Document:

Exhibit 10.2

 

SECURITY AGREEMENT: SECURITIES ACCOUNT

 

This Agreement amends and restates in its
entirety, and is given as a replacement for, and not in satisfaction of or as a novation with respect to, that certain Amended
and Restated Security Agreement dated as of August 12, 2016 among Debtor, JDL Technologies, Incorporated, Suttle, Inc., Transition
Networks, Inc. and Bank (as amended to date, the “Original Security Agreement”). It is the intent of the parties
hereto that the security interests and liens granted in any collateral under and pursuant to the Original Security Agreement shall
continue in full force and effect to the extent set forth herein.

 

1.       GRANT
OF SECURITY INTEREST. For valuable consideration, the undersigned COMMUNICATIONS SYSTEMS, INC., a Minnesota corporation ( “Debtor”),
hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a security interest in (a) Debtor’s
account no. 1BC29761, maintained as a safekeeping account at Wells Fargo Bank, N.A., and 1BC29761, maintained at Wells Fargo Securities,
LLC, through which assets from the safekeeping account are traded (whether held in Debtor’s name or as a Bank collateral
account for the benefit of Debtor), any sub-account thereunder or consolidated therewith, all replacements or substitutions therefor,
including any account resulting from a renumbering or other administrative re-identification thereof (such accounts each and collectively
being, the “Securities Account,” and the parties at which any such account is maintained each and collectively
being, the “Intermediary”), (b) all financial assets credited to the Securities Account (including, without
limitation, any interests or shares in hedge funds and any pending subscription or redemption amounts relating thereto (each, a
“Hedge Fund”), (c) all security entitlements with respect to the financial assets credited to the Securities
Account, and (d) any and all other investment property or assets maintained or recorded in the Securities Account (with all the
foregoing defined as “Collateral”), together with whatever is receivable or received when any of the Collateral
or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary,
including without limitation, (i) all rights to payment, including returned premiums, with respect to any insurance relating to
any of the foregoing, (ii) all rights to payment with respect to any claim or cause of action affecting or relating to any of the
foregoing, and (iii) all stock rights, rights to subscribe, stock splits, liquidating dividends, cash dividends, dividends paid
in stock, new securities or other property of any kind which Debtor is or may hereafter be entitled to receive on account of any
securities pledged hereunder, including without limitation, stock received by Debtor due to stock splits or dividends paid in stock
or sums paid upon or in respect of any securities pledged hereunder upon the liquidation or dissolution of the issuer thereof (hereinafter
called “Proceeds”), but excluding from such Collateral and Proceeds all common trust funds of Bank governed
by 12 CFR 9.18 now or hereafter maintained in the Securities Account. Except as otherwise expressly permitted herein, in the event
Debtor receives any such Proceeds, Debtor will hold the same in trust on behalf of and for the benefit of Bank and will immediately
deliver all such Proceeds to Bank in the exact form received, with the endorsement of Debtor if necessary and/or appropriate undated
stock powers duly executed in blank, to be held by Bank as part of the Collateral, subject to all terms hereof. As used herein,
the terms “security entitlement,” “financial asset” and “investment property” shall have the
respective meanings set forth in the Uniform Commercial Code or the Business and Commerce Code of the jurisdiction identified in
Section 22 below.

 

2.       OBLIGATIONS
SECURED. The obligations secured hereby are the payment and performance of: (a) all present and future Indebtedness of Debtor
to Bank, specifically including, without limitation, any Obligations (as defined in the Credit Agreement) and any other Reimbursement
Obligations (as defined below) and (b) all obligations of Debtor and rights of

 

 

     

     

    

 

Bank under this Agreement. For the avoidance of doubt, and notwithstanding
anything herein or in any other agreement between Debtor and Bank to the contrary, the statement herein that Reimbursement Obligations
are specifically included in the Indebtedness secured hereby, shall be sufficient to satisfy a requirement in any agreement executed
by Debtor and delivered to Bank in connection with any Credit Agreement stating that for such letter of credit or acceptance or
similar product obligations to be secured, they must be specifically described.

 

As used in this Agreement:

 

(A)  The
word “Indebtedness” is used in its most comprehensive sense and includes any and all advances, debts, obligations
and liabilities of Debtor, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary
and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including
under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement,
and whether Debtor may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter
becomes unenforceable.

 

(B)  “Reimbursement
Obligations” means, any Indebtedness arising directly or indirectly from any of the following described in a Credit Agreement:
letters of credit, bankers’ acceptances, open account acceptances, trade acceptances, or similar products, including, for
the avoidance of doubt, any such obligations arising under any related letter of credit agreement, acceptance agreement, open account
processing agreement, or similar document.

 

(C)  “Credit
Agreement” means that certain Credit Agreement of even date herewith between Debtor and Bank, as amended, restated, supplemented
or otherwise modified from time to time.

 

3.       EXCLUSIONS
FROM COLLATERAL. Bank may, in its sole discretion and at any time upon written notice to Debtor, release Bank’s security
interest in any WF Securities in the Collateral or Proceeds and exclude WF Securities from the determination of any value requirements
to which the Collateral is subject hereunder. Such release, if any, shall not relieve Debtor from the obligation to satisfy any
value requirements herein. As used herein, “WF Securities” means stock, securities, or obligations of Wells
Fargo & Company or any affiliate thereof (as the term affiliate is defined in Section 23A of the Federal Reserve Act (12 USC
§ 371(c), as amended from time to time).

 

 4.       COLLATERAL VALUE PROVISIONS.

 

(a)      Collateral
Value Requirements. The Margin Value of the Collateral shall at all times exceed the outstanding Indebtedness of Debtor to
Bank arising under or in connection with the line of credit granted by Bank to Debtor and evidenced by the Revolving Line of Credit
Note of even date herewith, in the stated principal amount of $5,000,000, executed by Debtor in favor of Bank, including any subfeature
under the line of credit (including any amount reserved under the line of credit in connection with the subfeature), and all extensions,
renewals or modifications thereof and restatements or substitutions therefor, including any modifications that increase the amount
thereof. Whenever applicable, the credit limits of Regulation U of the Federal Reserve Board (12 U.S.C. § 221 et seq.) shall
also be satisfied as prescribed therein. Such of the Collateral is as necessary to satisfy any other value requirement imposed
by Bank shall not be eligible to satisfy value requirements herein. See Section 6 below for the definition of “Margin Value”
and related definitions.

