Wrap Technologies, Inc 8-K, filed Dec 16, 2020
Wrap Technologies, Inc. (WRAP)
8-K
2020-12-16
For: 2020-12-14
View Original
Added on
April 08, 2026
About this 8-K
Wrap Technologies, Inc filed this 8-K on December 16, 2020, reporting on events of December 14, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 2.03: New debt or off-balance-sheet obligation
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): December 14,
2020
WRAP TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its
Charter)
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Delaware
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000-55838
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98-0551945
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(State
or other jurisdiction
of
incorporation)
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(Commission
File No.)
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(IRS
Employer
Identification
No.)
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1817 W
4th
Street, Tempe, Arizona 85281
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(Address
of principal executive offices)
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(800)
583-2652
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(Registrant’s
Telephone Number)
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Not
Applicable
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(Former
name or address, if changed since last report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17
CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR 240.12b-2) ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act ☐
Item 2.01 Completion of Acquisition or Disposition of
Assets.
On December 14, 2020, Wrap Technologies, Inc., a
Delaware corporation (the “Company”), through its wholly owned subsidiary Wrap
Reality, Inc. (“Buyer”), entered into an Asset Purchase Agreement
(the “Asset Purchase
Agreement”) with NSENA
Inc, a Delaware corporation (“NSENA”) and Ethan Moeller
(“Moeller”), the majority stockholder of NSENA to
acquire all of NSENA’s right, title, and interest in,
to, and under all of its tangible and intangible assets,
properties, and rights of every kind and nature and wherever
located, except for the specific
excluded assets, that relate to, or are used or held for use
in connection with NSENA’s
business (the “Transaction”). In addition, the Company also agreed to
hire three NSENA persons as employees (including Moeller)
(“Key
Employees”) and engage
two NSENA consultants (“Consultants”), (Key Employees and Consultants
collectively the “Key Persons”), at the consummation of the Transaction.
On December 14, 2020, the Company, Buyer, Seller and Key Persons
completed the transactions as contemplated by the Asset Purchase
Agreement (the “Closing”).
Pursuant
to the terms of the Asset Purchase Agreement, at the Closing, Buyer
paid to NSENA cash consideration of $210,000 and agree to pay
$100,000 on March 15, 2021, $100,000 on June 15, 2021 and $75,000
on September 15, 2021. In addition, the Buyer assumed $15,000 of
liabilities related to funds received by NSENA but unearned on
existing revenue related contract arrangements. As additional
earn-out consideration the Buyer has agreed to pay NSENA 10% of net
revenues (or a lesser amount equal to 50% of direct profit) from
specific identified prospects that become revenue customers before
September 30, 2021 but only on amounts collected between Closing
and June 30, 2022.
At Closing each of the Key Employees executed an
At-Will Employment, Confidential Information, Non-Compete/
Non-Solicitation, Invention Assignment, and Arbitration Agreement
(the “Non-Compete
Agreement”) and the Key
Employees were issued service-based stock options exercisable for
an aggregate of 150,000 shares of the Company’s common stock
exercisable for ten years at $5.46 per share, vesting over two
years unless accelerated by certain events. Mr. Moeller was granted
an additional ten-year performance-based stock option on 100,000
shares of common stock based on achieving certain virtual reality
revenue targets by December 1, 2024. Each of the two Consultants
were granted service-based stock options exercisable for 20,000
shares of the Company’s common stock for five years at $5.46
per share, vesting over two years unless accelerated by certain
events.
The
foregoing description of the terms of the Asset Purchase Agreement
and Non-Compete Agreements do not purport to be complete and is
subject to, and is qualified in its entirety by reference to the
agreements which are filed as Exhibits 2.1 and 2.2, respectively,
to this report.
The Asset
Purchase Agreement has been filed as Exhibit 2.1 to this
report to provide investors and securities holders with information
regarding its terms. It is not intended to provide any other
factual information about the parties to the Asset Purchase
Agreement or the business acquired. The Asset Purchase
Agreement contains representations and warranties that the
parties to the Asset Purchase Agreement made solely for
the benefit of each other. The assertions embodied in such
representations and warranties are qualified by information
contained in confidential disclosure schedules that the parties
exchanged in connection with signing the Asset Purchase
Agreement. In addition, these representations and warranties (i)
may be intended not as statements of fact, but rather as a way of
allocating risk to one of the parties if those statements prove to
be inaccurate, (ii) may apply materiality standards different from
what may be viewed as material to investors and securities holders,
and (iii) were made only as of the date of the Asset Purchase
Agreement or as of such other date or dates as may be
specified in the Asset Purchase Agreement. Moreover,
information concerning the subject matter of such representations
and warranties may change after the date of the Asset Purchase
Agreement, which subsequent information may or may not be fully
reflected in the Company’s public disclosures. Investors and
securities holders 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.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a
Registrant.
Reference
is made to Item 2.01 for a description of the minimum future
installment obligations aggregating $275,000 under the Asset
Purchase Agreement.
Item 7.01 Regulation FD Disclosure
On
December 16, 2020, the Company issued a press release announcing
completion of the Transaction, a copy of which is furnished with
this Current Report on Form 8-K as Exhibit 99.1.
The
information set forth in or incorporated by reference into this
Item 7.01, including Exhibit 99.1, shall not be deemed to be
“filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liability of that section,
and shall not be incorporated by reference into any registration
statement or other document filed under the Securities Act of 1933,
as amended (the “Securities Act”), or the Exchange Act,
except as shall be expressly set forth by specific reference in
such filing.
Item 9.01 Financial Statements and Exhibits
See
Exhibit Index.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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WRAP TECHNOLOGIES, INC.
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Date:
December 16, 2020
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By:
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/s/
James A. Barnes
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James
A. Barnes
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Chief
Financial Officer, Treasurer and Secretary
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Exhibit Index
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Exhibit No.
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Description
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Asset
Purchase Agreement between NSENA Inc. and Wrap Reality, Inc. dated
as of December 14, 2020. In accordance with the instructions to
Item 601(b)(2) of Regulation S-K, the schedules and exhibits to
the Asset Purchase Agreement are not filed
herewith. The Asset Purchase Agreement identifies
such schedules and exhibits, including the general nature of their
content. The Company undertakes to provide such
schedules and exhibits to the SEC upon request.
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Form of
At-Will Employment, Confidential Information, Non-Compete/
Non-Solicitation, Invention Assignment, and Arbitration Agreement
between the Key Employees and the Company dated December 14,
2020
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Press
Release dated December 16, 2020
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
between
NSENA INC.
and
WRAP REALITY, INC.
dated as of
December 14, 2020
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TABLE
OF CONTENTS
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ARTICLE 1 PURCHASE AND SALE
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1
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Section 1.01 Purchase and Sale of Assets.
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1
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Section 1.02 Excluded Assets.
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3
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Section 1.03 Assumed Liabilities.
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3
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Section 1.04 Purchase Price.
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3
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Section 1.05 Earn-out.
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4
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Section 1.06 Allocation of Purchase Price.
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4
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Section 1.06 Third-Party Consents.
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4
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ARTICLE 2 CLOSING
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5
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Section 2.01 Closing.
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5
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Section 2.02 Closing Deliverables.
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5
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
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7
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Section 3.01 Organization and Authority of Seller.
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7
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Section 3.02 No Conflicts or Consents.
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7
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Section 3.03 Financial Statements.
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7
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Section 3.04 Undisclosed Liabilities.
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8
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Section 3.05 Absence of Certain Changes, Events, and
Conditions.
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8
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Section 3.06 Assigned Contracts.
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8
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Section 3.07 Title to Purchased Assets.
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8
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Section 3.08 Condition and Sufficiency of Assets.
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8
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Section 3.09 Reserved.
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8
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Section 3.10 Accounts Receivable.
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8
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Section 3.11 Intellectual Property.
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9
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Section 3.12 Material Contracts.
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11
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Section 3.11 Material Customers and Suppliers.
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13
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Section 3.14 Legal Proceedings; Governmental Orders.
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13
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Section 3.15 Compliance with Laws.
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14
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Section 3.16 Taxes.
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14
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Section 3.17 No Owned Real Property.
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14
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Section 3.18 Employment Matters.
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14
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Section 3.19 No Employee Benefit Plans.
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14
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Section 3.20 Brokers.
