Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 24, 2022, Wrap Technologies, Inc. (the "Company") announced a
leadership transition plan to support the next phase of its corporate strategy,
which is focused on diversifying the Company's suite of products, offerings and
services (the "Management Restructuring"). The Management Restructuring includes
the following:
Resignation of Thomas P. Smith. Thomas P. Smith resigned as the Company's
President and Chief Executive Officer, and as a director of the Company, each
effective on January 24, 2022 (the "Resignation Date"), pursuant to a separation
agreement entered into by the Company and Mr. Smith on the Resignation Date (the
"Separation Agreement"). Under the terms of the Separation Agreement, Mr. Smith
is entitled to (i) a one-time bonus payment of $100,000 for the achievement of
certain business objectives in 2021; (ii) severance in an amount equal to nine
months of his base salary paid in installments over a period of nine months
following the Resignation Date, (iii) continued vesting of equity-based awards
granted pursuant to the Company's Amended 2017 Equity Compensation Plan and
outstanding as of the Resignation Date through and until December 31, 2022, (iv)
an extension of the time period during which Mr. Smith may exercise outstanding
vested stock options through the first anniversary of the Resignation Date (or,
if earlier, through the original expiration date of the applicable stock
option); and (v) reimbursement for the Company portion of any healthcare
premiums provided to Mr. Smith and any covered dependents under the Consolidated
Omnibus Reconciliation Act of 1986, as amended, ("COBRA") through December 31,
2022, subject to Mr. Smith's election of coverage under COBRA (collectively, the
"Separation Benefits"). As part of the Separation Agreement, Mr. Smith has
entered into a general release of claims in favor of the Company, affirmed his
obligations to abide by restrictive covenants, and agreed to a non-disparagement
covenant in favor of the Company.
Appointment of LW Varner, Jr. Effective on the date of Mr. Smith's resignation,
January 24, 2022, the Company announced the appointment of LW Varner, Jr., 71,
as Interim Chief Executive Officer of the Company. Mr. Varner will serve as
Interim Chief Executive Officer under the terms of a Consulting Agreement dated
January 24, 2022, by and between the Company and LWV Consulting, LLC (the
"Interim CEO Consulting Agreement"), pursuant to which LWV Consulting, LLC will
engage Mr. Varner to provide consulting services for a term of four weeks (the
"Initial Term"), which term shall automatically renew for two additional
consecutive four-week periods (each additional four-week period being a "Renewal
Term"), unless notice of non-renewal is delivered by either LWV Consulting, LLC
or the Company to the other party. The Interim CEO Consulting Agreement
provides that LWV Consulting or Mr. Varner will be entitled to receive: (i) a
weekly consulting cash fee of $15,000 during the Initial Term, pro-rated for any
partial week; and (ii) an equity-based award for each full week completed during
the Initial CEO Term in a form determined at the Board's discretion with a value
as of the grant date equal to $5,000. During any Renewal Term, Mr. Varner will
be entitled to receive (i) a weekly consulting cash fee of $11,250 during the
Renewal Term, pro-rated for any partial week; and (ii) an equity-based award for
each full week completed during the Renewal Term in a form determined at the
Board's discretion with a value as of the grant date equal to $3,750, which
Renewal Term amounts remain subject to change upon certain conditions as
provided by the Interim CEO Consulting Agreement.
Mr. Varner has significant experience as a corporate executive and director in
transition and turnaround situations. From June 2020 through November 2021, Mr.
Varner was the Chief Executive Officer and a director of Select Interior
Concepts, a publicly traded company focused on the building product space. Prior
to that, from July 2012 to May 2018, he was Chief Executive Officer of United
Subcontractors, Inc. ("USI"), an insulation services provider in the U.S. with
revenues exceeding $500 million. During his tenure, he led a transformation of
the business through organic growth and strategic transactions that resulted in
USI achieving double digit EBITDA margins and an eventual sale, creating
significant value for shareholders. From 2004 to 2012, Mr. Varner served as the
President and Chief Executive Officer of Aquilex Corporation, a leading provider
of specialty services to the energy sector. Under his leadership, the company
grew revenues by fivefold and achieved record earnings. Prior to joining in
2004, Mr. Varner served as President for several global businesses in various
industries orchestrating their growth in new markets through expansion of
service and product offerings. He is a graduate of The Citadel in Charleston,
South Carolina, and has served on various philanthropic, industry and community
boards. He has also served as a director of Bartlett Holdings, Aquilex Inc., USI
and The Identity Group, and currently serves on the Board of Directors of
Acousti Engineering, a portfolio company of Ardian, a global private equity
firm.