 

    -2-

     

    

 

(b)       Maintenance
of Value. In the event the Margin Value of the Collateral, for any reason and at any time, is less than the required amount,
Debtor shall, within three (3) business days, take all remedial action necessary to restore the Margin Value of the Collateral
to the required amount. Remedial action may include the following in any combination or amount: (i) delivery of additional Collateral
acceptable to Bank; (ii) replacement of assets providing little or no support to value requirements with assets providing greater
support; and/or (iii) payoff of the Indebtedness (or if applicable, reduction thereof).

 

(c)       Breach
of Value Requirements. Bank is not obligated to permit an advance when value requirements are not met or if permitted would
not be met. Failure to timely meet value requirements is an Event of Default and allows Bank, in its sole discretion, to accelerate
the Indebtedness secured hereby and exercise its rights and remedies hereunder.

 

(d)       Excess Collateral. Subject
to terms of the Credit Agreement and the other Loan Documents (as defined therein), unless an Event of Default occurs, Collateral
in excess of the value requirements is available for withdrawal at Debtor’s request to Bank, free and clear of Bank’s
security interest therein. Bank shall be afforded such reasonable time, information and cooperation as may be necessary to accommodate
Debtor requests for withdrawal of excess Collateral. Under no circumstances shall any Intermediary be authorized to release Collateral,
or allow withdrawals of excess Collateral, without the express written consent of Bank.

 

(e)       Rule 144/145 Collateral. Debtor
shall not sell or otherwise transfer shares of securities of the issuer of any Collateral that may be subject to the provisions
of SEC Rule 144 or 145 without Bank’s prior written consent, which consent shall be given in Bank’s sole discretion.

 

(f)       Hedge
Fund Collateral. As to any Collateral that may be a Hedge Fund credited, maintained or recorded in the Securities Account,
Debtor acknowledges and agrees that such Hedge Fund is Collateral subject to the terms of this Agreement whether or not the Hedge
Fund issuer’s books and records reflect same and whether or not Bank has agreed the Hedge Fund may contribute to value requirements
herein.

 

5.       TRADING
PERMITTED. So long as no Event of Default exists, and provided all value requirements would continue to be met, Debtor, or
any party authorized by Debtor to act with respect to the Securities Account, may (a) receive payments of interest and/or
cash dividends earned on Collateral in the Securities Account, and (b) trade Collateral in the Securities Account. Without
Bank’s prior written consent, except as permitted by the preceding sentence or paragraph 4(d), neither Debtor nor any
party other than Bank may withdraw or receive any distribution of any Collateral from the Securities Account.

 

 6.       DEFINITIONS RELATED TO MARGIN VALUE. As used herein:

 

“Brokered Certificates of Deposit”
means an FDIC-insured certificate of deposit of any financial institution other than Bank obtained from or through the mediation
or assistance of Wells Fargo Clearing Services, LLC, trading as Wells Fargo Advisors, Wells Fargo Securities, LLC, or the Investment
& Financial Services Group of Bank and held in the Securities Account.

 

“Commercial Paper” means
fixed rate debt instruments of domestic corporations rated A2 or higher by Standard & Poor’s and Prime 2 or higher by
Moody’s.

 

    -3-

     

    

 

“Corporate
Bonds” means bonds of domestic corporations which are not convertible to equity and which are rated BBB- or higher by
Standard & Poor’s and Baa3 or higher by Moody’s. “Short Term” Corporate Bonds are those with
5 years or less remaining until date of maturity; all others are “Longer Term”. “Convertible Corporate
Bonds” are Corporate Bonds convertible to equity securities of the issuer and which are rated A or higher by Standard
& Poor’s.

 

“Equities”
means: (1) common stock of domestic corporations and, except in the case of Small and Micro Cap Equities, American depository receipts
(“ADR’s”), which, as to all of the foregoing, have a value greater than or equal to $10.00 per share,
trade on a National Securities Exchange, and have done so for at least one year after initial settlement of the public offering
of such securities; and (2) preferred stock of domestic corporations (or their affiliated trusts and entities) so long as the common
stock of such issuers qualify as “Equities” (and despite that such preferred stock would not otherwise qualify as “Equities”
due to market capitalization or initial public offering date). Equity securities of value less than $10.00 per share, newly issued,
trading on OTC, Pink Sheets or regional exchanges only, unregistered, unlisted or de-listed, or not publicly traded entities, and
put or call options, rights or warrants, managed futures, auction rate preferred stock, and exchange funds, hedge funds, and other
private equity or investment groups are not included in this definition. Otherwise qualifying restricted and control securities
are included within the meaning of “Equities”, but only to the extent such securities can be converted to cash by Bank
in three days or less in accordance with SEC Rules 144 or 145 should an Event of Default occur. “Large Cap”
Equities are those of an issuer having a market capitalization greater than $10 billion; “Mid Cap” are those
with a market capitalization greater than $2 billion but no more than $10 billion; “Small Cap” are those with
a market capitalization greater than $1 billion but no more than $2 billion; and “Micro Cap” are those with
a market capitalization greater than $250 million but no more than $1 billion.

 

“Exchange Traded Fund”
means a security of an investment company formed under the Investment Company Act of 1940 which trades on a National Securities
Exchange, whose investments track an index, commodity or basket of assets, having greater than $100,000,000.00 in total assets
under management and a minimum fair market value greater than or equal to $4.00 per share except in the case of Money Market ETF’s
which shall have a minimum fair market value greater than or equal to $1.00, and except that leveraged ETF’s and inverse
or “bear market” ETF’s are not included in the term in this context. ETF investment objective distinctions,
as well as the factors that will exclude them from eligibility in this context, shall be identical to that applied in the case
of Mutual Funds.

 

“Fair Market Value” or
“FMV” means, as to any Collateral that is uncertificated, the per share or per unit closing sale price quoted
or reported at the close of the immediately preceding business day in the Securities Account, and, as to any Collateral that is
certificated, the per share or per unit closing sale price quoted or reported at the close of the immediately preceding business
day were such share or unit held in uncertificated form in a securities account at Wells Fargo Clearing Services, LLC, trading
as Wells Fargo Advisors (or in either case if not available, such other customary publication of securities closing sale prices
as Bank may reasonably elect to reference) multiplied by the number of shares or units of like Collateral. The aggregate Fair Market
Value of the Collateral is the total of all such Fair Market Values so determined plus the amount of cash Collateral. If Fair Market
Value cannot be determined by the foregoing procedure, then Fair Market Value shall be determined by the Bank, in its sole discretion,
by reference to the notional amount of such assets or to public information and procedures that may otherwise then be available.
All cash and other value references are to currency denominated in dollars of the United States of America.

