Document:

Exhibit 10.2

 

LOCK-UP AGREEMENT

 

______________, 2021          

 

Communications Systems, Inc.

 

Re:      Securities Purchase Agreement, dated as of June 28, 2021 (the “Purchase Agreement”), between Communications Systems, Inc. (the “Company”) and the purchasers signatory thereto (each, a “Purchaser” and, collectively, the “Purchasers”)

 

Ladies and Gentlemen:

 

Defined terms not otherwise defined in this letter agreement (the “Letter Agreement”) shall have the meanings set forth in the Purchase Agreement. Pursuant to Section 2.2(a) of the Purchase Agreement and in satisfaction of a condition of the Company’s obligations under the Purchase Agreement, and in order to induce the Purchasers to purchase the Preferred Stock and Warrants, the undersigned irrevocably agrees with the Company that, from the date hereof until thirty (30) days after the Effective Date (such period, the “Restriction Period”) (provided, that with respect to clause (a) of such definition, only if the Registration Statement registers for resale all Underlying Shares), the undersigned will not (i) offer, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any Affiliate of the undersigned or any person in privity with the undersigned or any Affiliate of the undersigned), directly or indirectly, (ii) establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, with respect to, any shares of Common Stock of the Company, or securities convertible, exchangeable or exercisable into shares of Common Stock of the Company, beneficially owned, held or hereafter acquired by the undersigned (the “Securities”). Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. In order to enforce this covenant, the Company shall impose irrevocable stop-transfer instructions preventing the transfer agent of the Company from effecting any actions in violation of this Letter Agreement.

 

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Securities in the following transactions, provided that (1) the Company receives a signed lock-up letter agreement (in the form of this Letter Agreement) for the balance of the Restriction Period from each donee, trustee, distributee, or transferee, as the case may be, prior to such transfer, (2) any such transfer shall not involve a disposition for value, (3) such transfer is not required to be reported with the Securities and Exchange Commission in accordance with the Exchange Act and no report of such transfer shall be made voluntarily, and

 

     

     

    

 

(4) neither the undersigned nor any donee, trustee, distributee or transferee, as the case may be, otherwise voluntarily effects any public filing or report regarding such transfers:

 

	
 

	
i)

	
as a bona fide gift or gifts;

	
 

	
ii)

	
to any immediate family member or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this Letter Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin);

 

	
 

	
iii)

	
to any corporation, partnership, limited liability company, or other business entity all of the equity holders of which consist of the undersigned and/or the immediate family of the undersigned;

 

	
 

	
iv)

	
if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (a) to another corporation, partnership, limited liability company, trust or other business entity that is an Affiliate of the undersigned or (b) in the form of a liquidating distribution to limited partners, limited liability company members or stockholders of the undersigned;

 

	
 

	
v)

	
if the undersigned is a trust, to the beneficiary of such trust;

 

	
 

	
vi)

	
by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the undersigned; or

 

	
 

	
vii)

	
of securities purchased in open market transactions after the Closing Date.

 

In addition, notwithstanding the foregoing, this Letter Agreement shall not restrict the delivery of shares of Common Stock (a) to the undersigned upon (i) exercise any options granted under any employee benefit plan of the Company; provided that any shares of Common Stock or other Securities acquired in connection with any such exercise will be subject to the restrictions set forth in this Letter Agreement, or (ii) the exercise of warrants; provided that such shares of Common Stock or other Securities delivered to the undersigned in connection with such exercise are subject to the restrictions set forth in this Letter Agreement or (b) by the undersigned to the Company in connection with the “net” or “cashless” exercise of options or other rights to purchase shares of Common Stock granted pursuant to any employee benefit plan of the Company in satisfaction of any tax withholding obligations through cashless surrender or otherwise.

 

Furthermore, the undersigned may enter into any new plan established in compliance with Rule 10b5-1 of the Exchange Act; provided that (i) such plan may only be established if no public announcement or filing with the Securities and Exchange Commission, or other applicable regulatory authority, is made in connection with the establishment of such plan during the Restriction Period and (ii) no sale of shares of Common Stock are made pursuant to such plan during the Restriction Period.

 

 

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The undersigned acknowledges that the execution, delivery and performance of this Letter Agreement is a material inducement to each Purchaser to complete the transactions contemplated by the Purchase Agreement and the Company and the Purchasers shall be entitled to specific performance of the undersigned’s obligations hereunder. The undersigned hereby represents that the undersigned has the power and authority to execute, deliver and perform this Letter Agreement, that the undersigned has received adequate consideration therefor and that the undersigned will indirectly benefit from the closing of the transactions contemplated by the Purchase Agreement.

 

This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of each of the Company, the holders of two-thirds of the shares of Preferred Stock issued pursuant to the Purchase Agreement and the undersigned. This Letter Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to the principles of conflict of laws. The undersigned hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in Manhattan, for the purposes of any suit, action or proceeding arising out of or relating to this Letter Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. The undersigned hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The undersigned hereby waives any right to a trial by jury.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The undersigned agrees and understands that this Letter Agreement does not intend to create any relationship between the undersigned and any Purchaser and that no Purchaser is entitled to cast any votes on the matters herein contemplated and that no issuance or sale of the Securities is created or intended by virtue of this Letter Agreement. The undersigned agrees that the Purchasers are third party beneficiaries of this Letter Agreement.

 

This Letter Agreement shall be binding on successors and assigns of the undersigned with respect to the Securities and any such successor or assign shall enter into a similar agreement for the benefit of the Purchasers.

