Item 1.01 Entry into a Material Definitive Agreement.
On March 4, 2021, the Board of Directors (the "Board") of Wrap Technologies,
Inc. (the "Company") entered into that certain Cooperation Agreement (the
"Agreement") by and between the Company and Elwood G. Norris and certain of his
affiliates (collectively, "Norris").
Pursuant to the Agreement, Norris agreed, among other things, to withdraw his
notice of intent to nominate a director candidate for election and submit
proposals for consideration at the 2021 annual meeting of stockholders of the
Company (the "2021 Annual Meeting"), to appear at all annual or special meetings
of the stockholders of the Company, and, with certain exceptions, to vote, or
cause to vote, all voting securities beneficially owned by Norris, in accordance
with the Board's recommendations, in exchange for the Board agreeing to do the
following: (i) the Nominating and Governance Committee of the Board (the
"Nominating Committee") will conduct and conclude within 45 days a joint search
process with Norris to choose two new director candidates (each a "New Director"
and together, the "New Directors"), with one New Director to be selected by the
Nominating Committee and the other New Director to be selected by Norris with
each having an approval right of the other's selection, which approval may not
be unreasonably withheld; (ii) appoint Thomas P. Smith as the Chief Executive
Officer of the Company; (iii) change the reporting duties of the Chief
Government Affairs Officer so that such officer reports directly to, and takes
directions from, the Company's Chief Executive Officer; and (iv) promptly
following the 2021 Annual Meeting, elect a Chairman of the Board who meets the
"Independent Director" standards, as defined in The Nasdaq Stock Market LLC
Listing Rule 5605.
Norris has also agreed to certain customary standstill provisions prohibiting
him from, among other things, (i) making certain announcements regarding the
Company's transactions; (ii) soliciting proxies; (iii) selling securities of the
Company resulting in any third party owning more than 4.9% of the outstanding
shares of the Company's common stock, $0.0001 par value per share ("Common
Stock"); (iv) taking actions to change or influence the Board, Company
management or the direction of certain Company matters; and (v) exercising
certain stockholder rights.
Unless the parties agree otherwise, the Agreement will terminate on the earliest
of (i) the tenth day (the "Final Replacement Date") following the adjournment of
the first applicable annual meeting of stockholders of the Company, which
follows the 2021 Annual Meeting, at which the New Directors were not
successfully re-elected at such meeting and no replacements were subsequently
appointed to the Board by the Final Replacement Date; (ii) the New Directors (or
any replacement) failing to be re-nominated for election at any annual or
special meeting of stockholders at which New Directors are up for election; and
(iii) the consummation of an Extraordinary Transaction (as defined in the
Agreement). The Agreement may also be terminated by either party upon a material
breach of the other, subject to certain cure periods.
The Agreement contains customary representations, warranties and agreements by
the Company, for which such representations, warranties and covenants were made
solely for the benefit of the parties thereto and may be subject to limitations
agreed upon by the contracting parties. Accordingly, the Agreement is
incorporated herein by reference only to provide investors with information
regarding the terms of the Agreement and not to provide investors with any other
factual information regarding the Company or its business, and investors are
urged not to rely on such representations and warranties as characterizations of
the actual state of facts or circumstances at this time or any other time.
A copy of the Agreement is attached hereto as Exhibit 10.1, and is incorporated
herein by reference. The foregoing description of the material terms of the
Agreement does not purport to be complete and is qualified in its entirety by
reference to such exhibit.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On March 4, 2021, the Company appointed Thomas P. Smith as Chief Executive
Officer. Prior to his appointment as the Chief Executive Officer of the Company,
Mr. Smith, age 53, was the Interim Chief Executive Officer and President,
serving in the capacity of Interim Chief Executive Officer since October 29,
2020, and as President since he joined the Company on March 16, 2019. Mr. Smith
co-founded TASER International (now Axon Enterprise, Inc. - Nasdaq:AXON)
("TASER") in 1993. He served as President of TASER until October 2006, and as
Chairman of the Board of Directors of TASER from October 2006 until he retired
to pursue entrepreneurial activities in February 2012. In 2012 he co-founded
Achilles Technology Solutions, LLC ("Achilles"), and through its wholly-owned
subsidiary ATS Armor, LLC ("ATS Armor"), which he co-founded in 2015, developed
a line of ballistic solutions for law enforcement and military. Mr. Smith served
as the Managing Member of Achilles from 2012 to January 2020. In addition, Mr.
Smith served as the Managing Member of ATS Armor and ATS MER ("ATS MER"), a
research and development company acquired by Achilles in 2015 that was primarily
funded by government SBIR contracts, until March 2019 and February 2019,
respectively. ATS Armor filed a petition for Chapter 7 Bankruptcy in March 2019,
and ATS MER filed a petition for Chapter 7 Bankruptcy in February 2019.
Mr. Smith holds a B.S. degree in Ecology and Evolutionary Biology from the
University of Arizona and a M.B.A. degree from Northern Arizona University.
As compensation for his services as Company's Chief Executive Officer, Mr. Smith
shall be entitled to receive an annual base salary of $400,000. In addition, Mr.
Smith will be eligible to receive a bonus equal to 100% of his base salary based
on the achievement of certain performance objectives to be determined by the
Compensation Committee of the Board. He will also be granted an option to
purchase 400,000 shares of Common Stock under the Company's 2017 Stock Incentive
Plan ("Option"), which Option shall vest one-third on the one-year anniversary
of the grant date, and the remainder in 24 equal monthly installments over the
two years thereafter, for an exercise price equal to the closing price of the
Common Stock as quoted on the Nasdaq Capital Market on the day preceding the
date of grant.
Except as disclosed herein, there are no related party transactions between the
Company and Mr. Smith that would require disclosure under Item 404(a) of
Regulation S-K, nor are there any further arrangements or understandings in
connection with the appointment of Mr. Smith as the Company's Chief Executive
Officer.
Item 8.01 Other Events
On March 8, 2021, the Company issued a press release announcing the appointment
of Mr. Smith as the Chief Executive Officer of the Company and the execution of
the Agreement by the Company and Norris. A copy of the press release is attached
to this Current Report on Form 8-K as Exhibit 99.1.
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