Exhibit 10.2

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) dated on and as of the latest date
set forth on the signature page hereto by and between Mikros Systems
Corporation, a Delaware corporation (“Issuer”), and U. S. Small Business
Administration (“SBA”).

 

Recitals

 

WHEREAS, SBA is the record and beneficial owner of 202,500 shares (the
“Convertible Shares”) of the Issuer's Convertible Preferred Stock, $0.01 par
value per share (the “Convertible Preferred Stock”), 231,961 shares (the “Series
B Shares”) of the Issuer's Series B Preferred Stock, $0.01 par value per share
(the “Series B Stock”), 138,000 shares (the “Series D Shares”) of the Issuer's
Series D Preferred Stock, $0.01 par value per share (the “Series D Stock”), and
2,084,167 shares (the “Common Shares”) of the Issuer's Common Stock, $0.01 par
value per share (“Common Stock”);

 

WHEREAS, concurrently with the closing of this Agreement, the Issuer will
conduct closings with respect to a series of exchange agreements (the
“Recapitalization”) with the other holders of all issued and outstanding shares
of Series D Stock (i.e., holders other than SBA), the holder of 50,000 issued
and outstanding shares of Convertible Preferred Stock, the holders of an
additional 664,925 shares of Series B Stock, and the holder of all issued and
outstanding shares of the Issuer’s Series C Preferred Stock, $0.01 par value per
share (the “Series C Stock”), pursuant to which such shares of Series D Stock,
Convertible Preferred Stock, Series B Stock, and Series C Stock will be
exchanged for a combination of cash and shares of Common Stock in the per share
amounts set forth on Exhibit A hereto;

 

WHEREAS, SBA intends to participate in the Recapitalization, but has requested
that the Issuer repurchase all shares of Common Stock currently owned by the SBA
and all shares of Common Stock issuable to it under the Recapitalization in
consideration of additional cash payment of $147,451;

 

WHEREAS, SBA and Issuer wish to exchange all of the Convertible Shares, Series B
Shares, Series D Shares, and Common Shares (collectively, the “Exchanged
Shares”) in consideration of payment to SBA of $250,000 upon the terms and
subject to the conditions hereof; and

 

WHEREAS, the parties hereto desire to make certain representations, warranties,
covenants and other agreements in connection with the transactions contemplated
hereby.

 

NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

 

 
 

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Article I
EXCHANGE OF SECURITIES

 

Section 1.1     Exchange of Securities. Upon the terms and subject to the
conditions of this Agreement, at the Closing (a) SBA will convey, assign,
transfer and deliver to Issuer, and Issuer will receive from SBA, the Exchanged
Shares, free and clear of all encumbrances except for as set forth in Section
2.1, and (b) Issuer will deliver to SBA, and SBA will receive from Issuer
$250,000 (the “Cash Payment”). Upon completion of the exchange of the Exchanged
Shares, SBA will have no ownership or other rights with respect to the Exchanged
Shares including, but not limited to, any right to receive any dividends,
whether accrued but unpaid, declared but unpaid, or undeclared and unpaid or
otherwise, distributions, or other payment on account of such Exchanged Shares.

 

Section 1.2     Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place the earlier of (a) after all
conditions set forth in Article IV have been satisfied or waived (other than
those conditions that are to be satisfied at the Closing); or (b) no later than
June 30, 2016. If the Closing does not occur on or before June 30, 2016, then
the terms of this Agreement shall expire and be of no effect unless extended by
a further written agreement of Issuer and SBA. The date on which the Closing
actually occurs will be referred to as the “Closing Date” and the Closing will
for all purposes be deemed effective as of 12:01 a.m., EST, on the Closing Date.
At the Closing, the following transactions and deliveries shall occur:

 

(a)     Issuer will issue and deliver via Federal Express or United Parcel
Service to SBA at the address set forth in Section 6.3 hereof, a check in the
amount of the Cash Payment in exchange for the Exchanged Shares in accordance
with Section 1.1; and

 

(b)     SBA will deliver to Issuer at the address set forth in Section 6.3
hereof, certificate(s) representing the Exchanged Shares or in the event that
any such certificate(s) have been lost or misplaced, an Affidavit of Lost
Certificate in the form attached hereto as Exhibit B duly endorsed by SBA for
each such lost or misplaced certificate) in exchange for the Cash Payment in
accordance with Section 1.1.

