Exhibit 10.2

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”) is entered into
as of August 12, 2016, by and among Communications Systems, Inc., a Minnesota
corporation (“Communications Systems”), JDL Technologies, Incorporated, a
Minnesota corporation (“JDL”), Transition Networks, Inc., a Minnesota
corporation (“Transition Networks”), and Suttle, Inc., a Minnesota corporation
(“Suttle”, together with Communications Systems, JDL and Transition Networks,
“Grantors” and each a “Grantor”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a
national banking association (together with its successors and assigns,
“Lender”).

 

Pursuant to an Amended and Restated Credit Agreement of even date herewith among
Grantors, as borrowers, and Lender, as lender (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
Lender has agreed to make certain advances and other extensions of credit to
Grantors.

 

As a condition to making advances and other extensions of credit under the
Credit Agreement, Lender has required, among other things, the execution and
delivery of this Agreement by Grantors.

 

1.           DEFINITIONS.

 

(a)          All capitalized terms not otherwise defined in this Agreement shall
have the meanings given them in the Credit Agreement.

 

(b)          The following terms, when used in this Agreement (whether or not
capitalized and whether or not singular or plural), shall have the meanings
given them in the Code, except that (i) for purposes of this Agreement, the
meaning of such terms will not be limited by reason of any limitation on the
scope of the Code, and (ii) to the extent the definition of any category or type
of Collateral is expanded by any amendment, modification or revision to the
Code, such expanded definition will apply automatically as of the date of such
amendment, modification or revision: “Accession”, “Account”, “Chattel Paper”,
“Commercial Tort Claim”, “Commodity Account”, “Deposit Account”, “Document”,
“Equipment”, “Fixtures”, “General Intangible”, “Goods”, “Instrument”,
“Inventory”, “Investment Property”, “Letter-of-Credit Right”, “Letter of
Credit”, “Money”, “Securities Account” and “Supporting Obligation”.

 

2.           GRANT OF SECURITY INTEREST. Each Grantor grants and transfers to
Lender, for the benefit of Lender and each Bank Product Provider, a continuing
security interest (the “Security Interest”) in all of the following property of
each Grantor or in which each Grantor has rights, whether presently existing or
acquired after the date of this Agreement (collectively, together with all
Proceeds, the “Collateral”):

 

(a)Accounts;

 

(b)Chattel Paper;

 

(c)Commercial Tort Claims;

 

(d)Deposit Accounts, Securities Accounts and Commodities Accounts;

 

(e)Documents;

 

(f)General Intangibles;

 

(g)Goods, including Equipment and Fixtures;

 

 

  

(h)Instruments;

 

(i)Inventory;

 

(j)Investment Property;

 

(k)Letters of Credit and Letter-of-Credit Rights;

 

(l)Money and other assets of each Grantor;

 

(m)all Accessions and Supporting Obligations; and

 

all books and records relating to the above property and all proceeds (as such
term is defined in the Code) and products, whether tangible or intangible of any
of the above property, all proceeds of any condemnation award relating to any of
the above property, all proceeds of insurance covering or relating to any or all
of the above property and all rebates and returns relating to any of the above
property (all such proceeds, collectively, “Proceeds”).

 

3.           OBLIGATIONS SECURED. The obligations secured by the Security
Interest are the payment and performance of:

 

(a)          all present and future Obligations; and

 

(b)          all now existing or subsequently arising debts, liabilities and
obligations of Grantors or any Grantor owing to Lender or any Bank Product
Provider and rights of Lender under this Agreement.

 

4.           AUTHORIZATION TO FILE FINANCING STATEMENTS. Each Grantor authorizes
Lender to file financing statements describing the Collateral to perfect the
Security Interest in the Collateral, and Lender may describe the Collateral as
“all personal property” or “all assets” or describe specific items of
Collateral, including, without limitation, any Commercial Tort Claims. All
financing statements filed before the date of this Agreement to perfect the
Security Interest were authorized by Grantors and are ratified.

 

5.           COLLECTION ACCOUNT. Subject to the terms and conditions of the
Credit Agreement, any money or other cash Proceeds received by Lender in respect
of the Collateral will be deposited into a non-interest bearing account over
which no Grantor shall have control, and the same shall, for all purposes, be
deemed Collateral, and such money and cash shall be applied to the Obligations
as set forth in the Credit Agreement or this Agreement.