 

    -4-

     

    

 

“Margin Value” means
the Fair Market Value of the Collateral multiplied by the applicable percentage in the following table for each type of eligible
Collateral held in the Securities Account at the time of computation, with the eligibility and classification of any particular
Collateral determined by Bank in its sole discretion; provided however, that (i) Bank may exclude from this computation
all Collateral from an issuer if Bank, in its sole discretion, determines such issuer to be ineligible, and (ii) subject to all
other provisions regarding the eligibility of Collateral to satisfy value requirements, Collateral subject to assignment, pledge
or similar consent requirements of third parties is not eligible to satisfy value requirements until such consents satisfactory
to Bank have been executed and delivered to Bank:

 

	Collateral Type	 	Percentage of Fair Market Value
	Cash and cash equivalents	 	 	95	%
	Brokered Certificates of Deposit	 	 	85	%
	Commercial Paper	 	 	80	%
	US Government Obligations - Short Term	 	 	90	%
	US Government Obligations - Longer Term	 	 	80	%
	Corporate & Municipal Bonds – Short Term	 	 	80	%
	Corporate & Municipal Bonds – Longer Term	 	 	70	%
	Corporate Bonds – Convertible	 	 	50	%*
	Equities – Common – ADR’s & Large Cap	 	 	75	%*
	Equities – Common – ADR’s & Mid Cap	 	 	65	%*
	Equities – Common - Small & Micro Cap	 	 	55	%*
	Equities – Preferred – Large, Mid, Small & Micro Cap	 	 	70	%*
	Mutual Funds - Money Market	 	 	95	%
	Mutual Funds/ETF’s – Bond – US Government (Short Term)	 	 	90	%*
	Mutual Funds/ETF’s – Bond – US Government (General and Longer Term)	 	 	80	%*
	Mutual Funds/ETF’s – Bond – Corporate & Municipal (Short Term)	 	 	80	%*
	Mutual Funds/ETF’s – Bond – Corporate & Municipal (Longer Term)	 	 	70	%*
	Mutual Funds/ETF’s – Bond – High Yield	 	 	60	%*
	Mutual Funds/ETF’s – Bond – Global & International	 	 	55	%*
	Mutual Funds/ETF’s – Equity – Large Cap, S&P Index, Equity Income, Balanced	 	 	75	%*
	Mutual Funds/ETF’s – Equity – Multi & Mid Cap	 	 	65	%*
	Mutual Funds/ETF’s – Equity – Small Cap, Specialty, Sector, Global & International	 	 	55	%*
	Master Limited Partnerships	 	 	55	%*
	Real Estate Investment Trusts	 	 	55	%*
	Unit Investment Trusts	 	 	55	%*
	Wells Fargo Market Linked Certificates of Deposit	 	 	70	% *ϯ
	Wells Fargo Market Linked Notes	 	 	70	% *ϯ
	All Other Types of Collateral	 	 	0	%

 

* If Regulation U of the Federal Reserve Board applies, then
the lower of the percentage stated or 50% shall be the percentage applied for these assets.

 

Ϯ In the case of these assets types, the stated percentage
is applied to Fair Market Value and the resulting amount may not exceed the notional amount.

 

“Master Limited
Partnerships” means limited partner equity interests in limited partnerships with a market capitalization greater than
$250 million and which trade on a National Securities Exchange, and have done so for at least one year after initial settlement
of the public offering of such securities, if the unit value (or per share price) therein is greater than

 

    -5-

     

    

 

or equal to $10.00. Limited partner interests
of value less than $10.00 per unit, newly issued, trading on OTC, Pink Sheets or regional exchanges only, unregistered, unlisted
or de-listed, or not publicly traded, and general partner interests of any kind are not included in this definition.

 

“Municipal
Bonds” means bonds of state, city, county, municipality and other public entities rated BBB- or higher by Standard &
Poor’s and Baa3 or higher by Moody’s. “Short Term” Municipal Bonds are those with 5 years or less
remaining until date of maturity; all others are “Longer Term”.

 

“Mutual Funds”
means investment companies regulated under the Investment Company Act of 1940, except those regulated under Sections 4 and 26,
that invest primarily in money markets securities (“Money Market”), short or longer term US government taxable
or tax exempt bonds (“US Government”), short or longer term taxable corporate bonds (“Corporate”),
short or longer term, insured and single state municipal bonds (“Municipal”), bonds that seek higher returns
to compense increased risk of investing in lower rated issuers (“High Yield”), equities of US issuers in particular
market capitalization segments (Large Cap, Mid Cap, “Multi Cap” and Small Cap), bonds and/or equities of non-US issuers
(“International”) or worldwide including the US issuers (“Global”), or invest by designs
to track the performance of the S&P 500 index (“S&P Index”), to provide both current income and growth
potential (“Equity Income”), for balanced or allocated portfolios of securities (“Balanced”),
for particular sectors of the economy (“Sector”) or for particular specialized traits associated with their
investments made (“Specialty”), and which have greater than $100,000,000.00 in total assets under management
and a minimum fair market value greater than or equal to $4.00 per share except in the case of Money Market Mutual Funds which
shall have a minimum fair market value greater than or equal to $1.00. Leveraged mutual funds and inverse or “bear market”
mutual funds, non-networked funds, funds organized under the laws of, and/or operated from within, countries other than the United
States of America, and face-amount certificate and management companies are not included in this definition.

 

“National
Securities Exchange” means securities exchanges registered with the Securities Exchange Commission as national securities
exchanges in accordance with Section 6 (a) of the Securities Exchange Act of 1934.