 

Article II
REPRESENTATIONS AND WARRANTIES OF HOLDER

 

As of the date hereof and as of the Closing Date, SBA represents and warrants to
Issuer as follows:

 

Section 2.1     Ownership of Exchanged Shares. To the best of SBA’s knowledge,
SBA is the sole record and beneficial owner of the Exchanged Shares. Except for
a lien in the amount of approximately $180,000 held by the United States
Internal Revenue Service (the “IRS”) pursuant to IRS filings dated December 30,
2002 and March 25, 2003 (and which lien may have expired), the Exchanged Shares
are not subject to any liens or encumbrances of any kind or nature, and SBA has
not granted any rights to any person or entity to purchase any of the Exchanged
Shares. The IRS did not contact SBA regarding enforcement, execution or
collection of the foregoing lien after the closure on February 13, 2013 of the
federal receivership from which SBA acquired the Exchanged Shares. The SBA does
not know of any effort of the IRS after the closure of that receivership to
enforce, execute or collect the forgoing lien with respect to the Exchanged
Shares. SBA has the sole right to transfer the Exchanged Shares to Issuer.

 

 
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Section 2.2     Authority; Non-Contravention.

 

(a)     SBA has all requisite organizational power and authority to execute,
deliver and perform its obligations under this Agreement. This Agreement has
been duly and validly authorized, executed and delivered by SBA and constitutes
the valid and legally binding obligation of SBA, enforceable in accordance with
its terms and conditions, subject to bankruptcy, insolvency, fraudulent
transfer, moratorium or similar laws relating to or affecting creditors’ rights
generally and to general principles of equity.

 

(b)     The execution, delivery and performance of this Agreement by SBA and the
consummation of the transactions contemplated hereby will not result in any
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over SBA or any of its
properties or assets, except where such violation will not, individually or in
the aggregate, prevent SBA from consummating the transactions contemplated
hereby.

 

(c)     No consent, approval, authorization or order of, or filing or
registration with, any court or governmental agency or body having jurisdiction
over SBA or any of its properties or assets is required for the execution,
delivery and performance of this Agreement by SBA or the consummation of the
transactions contemplated hereby.

 

Section 2.3     Access to Information. SBA acknowledges that it has had access
to and has had the opportunity to review all documents and records relating to
the Issuer, including, but not limited to, that certain Confidential Information
Statement of the Issuer dated April 29, 2016, that it has deemed necessary in
order to make an informed investment decision with respect to the transaction
contemplated hereby; that it has had the opportunity to ask representatives of
the Issuer certain questions and request certain additional information
regarding the terms and conditions of the transaction contemplated hereby and
the finances, operations, business and prospects of the Issuer and has had any
and all such questions and requests answered to its satisfaction; and that it
understands the risks and other considerations relating to the transactions
contemplated hereby. SBA has, to the extent deemed necessary by SBA, consulted
with its own advisors (including SBA’s attorney, accountant or investment
advisor) regarding the transactions contemplated by this Agreement, including
without limitation any tax consequences related thereto.

 

Article III
REPRESENTATIONS AND WARRANTIES OF ISSUER

 

As of the date hereof and as of the Closing Date, Issuer represents and warrants
to SBA as follows:

 

 
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Section 3.1     Organization of Issuer. Issuer has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of
Delaware, with all corporate power and authority necessary to conduct the
business in which it is engaged and is duly qualified or licensed to do business
and in good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of its properties or assets or the conduct of its businesses
requires such qualification or license, except where the failure to be so
qualified or be so licensed or in good standing would not, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), results of operations, stockholders’ equity, properties or business
of Issuer and its subsidiaries taken as a whole.

 

Authority; Non-Contravention.(a)     Issuer has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly and validly authorized by Issuer and
executed and delivered by Issuer. This Agreement constitutes the valid and
legally binding obligation of Issuer, enforceable in accordance with its terms
and conditions, subject to bankruptcy, insolvency, fraudulent transfer,
moratorium or similar laws relating to or affecting creditors’ rights generally
and to general principles of equity.