 

6.           REPRESENTATIONS AND WARRANTIES OF GRANTORS. Each Grantor represents
and warrants to Lender that:

 

(a)          such Grantor’s legal name is exactly as set forth on the first page
of this Agreement, its chief executive office and principal place of business
are set forth on Schedule A, and all of such Grantor’s organizational documents
or agreements delivered to Lender are complete and accurate in every respect;

 

(b)such Grantor has legal title to and has possession or control of its
Collateral;

 

(c)such Grantor has the exclusive right to grant a security interest in its
Collateral;

 

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(d)         all Collateral is genuine, free from Liens, adverse claims, setoffs,
default, prepayment, defenses and conditions precedent of any kind or character,
except the Security Interest created by this Agreement and Permitted Liens;

 

(e)          all statements contained in this Agreement and each other Loan
Document regarding the Collateral are true and complete in all material
respects;

 

(f)          no financing statement covering any of the Collateral, and naming
any secured party other than Lender and holders of Permitted Liens, is on file
in any public office;

 

(g)          all Persons appearing to be obligated on Collateral have authority
and capacity to contract and are bound as they appear to be;

 

(h)          all property subject to Chattel Paper has been properly registered
and filed in compliance with law and to perfect the interest of such Grantor in
such property;

 

(i)           all Accounts and other rights to payment comply with all
applicable laws concerning form, content and manner of preparation and
execution, including where applicable Federal Reserve Regulation Z and any state
consumer credit laws;

 

  (j)            Schedule A lists all real property owned or leased by such
Grantor;

 

(k)          Schedule A provides a complete and correct list of: (i) all
registered copyrights and copyright applications owned by such Grantor, (ii) all
intellectual property licenses entered into by such Grantor; (iii) all
registered patents and patent applications owned by such Grantor; and (iv) all
registered trademarks and trademark applications owned by such Grantor;

 

(l)           Schedule A contains a listing of all of Deposit Accounts,
Securities Accounts and Commodity Accounts of such Grantor, including, with
respect to each bank, securities intermediary or commodity intermediary: (i) the
name and address of such entity, and (ii) the account numbers of the Deposit
Accounts, Securities Accounts or Commodity Accounts maintained with such entity;

 

(m)         the Inventory and Equipment of such Grantor are not stored with a
bailee, warehouseman, processor or similar party and are located only at, or
in-transit between or to, the locations identified on Schedule A; and

 

(n)          each Account that is identified as an Eligible Account in a
borrowing base certificate or daily collateral report submitted to Lender is (i)
a bona fide existing payment obligation of the applicable Account Debtor created
by the sale and delivery of Inventory or the rendition of services to such
Account Debtor in the ordinary course of such Grantor’s business, (ii) owed to
such Grantor, and (iii) not excluded as ineligible by virtue of one or more of
the excluding criteria set forth in the definition of Eligible Accounts in the
Credit Agreement.

 

7.COVENANTS OF GRANTORS.

 

(a)          Each Grantor covenants and agrees:

 

(i)          to permit Lender to exercise its rights, remedies, and powers under
the Credit Agreement, this Agreement, the other Loan Documents and under law;

 

(ii)         not to change its name, or, as applicable, its chief executive
office, its principal residence or the jurisdiction in which it is organized
without giving Lender 30 days’ prior written notice; and

 

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(iii)        not to change the places where any Grantor keeps any Collateral or
any Grantor’s records concerning the Collateral without (A) giving Lender 30
days’ prior written notice of the address to which such Grantor is moving same,
and (B) delivering to Lender a fully executed Collateral Access Agreement with
respect to such location if not owned by a Grantor; and

 

(iv)        to cooperate with Lender in perfecting all security interests
granted by this Agreement and in obtaining such agreements from third parties as
Lender deems necessary, proper or convenient in connection with the
preservation, perfection or enforcement of any of its rights with regard to
Collateral or access to Collateral.

