Exhibit 10.2

REVOLVING LINE OF CREDIT NOTE

 

 

$10,000,000

Minnetonka, Minnesota

October 28, 2011

 

FOR VALUE RECEIVED, the undersigned COMMUNICATIONS Systems, Inc., a Minnesota
corporation (“Communications Systems”), JDL TECHNOLOGIES, INCORPORATED, a
Minnesota corporation (“JDL”), TRANSITION NETWORKS, INC., a Minnesota
corporation (“Transition Networks”; together with Communications Systems and
JDL, “Borrowers” and each a “Borrower”), promises to pay on November 1, 2013
(the “Maturity Date”) to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”) at its office at 7900 Xerxes Avenue S., Suite 2300, Bloomington, MN
55431, Minnesota, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of TEN MILLION Dollars ($10,000,000), or so much thereof as
may be advanced and be outstanding, with interest thereon, to be computed on
each advance from the date of its disbursement as set forth herein.

 

DEFINITIONS:

 

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

 

(a)        “Business Day” means any day except a Saturday, Sunday or any other
day on which commercial banks in Minnesota are authorized or required by law to
close.

 

(b)        “Daily One Month LIBOR” means, for any day, the rate of interest
equal to LIBOR then in effect for delivery for a one (1) month period.

 

(c)        “LIBOR” means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

 

LIBOR = Base LIBOR     100% - LIBOR Reserve Percentage  

 

(i)        “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, for delivery of
funds for one (1) month in an amount equal to the outstanding principal balance
of this Note. Borrower understands and agrees that Bank may base its quotation
of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems appropriate
including, but not limited to, the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.

 

(ii)        “LIBOR Reserve Percentage” means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the term of this Note.

 

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INTEREST:

 

(a)        Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) at a
fluctuating rate per annum determined by Bank to be one and one-tenth of one
percent (1.10%) above Daily One Month LIBOR in effect from time to time. Each
change in the rate of interest hereunder shall become effective on each Business
Day a change in Daily One Month LIBOR is announced within Bank. Bank is hereby
authorized to note the date and interest rate applicable to this Note and any
payments made thereon on Bank’s books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.

 

(b)        Taxes and Regulatory Costs. Borrowers shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrowers hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.

 

(c)        Payment of Interest. Interest accrued on this Note shall be payable
on the first day of each month, commencing December 1, 2011.

 

(d)        Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a)        Borrowing and Repayment. Borrowers may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for Borrowers, which balance may be endorsed hereon from time to time by
the holder. The outstanding principal balance of this Note shall be due and
payable in full on the Maturity Date.

 

(b)        Advances. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
any officer of any Borrower, until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any deposit account
of any Borrower, which advances, when so deposited, shall be conclusively
presumed to have been made to or for the benefit of Borrowers regardless of the
fact that persons other than those authorized to request advances may have
authority to draw against such account. The holder shall have no obligation to
determine whether any person requesting an advance is or has been authorized by
Borrowers.

 

 

fb.us.7396315.02: Revolving Line;

Daily One Month LIBOR (Rev. 05/09)

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(c)        Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement among Borrowers and Bank dated as of October 28, 2011
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Any default in the payment or performance of any obligation
under this Note, or the occurrence of any Event of Default (as defined in the
Credit Agreement) under the Credit Agreement, shall constitute an “Event of
Default” under this Note.

 

MISCELLANEOUS:

 

(a)        Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder’s option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrowers shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of the holder’s in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder’s rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrowers or any other person or entity.

 

(b)        Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.

 

(c)        Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Minnesota.

Signature page follows

 

 

 

 

 

 

fb.us.7396315.02: Revolving Line;

Daily One Month LIBOR (Rev. 05/09)

-3-  

 

 

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

  COMMUNICATIONS SYSTEMS, INC.                     By:  /s/ David T. McGraw    
Name:  David T. McGraw     Title: Chief Financial Officer             JDL
TECHNOLOGIES, INCORPORATED                     By: /s/ David T. McGraw    
Name:  David T. McGraw     Title: Chief Financial Officer                    
TRANSITION NETWORKS, INC.             By: /s/ David T. McGraw     Name:  David
T. McGraw     Title: Chief Financial Officer  

 

 

 

 

 

 

Signature Page to Revolving Note