 

“Real Estate
Investment Trusts” means real estate investment trust equity interests with a market capitalization greater than $250
million and which trade on a National Securities Exchange, and have done so for at least one year after initial settlement of the
public offering of such securities, if the unit value (or per share price) therein is greater than or equal to $10.00. Real estate
investment trust interests of value less than $10.00 per unit, newly issued, trading on OTC, Pink Sheets or regional exchanges
only, unregistered, unlisted or de-listed, or not publicly traded, and general partner interests of any kind are not included in
this definition. “Large Cap” REITs are those of an issuer having a market capitalization greater than $10 billion;
“Mid Cap” are those with a market capitalization greater than $2 billion but no more than $10 billion; “Small
Cap” are those with a market capitalization greater than $1 billion but no more than $2 billion; and “Micro
Cap” are those with a market capitalization greater than $250 million but no more than $1 billion.

 

“Unit
Investment Trusts” means investment companies regulated primarily under Sections 4 and 26 of the Investment Company
Act of 1940 that are invested primarily in municipal securities or securities of domestic corporations and which have greater
than $100,000,000.00 in total assets under management and a fair market value greater than or equal to $4.00 per share.
Leveraged and inverse or “bear market” funds, non-networked funds,

 

    -6-

     

    

 

funds invested primarily in private equity,
private placements, limited partnership interests, or venture capital enterprise, funds organized under the laws of, and/or operated
from within, countries other than the United States of America, and face-amount certificate and management companies are not included
in this definition.

 

“US Government
Obligations” means US Treasury Bills, US Treasury Bonds and Notes, US Government Zero Coupon Bonds, Government National
Mortgage Association fixed income securities and U.S. Government sponsored enterprise (Federal Home Loan Banks, Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal Farm Credit Banks,
and Federal Agricultural Mortgage Corporation) fixed income securities. “Short Term” US Government Obligations
are those with 5 years or less remaining until date of maturity; all others are “Longer Term”.

 

“Wells Fargo
Market Linked Certificates of Deposit” means a FDIC insured and CUSIP numbered certificates of deposit issued by Bank,
which provide at maturity the return of the entire original deposit amount and an interest payment based on performance of a specified
market measure during the term thereof, which may be liquidated at any time without penalty or fee, which are not subject to any
lock up periods, and which have no more than 96 months remaining until maturity.

 

“Wells Fargo Market Linked Notes”
means CUSIP numbered notes issued by Wells Fargo & Company which provide at maturity the return of the entire original principal
amount and an interest payment based on performance of a specified market measure during the term thereof, which may be liquidated
at any time without penalty or fee, which are not subject to any lock up periods, and which have no more than 96 months remaining
until maturity.

 

7.       TERMINATION.
This Agreement will terminate upon the performance of all obligations of Debtor to Bank secured hereby, including without limitation,
the payment of all Indebtedness of Debtor to Bank secured hereby, and the termination of all commitments of Bank to extend credit
to Debtor that would constitute Indebtedness secured hereby, existing at the time Bank receives written notice from Debtor of the
termination of this Agreement.

 

8.       OBLIGATIONS
OF BANK. Bank has no obligation to make any loans hereunder. Any money received by Bank in respect of the Collateral may be deposited,
at Bank’s option, into a non-interest bearing account over which Debtor shall have no control, and the same shall, for all
purposes, be deemed Collateral hereunder. Bank shall not be required to apply such money to the Indebtedness or other obligations
secured hereby or to remit such money to Debtor or to any other party until the full payment of all Indebtedness of Debtor to Bank,
and the termination of all commitments of Bank to extend credit to Debtor. Bank shall have no duty to take any steps necessary
to preserve the rights of Debtor against prior parties, or to initiate any action to protect against the possibility of a decline
in the market value of the Collateral or Proceeds. Bank shall not be obligated to take any action with respect to the Collateral
or Proceeds requested by Debtor unless such request is made in writing and Bank determines, in its sole discretion, that the requested
action would not unreasonably jeopardize the value of the Collateral and Proceeds as security for the Indebtedness.

 

9.       REPRESENTATIONS
AND WARRANTIES. Debtor represents and warrants to Bank that: (a) Debtor’s legal name is exactly as set forth on the first
page of this Agreement, and all of Debtor’s organizational documents or agreements delivered to Bank are complete and accurate
in every respect; (b) Debtor is the owner of the Collateral and Proceeds; (c) Debtor has the exclusive right to grant a security
interest in the Collateral and Proceeds; (d) all Collateral

 

    -7-

     

    

 

and Proceeds are genuine, free from liens, adverse claims, setoffs,
default, prepayment, defenses and conditions precedent of any kind or character, except as expressly permitted under Section 5.9
of the Credit Agreement; (e) all statements contained herein and, where applicable, in the Collateral, are true and complete in
all material respects; (f) no financing statement or control agreement covering any of the Collateral or Proceeds, and naming any
secured party other than Bank, exists or is on file in any public office or remains in effect; (g) no person or entity, other than
Debtor, Bank and Intermediary, has any interest in or control over the Collateral; and (h) specifically with respect to Collateral
and Proceeds consisting of investment securities, instruments, chattel paper, documents, contracts, insurance policies or any like
property, (i) all persons appearing to be obligated thereon have authority and capacity to contract and are bound as they appear
to be, and (ii) the same comply with applicable laws concerning form, content and manner of preparation and execution.

 

 10.       COVENANTS OF DEBTOR.

 

(a)       Debtor
agrees in general: (i) to pay Indebtedness secured hereby when due; (ii) to indemnify Bank against all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto; (iii) to permit Bank to exercise its powers; (iv) to
execute and deliver such documents as Bank deems necessary to create, perfect and continue the security interests contemplated
hereby; (v) not to change its name, and as applicable, its chief executive office, its principal residence or the jurisdiction
in which it is organized and/or registered without giving Bank prior written notice thereof; (vi) not to change the places where
Debtor keeps any Collateral or Debtor’s records concerning the Collateral and Proceeds without giving Bank prior written
notice of the address to which Debtor is moving same; (vii) not to sell, lease, transfer or otherwise dispose of all or a substantial
or material portion of Debtor’s assets except in the ordinary course of its business or except as expressly permitted under
the Credit Agreement, nor accomplish any of the above by virtue of a division or similar transaction; and (viii) to cooperate with
Bank in perfecting all security interests granted herein and in obtaining such agreements from third parties as Bank deems necessary,
proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder.