 

(b)Each Grantor agrees, unless Lender agrees otherwise in writing:

 

(i)          not to use any Collateral for any unlawful purpose or in any way
that would void any insurance required to be carried on such Collateral;

 

(ii)         to insure the Collateral, with Lender named as first lender loss
payee and additional insured, in form, substance and amounts, under agreements,
against risks and liabilities, and with insurance companies satisfactory to
Lender;

 

(iii)        to keep, in accordance with GAAP, complete and accurate records
regarding all Collateral, and to permit Lender to inspect the same and make
copies thereof at any reasonable time;

 

(iv)        not to sell, pledge or dispose of, nor permit the transfer by
operation of law of, any of the Collateral or any interest in the Collateral,
except sales of Inventory to buyers in the ordinary course of such Grantor’s
business or as otherwise expressly permitted by the Credit Agreement;

 

(v)         not to permit any Lien on the Collateral, including, without
limitation, Liens arising from the storage of Inventory, except for Liens in
favor of Lender and Permitted Liens;

 

(vi)        if requested by Lender and required pursuant to the terms of the
Credit Agreement, to receive and use reasonable diligence to collect Accounts,
in trust and as the property of Lender, and to immediately endorse as
appropriate and deliver collections or payments on such Accounts or proceeds
thereof to Lender daily in the exact form in which they are received;

 

(vii)not to commingle Accounts, Proceeds or collections with other property of
any other Person;

 

(viii)      to give only normal allowances and credits consistent with past
practices and in the ordinary course of business and to advise Lender thereof
immediately in writing if they affect any Accounts in any material respect;

 

(ix)        on Lender’s demand, (A) to deliver to Lender returned property
resulting from, or payment equal to, such allowances or credits on any Accounts
as required by the Credit Agreement or upon the occurrence and during the
continuance of an Event of Default and (B) to execute such documents and do such
other things as Lender may reasonably request for the purpose of perfecting,
preserving and enforcing its security interest in such returned property;

 

(x)         from time to time, when requested by Lender, to prepare and deliver
a schedule of all Collateral subject to this Agreement and to, subject to the
terms of this Agreement and each other Loan Document assign in writing and
deliver to Lender all Accounts, contracts, leases and other Chattel Paper,
Instruments, Documents and other evidences thereof;

 

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(xi)         to deliver to Lender (A) notice of any Commercial Tort Claim it may
have against any Person, including a detailed description of such Commercial
Tort Claim and, upon receipt of such description by Lender the description of
Collateral set forth in Section 1 of this Agreement shall be deemed to be
amended to include such description of each such Commercial Tort Claim, and (B)
such documents as Lender may require to grant Lender a security interest in any
Grantor’s rights in such Commercial Tort Claim;

 

(xii)       to deliver to Lender any Instrument, Document or Chattel Paper
constituting Collateral with a value greater than $250,000, duly endorsed or
assigned by the applicable Grantor to Lender;

 

(xiii)      to provide any service and do any other acts which may be reasonably
necessary to maintain, preserve and protect all Collateral and, as appropriate
and applicable, to keep all Collateral in good and saleable condition, to deal
with the Collateral in accordance with the standards and practices adhered to
generally by users and manufacturers of like property, and to keep all
Collateral free and clear of all defenses, rights of offset and counterclaims
(other than Permitted Liens);

 

(xiv)      not to withdraw any funds from any Deposit Account pledged to Lender
pursuant to this Agreement, except as expressly permitted under the Credit
Agreement and except for any Deposit Accounts which are specifically and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for employees of a Grantor (“Excluded Deposit Accounts”);

 

(xv)       not to open or establish any Deposit Account, Securities Account, or
Commodities Account unless Lender has control of such account as contemplated in
the Code (but excluding Excluded Deposit Accounts, to the extent permitted under
the Credit Agreement) and to close when and as required under the Credit
Agreement each Grantor’s Deposit Accounts maintained by any Grantor with any
financial institution other than Lender in accordance with the Credit Agreement;

 

(xvi)      not to consign any of its Inventory or sell any of its Inventory on
bill and hold, sale or return (other than with respect to returns of Inventory
in the ordinary course of business), sale on approval, or other conditional
terms of sale; and

 

(xvii)     promptly, and in any event within two (2) Business Days after
Lender’s request after acquisition of motor vehicles or other certificated
rolling stock with an aggregate or individual value in excess of $75,000,
deliver to Lender an original certificate of title for each such motor vehicle
or other rolling stock together with a signed motor vehicle or other applicable
title application naming the Lender as first lien holder with respect to such
motor vehicle or other rolling stock, and will cause such certificates to be
filed (with the Lender’s Lien noted thereon) in the appropriate state filing
office.