 

(b)     The execution, delivery and performance of this Agreement by Issuer and
the consummation of the transactions contemplated hereby will not (i)  result in
any violation of the provisions of the governing instruments of Issuer or
(ii) result in any violation of any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over Issuer or any
of its properties or assets, except where such violation will not, individually
or in the aggregate, prevent SBA from consummating the transactions contemplated
hereby.

 

(c)     No consent, approval, authorization or order of, or filing or
registration with, any court or governmental agency or body having jurisdiction
over Issuer or any of its subsidiaries or any of their properties or assets is
required for the execution, delivery and performance of this Agreement by Issuer
or the consummation of the transactions contemplated hereby.

 

Section 3.3     Lawful Source of Funds. The funds used to make the Cash Payment
were generated from performance of services and provision of products to the
United States Department of Defense.

 

Article IV
CLOSING CONDITIONS

 

Section 4.1     SBA Conditions to Closing. The obligation of SBA to effect the
Closing and consummate the transactions contemplated by this Agreement is
subject to satisfaction or waiver on or prior to the Closing Date of the
following conditions:

 

(a)     Issuer will deliver to SBA a check in the amount of the Cash Payment in
exchange of the Exchanged Shares in accordance with Section 1.1;

 

 
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(b)     Issuer will have performed or complied with, in all material respects,
its covenants and agreements contained in this Agreement that are required to be
performed or complied with on or prior to the Closing Date;

 

(c)     There will not be any judgment, order, decree, stipulation, injunction
or charge, or applicable law in any jurisdiction material to Issuer or SBA, in
each case, issued by any court of competent jurisdiction or any other
governmental entity in effect preventing consummation of the transactions
contemplated by this Agreement; and

 

(d)     All holders of Series D Stock other than SBA shall have executed an
agreement with Issuer for the exchange of their Series D Shares on substantially
the terms described in the Information Statement, all conditions to each such
holder’s and the Issuer’s obligation to close the transactions contemplated
thereby have been satisfied or waived in accordance with such agreements, and
prior to or simultaneous with the Closing, a closing shall be conducted with
respect to the transactions contemplated by such agreements.

 

Section 4.2     Issuer Conditions to Closing. The obligation of Issuer to effect
the Closing and consummate the transactions contemplated by this Agreement is
subject to satisfaction or waiver on or prior to the Closing Date of the
following conditions:

 

(a)     SBA will deliver to Issuer certificates representing the Exchanged
Shares (or in the event that any such certificates have been lost or misplaced,
an Affidavit of Lost Certificate in the form attached hereto as Exhibit B duly
endorsed by SBA for each such lost or misplaced certificate) in exchange for the
Issued Shares and Cash Payment in accordance with Section 1.1;

 

(b)     SBA will have performed or complied with, in all material respects, its
covenants and agreements contained in this Agreement that are required to be
performed or complied with on or prior to the Closing Date;

 

(c)     There will not be any judgment, order, decree, stipulation, injunction
or charge, or applicable law in any jurisdiction material to Issuer or SBA, in
each case, issued by any court of competent jurisdiction or any other
governmental entity in effect preventing consummation of the transactions
contemplated by this Agreement; and

 

(d)     All holders of Series D Stock other than SBA shall have executed an
agreement with Issuer for the exchange of their Series D Shares on substantially
the terms described in the Information Statement, all conditions to each such
holder’s and the Issuer’s obligation to close the transactions contemplated
thereby have been satisfied or waived in accordance with such agreements, and
prior to or simultaneous with the Closing, a closing shall be conducted with
respect to the transactions contemplated by such agreements.

 

 
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Article V
ADDITIONAL AGREEMENTS

 

Section 5.1     Confidentiality. SBA acknowledges and agrees that (i) certain of
the information contained herein, including the existence and terms of this
Agreement, is of a confidential nature and constitutes material non-public
information under United States federal securities laws, (ii) United States
federal securities laws prohibit any person who has received material non-public
information relating to the Issuer from purchasing or selling securities of the
Issuer, or from communicating such information to any person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell securities of the Issuer, and (iii) until such time as any such non-public
information has been adequately disseminated to the public, SBA shall not
purchase or sell any securities of the Issuer, or communicate such information
to any other person or entity, other than its personal financial and legal
advisors for the sole purpose of evaluating the entering into and the
consummation of the transactions contemplated hereby, or the Office of SBA
Inspector General or to any federal agency, department or federal institution
with a lawful reason for requiring SBA to supply such information.