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14
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Section 3.21 Full Disclosure.
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14
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
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15
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Section 4.01 Organization and Authority of Buyer.
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15
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Section 4.02 No Conflicts; Consents.
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15
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Section 4.03 Brokers.
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15
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Section 4.04 Legal Proceedings.
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15
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Section 4.05 No Material Omissions.
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15
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Section 4.06 Access.
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15
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ARTICLE 5 COVENANTS
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16
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Section 5.01 Confidentiality.
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16
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Section 5.02 Non-Competition; Non-Solicitation.
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Section 5.03 Public Announcements.
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17
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Section 5.04 Bulk Sales Laws.
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17
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Section 5.05 Receivables.
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18
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Section 5.06 Transfer Taxes.
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18
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Section 5.07 Further Assurances.
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18
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Section 5.08 Restrictions on Seller Dissolution; Name
Change
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ARTICLE 6 INDEMNIFICATION
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Section 6.01 Survival.
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18
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Section 6.02 Indemnification by Seller.
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Section 6.03 Indemnification by Buyer.
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19
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Section 6.04 Indemnification Procedures.
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20
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Section 6.05 Cumulative Remedies.
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20
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Section 6.06 Cap; Insurance.
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20
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ARTICLE 7 MISCELLANEOUS
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20
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Section 7.01 Expenses.
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20
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Section 7.02 Notices.
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20
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Section 7.03 Interpretation; Headings.
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21
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Section 7.04 Severability.
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21
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Section 7.05 Entire Agreement.
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21
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Section 7.06 Successors and Assigns; Assignment.
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22
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Section 7.07 Amendment and Modification; Waiver.
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Section 7.10 Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial.
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Section 7.09 Counterparts.
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23
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Section 7.10 Made Available.
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Exhibit
A –
Definitions
Exhibit B – Bill
of Sale
Exhibit C –
Assignment and Assumption Agreement
Exhibit D-1 – Seller Form of
Intellectual Property Assignment
Exhibit D-2 – Founder Form of
Intellectual Property Assignment
Exhibit E-1 – Form of
Incentive Stock Option Agreement
Exhibit E-2 – Form of
Non-Statutory Stock Option Agreement
Exhibit F
– Form of Non-Compete
Agreement
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ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement (this “Agreement”) dated as of December
14, 2020 (the “Closing
Date”) is entered into between NSENA Inc., a Delaware
corporation (“Seller”), and Wrap Reality, Inc.
an Arizona corporation (“Buyer”), and Ethan Moeller, the
majority stockholder of Seller (the “Seller Stockholder”) (each of
Seller, Buyer and the Seller Stockholder are a “Party” and collectively, the
“Parties”).
Capitalized terms used in this Agreement have the meanings given to
such terms in Exhibit
A.
RECITALS
A.
Seller is engaged
in the business of developing, marketing and selling virtual
reality training software and modules for the law enforcement and
corrections industries (the “Business”).
B.
Seller wishes to
sell and assign to Buyer, and Buyer wishes to purchase and assume
from Seller (i) substantially all the assets and (ii) certain
specified liabilities of the Business, subject to the terms and
conditions set forth herein.
NOW,
THEREFORE, in consideration of
the mutual covenants and agreements hereinafter set forth and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE 1
PURCHASE AND
SALE
Section
1.01
Purchase and Sale
of Assets. Subject to the terms
and conditions set forth herein, at the Closing, Seller will sell,
convey, assign, transfer, and deliver to Buyer, and Buyer will
purchase, acquire and assume from Seller, all of Seller’s
right, title, and interest in, to, and under all of the tangible
and intangible assets, properties, and rights of every kind and
nature and wherever located (other than the Excluded Assets), which
relate to, or are used or held for use in connection with, the
Business (collectively, the “Purchased
Assets”), including the
following:
(a) Accounts
receivable, if any, not billed prior to the Closing and collected
or received by Seller after the Closing, and any security, claim,
remedy or other right related to any of the foregoing
(“Accounts
Receivable”).
(b) The
following Contracts (the “Assigned
Contracts”):
(i) Reserved.
(ii) Contracts
with customers (including support and services Contracts) of the
Business; and
(iii) Contracts
and revenue arrangements set forth on Schedule
1.01(b)(iii).
(c) Contract
deposits of Seller received in connection with the Assigned
Contracts prorated to include only the value of such deposits
corresponding to the remaining work to be performed under each
applicable Contract as set forth on Schedule
1.01(c).
(d) Sales
data, end user data, or other data related to the
Business.
(e) All
Seller Intellectual Property including, without limitation (i) all
Source Code and other Software, (ii) all virtual reality training
modules and gallery scenes, (iii) all business and strategic
planning materials, (iv) all advertising, marketing, promotional
and trade show materials, Internet domain names and websites and
similar designation of origin and rights therein, social media
sites and accounts, and all other printed or written marketing
materials included or used in or related to the Business, including
the name “Nsena”, and (v) all other forms of
Intellectual Property (whether or not embodied in any tangible form
and including all tangible embodiments of the foregoing, such as
instruction manuals, prototypes, samples, studies and summaries)
included in or related to the Business.
(f) Claims
(including claims for past infringement, violation or
misappropriation of the Seller Intellectual Property) and causes of
action of Seller against third parties (regardless of whether or
not such claims and causes of action have been asserted by Seller),
and all rights of indemnity, warranty rights, rights of
contribution, rights to refunds, rights of reimbursement and other
rights of recovery possessed by Seller (regardless of whether such
rights are currently exercisable) that are related to the Seller
Intellectual Property.
(g) Furniture,
fixtures, virtual reality and other equipment, office equipment,
supplies, computers, telephones, and other tangible personal
property as set forth on Schedule 3.08
(“Tangible Personal
Property”).
(h) Prepaid
expenses, credits, advance payments, claims, security, refunds,
rights of recovery, rights of set-off, rights of recoupment,
deposits, charges, sums, and fees.
(i) Seller’s
rights under warranties, indemnities, and all similar rights
against third parties to the extent related to any Purchased
Assets.
(j) Insurance
benefits, including rights and proceeds, arising from or relating
to the Business, the Purchased Assets, or the Assumed
Liabilities.
(k) Originals
or, where not available, copies, of all books and records,
including books of account, ledgers, and general, financial, and
accounting records, machinery and equipment maintenance files,
customer lists, customer purchasing histories, price lists,
distribution lists, supplier lists, production data, quality
control records and procedures, customer complaints and inquiry
files, research and development files, records, and data (including
all correspondence with any “Governmental Authority”),
sales material and records, strategic plans and marketing, and
promotional surveys, material, and research
(“Books and
Records”).
2
(l) Goodwill
and the going concern value of the Purchased Assets and the
Business.
Section
1.02
Excluded
Assets. Notwithstanding the
foregoing, the Purchased Assets do not include the following (the
“Excluded
Assets”):
(a) Accounts
receivable and customer deposits billed, collected and received by
Seller on or prior to the Closing, and
(b) Any
such asset not specifically identified as a Purchased Asset under
Section 1.01 above, including without limitation the cash,
securities and cash equivalents held by Seller as of the Closing,
shall be excluded from the transactions contemplated by this
Agreement, shall be retained by Seller, as the case may be, and may
be referred to herein as an “Excluded
Asset.”
Section
1.03
Assumed
Liabilities.
(a) Subject
to the terms and conditions set forth herein, Buyer will not assume
or agree to pay, perform, and discharge any Liabilities of Seller
except for the following customer deposits in respect of the Assigned
Contracts in the amounts set forth in Schedule
1.03(a)(ii) but only to the
extent that such Deposits represent Liabilities required to be
performed after the Closing Date, were incurred in the ordinary
course of business, and do not relate to any failure to perform,
improper performance, warranty, or other breach, default, or
violation by Seller on or prior to the Closing (the
“Assumed
Liabilities”).
(b) Notwithstanding
any provision in this Agreement to the contrary, Buyer does not
assume and will not be responsible to pay, perform, or discharge
any Liabilities of Seller or any of its Affiliates of any kind or
nature whatsoever other than the Assumed Liabilities (the
“Excluded
Liabilities”). For
clarification, the Excluded Liabilities include, without
limitation, trade accounts payable, lease or rent obligations,
those items set forth on Schedule
1.03(b) and any other
Liabilities in connection with the Business.