 

(c)          Each Grantor covenants and agrees to deliver to Lender a completed
Schedule A no later than the date required by the Credit Agreement, and for
purposes hereof all representations and warranties related to such Schedule A
shall be deemed to take effect as of the date on which Schedule is required to
be delivered to Lender in under the Credit Agreement (or, if earlier, the date a
completed Schedule A is actually delivered).

 

8.POWERS OF LENDER.

 

(a)          Each Grantor appoints Lender its attorney in fact to perform any of
the following powers, which are coupled with an interest, are irrevocable until
termination of this Agreement, payment in full of all Obligations and
termination of all commitments of Lender under the Credit Agreement, and may be
exercised from time to time by Lender’s officers and employees, or any of them,
whether or not

 

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an Event of Default has occurred: (i) to perform any obligation of Grantor
hereunder in Grantor’s name or otherwise; (ii) to give notice to Account Debtors
or others of Lender’s rights in the Collateral; (iii) to release or substitute
security; (iv) to prepare, execute, file, record or deliver notes, assignments,
schedules, designation statements, initial financing statements and amendments,
continuation statements, termination statements, statements of assignment,
applications for registration or like papers to perfect, preserve or release
Lender’s interest in the Collateral; (v) to take cash, instruments for the
payment of money and other property to which Lender is entitled; (vi) to verify
facts concerning the Collateral by inquiry of obligors thereon, or otherwise, in
its own name or a fictitious name; (vii) to prepare, adjust, execute, deliver
and receive payment under insurance claims, and to collect and receive payment
of and endorse any instrument in payment of loss or returned premiums or any
other insurance refund or return, and to apply such amounts received by Lender,
at Lender’s sole option, toward repayment of the Obligations or replacement or
restoration of the Collateral; (viii) to enter onto Grantor’s premises to
inspect the Collateral; (ix) to make withdrawals from and to close deposit
accounts or other accounts with any financial institution, wherever located,
into which Proceeds may have been deposited, and to apply funds so withdrawn to
payment of the Obligations; (x) to preserve or release the interest evidenced by
chattel paper to which Lender is entitled hereunder and to endorse and deliver
any evidence of title to such interest; and (xi) to do all acts and things and
execute all documents in the name of Grantor or otherwise, deemed by Lender as
reasonably necessary, proper and convenient in connection with the preservation,
perfection, priority or enforcement of Lender’s rights.

 

(b)          Each Grantor appoints Lender its attorney in fact to perform any of
the following powers, which are coupled with an interest, are irrevocable until
termination of this Agreement, payment in full of all Obligations and
termination of all commitments of Lender under the Credit Agreement, and may be
exercised from time to time by Lender’s officers and employees, or any of them,
after the occurrence and during the continuation of an Event of Default: (i) to
enforce or forebear from enforcing the rights of Lender with respect to any
Account Debtor and to make extension or modification agreements with any Account
Debtor; (ii) to resort to security in any order; (iii) to receive, open and read
mail addressed to Grantor; (iv) to endorse, collect, deliver and receive payment
under instruments for the payment of money constituting or relating to
Collateral; (v) to release Persons liable on Collateral and to give receipts and
compromise disputes between Grantor and such Persons; and (vi) to exercise all
rights, powers and remedies which Grantor would have, but for this Agreement,
with respect to all Collateral.

 

9.             PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Each
Grantor agrees to pay, prior to delinquency, all insurance premiums, taxes,
charges, liens and assessments against the Collateral, and upon the failure of
any Grantor to do so, Lender at its option may pay any of them and shall be the
sole judge of the legality or validity and the amount necessary to discharge the
same. Any such payments made by Lender shall be Obligations under the Credit
Agreement. Any such payments made by Lender shall be obligations of Grantors to
Lender, due and payable immediately upon demand, together with interest at a
rate determined in accordance with the provisions of the Credit Agreement, and
shall be secured by the Collateral, subject to all terms and conditions of this
Agreement.

 

10.           EVENTS OF DEFAULT. The occurrence of an Event of Default (as
defined in the Credit Agreement) under the Credit Agreement shall constitute an
“Event of Default” under this Agreement.

