Address:
         
Fax No.:
     
Taxpayer ID# (if applicable):
     
/s/ [Subscriber]
 
(Signature)
 
By:
     
Dated: November 8, 2012
 
Number of Shares: 149,534
 
Aggregate Purchase Price: $500,000.00
     (No. Shares x purchase price per Share)
 

 
[Signature Page to Subscription Agreement]
 
 
 

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Schedule 3(c)

The Company has a total of 400,992 stock options, warrants stock subscriptions,
and warrants outstanding with a weighted average purchase price of approximately
$5.33 per share.

Outstanding Stock Options
·  
138,100 (Average Exercise Price of $5.41)

 
Outstanding Warrants
·  
136,920 warrants at $6.70 under 9 year warrant, dated September 10, 2010

·  
10,416 warrants at $6.70 under 5 year warrant, dated September 10, 2010

·  
70,000 warrants at $3.35 under warrant expiring September 10, 2019, dated July
26, 2012

Outstanding Stock Subscriptions
·  
55,556 shares at $3.60, expiring December 31, 2012. Expected to be exercised in
conjunction with this equity fund raising

 
 

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Schedule 3(k)

The Company is currently below the $4 million minimum net worth requirement for
listing on the NYSE Amex stock exchange and has been placed on a watch list by
the NYSE Amex.