Section
1.04
Purchase
Price.
(a) The
aggregate purchase price for the Purchased Assets (the
“Purchase
Price”) shall
be:
(i) Four
Hundred Eighty-Five Thousand Dollars ($485,000),
plus
(ii) the
assumption of the Assumed Liabilities in the aggregate amount of
Fifteen Thousand Dollars ($15,000).
3
(b) Buyer
shall pay the Purchase Price by wire transfer to Seller of
immediately available funds in accordance with the wire transfer
instructions set forth on Schedule 1.04
in four (4) quarterly installments as
follows:
(i) Two
Hundred and Ten Thousand Dollars ($210,000) payable at the Closing
(the “Initial
Payment”),
and
(ii) One
Hundred Thousand Dollars ($100,000) payable on each of March 15,
2021 and June 15, 2021, and Seventy-Five Thousand Dollars ($75,000)
payable on September 15, 2021, for an aggregate amount equal to Two
Hundred Seventy-Five Thousand Dollars
($275,000).
Section
1.05
Earn-out.
As additional consideration for the
Purchased Assets, Buyer shall pay to Seller the lesser of (a) ten
percent (10%) of Net Revenues, or (b) fifty percent (50%) of Direct
Profit, in each case, only to the extent actually collected by
Buyer, from each sale to any of the customers set forth on
Schedule
1.05 (the
“Prospects”) with whom Buyer signs a Contract or other
similar revenue arrangement on or prior to September 30, 2021 and
with respect to which Buyer collects payment from such Prospect on
or before June 30, 2022 (the “Earn-Out
Amount”). The Earn-Out
Amount shall be paid by Buyer to Seller in one lump sum on or
before July 31, 2022 in cash by wire transfer of immediately
available funds to the bank account for Seller set forth on
Schedule 1.04, or such other account as designated by the Seller to
the Buyer in writing no later than five (5) calendar days prior to
July 31, 2022. No interest is payable with respect to the Earn-Out
Amount. For purposes of this Section 1.05, (a)
“Net
Revenues” shall mean
gross sales revenue from Contracts or other similar revenue
arrangements less any discounts, returns, allowances and price
adjustments and less any license fees and direct selling costs,
paid to and collected by Buyer, and (b) “Direct
Profit” shall mean the
revenue actually collected in respect of all Contracts or other
similar revenue arrangements entered into by Buyer with Prospects
on or before June 30, 2022, less customer hardware costs,
development and contract costs and any selling costs, but excluding
any overhead allocation from Buyer’s
operations.
Section
1.06 Allocation of Purchase
Price. The Purchase Price and
the Assumed Liabilities will be allocated among the Purchased
Assets for all purposes (including Tax and financial accounting) as
determined by the Seller within ninety (90) days following the
Closing. (the “Allocation”). The Allocation will be prepared in
accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended (the “Code”). Buyer and Seller will file all returns,
declarations, reports, information returns and statements, and
other documents relating to Taxes (including amended returns and
claims for refund) (“Tax Returns”) in a manner consistent with the
Allocation.
Section
1.07
Reserved.
Section
1.08 Third-Party Consents.
To the extent that Seller’s
rights under any Purchased Asset may not be assigned to Buyer
without the consent of another Person which has not been obtained,
this Agreement does not constitute an agreement to assign the same
if an attempted assignment would constitute a breach thereof or be
unlawful, and Seller, at its expense, will use its commercially
reasonable efforts to obtain any such required consents as promptly
as possible. If any such consent is not obtained or if any
attempted assignment would be ineffective or would impair
Buyer’s rights under the Purchased Asset so that Buyer would
not in effect acquire the benefit of such rights, Seller, to the
maximum extent permitted by Law, shall act after the Closing as
Buyer’s agent in order to obtain for Buyer the benefits
thereunder and will cooperate, to the maximum extent permitted by
Law (as defined herein), with Buyer in any other reasonable
arrangement designed to provide such benefits to
Buyer.
4
ARTICLE 2
CLOSING
Section
2.01 Closing. Subject to the terms and conditions of this
Agreement, the consummation of the transactions contemplated by
this Agreement (the “Closing”) shall take place by remote exchange of
the executed Transaction Documents’ on the Closing Date. The
Closing will be deemed to have occurred at 5:00 p.m., Eastern Time,
on the Closing Date.
Section 2.02
Closing
Deliverables.
(a) Seller
Closing Deliverables. At the
Closing, Seller will deliver to Buyer the
following:
(i) A
bill of sale in the form of Exhibit B
(the “Bill of Sale”) duly executed by Seller, transferring the
Tangible Personal Property included in the Purchased Assets to
Buyer.
(ii) An
assignment and assumption agreement in the form of
Exhibit
C (the
“Assignment and Assumption
Agreement”) duly executed
by Seller, effecting the assignment to and assumption by Buyer of
the Purchased Assets and the Assumed
Liabilities.
(iii) An
Assignment in the form of Exhibit D-1
(the “Seller Intellectual Property
Assignment”) duly
executed by Seller transferring the right, title and interest in
and to such IP Rights to Buyer.
(iv) An
Assignment in the form of Exhibit D-2
(the “Founder Intellectual Property
Assignment” and together
with the Seller Intellectual Property Assignment, the
“IP
Assignments”) duly
executed by Ethan Moeller (“Moeller”), as owners of IP Rights included in the
Purchased Assets, transferring the right, title and interest in and
to such IP Rights to Buyer.
(v) Incentive
Stock Option Agreements in the form of Exhibit E-1
(the “Incentive Stock Option
Agreements”) with each of
Moeller, Bailey and Robert Bemis (“Bemis”, and together with Moeller and Bailey,
collectively, the “Key Persons”), in each case duly executed by the
applicable Key Person.
5
(vi) Non-Incentive
Stock Option Agreements in the form of Exhibit E-2
(the “Non-Incentive Stock Option
Agreements” and together
with the Incentive Stock Option Agreements, the
“Stock
Option Agreements”) with
each of the Key Persons, in each case duly executed by the
applicable Key Person.
(vii)
At-Will Employment, Confidential
Information, Non-Compete/Non-Solicitation, Invention Assignment and
Arbitration Agreements (the “Non-Compete
Agreements”) in the form
of Exhibit F
with each of the Key Persons, in each
case, duly executed by the applicable Key
Person.
(viii)
The consents listed on
Schedule
3.02.
(ix) Evidence
that the Contracts with independent contractors listed on
Schedule
2.02(a)(ix) have been
terminated as of the Closing.
(x) A
certificate of the Secretary (or equivalent officer) of Seller
certifying as to (A) the resolutions of the board of directors and
the stockholders of Seller, which authorize the execution,
delivery, and performance of this Agreement, the Bill of Sale, the
Assignment and Assumption Agreement, and the other Transaction
Documents, and the consummation of the transactions contemplated
hereby and thereby, (B) the names and signatures of the officers of
Seller authorized to sign this Agreement and the other Transaction
Documents, and (C) that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated hereby and thereby.
(xi)
Such other customary instruments of
transfer or assumption, filings, or documents, in form and
substance reasonably satisfactory to Buyer, as may be reasonably
required to give effect to the transactions contemplated by this
Agreement.
(b) Buyer
Closing Deliverables.
At the Closing, Buyer will deliver to
Seller (unless otherwise state below) the
following:
(i) (a)
The Initial Payment less the Broker Fee to Seller, and (b) the
Broker Fee to James Ramos.
(ii)
The Assignment and Assumption
Agreement duly executed by Buyer.
(iii)
The IP Assignments each duly executed
by Buyer.
6
(iv)
Counterpart signature pages to each
Stock Option Agreement duly executed by Buyer’s parent
company, Wrap Technologies, Inc., a Delaware corporation
(“Parent”).
(v) Counterpart
signature pages to each of the Non-Compete Agreements duly executed
by Parent.
(vi)
A certificate of the Secretary (or
equivalent officer) of Buyer certifying as to (A) the resolutions
of the board of directors of Buyer, which authorize the execution,
delivery, and performance of this Agreement and the other
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, (B) the names and signatures of
the officers of Buyer authorized to sign this Agreement and the
other Transaction Documents, and (C) that all such resolutions are
in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated hereby and
thereby.