 

Section 5.2     Mutual Releases.

 

(a)     SBA, for itself, but not for any other agency or department, hereby
fully, forever, absolutely, irrevocably and unconditionally releases, remises
and forever discharges Issuer and each of its officers, directors, employees,
agents, affiliates, successors and assigns (collectively, the “SBA Releasees”
and individually, an “SBA Releasee”), of and from any and all manner of claims,
actions, demands, causes of action, suits, covenants, contracts, promises,
grievances, liabilities, obligations, promises, damages, agreements, rights,
debts and expenses (including claims for attorneys' fees and costs), of every
kind and nature, either in law or in equity, whether contingent, mature, known
or unknown, or suspected or unsuspected, including, without limitation, any
claims arising under any federal, state, local or municipal law, common law or
statute, and whether arising in contract or in tort, and any claims arising
under any other laws or regulations of any nature whatsoever that SBA ever had,
now has or may have, for or by reason of, or in any way related to, its
ownership of the Exchanged Shares, including, but not limited to, any right to
receive any dividends, distributions, or payment on account of such Exchanged
Shares, from the beginning of the world to the Closing Date (collectively, the
“SBA Released Claims”); provided, however, that the release set forth in this
Section 5.2(a) shall not apply to any claim unrelated to SBA’s ownership of
stock in Issuer or any claim arising from or related to fraud, criminal laws,
anti-trust laws, environmental laws or Federal taxes; provided, however, that
the release set forth in this Section 5.2(a) shall not apply to any claim to
enforce this Agreement. SBA represents and warrants to the SBA Releasees that
SBA has not previously directly or indirectly assigned or otherwise transferred
to any person or entity all or any of any of the SBA Released Claims.

 

 
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(b)     Issuer, on behalf of itself and its successors and assigns
(collectively, the “Release Group Members” and individually a “Release Group
Member”), hereby fully, forever, absolutely, irrevocably and unconditionally
release, remise and forever discharge SBA and each of its employees, agents,
attorneys, successors and assigns (collectively, the “Issuer Releasees” and
individually, a “Issuer Releasee”), of and from any and all manner of claims,
actions, demands, causes of action, suits, covenants, contracts, promises,
grievances, liabilities, obligations, promises, damages, agreements, rights,
debts and expenses (including claims for attorneys' fees and costs), of every
kind and nature, either in law or in equity, whether contingent, mature, known
or unknown, or suspected or unsuspected, including, without limitation, any
claims arising under any federal, state, local or municipal law, common law or
statute, and whether arising in contract or in tort, and any claims arising
under any other laws or regulations of any nature whatsoever that any Release
Group Member ever had, now has or may have, for or by reason of, or in any way
related to, the Exchanged Shares, from the beginning of the world to the Closing
Date (collectively, the “Issuer Released Claims”); provided, however, that the
release set forth in this Section 5.2(b) shall not apply to any claim to enforce
this Agreement. Issuer represents and warrants to the SBA that neither Issuer
nor any other Release Group Member has previously directly or indirectly
assigned or otherwise transferred to any person or entity all or any of any of
the Issuer Released Claims.

 

Section 5.3     Payment of IRS Lien. To the extent the IRS lien has not expired,
SBA shall pay to the IRS the amount of the lien on the Exchanged Shares held by
the IRS, but in no event in any amount greater than the proceeds SBA actually
receives from Issuer.

 

Section 5.4     Indemnification. SBA shall indemnify the Issuer and each of its
officers, directors, employees, agents, affiliates, successors and assigns
(collectively, the “Indemnified Parties” and individually, an “Indemnified
Party”) from and against any and all demands, claims, actions, causes of action,
investigations, proceedings judgments, assessments, losses, liabilities, damages
or penalties and reasonable attorneys’ fees and related disbursements incurred
by the Issuer that arise out of or result from a breach of any representations,
warranties or covenants made by SBA herein or any claim by the IRS related in
any way to its lien on the Exchanged Shares, regardless of whether any such
Indemnified Party is a party thereto, and to reimburse each Indemnified Party
for reasonable legal and other expenses as they are incurred in connection with
investigating, responding to or defending any of the foregoing; provided that
SBA’s maximum total liability (including any expenses) to the Indemnified
Parties in the aggregate under this Section 5.4 shall not exceed the amount of
the Cash Payment actually received by SBA.