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Appointment of Lawrence Hirsh. On January 24, 2022, the Company entered into a
consulting agreement with LRHIRSH, LLC (the "Hirsh Consulting Agreement"). Under
the terms of the Hirsh Consulting Agreement, LRHIRSH, LLC will cause Lawrence
Hirsh, 59 to provide certain consulting services to the Company with respect to
Company financial matters, for a term of four weeks (the "Initial Consulting
Term"), which term shall automatically renew for two additional consecutive
four-week periods (each additional four-week period being a "Renewal Consulting
Term") unless notice of non-renewal is delivered by either Mr. Hirsh or the
Company to the other party. The Hirsh Consulting Agreement provides that either
LRHIRSH, LLC or Mr. Hirsh will be entitled to receive: (i) a weekly consulting
cash fee of $7,500 during the Initial Consulting Term, pro-rated for any partial
week; and (ii) an equity-based award for each full week completed during the
Initial Consulting Term in a form determined at the Board's discretion with a
value as of the grant date equal to $2,500. During any Renewal Consulting Term,
Mr. Hirsh will be entitled to receive (i) a weekly consulting cash fee of $5,625
during the Renewal Consulting Term, pro-rated for any partial week; and (ii) an
equity-based award for each full week completed during the Renewal Consulting
Term in a form determined at the Board's discretion with a value as of the grant
date equal to $1,875, which Renewal Consulting Term amounts remain subject to
change upon certain conditions as provided by the Hirsh Consulting Agreement.
Mr. Hirsh has decades of experience as an advisor, corporate executive and
director. He is an expert in corporate finance, capital markets, cost management
and strategic planning for transformations. From 2002 through 2020, Mr. Hirsh
was a Managing Director at Alvarez & Marsal, a leading professional services
firm and provider of business consulting and interim management solutions. He
has most recently served as Senior Advisor at Alvarez & Marsal. He has
previously served as chairman and a director of companies that include Alert
360, Sierra Hamilton, The Identity Group, Deep Rock Water Company and Premier
Care In Bathing.
James A. Barnes' Planned Retirement. James A. Barnes will continue to serve as
Chief Financial Officer, Treasurer and Secretary of the Company until the
earlier of his retirement or the naming of his replacement by the Company. In
this regard, the Board of Directors has commenced a formal search to identify a
highly qualified candidate to serve in the capacity of Chief Financial Officer.
Director Resignations
On January 23, 2022, Messrs. Patrick Kinsella and Jeffrey Kukowski resigned from
their positions as members of the Board of Directors of the Company. In
addition, on January 24, 2022, as disclosed above, Mr. Smith resigned as a
member of the Board of Directors. Mr. Kinsella served as the Chairman of the
Board of Directors and as Chairman of the Audit Committee, and Mr. Kukowski
served as a member of the Compensation Committee. Mr. Wayne Walker, a current
member of the Board of Directors, was appointed as Chairman of the Board.
Messrs. Smith, Kinsella and Kukowski's respective resignations from the Board of
Directors are not due to any disagreement with respect to the Company's
operations, policies, or practices.
The foregoing descriptions of the Separation Agreement, Interim CEO Consulting
Agreement, and the Hirsh Consulting Agreement are qualified, in their entirety,
by the full text of the Separation Agreement, Interim CEO Consulting Agreement
and the Hirsh Consulting Agreement, copies of which are attached to this Current
Report on Form 8-K as Exhibits 10.1, 10.2 and 10.3, respectively, and are
incorporated by reference herein.
A copy of the press release issued by the Company regarding Management
Restructuring is attached hereto as Exhibit 99.1
Item 9.01 Financial Statements and Exhibits.
See Exhibit Index.
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