(vii)
Such other customary
instruments of transfer or assumption, filings, or documents, in
form and substance reasonably satisfactory to Seller, as may be
reasonably required to give effect to the transactions contemplated
by this Agreement.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller represents and warrants to Buyer that
except as set forth in the Disclosure Schedules the statements
contained in this Article 3
are true and correct as of the Closing
Date.
Section
3.01 Organization and Authority of
Seller. Seller is a corporation
duly organized, validly existing, and in good standing under the
Laws of the State of Delaware. Seller has full corporate power and
authority to enter into this Agreement and the other Transaction
Documents to which Seller is a party, to carry out its obligations
hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by
Seller of this Agreement and any other Transaction Document to
which Seller is a party, the performance by Seller of its
obligations hereunder and thereunder, and the consummation by
Seller of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate, board, and
shareholder action on the part of Seller. This Agreement and the
Transaction Documents constitute legal, valid, and binding
obligations of Seller enforceable against Seller in accordance with
their respective terms. Seller has no
subsidiaries.
Section
3.02 No Conflicts or
Consents. Except as disclosed
on Schedule 3.02, the execution, delivery, and performance by
Seller of this Agreement and the other Transaction Documents to
which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (a) violate
or conflict with any provision of the certificate of incorporation,
by-laws, or other governing documents of Seller; (b) violate or
conflict with any provision of any statute, law, ordinance,
regulation, rule, code, constitution, treaty, common law, other
requirement, or rule of law of any Governmental Authority
(collectively, “Law”) or any order, writ, judgment, injunction,
decree, stipulation, determination, penalty, or award entered by or
with any Governmental Authority (“Governmental
Order”) applicable to
Seller, the Business, or the Purchased Assets; (c) require the
consent, notice, declaration, or filing with or other action by any
“Person”; (d) violate or conflict with, result in the
acceleration of, or create in any party the right to accelerate,
terminate, modify, or cancel any Contract to which Seller is a
party or by which Seller or the Business is bound or to which any
of the Purchased Assets are subject (including any Assigned
Contract); or (e) result in the creation or imposition of any
charge, claim, pledge, equitable interest, lien, security interest,
restriction of any kind, or other encumbrance
(“Encumbrance”) on the Purchased
Assets.
7
Section
3.03
Section 3.03
Financial Statements.
Financial Statements.
Seller has delivered to Buyer (a)
complete copies of the unaudited financial statements consisting of
the balance sheet of the Business as at December 31 in each of the
years 2017, 2018, and 2019 and the related statements of income for
the years then ended (the “Financial
Statements”), and (b) the
unaudited balance sheet of Seller as at November 30, 2020 (the
“Interim Balance
Sheet”) and the related
unaudited statements of income for the 11-months then ended. The
Financial Statements have been prepared on an income tax basis. The
Financial Statements fairly present in all material respects the
financial condition of the Business as of the respective dates they
were prepared and the results of the operations of the Business for
the periods indicated. The Financial Statements have been and will
be prepared from and are in accordance with the accounting records
of Seller. The balance sheet of the Business as of November 30,
2020 is referred to herein as the “Balance
Sheet” and the date
thereof as the “Balance Sheet
Date.”
Section
3.04
Undisclosed
Liabilities. Seller has no
Liabilities with respect to the Business, except: (a) those which
are adequately reflected or reserved against in the Balance Sheet
as of the Balance Sheet Date; and (b) those which have been
incurred in the ordinary course of business consistent with past
practice since the Balance Sheet Date and which are set forth
on Schedule
3.04.
Section
3.05
Absence of Certain
Changes, Events, and Conditions. Since the Balance Sheet Date, and other than in
the ordinary course of business consistent with past practice,
there has not been any change, event, condition, or development
that is, or could reasonably be expected to be, individually or in
the aggregate, materially adverse to (a) the business, results of
operations, condition (financial or otherwise), or assets of the
Business; or (b) the value of the Purchased
Assets.
Section
3.06
Assigned
Contracts. Each Assigned
Contract is valid and binding on Seller in accordance with its
terms and is in full force and effect. Neither Seller nor, to
Seller’s Knowledge, any other party thereto is in material
breach of or default under (or is alleged to be in material breach
of or default under), or has provided or received any notice of any
intention to terminate, any Assigned Contract. No event or
circumstance has occurred that would constitute an event of default
under any Assigned Contract or result in a termination thereof.
Complete and correct copies of each Assigned Contract (including
all modifications, amendments, and supplements thereto and waivers
thereunder) have been made available to Buyer. There are no
disputes pending or to the Seller’s Knowledge, threatened,
under any Assigned Contract.
8
Section
3.07
Title to Purchased
Assets. Seller has good and
valid title to all of the Purchased Assets, free and clear of
Encumbrances.
Section
3.08
Condition and
Sufficiency of Assets. Schedule 3.08
sets forth a true, correct and
complete list as of the date hereof of each item of Tangible
Personal Property. To Seller’s Knowledge, each item of
Tangible Personal Property is structurally sound, is in good
operating condition and repair, and is adequate for the uses to
which it is being put, and no item of Tangible Personal Property is
in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or
cost.
Section
3.09
Reserved.
Section
3.10
Accounts
Receivable. Except as set forth
on Schedule
3.10, there are no Accounts
Receivable billed and not collected by Seller as of the
Closing.
Section
3.11
Intellectual
Property.
(a) Registered
and Material Intellectual Property; Proceedings. Schedule
3.11(a) sets forth a true,
correct and complete list as of the date hereof of all (i) Seller
Registered Intellectual Property and specifies, where applicable,
the jurisdictions in which each such item of Seller Registered
Intellectual Property has been filed, issued or registered; (ii)
all material unregistered Seller Intellectual Property, including
Software which is material to the Business, owned by, or
exclusively licensed from any third Person to the Seller, any
unregistered Marks which are material to the Business and are owned
by the Seller, and all virtual reality training modules and gallery
scenes included within the Seller Intellectual Property; and (iii)
Legal Proceedings before any Governmental Authority (other than
actions related to the ordinary course prosecution of Seller
Registered Intellectual Property before the United States Patent
and Trademark Office or the equivalent authority anywhere in the
world) related to any Seller Registered Intellectual Property. The
Seller has maintained all Seller Registered Intellectual Property
in the ordinary course consistent with reasonable business
practices, and all Seller Registered Intellectual Property is
subsisting and, to the Knowledge of the Seller, valid and
enforceable. None of the Seller Registered Intellectual Property is
jointly owned with any third Person.
(b) No
Order. No Seller Intellectual
Property is subject to any Legal Proceeding or outstanding order
with respect to the Seller restricting in any manner the use,
transfer licensing or commercial exploitation thereof by the Seller
of such Seller Intellectual Property or any of the Seller’s
products or service offerings.
9
(c) Absence
of Liens. The Seller
exclusively owns and has good and valid legal and equitable title
to, or, to the Knowledge of the Seller, has a valid and enforceable
license or right to use, all Intellectual Property used in or
necessary for the operation of the Business, in each case free and
clear of any liens or other Encumbrances (other than nonexclusive
licenses to Seller Intellectual Property granted to Material
Customers in the ordinary course of business).
(d) Transfers.
The Seller has not transferred ownership of, or granted any
exclusive license with respect to, any Seller Intellectual Property
to any third Person.
(e) IP
Contracts. Schedule
3.11(e) sets forth a true,
correct and complete list of all Contracts to which the Seller is a
party (i) with respect to Seller Intellectual Property that is
licensed or transferred to, or granted any other right to, any
third Person, other than any (a) non-disclosure agreements entered
into in the ordinary course of business; and (b) non-exclusive
licenses (including Software or platform as a service or
“SaaS” or “PaaS” license) granted to
customers in the ordinary course of business or in connection with
the sale of the Seller’s products; (ii) pursuant to which a
third Person has licensed or transferred, or granted any other
right in or to, any Intellectual Property to the Seller, other than
any (a) non-disclosure agreements entered into in the ordinary
course of business non-exclusive licenses of commercially available,
off-the-shelf Software that is licensed pursuant to standard terms
and conditions with a total replacement cost of less than $2,500;
and (c) non-exclusive licenses to Software and materials licensed
as open-source, public-source or freeware; or (iii) pursuant to
which the Seller is obligated to perform any material development
with respect to any material Seller Intellectual Property (all such
Contracts, the “IP Contracts”). Except as set forth on
Schedule
3.11(e), the Seller has not
performed developments for any third party except where the Seller
owns all Intellectual Property developed in connection therewith
that is used in or necessary for the operation of the
Business.