 

11.           REMEDIES. Upon the occurrence of and during the continuation of
any Event of Default, Lender shall have the right to declare immediately due and
payable all or any Obligations (other than Obligations arising under any Hedge
Agreement, which may be accelerated pursuant to the applicable Hedge Agreement)
secured by this Agreement and to terminate any commitments to make loans or
otherwise extend credit under the Credit Agreement. Lender shall have all other
rights, powers,

 

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privileges and remedies granted to a secured party upon default under the Code
or otherwise provided by law or agreement, including without limitation, the
right to:

 

(a)          contact all Persons obligated to a Grantor on any Collateral and to
instruct such Persons to deliver all Collateral directly to Lender;

 

   (b)         sell, lease, license or otherwise dispose of any or all
Collateral;

 

(c)          notify the United States Postal Service to change the address for
delivery of mail of any Grantor to any address designated by Lender;

 

(d)          without notice to or consent by Grantors and without the obligation
to pay rent or other compensation, to take exclusive possession of all locations
where any Grantor conducts its business or has any rights of possession and use
the locations to store, process, manufacture, sell, use and liquidate or
otherwise dispose of Collateral;

 

(e)          with regard to any Deposit Account, instruct the bank maintaining
such Deposit Account to pay the balance of such Deposit Account to Lender or
take such other action as Lender shall instruct; and

 

(f)          with regard to any Securities Account or Commodity Account,
instruct the securities intermediary maintaining such Securities Account or the
commodity intermediary maintaining such Commodity Account, as applicable, to pay
the balance of such Securities Account or such Commodity Account, as applicable,
to Lender or take such other action as Lender shall instruct; and

 

(g)          without regard to the occurrence of waste or the adequacy of
security, apply for the appointment of a receiver for Grantors or any Grantor or
for the assets of Grantors or any Grantor and each Grantor waives any objection
to such appointment or to the right to have a bond or security posted by Lender.
Each Grantor hereby waives any objection or defense to the appointment of any
such receiver and any right that Grantors or any Grantor has or may have to seek
the posting of a bond or other security by Lender.

 

While an Event of Default exists:

 

(1)Each Grantor will deliver to Lender from time to time, as requested by
Lender, current lists of all Collateral;

 

(2)No Grantor will dispose of any Collateral except on terms approved by Lender
or as otherwise agreed in writing by Lender;

 

(3)at Lender’s request, Grantors will assemble and deliver all Collateral, and
books and records pertaining thereto, to Lender at a reasonably convenient place
designated by Lender; and

 

(4)Lender may, without notice to Grantors, enter onto any Grantor’s premises and
take possession of the Collateral.

 

12.          CUMULATIVE RIGHTS. All rights, powers, privileges and remedies of
Lender shall be cumulative. No delay, failure or discontinuance of Lender in
exercising any right, power, privilege or remedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise or the
exercise of any other right, power, privilege or remedy.

 

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13.           WAIVERS AND CONSENTS OF LENDER. Any waiver, permit, consent or
approval of any kind by Lender of any default, or any such waiver of any
provisions or conditions, must be in writing and shall be effective only to the
extent set forth in writing.

 

14.          DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS.
In disposing of Collateral, Lender may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any disposition of any
Collateral, may be applied by Lender to the payment of expenses incurred by
Lender, including reasonable attorneys’ fees, and the balance of such proceeds
may be applied by Lender toward the payment of the Obligations in such order of
application as Lender may from time to time elect. Upon the transfer of all or
any part of the Obligations, Lender may transfer all or any part of the
Collateral and shall be fully discharged from all liability and responsibility
with respect to such transferred Collateral, and the transferee shall be vested
with all rights and powers of Lender hereunder; but with respect to any
Collateral not so transferred, Lender shall retain all rights, powers,
privileges and remedies. It is agreed that public or private sales or other
dispositions, for cash or on credit, to a wholesaler or retailer or investor, or
user of property of the types subject to this Agreement, or public auctions, are
all commercially reasonable since differences in the prices generally realized
in the different kinds of dispositions are ordinarily offset by the differences
in the costs and credit risks of such dispositions. Each Grantor agrees that, to
the extent notice of sale shall be required by law, at least 10 days’ notice to
Grantors of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification and such
notice shall constitute a reasonable “authenticated notification of disposition”
within the meaning of Section 9- 611 of the Code. Lender shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Lender may adjourn any public or private sale from time to time, and such sale
may be made at the time and place to which it was so adjourned. Each Grantor
agrees that the internet shall constitute a “place” for purposes of Section
9-610(b) of the Code. Each Grantor agrees that any sale of Collateral to a
licensor pursuant to the terms of a license agreement between such licensor and
such Grantor is sufficient to constitute a commercially reasonable sale
(including as to method, terms, manner, and time) within the meaning of Section
9-610 of the Code. Each Grantor grants to Lender a non-exclusive, worldwide and
royalty-free license to use or otherwise exploit all intellectual property
rights of such Grantor for the purpose of: (a) completing the manufacture of any
in-process materials following any Event of Default so that such materials
become saleable Inventory, all in accordance with the same quality standards
previously adopted by such Grantor for its own manufacturing; and (b) selling,
leasing or otherwise disposing of any or all Collateral following any Event of
Default.