 

(b)       Debtor
agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in writing: (i) that Bank is authorized to file
financing statements in the name of Debtor to perfect Bank’s security interest in Collateral and Proceeds; (ii) not to permit
any security interest in or lien on the Collateral or Proceeds, except in favor of Bank and except liens in favor of Intermediary
to the extent expressly permitted under the Credit Agreement; (iii) not to hypothecate (including, by illustration, by merger,
conversion or division), or permit the transfer by operation of law of any of the Collateral or Proceeds or any interest therein;
(iv) to keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral
and Proceeds, and to permit Bank to inspect the same and make copies thereof at any reasonable time; (v) if requested by Bank,
to receive and use reasonable diligence to collect Proceeds, in trust and as the property of Bank, and to immediately endorse as
appropriate and deliver such Proceeds to Bank daily in the exact form in which they are received together with a collection report
in form satisfactory to Bank; (vi) in the event Bank elects to receive payments of Proceeds hereunder, to pay all expenses incurred
by Bank in connection therewith, including expenses of accounting, correspondence, collection efforts, filing, recording, record
keeping and expenses incidental thereto; (vii) to provide any service and do any other acts which may be necessary to keep all
Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims; and (viii) if the Collateral or Proceeds
consists of securities and so long as no Event of Default exists, to vote said securities and to give consents, waivers and ratifications
with respect thereto, provided that no vote shall be cast or consent,

 

    -8-

     

    

 

waiver or ratification given or action taken which would impair
Bank’s interests in the Collateral and Proceeds or be inconsistent with or violate any provisions of this Agreement. Debtor
further agrees that any party now or at any time hereafter authorized by Debtor to advise or otherwise act with respect to the
Securities Account shall be subject to all terms and conditions contained herein and in any control, custodial or other similar
agreement at any time in effect among Bank, Debtor and Intermediary relating to the Collateral.

 

11.       POWERS
OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the following powers, which are coupled with an interest,
are irrevocable until termination of this Agreement and may be exercised from time to time by Bank’s officers and employees,
or any of them, whether or not Debtor is in default: (a) to perform any obligation of Debtor hereunder in Debtor’s name or
otherwise; (b) to notify any person obligated on any security, instrument or other document subject to this Agreement of Bank’s
rights hereunder; (c) to collect by legal proceedings or otherwise all dividends, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral or Proceeds; (d) to enter into any extension, modification, reorganization, deposit,
merger or consolidation agreement, or any other agreement relating to or affecting the Collateral or Proceeds, and in connection
therewith to deposit or surrender control of the Collateral and Proceeds, to accept other property in exchange for the Collateral
and Proceeds, and to do and perform such acts and things as Bank may deem proper, with any money or property received in exchange
for the Collateral or Proceeds, at Bank’s option, to be applied to the Indebtedness or held by Bank under this Agreement;
(e) to make any compromise or settlement Bank deems desirable or proper in respect of the Collateral and Proceeds; (f) to insure,
process and preserve the Collateral and Proceeds; (g) to exercise all rights, powers and remedies which Debtor would have, but
for this Agreement, with respect to all Collateral and Proceeds subject hereto; and (h) to do all acts and things and execute all
documents in the name of Debtor or otherwise, deemed by Bank as necessary, proper and convenient in connection with the preservation,
perfection or enforcement of its rights hereunder. To effect the purposes of this Agreement or otherwise upon instructions of Debtor,
or any of them, Bank may cause any Collateral and/or Proceeds to be transferred to Bank’s name or the name of Bank’s
nominee. If an Event of Default has occurred and is continuing, any or all Collateral and/or Proceeds consisting of securities
may be registered, without notice, in the name of Bank or its nominee, and thereafter Bank or its nominee may exercise, without
notice, all voting and corporate rights at any meeting of the shareholders of the issuer thereof, any and all rights of conversion,
exchange or subscription, or any other rights, privileges or options pertaining to such Collateral and/or Proceeds, all as if it
were the absolute owner thereof. The foregoing shall include, without limitation, the right of Bank or its nominee to exchange,
at its discretion, any and all Collateral and/or Proceeds upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof, or upon the exercise by the issuer thereof or Bank of any right, privilege or option pertaining
to any shares of the Collateral and/or Proceeds, and in connection therewith, the right to deposit and deliver any and all of the
Collateral and/or Proceeds with any committee, depository, transfer agent, registrar or other designated agency upon such terms
and conditions as Bank may determine. All of the foregoing rights, privileges or options may be exercised without liability on
the part of Bank or its nominee except to account for property actually received by Bank. Bank shall have no duty to exercise any
of the foregoing, or any other rights, privileges or options with respect to the Collateral or Proceeds and shall not be responsible
for any failure to do so or delay in so doing.

 

12.       PAYMENT
OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes,
charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Bank

 

    -9-

     

    

 

at its option may pay any of them and shall be the sole judge
of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations
of Debtor to Bank, due and payable immediately upon demand, and at Bank’s option and subject to any restrictions under applicable
law pertaining to usury, together with interest at a rate determined in accordance with the provisions of this Agreement, and shall
be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement.

 

13.       EVENTS
OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:
(a) any Event of Default under and as defined in the Credit Agreement, (b) any other default in the payment or performance of any
obligation, or any defined event of default, under (i) any contract or instrument evidencing any Indebtedness secured hereby, (ii)
any other agreement between Debtor and Bank, including without limitation any loan agreement, relating to or executed in connection
with any Indebtedness secured hereby, or (iii) any control, custodial or other similar agreement in effect among Bank, Debtor and
Intermediary relating to the Collateral; (c) any representation or warranty made by Debtor herein shall prove to be incorrect,
false or misleading in any material respect when made; (d) Debtor shall fail to observe or perform any obligation or agreement
contained herein; (e) any impairment of the rights of Bank in any Collateral or Proceeds, or any attachment or like levy on any
Collateral or Proceeds; and (f) Bank, in good faith, believes any or all of the Collateral and/or Proceeds to be in danger of dissipation,
commingling, loss, theft, damage or destruction, or otherwise in jeopardy.