(f) Changes.
The consummation of the transactions contemplated by this Agreement
will not under any IP Contract result: (i) in the termination of
any material license of Intellectual Property to the Seller by a
third Person; (ii) the granting by the Seller of any license or
rights to any material Seller Intellectual Property; or (iii) the
release from escrow of any material Seller Technology or
Software.
(g) No
Government Funding. The Seller
has not received funding from a Governmental Authority used to
develop Seller Intellectual Property resulting in any obligation to
license such Seller Intellectual Property to any Governmental
Authority.
(h) No
Infringement. To the Knowledge
of the Seller, the use of the Seller Intellectual Property or the
operation of the Business as currently conducted does not infringe,
misappropriate, dilute or otherwise violate the Intellectual
Property of any third Person or constitute unfair competition or
unfair trade practices pursuant to the laws of any
jurisdiction.
10
(i) No
Notice of Infringement. The
Seller has not received written notice from any third Person, or
been involved in any Legal Proceeding, alleging that the operation
of the business of the Seller or of the Seller’s products
infringe, misappropriate, dilute or otherwise violate the
Intellectual Property of any third Person or constitutes unfair
competition or unfair trade practices pursuant to the laws of any
jurisdiction, and the Seller is not aware of any reasonable basis
for such Legal Proceeding.
(j) No
Third Person Infringement. The
Seller has not provided any third Person with written notice
claiming that such third Person is infringing, misappropriating,
diluting or otherwise engaged in any activity violating any Seller
Intellectual Property, and, to the Knowledge of the Seller, no such
activity is occurring.
(k) Proprietary
Information. The Seller has
taken reasonable steps to maintain, enforce and protect the Seller
Intellectual Property, including to protect the rights in its
confidential information and trade secrets. Without limiting the
foregoing, the Seller has obtained from each officer and employee
engaged in the development of any material Intellectual Property
for the Seller a valid and enforceable proprietary information and
confidentiality agreement that includes an obligation to assign
such Intellectual Property (except to the extent such Intellectual
Property is automatically owned by the Seller by operation of law)
to the Seller and reasonable confidentiality obligations on such
officer or employee.
(l) Data
Security Requirements and Privacy. The Seller (i) maintains policies and procedures
that are commercially reasonable regarding the security, privacy,
transfer and use of personally identifiable information collected
by the Seller; and (ii) is in compliance in all material respects
with such policies and all laws, rules, regulations, contractual
obligations of the Seller (including with respect to Payment Card
Industry Data Security Standard) and applicable industry standards,
in each case related to data privacy and data security. To the
Knowledge of the Seller, there have been no (A) losses or thefts
of, or security breaches relating to, personally identifiable
information in the possession, custody or control of the Seller;
(B) unauthorized access or unauthorized use of any such personally
identifiable information; (C) improper disclosure of any personally
identifiable information in the possession, custody or control of
the Seller or any Person acting on their behalf, or (D) notices
received related to the foregoing.
(m) Products
and Source Code. Except as
would not be material to the operations of the business of the
Seller, there are, to the Knowledge of the Seller, (i) no material
defects in any of the products or service offerings of the Seller
that would prevent the same from substantially performing in
accordance with the Seller’s obligations to customers under
written customer agreements; and (ii) no material viruses, worms,
Trojan horses or similar disabling codes or programs in any of the
same. As of the date hereof, the Seller possesses all Source Code
and other materials that embody material Seller Intellectual
Property used by the Seller in the development and maintenance of
the products of the Seller. The Seller has not disclosed,
delivered, licensed or otherwise made available, and does not have
a duty or obligation (whether present, contingent, or otherwise) to
disclose, deliver, license, or otherwise make available, any Seller
Source Code to any Person.
11
(n) Open
Source Software. No product or
service offering of the Seller is distributed with any material
Software that is licensed to the Seller pursuant to an open source,
public-source, freeware or other third party license agreement in a
manner that, in each case, requires the Seller to disclose, license
or make available any Source Code that embodies or constitutes
material Seller Intellectual Property, including for any material
product or service offering of the Seller or in a manner that
requires any material product or services offering of the Seller to
be made available at no charge.
(o) Information
Technology Systems. Seller has
implemented commercially reasonable, sufficient and adequate backup
and disaster recovery arrangements with respect to the IT Systems.
The IT Systems are adequate and suitable for purposes of the
Business. “IT Systems” means Seller’s network servers
(including external and internal facing), and any other information
technology systems, including all computer hardware, Software,
firmware, process automation and telecommunications systems,
network equipment and circuits and related hardware, owned, leased,
used or held for use by Seller. The IT Systems have performed in
material conformance with the applicable specifications or
documentation for such systems during the twelve (12) months prior
to Closing, except for incidents and problems corrected in the
ordinary course of business. There have been no data security
breaches that have materially adversely affected the
Company.
Section
3.12
Material
Contracts.
(a) Schedule
3.12 sets forth a complete and
accurate list of the following Contracts by which any of the
Purchased Assets are bound or affected, or to which Seller is a
party or by which Seller is bound in connection with the Business
or the Purchased Assets (the “Material
Contracts”):
(i) Contracts
with clients or customers of Seller.
(ii) License
Contracts (other than those listed pursuant to Section
3.12(a)) under which Seller is
either a licensee or licensor or under which Seller is required to
pay any royalty.
(iii)
Contracts which cannot be cancelled
without penalty or without more than 90 days’
notice;
(iv)
Arrangements concerning
confidentiality or any arrangement concerning all Contracts that provide for the indemnification
of any Person or the assumption of any Tax, environmental or other
Liability of any Person.
12
(v) Contracts
that relate to the acquisition or disposition of any business, a
material amount of stock or assets of any other Person or any real
property (whether by merger, sale of stock, sale of assets or
otherwise).
(vi) Broker,
distributor, dealer, manufacturer’s representative,
franchise, agency, sales promotion, market research, marketing
consulting and advertising Contracts.
(vii)
Employment Contracts and Contracts
with independent contractors or consultants (or similar
arrangements), including, but not limited to those which are not
cancellable without material penalty or without more than 30
days’ notice.
(viii)
Except for Contracts relating
to trade receivables, all Contracts relating to indebtedness
(including, without limitation, guarantees).
(ix) Contracts
with any Governmental Authority.
(x)
Contracts that limit or purport
to limit the ability of Seller to compete in any line of business
or with any Person or in any geographic area or during any period
of time.
(xi) Joint
venture, partnership or similar Contracts.
(xii)
Contracts for the sale of any of the
Purchased Assets or for the grant to any Person of any option,
right of first refusal or preferential or similar right to purchase
any of the Purchased Assets.
(xiii)
All other Contracts that are material
to the Purchased Assets or the operation of the Business and not
previously disclosed pursuant to this Section
3.12.
(b) Each
Material Contract is valid and binding on Seller in accordance with
its terms and is in full force and effect. None of Seller or, to
Seller’s knowledge, any other party thereto is in material
breach of or default under (or is alleged to be in material breach
of or default under), or has provided or received any notice of any
intention to terminate, any Material Contract. No event or
circumstance has occurred that, with notice or lapse of time or
both, would constitute an event of default under any Material
Contract or result in a termination thereof or would cause or
permit the acceleration or other changes of any right or obligation
or the loss of any benefit thereunder. Complete and correct copies
of each Material Contract (including all modifications, amendments
and supplements thereto and waivers thereunder) have been made
available to Buyer. There are no material disputes pending or to
the Seller’s Knowledge, threatened, under any Contract
included in the Purchased Assets.
Section
3.13
Customers and
Suppliers.
(a) Schedule
3.13(a) sets forth with respect
to the Business: (i) each customer who has paid consideration to
Seller for goods or services rendered for each of the two (2) most
recent fiscal years (collectively, the “Material
Customers”); and (ii) the
amount of consideration paid by each Material Customer during such
periods. Other than as set forth on Schedule
3.13(a), Seller has not
received any notice, and has no reason to believe, that any of the
Material Customers has ceased, or intends to cease after the
Closing, to use the goods or services of the Business or to
otherwise terminate or materially reduce its relationship with the
Business.