 

15.          STATUTE OF LIMITATIONS. Until all Obligations shall have been paid
in full and all commitments of Lender under the Credit Agreement have
terminated, the power of sale or other disposition and all other rights, powers,
privileges and remedies granted to Lender shall continue to exist and may be
exercised by Lender at any time and from time to time irrespective of the fact
that the Obligations or any part thereof may have become barred by any statute
of limitations, or that the personal liability of Grantors or any Grantor may
have ceased, unless such liability shall have ceased due to the payment in full
of all Obligations and Indebtedness secured by this Agreement.

 

16.          WAIVERS OF GRANTORS. Each Grantor waives any right to require
Lender to: (a) proceed against Grantors or any Grantor or any other Person; (b)
marshal assets or proceed against or exhaust any security from Grantors or any
Grantor or any other Person; (c) perform any obligation of Grantors or any
Grantor with respect to any Collateral; and (d) make any presentment or demand,
or give any notice of nonpayment or nonperformance, protest, notice of protest
or notice of dishonor hereunder or in connection with any Collateral or
Proceeds. Each Grantor further waives any right to direct the application of
payments or security for any Indebtedness of Grantors or any Grantor or
indebtedness of customers of Grantor.

 

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17.           JOINT AND SEVERAL LIABILITY. When there is more than one Grantor
named in this Agreement, the obligations of each Grantor hereunder are joint and
several.

 

18.           FURTHER ASSURANCES. At any time upon the request of Lender,
Grantors will execute or deliver to Lender any and all financing statements,
fixture filings, security agreements, pledges, assignments, endorsements,
certificates of title, mortgages, deeds of trust and all other documents (the
“Additional Documents”) that Lender may request and in form and substance
satisfactory to Lender, to create, perfect, and continue perfection or to better
perfect Lender’s Liens in all of the assets of Grantors or any Grantor (whether
now owned or subsequently arising of acquired, tangible or intangible, real or
personal), and in order to fully consummate all of the transactions contemplated
under this Agreement and under the other Loan Documents. If any Grantor refuses
or fails to execute or deliver any requested Additional Documents, Grantors
authorize Lender to execute such Additional Documents in such Grantor’s name,
and authorizes Lender to file such executed Additional Documents in any
appropriate filing office. Each Grantor acknowledges that no Grantor is
authorized to file any financing statement or amendment with respect to any
financing statement filed in connection with this Agreement without the prior
written consent of Lender, subject to Grantors’ rights under Section 9-509(d) of
the Code.

 

19.           SUBROGATION RIGHTS. Until all Obligations shall have been paid in
full and all commitments by Lender to extend credit under the Credit Agreement
have been terminated, no Grantor shall have any right of subrogation or
contribution or similar right, and each Grantor waives any benefit of or right
to participate in any of the Collateral or any other security now or
subsequently held by Lender.

 

20.           NOTICES. All notices, requests and demands required under this
Agreement must be given, and shall be deemed received, as provided in Section
7.3 of the Credit Agreement.

 

21.           COSTS, EXPENSES AND ATTORNEYS’ FEES. Each Grantor shall pay to
Lender 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 Lender’s in-house counsel),
expended or incurred by Lender in connection with or related to this Agreement,
including, without limitation, all Lender Expenses. Further, each Grantor
indemnifies Lender against all losses, claims, demands, liabilities and expenses
of every kind caused by property subject to this Agreement, all in accordance
with and subject to the limitations described in the Credit Agreement.