 

Article VI
GENERAL PROVISIONS

 

Section 6.1     Further Assurances. Each of the parties will use reasonable
efforts to take or cause to be taken all actions and to do or cause to be done,
as soon as possible, all things necessary, proper or advisable (subject to any
applicable laws) to consummate the Closing and the other transactions
contemplated by this Agreement. In the event that at any time after the Closing
Date any further action is reasonably necessary to carry out the purposes of
this Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party may reasonably request, at the sole cost and expense of the requesting
party. Each party shall promptly notify the other party of any facts,
circumstances, changes, events or actions discovered by such party and occurring
between the date of this Agreement and the Closing Date that has resulted in, or
could reasonably be expected to result in, any representation or warranty made
by such party not being true and correct.

 

 
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Section 6.2     Survival. The representations and warranties contained in
Articles II and III will survive the Closing and continue in full force and
effect indefinitely if the Closing occurs. Any covenants or agreements contained
in this Agreement, which by their terms have any remaining obligation to be
performed or observed following the occurrence of the Closing will survive and
continue in full force and effect until fully performed or observed in
accordance with their terms.

 

Section 6.3     Notices. Any notice, request, instruction, or other
communication to be given hereunder, and any delivery to be made hereunder, will
be in writing and delivered personally or sent by reputable, overnight courier
service (charges prepaid), according to the instructions set forth below. Such
notices, requests, other communications and deliveries will be sent to Issuer
and SBA, as the case may be at the addresses indicated below:

 

if to Issuer:

 

Mikros Systems Corporation
220 Commerce Drive, Suite 300
Fort Washington, PA 19034
Attention: Patricia Kapp, Vice President of Finance,

                   Secretary and Treasurer

 

if to SBA:

 

U.S. Small Business Administration
Office of SBIC Liquidation
Attn: Angela Wingard-Brusch, Senior Financial Analyst
409 Third St., S.W.
Washington, D.C. 20416

 

Section 6.4     Counterparts. This Agreement may be executed in counterparts and
each such counterpart will for all purposes be deemed to be an original, and
both such counterparts will together constitute but one and the same instrument.
Facsimiles or other electronic copies of signatures will be deemed to be
originals.

 

Section 6.5     Governing Law. This Agreement shall be interpreted, construed
and enforced in accordance with federal law, with the laws of the State of
Delaware governing in the absence of applicable federal law, without giving
effect to Delaware principles of conflicts of law.

 

Section 6.6     Entire Agreement. This Agreement constitutes the entire
agreement of Issuer and SBA with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, between
Issuer and SBA with respect to the subject matter hereof.

 

 
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Section 6.7     Amendment and Waiver. This Agreement may be amended, modified or
supplemented, and any of the provisions hereof may be waived, provided that the
same are in writing and signed by Issuer and SBA.

 

Section 6.8     Assignment. Neither this Agreement nor any of the rights,
interests or obligations provided by this Agreement will be assigned by either
party (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns.

 

[Signature page follows]

 

 
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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have
caused this Agreement to be executed as of the date set forth below.

 

 

UNITED STATES SMALL BUSINESS

ADMINISTRATION

 

 

 

 

 

 

By:

/s/ Thomas G. Morris

 

 

Name:

Thomas G. Morris

 

 

Title:

Director, Office of SBIC Liquidation

 

  Dated: May 2, 2016  

 

 

 

Agreed and Accepted by the Mikros Systems Corporation on and as of this 3d day
of May, 2016.

 

 

 

MIKROS SYSTEMS CORPORATION.

 

 

 

 

 

 

By:

/s/ Thomas J. Meaney

 

 

Name:

Thomas J. Meaney

 

 

Title:

President and Chief Executive Officer

 

 

 

 
[Signature Page to Exchange Agreement]

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Exhibit A

 

Series of
Preferred Stock

 

Amount of
Cash per Share

   

Number of Shares of
Common Stock Per Share

                   

Convertible Preferred Stock

  $ 0.165       1.95  

Series B Preferred Stock

  $ 0.0825       2.43  

Series C Preferred Stock

  $ 2.708       31.27  

Series D Preferred Stock

  $ 0.36232       5.072464