 

14.       REMEDIES.
Upon the occurrence of any Event of Default, Bank shall have the right to declare immediately due and payable all or any
Indebtedness secured hereby and to terminate any commitments to make loans or otherwise extend credit to Debtor. Bank shall
have all other rights, powers, privileges and remedies granted to a secured party upon default under the Uniform Commercial
Code or the Business and Commerce Code of the jurisdiction identified in Section 22 below or otherwise provided by law,
including without limitation, the right (a) to contact all persons obligated to Debtor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to Bank, and (b) to sell, lease, license or
otherwise dispose of any or all Collateral. In addition to any other remedies set forth in this Agreement, Debtor authorizes
Bank to engage in “electronic self-help” as defined in and in accordance with applicable law. All rights,
powers, privileges and remedies of Bank shall be cumulative. No delay, failure or discontinuance of Bank 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 thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit,
consent or approval of any kind by Bank of any default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in writing. 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. While an Event of Default exists: (a) Debtor will not dispose of any Collateral or Proceeds except on
terms approved by Bank; (b) Bank may appropriate the Collateral and apply all Proceeds toward repayment of the
Indebtedness secured hereby in such order of application as Bank may from time to time elect; (c) Bank may, at any time,
liquidate any time deposits pledged to Bank hereunder and apply the proceeds thereof to payment of the Indebtedness secured,
whether or not said time deposits have matured and notwithstanding the fact that such liquidation may give rise to penalties
for early withdrawal of funds, (d) Bank may

 

    -10-

     

    

 

take any action with respect to the Collateral contemplated
by any control, custodial or other similar agreement then in effect among Bank, Debtor and Intermediary; and (e) at Bank’s
request, Debtor will assemble and deliver all books and records pertaining to the Collateral or Proceeds to Bank at a reasonably
convenient place designated by Bank. For any Collateral or Proceeds consisting of securities, Bank shall have no obligation to
delay a disposition of any portion thereof for the period of time necessary to permit the issuer thereof to register such securities
for public sale under any applicable state or Federal law, even if the issuer thereof would agree to do so. Debtor further agrees
that Bank shall have no obligation to process or prepare any Collateral for sale or other disposition.

 

15.       DISPOSITION
OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of Collateral hereunder, Bank may disclaim all warranties of
title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral or Proceeds, or any part thereof,
may be applied by Bank to the payment of expenses incurred by Bank in connection with the foregoing, including reasonable attorneys’
fees, and the balance of such proceeds may be applied by Bank toward the payment of the Indebtedness secured hereby in such order
of application as Bank may from time to time elect. Upon the transfer of all or any part of the Indebtedness secured hereby, Bank
may transfer all or any part of the Collateral or Proceeds and shall be fully discharged thereafter from all liability and responsibility
with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder
with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred, Bank shall
retain all rights, powers, privileges and remedies herein given.

 

16.       STATUTE
OF LIMITATIONS. Until all Indebtedness secured hereby shall have been paid in full and all commitments by Bank to extend credit
to Debtor have been terminated, the power of sale or other disposition and all other rights, powers, privileges and remedies granted
to Bank hereunder shall, to the extent permitted by law, continue to exist and may be exercised by Bank at any time and from time
to time irrespective of the fact that the Indebtedness secured hereby or any part thereof may have become barred by any statute
of limitations, or that the personal liability of Debtor may have ceased, unless such liability shall have ceased due to the payment
in full of all Indebtedness secured hereby.

 

17.       MISCELLANEOUS.
When there is more than one Debtor named herein: (a) the word “Debtor” shall mean all or any one or more of
them as the context requires; (b) the obligations of each Debtor hereunder are joint and several; and (c) until all Indebtedness
shall have been paid in full, no Debtor shall have any right of subrogation or contribution, and each Debtor hereby waives any
benefit of or right to participate in any of the Collateral or Proceeds or any other security now or hereafter held by Bank. Debtor
hereby waives any right to require Bank to (i) proceed against Debtor or any other person, (ii) marshal assets or proceed against
or exhaust any security from Debtor or any other person, (iii) perform any obligation of Debtor with respect to any Collateral
or Proceeds, and (d) make any presentment or demand, or give any notices of any kind, including without limitation, any notice
of nonpayment or nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of
acceleration hereunder or in connection with any Collateral or Proceeds. Debtor further waives any right to direct the application
of payments or security for any Indebtedness of Debtor or indebtedness of customers of Debtor.

 

18.       NOTICES.
All notices, requests and demands required under this Agreement must be in writing, and given to such addresses and in a manner
set forth in the Credit Agreement.

 

    -11-

     

    

 

19. COSTS, EXPENSES AND ATTORNEYS’
FEES. Debtor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses,
including, to the extent permitted by applicable law, reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of Bank’s in-house counsel to the extent permissible), expended or incurred by Bank in connection with (a)
the perfection and preservation of the Collateral or Bank’s interest therein, and (b) the realization, enforcement and exercise
of any right, power, privilege or remedy conferred by this Agreement, whether or not suit is brought or foreclosure is commenced,
and where suit is brought, 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 Debtor or in any way affecting any of the Collateral
or Bank’s ability to exercise any of its rights or remedies with respect thereto. Notwithstanding anything in this Agreement
to the contrary, reasonable attorneys’ fees shall not exceed the amount permitted by law. Whenever in this Agreement Debtor
is obligated to pay for the attorneys’ fees of Bank, or the phrase “reasonable attorneys’ fees”
or a similar phrase is used, it shall be Debtor’s obligation to pay the attorneys’ fees actually incurred or allocated,
at standard hourly rates, without regard to any statutory interpretation, which shall not apply, Debtor hereby waiving the application
of any such statute. Subject to any restrictions under applicable law pertaining to usury, all of the foregoing shall be paid by
Debtor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or
Bank’s Prime Rate in effect from time to time.

 

20.       SUCCESSORS;
ASSIGNS; AMENDMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or modified only in writing signed by Bank and Debtor.

 

21.       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.

 

22.       GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, but giving effect
to federal laws applicable to national banks.

 

Debtor warrants that Debtor is an organization
registered under the laws of the State of Minnesota.

 

Debtor warrants that its chief executive
office (or principal residence, if applicable) is located at the following address: 10900 Red Circle Drive, Minnetonka, MN 55343.

 

Signature page follows

 

    -12-

     

    

 

IN WITNESS WHEREOF, this agreement has been
duly executed by Debtor, intending to be legally bound hereby, as of August 28, 2020.

 

	 	COMMUNICATIONS SYSTEMS, INC.
	 	 	 
	 	By:	
	 	Name: Mark D. Fandrich
	 	Title: Chief Financial Officer

 

Signature Page to Security Agreement: Securities AccountExhibit 10.3

 

REVOLVING LINE OF CREDIT NOTE

 

	$5,000,000	Minneapolis, Minnesota
	 	August 28, 2020

 

This Note amends, restates
and supersedes in its entirety, and is given as a replacement for, and not in satisfaction of or as a novation with respect to,
that certain Amended and Restated Revolving Note in the principal amount of $15,000,000, executed by Borrower, JDL Technologies,
Incorporated, Transition Networks, Inc. and Suttle, Inc. in favor of Bank and dated August 12, 2016, as amended to date.