 

22.           SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement will be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided that no Grantor
may assign or transfer its interests, rights, or obligations under this
Agreement without Lender’s prior written consent. Lender may sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Lender’s rights and benefits under this Agreement and the other
Loan Documents. This Agreement may be amended or modified only in writing signed
by Lender and Grantors, except as expressly provided in this Agreement.

 

23.           SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

24.           GOVERNING LAW. The validity of this Agreement and the
construction, interpretation, and enforcement of this Agreement, and the rights
of the parties, as well as all claims, controversies or disputes arising under
or related to this Agreement will be determined under, governed

 

-9-

 

 

by and construed in accordance with the laws of the State of Minnesota without
regard conflicts of laws principles.

 

25.           JURISDICTION. All actions or proceedings arising in connection
with this Agreement and the other Loan Documents may be tried and litigated in
the State of Minnesota and, to the extent permitted by applicable law, federal
courts located in the County of Hennepin, State of Minnesota; provided that any
suit seeking enforcement against any Collateral or other property may be
brought, at Lender’s option, in the courts of any jurisdiction where Lender
elects to bring such action or where such Collateral or other property may be
found. Grantors and Lender each waive, to the extent permitted under applicable
law, any right they may have to assert the doctrine of forum non conveniens or
to object to venue to the extent any proceeding is brought in accordance with
this section.

 

26.           WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, GRANTORS AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS, IF ANY,
TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY
OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS
(EACH, A “CLAIM”). GRANTORS AND LENDER EACH REPRESENT THAT IT HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

27.           AMENDMENT AND RESTATEMENT. This Agreement constitutes an amendment
to, and a complete restatement of, that certain Security Agreement (Equipment)
dated as of October 28, 2011 and that certain Security Agreement: Rights to
Payment and Inventory dated as of October 28, 2011 by Grantors in favor of
Lender (collectively, as amended to date, the “Prior Security Agreement”). The
execution and delivery of this Agreement shall not constitute a novation of the
Prior Security Agreement or any indebtedness or other obligations owing to
Lender thereunder. On the date hereof, the Obligations of each Grantor described
in the Prior Security Agreement shall be amended, modified and restated in their
entirety by the terms hereof, without further action by any Person.

 

Signature pages follow

 

-10-

 

 

This Agreement has been duly executed as of the date set forth on page 1.

        GRANTORS:       COMMUNICATIONS SYSTEMS, INC.

  By: -s- Edwin C. Freeman [a162853001_v1.jpg]   Name: Edwin C. Freeman   Title:
  Chief Financial Officer       JDL TECHNOLOGIES, INCORPORATED   By:
 -s-a162853001_v1 [a162853001_v1.jpg]   Name: Edwin C. Freeman   Title:   Chief
Financial Officer       TRANSITION NETWORKS, INC.   By:  -s-a162853001_v1
[a162853001_v1.jpg]   Name: Edwin C. Freeman   Title:   Chief Financial Officer
      SUTTLE, INC.   By:  -s-a162853001_v1 [a162853001_v1.jpg]   Name: Edwin C.
Freeman   Title:   Chief Financial Officer

 

Signature Page to Amended and Restated Security Agreement

 

 

 

        LENDER:       WELLS FARGO BANK, NATIONAL   ASSOCIATION       By:
-s-a1628530002_v1 [a162853002_v1.jpg]    Name: Roger Pfiffner   Title:   Vice
President

 

Signature Page to Amended and Restated Security Agreement

 

 

 

SCHEDULE A

 

1.Chief Executive Office and Principal Place of Business:

 

2.Owned Real Property:

 

3.Copyrights, Trademarks, Patents and Licensing Agreements:

 

4.Deposit Accounts, Securities Accounts, Commodity Accounts and other Investment
Accounts:

 

Part 1 - Deposit Accounts

 

Grantor Name of Bank Account No. Purpose                              

 

Part 2 – Securities Accounts, Commodity Accounts and other Investment Accounts:

 

Grantor Name of Financial
Institution Account No. Type of Account                

 

5.Locations of Books and Records:

 

6.Locations of Inventory, Equipment, and Other Assets:

 

Address Owned/Leased/Third
Party Name/Address of Owner, Lessor or
Third Party, as Applicable