13
(b) Schedule
3.13(b) sets forth with respect
to the Business: (i) each supplier to whom Seller has paid
consideration for goods or services rendered for each of the two
(2) most recent fiscal years (collectively, the
“Material
Suppliers”); and (ii) the
amount of purchases from each Material Supplier during such
periods. Seller has not received any notice, and has no reason to
believe, that any of the Material Suppliers has ceased, or intends
to cease, to supply goods or services to the Business or to
otherwise terminate or materially reduce its relationship with the
Business.
Section 3.14
Legal Proceedings; Governmental
Orders.
(a) There
are no claims, actions, causes of action, demands, lawsuits,
arbitrations, inquiries, audits, notices of violation, proceedings,
litigation, citations, summons, subpoenas, or investigations of any
nature, whether at law or in equity (collectively,
“Actions”) pending or, to Seller’s knowledge,
threatened against or by Seller: (i) relating to or affecting the
Business, the Purchased Assets, or the Assumed Liabilities; or (ii)
that challenge or seek to prevent, enjoin, or otherwise delay the
transactions contemplated by this Agreement. No event has occurred
or circumstances exist that may give rise to, or serve as a basis
for, any such Action.
(b) There
are no outstanding Governmental Orders against, relating to, or
affecting the Business or the Purchased Assets.
Section
3.1 Compliance with Laws.
Seller is in compliance with all Laws
applicable to the conduct of the Business as currently conducted or
the ownership and use of the Purchased Assets.
Section
3.16 Taxes. All Taxes due and owing by Seller have been, or
will be, timely paid. No extensions or waivers of statutes of
limitations have been given or requested with respect to any Taxes
of Seller. All Tax Returns with respect to the Business required to
be filed by Seller for any tax periods prior to Closing have been,
or will be, timely filed. Such Tax Returns are, or will be, true,
complete, and correct in all respects.
Section
3.17 No Owned Real Property.
Seller does not own any real
property.
14
Section
3.18 Employment Matters.
Schedule 3.18
sets forth as of the date hereof a
list of the names of each current Business employee, together with
their title or job classification, work location, employing entity,
current annual salary and target annual cash bonus and commissions
for 2020, if any and Schedule 3.18
sets forth a list of all employees,
consultants or independent contractors that have had a material
contribution to the Business over the last three (3) years. Except
as set forth in Schedule
3.18, none of such persons has
an employment, consultant or independent contractor agreement with
Seller. Seller represents that they have at all times complied with
all terms of any such Contract with any Business employee,
consultant or independent contractor. Seller represents that it has
paid all Business employees, consultants, and independent
contractors for all hours worked, including commissions, overtime,
or other wages due, along with related Taxes (or have appropriately
accrued for such amounts). Since November 3, 2015, Seller has been
in material compliance with all applicable Laws pertaining to
employment and employment practices, including but not limited Laws
relating to wages, overtime, expenses, sick time, leave,
contributions, classification of contractors and employees,
reductions in force, hours, meal and rest periods, employment
discrimination and equal opportunity laws, harassment, collective
bargaining, labor relations, occupational safety and health,
disability, background checks, drug and alcohol testing,
immigration and the payment of Social Security and other
taxes.
Section
3.19 Employee Benefits.
Seller does not maintain, sponsor,
contribute to, and is not required to contribute to, for the
benefit of any current or former employee, officer, director,
retiree, independent contractor or consultant of the Business or
any spouse or dependent of such individual, any pension, benefit,
retirement, compensation, employment, consulting, profit-sharing,
deferred compensation, incentive, bonus, performance award, phantom
equity, stock or stock-based, change in control, retention,
severance, vacation, paid time off (PTO), medical, vision, dental,
disability, welfare, Code Section 125 cafeteria, fringe-benefit and
other similar agreement, plan, policy, program or arrangement (and
any amendments thereto), in each case whether or not reduced to
writing and whether funded or unfunded.
Section
3.20
Brokers.
Other than as set forth on Schedule
3.20, no broker, finder, or investment banker is entitled to any
brokerage, finder’s, or other fee or commission in connection
with the transactions contemplated by this Agreement or any other
Transaction Document based upon arrangements made by or on behalf
of Seller.
Section
3.21
Full
Disclosure. No representation
or warranty by Seller in this Agreement and no statement contained
in the Disclosure Schedules to this Agreement or any certificate or
other document furnished or to be furnished to Buyer pursuant to
this Agreement contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are
made, not misleading.
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the
statements contained in this Article 4
are true and correct as of the Closing
Date.
15
Section
4.01
Organization and
Authority of Buyer. Buyer is a
corporation duly organized, validly existing, and in good standing
under the Laws of the State of Arizona. Buyer has full corporate
power and authority to enter into this Agreement and the other
Transaction Documents to which Buyer is a party, to carry out its
obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery by Buyer of this Agreement and any other Transaction
Document to which Buyer is a party, the performance by Buyer of its
obligations hereunder and thereunder, and the consummation by Buyer
of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate, board, and shareholder
action on the part of Buyer. This Agreement and the other
Transaction Documents constitute legal, valid, and binding
obligations of Buyer enforceable against Buyer in accordance with
their respective terms.
Section
4.02
No Conflicts;
Consents. The execution,
delivery, and performance by Buyer of this Agreement and the other
Transaction Documents to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, do not and
will not: (a) violate or conflict with any provision of the
certificate of incorporation, by-laws, or other organizational
documents of Buyer; (b) violate or conflict with any provision of
any Law or Governmental Order applicable to Buyer; or (c) require
the consent, notice, declaration, or filing with or other action by
any Person or require any permit, license, or Governmental
Order.
Section
4.03
Brokers.
No broker, finder, or investment
banker is entitled to any brokerage, finder’s, or other fee
or commission in connection with the transactions contemplated by
this Agreement or any other Transaction Document based upon
arrangements made by or on behalf of Buyer.
Section
4.04
Legal
Proceedings. There are no
Actions pending or, to Buyer’s knowledge, threatened against
or by Buyer that challenge or seek to prevent, enjoin, or otherwise
delay the transactions contemplated by this Agreement. No event has
occurred or circumstances exist that may give rise to, or serve as
a basis for, any such Action.
Section
4.05
No Material
Omissions. No representation or
warranty by Buyer in this Agreement, nor any certificate, schedule,
statement, exhibit, document or instrument furnished or to be
furnished to Seller pursuant hereto or in connection with the
negotiation, execution or performance of this Agreement, contains
or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or
therein or necessary to make any statement herein or therein not
misleading.
Section
4.06
Access.
Buyer acknowledges that it has been
afforded the opportunity to conduct such due diligence on the
materials provided by Seller as Buyer has determined to be prudent,
including to the extent provided or made available by Seller, the
opportunity to review all of the provided contracts, inspect the
provided books and records and ask questions of
Seller.
ARTICLE 5
COVENANTS
16
Section
5.01
Confidentiality.
From and after the Closing, Seller and
Seller Stockholder shall, and shall cause their respective
Affiliates to, hold, and shall use its commercially reasonable
efforts to cause its or their respective “Representatives” to hold, in
confidence any and all information, whether written or oral,
concerning the Business and the Purchased Assets
(“Confidential
Information”), except to
the extent that Seller or Seller Stockholder can show that such
information: (a) is generally available to and known by the public
through no fault of Seller or Seller Stockholder, any of their
Affiliates, or their respective Representatives; or (b) is lawfully
acquired by Seller or Seller Stockholder, any of their Affiliates,
or their respective Representatives from and after the Closing from
sources which are not prohibited from disclosing such Confidential
Information by a legal, contractual, or fiduciary obligation. If
Seller, Seller Stockholder or any of their respective Affiliates or
their respective Representatives are compelled to disclose any
Confidential Information by Governmental Order or Law, Seller and
Seller Stockholder will promptly notify Buyer in writing and
disclose only that portion of such Confidential Information which
is legally required to be disclosed, provided that
Seller and Seller Stockholder will use
commercially reasonable efforts to obtain as promptly as possible
an appropriate protective order or other reasonable assurance that
confidential treatment will be accorded such Confidential
Information.
Section
5.02
Non-Competition;
Non-Solicitation.