 

FOR VALUE RECEIVED,
the undersigned COMMUNICATIONS SYSTEMS, INC., a Minnesota corporation (“Borrower”) promises to pay to the order
of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 90 South 7th Street, 18th Floor, Minneapolis,
MN 55402, [Account Number Redacted] 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 $5,000,000, or so much thereof as may be advanced and
be outstanding pursuant to the terms of the Credit Agreement, as defined herein, 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)           “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.

 

(b)           “LIBOR”
means the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds
for one (1) month as published by the ICE Benchmark Administration Limited, a United Kingdom company, at approximately 11:00 a.m.,
London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so published,
then as determined by Bank from another recognized source or interbank quotation); provided, however, that if LIBOR determined
as provided above would be less than 0.75%, then LIBOR shall be deemed to be 0.75%.

 

(c)           “London
Business Day” means any day that is a day for trading by and between banks in dollar deposits in the London interbank
market.

 

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 1.25% above Daily One Month LIBOR in effect from time to time. 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. Borrower 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) costs, expenses and liabilities arising from or in connection with reserve percentages 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), 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. In determining which of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

 

(c)           Default
Interest. The Bank shall have the option in its sole and absolute discretion to have the outstanding principal balance of this
Note 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 (i) from and after the maturity date of this
Note; (ii) from and after the date prior to the maturity date of this Note when all principal owing hereunder becomes due and payable
by acceleration or otherwise; and/or (iii) upon the occurrence and during the continuance of any Event of Default.

 

BENCHMARK REPLACEMENT PROVISIONS:

 

Notwithstanding anything
to the contrary contained in this Note or in any related loan document (for the purposes of these Benchmark Replacement Provisions,
a Swap Agreement is not a loan document):

 

(a)           Benchmark
Replacement. If a Benchmark Transition Event or an Early Opt-in Election, as applicable, occurs, the applicable Benchmark Replacement
will replace the then-current Benchmark for all purposes under this Note or under any related loan document. Any Benchmark Replacement
will become effective on the applicable Benchmark Replacement Date without any further action or consent of Borrower.

 

(b)           Benchmark
Replacement Conforming Changes. Bank will have the right to make Benchmark Replacement Conforming Changes from time to time
and any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action
or consent of Borrower.

 

(c)           Notices;
Standards for Decisions and Determinations. Bank will promptly notify Borrower of (i) any occurrence of a Benchmark Transition
Event or an Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark Replacement, and (iii) the effectiveness
of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by Bank pursuant to these
Benchmark Replacement Provisions, including any determination with respect to a tenor, rate or adjustment or of the occurrence
or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection,
will be conclusive and binding absent manifest error and will be made in its sole discretion and without Borrower consent

 

(d)           Certain
Defined Terms. As used in this Note, each of the following capitalized terms has the meaning given to such term below: 

(i)           “Benchmark”
means, initially, LIBOR (including Daily One Month LIBOR, if applicable); provided, however, that if a Benchmark
Transition Event or an Early Opt-in Election, as applicable, has occurred with respect to LIBOR or the then-current Benchmark,
then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become
effective pursuant to the provisions of this Note.

 

     

     

    

  

(ii)          “Benchmark
Administrator” means, initially, ICE Benchmark Administration Limited, a United Kingdom company, or any successor administrator
of the then-current Benchmark or any insolvency or resolution official with authority over such administrator.

 

(iii)          “Benchmark
Replacement” means the first alternative set forth in the order below that can be determined by Bank as of the applicable
Benchmark Replacement Date:

 

(1)           the
sum of: (A) Term SOFR or, if Bank determines that Term SOFR for the Corresponding Tenor cannot be determined, Term SOFR for the
longest tenor that can be determined by Bank that is shorter than the Corresponding Tenor, and (B) the spread adjustment, or method
for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected
or recommended by the Relevant Governmental Body for Term SOFR; provided, however, that this clause (1) shall not
apply (i) to any borrowings under this Note if a Swap Agreement is in effect with respect to all or any portion of this Note as
of the Benchmark Transition Event or Early Opt-in Election, and (ii) to any borrowings under this Note that bear interest at Daily
One Month LIBOR;

 

(2)           the
sum of: (A) the alternate rate of interest that has been selected by Bank as the replacement for the then-current Benchmark for
the Corresponding Tenor (which, without limitation, may be compounded SOFR in arrears, term SOFR, Bank’s Prime Rate, or another
benchmark selected by Bank); and (B) the applicable spread adjustment or method for calculating or determining such spread adjustment,
(which may be a positive or negative value or zero) that has been selected by Bank.

 

With respect to Bank’s
decisions under this paragraph (2):

 

(i)           if
a Swap Agreement relating to a portion of this Note is in effect as of the Benchmark Transition Event or Early Opt-in Election,
then Bank may without limitation, select (i) the benchmark referenced in the Swap Agreement, which may be the sum of a fallback
rate and spread adjustment, for the entire balance of this Note, or (ii) the benchmark referenced in the Swap Agreement, which
may be the sum of a fallback rate and spread adjustment, for the hedged portion of this Note, and the applicable Benchmark Replacement
for the remaining non-hedged portion of this Note; and

 

(ii)          in
the case of a replacement rate for Daily One Month LIBOR, Bank may, without limitation, select SOFR notwithstanding the availability
or feasibility of determining a daily one month SOFR; and

 

(iii)         Bank’s
selection of any applicable Benchmark Replacement shall give due consideration to (i) any selection or recommendation by the Relevant
Governmental Body at such time for a replacement rate, the mechanism for determining such a rate, the methodology or conventions
applicable to such rate, or the spread adjustment, or method for calculating or determining such spread adjustment, for such rate,
or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the then-current
Benchmark, the methodology or conventions applicable to such rate, or the spread adjustment, or method for calculating or determining
such spread adjustment, for such alternate rate for U.S. dollar-denominated syndicated or bilateral credit facilities at such time.