 

*** SIGNATURE PAGE FOLLOWS***

 

 

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This Letter Agreement may be executed in two or more counterparts, all of which when taken together may be considered one and the same agreement.

 

	
 

	
 

	
 

	
Signature

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Print Name

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Position in Company, if any

	
 

	
 

	
 

	
 

	
 

	
Address for Notice:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Number of shares of Common Stock

	
 

	
 

	
 

	
 

	
 

	
Number of shares of Common Stock underlying subject to warrants, options, debentures or other convertible securities

 

By signing below, the Company agrees to enforce the restrictions on transfer set forth in this Letter Agreement.

 

Communications Systems, Inc.

 

	
By:

	
 

	
 

	
Name:

	
 

	
Title:

	
 

 

    4Exhibit
10.3

June 28, 2021

CrowdOut Capital LLC

3001 S. Lamar Blvd., Suite 300

Austin Texas 78704

Attn: Alexander Schoenbaum

Email: alexander@crowdoutcapital.com

Re: Securities
Purchase Agreement dated as of June 27, 2021 (the “Securities Purchase Agreement”), by and among Communications Systems,
Inc., a Minnesota corporation (the “Company”), CrowdOut Capital LLC (“CrowdOut”) and each other
purchaser identified on the signature pages thereto to. Capitalized terms used herein but not otherwise defined shall have the meaning
given to such terms in the Securities Purchase Agreement. 

Ladies and Gentlemen: 

This letter
agreement (this “Letter Agreement”) is being entered into in connection with, and as a condition to, CrowdOut’s
execution and delivery of the Securities Purchase Agreement, pursuant to which CrowdOut will agree to purchase 9,000 shares of Series
A Preferred Stock of the Company and a Warrant to purchase up to 2,647,059 shares of Common Stock at the Closing (the “Equity
Transaction”). 

CrowdOut and
the Company have also entered into a non-binding letter of intent, a copy of which is attached hereto as Exhibit A, for a $20,000,000
term loan to be provided by CrowdOut to the Company to assist the Company in the purchase of certain acquisition targets (the “Debt
Transaction”). To induce CrowdOut to enter into the Securities Purchase Agreement, CrowdOut and the Company hereby agree as
follows: 

1.     
Equity Transaction Conditional. CrowdOut’s obligation
to consummate the transactions contemplated by the Securities Purchase Agreement, including its obligation to purchase the Preferred Stock
and Warrant from the Company, is expressly conditioned on CrowdOut closing and funding, on or prior to the Closing Date, the Debt Transaction
pursuant to fully executed credit documents that are mutually acceptable to the parties. In the event that the Debt Transaction is not
consummated by the parties, for any reason or no reason, CrowdOut shall have no obligation to consummate the transactions contemplated
by the Securities Purchase Agreement, including the purchase of the Preferred Stock and the Warrant, and any and all rights or obligations
that CrowdOut may have under the Securities Purchase Agreement shall immediately and automatically be of no further force and effect with
no further action required by CrowdOut and void ab initio. In such event, the Company shall issue a press release, and make the
appropriate filings with the Securities and Exchange Commission, announcing that CrowdOut is no longer participating in the transactions contemplated by the Securities Purchase Agreement and removing all
references to CrowdOut from the registration statement filed pursuant to the Registration Rights Agreement.

     

     

    

 

	Miscellaneous. 

 

a.      
This Letter Agreement may be executed in any number of counterparts each of
which shall constitute an original but which together shall constitute one instrument. This Letter Agreement may only be amended by an
instrument in writing executed by each of the parties hereto. 

 

b.     
This Letter Agreement shall be considered a Transaction Document as such term
is defined in the Securities Purchase Agreement. 

 

c.      
This Letter Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. 

 

d.     
By executing this Letter Agreement, each party represents and warrants to the
other party that (i) the representing party has duly authorized the execution, delivery and performance of this Letter Agreement; (ii)
the terms of this Letter Agreement are binding upon and in full force and effect against, the representing party, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights and
remedies generally, to general principles of equity and to principles of sovereign immunity; and (iii) the execution, delivery and performance
of this Letter Agreement by such representing party does not and will not violate any agreement or arrangement to which it is a party
or by which it may be bound, or any order or decree to which such party is subject. 

 

e.      
No party hereto waives any right under this Letter Agreement by failure or delay
in its exercise. A single or partial exercise of any rights does not preclude the later exercise of such right or any other right. The
rights and remedies of this Letter Agreement are cumulative and not exclusive of any rights or remedies available pursuant to applicable
law. 

 

f.      
This Letter Agreement will be binding upon, and will inure to the benefit of
and be enforceable by, the parties and their respective successors and permitted assigns. 

 

g.      
Notwithstanding any provision of the Securities Purchase Agreement to the contrary,
to the extent that any provision of the Securities Purchase Agreement conflicts with the terms of this Letter Agreement, the terms of
this Letter Agreement shall control. 

 

[Signatures
follow on next page.]

     

     

    

	 	COMPANY:
	 	
	 	COMMUNICATION SYSTEMS, INC., a
	 	Minnesota corporation
	 	 
	 	By: 
	 	Name: 
	 	Title: 
	 	 
	Acknowledged and Agreed as of June 28, 2021	 
	 	 
	CROWDOUT CAPITAL LLC	 
	 	 
	By: 	 
	Name:	 
	Title: 	 

     

     

    

 

EXHIBIT A

TERM LOAN LETTER OF INTENT

 

[Omitted]

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