(a) Each
of Seller and Seller Stockholder acknowledges the competitive
nature of the Business and accordingly agrees, in connection with
the sale of the Purchased Assets, including the goodwill of the
Business, which Buyer considers to be a valuable asset, and in
exchange for good and valuable consideration, that for a period of
two years commencing on the Closing Date (the
“Restricted
Period”), Seller and
Seller Stockholder will not, and will not permit any of their
respective Affiliates to, directly or indirectly: (i) engage in or
assist others in engaging in the Business (the
“Restricted
Business”) in United
States (the “Territory”); (ii) have an interest in any Person that
engages directly or indirectly in the Restricted Business in the
Territory in any capacity, including as a partner, shareholder,
director, member, manager, employee, principal, agent, trustee, or
consultant; or (iii) cause, induce, or encourage any material
actual or prospective client, customer, supplier, or licensor of
the Business (including any existing or former client or customer
of Seller and any Person that becomes a client or customer of the
Business after the Closing), or any other Person who has a material
business relationship with the Business, to terminate or modify any
such actual or prospective relationship. Notwithstanding the
foregoing, Seller and Seller Stockholder may own, directly or
indirectly, solely as an investment, securities of any Person
traded on any national securities exchange if Seller or Seller
Stockholder is not a controlling Person of, or a member of a group
which controls, such Person and does not, directly or indirectly,
own 2% or more of any class of securities of such
Person.
(b) During
the Restricted Period, neither Seller nor Seller Stockholder will,
and will not permit any of their respective Affiliates to, directly
or indirectly, hire or solicit any person who is or was employed in
the Business during the Restricted Period, or encourage any such
employee to leave such employment or hire any such employee who has
left such employment, except pursuant to a general solicitation
which is not directed specifically to any such employees;
provided
that nothing in this
Section
5.02(b) prevents Seller nor
Seller Stockholder or any of their respective Affiliates from
hiring: (i) any employee whose employment has been terminated by
Buyer; or (ii) after 180 days from the date of termination of
employment, any employee whose employment has been terminated by
the employee.
17
(c) Each
of Seller and Seller Stockholder acknowledges that a breach or
threatened breach of this Section 5.02
would give rise to irreparable harm to
Buyer, for which monetary damages would not be an adequate remedy,
and hereby agrees that in the event of a breach or threatened
breach by Seller or Seller Stockholder of any such obligations,
Buyer shall, in addition to any and all other rights and remedies
that may be available to it in respect of such breach, be entitled
to equitable relief, including a temporary restraining order, an
injunction, specific performance, and any other relief that may be
available from a court of competent jurisdiction (without any
requirement to post bond or other security or to prove actual
damages or that monetary damages will not afford an adequate
remedy).
(d) Each
of Seller and Seller Stockholder acknowledges that the restrictions
contained in this Section 5.02
are reasonable and necessary to
protect the legitimate interests of Buyer and constitute a material
inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated by this Agreement. In the event that any
covenant contained in this Section 5.02
should ever be adjudicated to exceed
the time, geographic, product or service, or other limitations
permitted by applicable Law in any jurisdiction or any Governmental
Order, then any court is expressly empowered to reform such
covenant in such jurisdiction to the maximum time, geographic,
product or service, or other limitations permitted by applicable
Law or such Governmental Order. The covenants contained in
this Section 5.02
and each provision hereof are
severable and distinct covenants and provisions. The invalidity or
unenforceability of any such covenant or provision as written shall
not invalidate or render unenforceable the remaining covenants or
provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
covenant or provision in any other
jurisdiction.
Section
5.03
Public
Announcements. Unless otherwise
required by applicable Law, Buyer shall not make any public
announcements in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of the
Seller.
Section
5.04
Bulk Sales
Laws. The parties hereby waive
compliance with the provisions of any bulk sales, bulk transfer, or
similar Laws of any jurisdiction that may otherwise be applicable
with respect to the sale of any or all of the Purchased Assets to
Buyer. Any Liabilities arising out of the failure of Seller to
comply with the requirements and provisions of any bulk sales, bulk
transfer, or similar Laws of any jurisdiction which would not
otherwise constitute Assumed Liabilities shall be treated as
Excluded Liabilities.
18
Section
5.05
Receivables.
From and after the Closing, if Seller
or any of its Affiliates receives or collects any funds relating to
any Accounts Receivable or any other Purchased Asset, Seller or its
Affiliate shall remit such funds to Buyer within five (5) Business
Days after its receipt thereof. From and after the Closing, if
Buyer or its Affiliate receives or collects any funds relating to
any Excluded Asset, Buyer or its Affiliate shall remit any such
funds to Seller within five (5) Business Days after its receipt
thereof.
Section
5.06
Taxes; Set-Off
Rights. All sales, use,
registration, and other Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the other
Transaction Documents, if any, shall be borne and paid by Seller
when due, regardless of the Person on whom such Taxes are imposed
by applicable law. Seller shall, at its own expense, timely file
any Tax Return or other document with respect to such Taxes or fees
(and Buyer shall cooperate with respect thereto as necessary)
unless such filing obligation belongs to Buyer, in which case
Seller shall deliver to Buyer for timely filing any Tax Return or
other document with respect to such Taxes or fees.
Buyer shall have the right to withhold
and set off against any amount otherwise due to be paid by any
Buyer Indemnitee to any Seller Indemnitee, only the amount of any
Taxes and fees (including penalties and interest) required to be
paid by Seller pursuant to this Section 5.06.
Section
5.07
Further
Assurances. Following the
Closing, each of the parties hereto shall, and shall cause their
respective Affiliates to, execute and deliver such additional
documents, instruments, conveyances, and assurances and take such
further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated
by this Agreement and the other Transaction
Documents.
Section
5.08
Restrictions on
Seller Dissolution; Name Change. Seller shall not dissolve until thirty (30) days
after the later of the last payment of the Purchase Price and the
Earn-Out Amount, if applicable, due hereunder. Notwithstanding the
foregoing, within 10 days following the Closing, Seller shall
change the name of the Company to a name that does not reference
“Nsena” or any other trademark or trade name included
in the Intellectual Property acquired by Buyer
hereunder.
ARTICLE 6
INDEMNIFICATION
Section
6.01
Survival.
All representations and warranties
contained herein and all related rights to indemnification will
survive the Closing until the date that is eighteen (18) months
from the Closing Date. All covenants and agreements of the parties
in this Agreement will survive the Closing indefinitely or for the
period explicitly specified therein. Notwithstanding the foregoing,
any claims asserted in good faith with reasonable specificity (to
the extent known at such time) and in writing by notice from the
non-breaching party to the breaching party prior to the expiration
date of the applicable survival period will not be barred by the
expiration of the relevant representation or warranty, and such
claims shall survive until finally resolved.
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Section
6.02
Indemnification by
Seller. Subject to the other
terms and conditions of this Article
6, each of Seller and Seller
Stockholder (together, the “Seller
Indemnitors”) will,
jointly and severally, indemnify and defend each of Buyer and its
Affiliates and their respective Representatives (collectively, the
“Buyer
Indemnitees”) against,
and shall hold each of them harmless from and against, any and all
losses, damages, Liabilities, deficiencies, Actions, judgments,
interest, awards, penalties, fines, costs, or expenses of whatever
kind, including reasonable attorneys’ fees relating to the
breach or alleged breach of this Agreement, or diminution of value
or any damages based on any type of multiple (collectively,
“Losses”), incurred or sustained by, or imposed
upon, the Buyer Indemnitees based upon, arising out of, or with
respect to:
(a) Any
inaccuracy in or breach of any of the representations or warranties
of Seller contained in this Agreement, any other Transaction
Document, or any schedule, certificate, or exhibit related thereto,
as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing
Date (except for representations and warranties that expressly
relate to a specified date, the inaccuracy in or breach of which
will be determined with reference to such specified
date).
(b) Any
breach or non-fulfillment of any covenant, agreement, or obligation
to be performed by Seller pursuant to this Agreement, any other
Transaction Document, or any schedule, certificate, or exhibit
related thereto.
(c) Any
Excluded Asset or any Excluded Liability.
(d) Excluded
Taxes.
(e) Any
Third-Party Claim based upon, resulting from, or arising out of the
business, operations, properties, assets, or obligations of Seller
or any of its Affiliates (other than the Purchased Assets or
Assumed Liabilities) conducted, existing, or arising on or prior to
the Closing Date. “Third-Party
Claim” means notice of
the assertion or commencement of any Action made or brought by any
Person who is not a party to this Agreement or an Affiliate of a
party to this Agreement or a Representative of the
foregoing.