 

Provided, however, during
any period of time that the Benchmark Replacement would be less than 0.75%, the Benchmark Replacement shall be deemed to be 0.75%
for the purposes of this Note and the related loan documents, subject to any applicable floor rate provision.

 

(iv)            “Benchmark
Replacement Conforming Changes” means any technical,

 

     

     

    

administrative or operational changes (including,
without limitation, changes to the definition of “Interest Period,” timing and frequency of determining rates and making
payments of interest, prepayment provisions and other administrative matters) that Bank decides may be appropriate to reflect the
adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Bank.

 

(v)           “Benchmark
Replacement Date” means the date specified by Bank in a notice to Borrower following a Benchmark Transition Event or
Early Opt-in Election.

 

(vi)           “Benchmark
Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
a public statement or publication of information by or on behalf of the Benchmark Administrator or a regulatory supervisor for
the Benchmark Administrator announcing that (A) the Benchmark Administrator has ceased or will cease to provide the Benchmark permanently
or indefinitely or (B) the Benchmark is no longer representative of underlying markets.

 

(vii)          “Corresponding
Tenor” means a tenor having approximately the same length as the Interest Period, provided, however, that the Corresponding
Tenor for Daily One Month LIBOR shall be one day.

 

(viii)         “Early
Opt-in Election” means the election by Bank to declare that the Benchmark will be replaced prior to the occurrence of
a Benchmark Transition Event and the provision by Bank of written notice of such election to Borrower indicating that at least
five (5) currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment
or as originally executed) Term SOFR plus a spread adjustment that has been selected or recommended by the Relevant Governmental
Body.

 

(ix)          “Interest
Period” means, initially, the applicable LIBOR Period, and if a Benchmark Replacement is applicable, the tenor of the
Benchmark Replacement.

 

(x)           “Relevant
Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially
endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

 

(xi)          “SOFR”
with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York,
as the administrator thereof, (or a successor administrator) on its website.

 

(xii)         “Swap
Agreement” means a swap agreement by and between Borrower and Bank or its affiliates.

 

(xiii)        “Term
SOFR” means the forward-looking term rate for the Corresponding Tenor based on SOFR that has been selected or recommended
by the Relevant Governmental Body.

 

BORROWING AND REPAYMENT:

 

(a)         Borrowing
and Repayment of Principal. Borrower 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 or such lesser amount as set forth in the Credit Agreement. 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 Borrower, 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 August 28, 2021.

 

(b)           Payment
of Interest. Interest accrued on this Note shall be payable on the first day of each month, commencing October 1, 2020, and
on the maturity date set forth above.

 

(c)           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 (i) Mark Fandrich or Kristin Hlavka, any one acting alone (subject to any of Bank’s applicable authentication policies
or procedures, which may require that a particular individual—including another specific individual listed above—provide
verification of the identity of the requestor), who are authorized to request advances and direct the disposition of any advances
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 Borrower, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of Borrower 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 Borrower.

 

(d)           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.

 

PREPAYMENT:

 

Borrower may prepay
principal on this Note at any time, in any amount and without penalty. If principal under this Note is payable in more than one
installment, then any prepayments of principal shall be applied to the most remote principal installment or installments then unpaid.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant
to and is subject to the terms and conditions of that certain Credit Agreement of even date herewith between Borrower and Bank
(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 any “Event of Default” as defined under
the Credit Agreement, shall constitute an “Event of Default” under this Note.

 

     

     

    

 

MISCELLANEOUS:

 

(a)           Remedies.
Upon the sale, transfer, hypothecation, assignment or other encumbrance, whether voluntary, involuntary or by operation of law,
of all or any interest in any real property securing this Note, if any, or 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 Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower 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 whether or not suit is brought, 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 Borrower or any other person or entity.

 

(b)           Collateral
Exclusion. No lien or security interest created by or arising under any deed of trust, mortgage, security deed, or similar
real estate collateral agreement (“Lien Document”) shall secure the Note Obligations unless such Lien Document
specifically describes the promissory note(s), instrument(s) or agreement(s) evidencing Note Obligations as a part of the indebtedness
secured thereby. This exclusion shall apply notwithstanding (i) the fact that such Lien Document may appear to secure the Note
Obligations by virtue of a cross-collateralization provision or other provisions expanding the scope of the secured obligations,
and (ii) whether such Lien Document was entered into prior to, concurrently with, or after the date hereof. As used herein, “Note
Obligations” means any obligations under this Note, as amended, extended, renewed, refinanced, supplemented or otherwise
modified from time to time, or under any other evidence of indebtedness that has been modified, renewed or extended in whole or
in part by this Note, as amended, extended, renewed, refinanced, supplemented or otherwise modified from time to time.

 

(c)           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.

 

(d)           Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of Minnesota, but giving effect
to federal laws applicable to national banks, without reference to the conflicts of law or choice of law principles thereof.

 

(e)           Effective
Date. The effective date of this Note shall be the date that Bank has accepted this Note and all conditions to the effectiveness
of the Credit Agreement have been fulfilled to Bank’s satisfaction. Notwithstanding the occurrence of the effective date
of this Note, Bank shall not be obligated to extend credit under this Note until all conditions to each extension of credit set
forth in the Credit Agreement have been fulfilled to Bank’s satisfaction.

 

Signature page follows

 

     

     

    

 

IN WITNESS WHEREOF,
the undersigned have executed this Note to be effective as of the effective date set forth herein.

 

	 	COMMUNICATIONS SYSTEMS, INC.
	 	 
	 	By: 	 
	 	Name: Mark D. Fandrich
	 	Title: Chief Financial Officer
	 	 	 
	 	WELLS
FARGO BANK, NATIONAL ASSOCIATION
	 	 	 
	 	By:	 
	 	Name: Kael Peterson
	 	Title:   Senior Vice President

 

Signature Page to Revolving Line of Credit
Note

 

     

     

    

  

IN WITNESS WHEREOF,
the undersigned have executed this Note to be effective as of the effective date set forth herein.

 

	 	COMMUNICATIONS SYSTEMS, INC.
	 	 
	 	By: 	                 
	 	Name: 
	 	Title:
	 	 	 
	 	WELLS
FARGO BANK, NATIONAL ASSOCIATION
	 	 	 
	 	By:	 
	 	Name: Kael Peterson
	 	Title:   Senior Vice President

 

Signature Page to Revolving Line of Credit
Note

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00313-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00313-of-00352.parquet"}]]