Section
6.03
Indemnification by
Buyer. Subject to the other
terms and conditions of this Article
6, Buyer shall indemnify and
defend each of Seller and its Affiliates and their respective
Representatives (collectively, the “Seller
Indemnitees”) against,
and shall hold each of them harmless from and against any and all
Losses incurred or sustained by, or imposed upon, the Seller
Indemnitees based upon, arising out of, or with respect
to:
(a) any
inaccuracy in or breach of any of the representations or warranties
of Buyer contained in this Agreement, any other Transaction
Document, or any schedule, certificate, or exhibit related thereto,
as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing
Date (except for representations and warranties that expressly
relate to a specified date, the inaccuracy in or breach of which
will be determined with reference to such specified
date);
20
(b) any
breach or non-fulfillment of any covenant, agreement, or obligation
to be performed by Buyer pursuant to this Agreement;
or
(c) any
Assumed Liability.
Section
6.04
Indemnification
Procedures. Whenever any claim
shall arise for indemnification hereunder, the party entitled to
indemnification (the “Indemnified
Party”) shall promptly
provide written notice of such claim to the other party (the
“Indemnifying
Party”). In connection
with any claim giving rise to indemnity hereunder resulting from or
arising out of any Action by a Person who is not a party to this
Agreement, the Indemnifying Party, at its sole cost and expense and
upon written notice to the Indemnified Party, may assume the
defense of any such Action with counsel reasonably satisfactory to
the Indemnified Party. The Indemnified Party shall be entitled to
participate in the defense of any such Action, with its counsel and
at its own cost and expense. If the Indemnifying Party does not
assume the defense of any such Action, the Indemnified Party may,
but shall not be obligated to, defend against such Action in such
manner as it may deem appropriate, including settling such Action,
after giving notice of it to the Indemnifying Party, on such terms
as the Indemnified Party may deem appropriate and no action taken
by the Indemnified Party in accordance with such defense and
settlement shall relieve the Indemnifying Party of its
indemnification obligations herein provided with respect to any
damages resulting therefrom. The Indemnifying Party shall not
settle any Action without the Indemnified Party’s prior
written consent (which consent shall not be unreasonably withheld
or delayed).
Section
6.05
Cumulative
Remedies. The rights and
remedies provided in this Article 6
are cumulative and are in addition to
and not in substitution for any other rights and remedies available
at law or in equity or otherwise.
Section
6.06
Cap;
Insurance. The Seller
Indemnitors shall have no liability for indemnification under
Section 6.02 for any amounts in excess of the Purchase Price,
except in the event of (a) any breach of any representation and
warranty of which a Seller Indemnitor had Knowledge at any time
prior to the date on which such representation and warranty is made
or (b) any intentional breach by Seller or Seller Stockholder of
any covenant or obligation, and the Seller Indemnitors will be
jointly and severally liable for all Losses with respect to such
breaches. The indemnification obligations of the Seller Indemnitors
shall not apply to any Loss for which any Buyer Indemnified Party
is compensated under any insurance policy, but only to the extent
of the amount actually received by Buyer and not taking into
account any deductible paid by Buyer.
ARTICLE 7
MISCELLANEOUS
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Section
7.01
Expenses.
All costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and
expenses.
Section
7.02
Notices.
All notices, claims, demands, and
other communications hereunder shall be in writing and shall be
deemed to have been given: (a) when delivered by hand (with written
confirmation of receipt); (b) when received by the addressee if
sent by a nationally recognized overnight courier (receipt
requested); (c) on the date sent by email of a PDF document (with
confirmation of transmission); or (d) on the third day after the
date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications must be sent to the
respective parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in
accordance with this Section
7.02):
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If to
Seller:
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Nsena
Inc.
64
Bleecker Street, #238
New
York, NY 10012
Attn:
Ethan Moeller, Chief Executive Officer
Email:
ethan@nsenavr.com
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with a
copy (which shall not
constitute
notice) to:
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Fox
Rothschild LLP
997
Lenox Drive
Lawrenceville,
NJ 08648
Attn:
Douglas J. Zeltt, Esq.
Email:
DZeltt@foxrothschild.com
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If to
the Buyer:
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Wrap
Reality, Inc.
1817 W.
4th
Street
Tempe,
Arizona 85281
Attn:
James Barnes, Chief Financial Officer
Email:
Jim@wrap.com
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with a
copy (which shall not
constitute
notice) to:
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Snell
& Wilmer LLP
One
Arizona Center
400
East Van Buren Street
Suite
1900
Phoenix,
AZ 85004-2202
Attn:
Daniel M. Mahoney, P.C.
Email:
dmahoney@swlaw.com
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Section
7.03
Interpretation;
Headings. This Agreement shall
be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an
instrument or causing any instrument to be drafted. The headings in
this Agreement are for reference only and shall not affect the
interpretation of this Agreement.
Section
7.04
Severability.
If any term or provision of this
Agreement is invalid, illegal, or unenforceable in any
jurisdiction, such invalidity, illegality, or unenforceability
shall not affect any other term or provision of this
Agreement.
Section
7.05
Entire
Agreement. This Agreement and
the other Transaction Documents constitute the sole and entire
agreement of the parties to this Agreement with respect to the
subject matter contained herein and therein, and supersede all
prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. In the event
of any inconsistency between the statements in the body of this
Agreement and those in the other Transaction Documents, the
Exhibits, and the Disclosure Schedules (other than an exception
expressly set forth as such in the Disclosure Schedules), the
statements in the body of this Agreement will
control.
Section
7.06
Successors and
Assigns; Assignment. This
Agreement is binding upon and inures to the benefit of the parties
hereto and their respective successors and permitted assigns.
Neither party may assign any of its rights or obligations hereunder
without the prior written consent of the other party, which consent
shall not be unreasonably withheld, conditioned, or delayed. Any
purported assignment in violation of this Section shall be null and
void. No assignment shall relieve the assigning party of any of its
obligations hereunder.
Section
7.07
Amendment and
Modification; Waiver. This
Agreement may only be amended, modified, or supplemented by an
agreement in writing signed by each party hereto. No waiver by any
party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and signed by the party so waiving.
No failure to exercise, or delay in exercising, any right or remedy
arising from this Agreement shall operate or be construed as a
waiver thereof; nor shall any single or partial exercise of any
right or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right or
remedy.
23
Section
7.08
Governing Law;
Submission to Jurisdiction; Waiver of Jury
Trial.
(a) This
Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction).
(b) ANY
LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE
UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF DELAWARE IN
EACH CASE LOCATED IN DELAWARE, AND EACH PARTY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT,
ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER
DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN
SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE
AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH
PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS
AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE
EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.10(c).
24
Section
7.09
Counterparts.
This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall be deemed to be one and the same agreement. A
signed copy of this Agreement delivered by facsimile, email, or
other means of electronic transmission shall be deemed to have the
same legal effect as delivery of an original signed copy of this
Agreement.
Section
7.10
Data Room.
With respect to all materials that are
described as having been made available or delivered to Buyer or
Buyer’s Affiliates or Representatives, such materials shall
be deemed to have been delivered or made available to Buyer only if
such materials were uploaded to the data room located at
https://drive.google.com/drive/folders/136xchOtayIp2TPDtCN0vtTguTBfHRmNe
at least two (2) Business Days prior to
Closing.
[Signature page follows.]
25
IN WITNESS
WHEREOF, the Parties have
caused this Agreement to be executed as of the Closing Date by
their respective officers thereunto duly
authorized.
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Seller:
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NSENA INC.
By: /s/
Ethan
Moeller
Name: Ethan MoellerTitle: Chief Executive Officer
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Buyer:
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WRAP REALITY, INC.
By: /s/
James
Barnes
Name: James BarnesTitle: Chief financial Officer
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Seller Stockholder:
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/s/
Ethan
Moeller
Ethan Moeller, individually
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EXHIBIT A
DEFINITIONS
The following terms are defined as follows:
“Affiliate” of a Person means any
other Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such Person. The term “control”
(including the terms “controlled by” and “under
common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of voting securities, by contract or otherwise.
“Broker Fee” means a payment equal
to five percent (5%) of the Purchase Price in the total amount of
Twenty Five Thousand Dollars ($25,000) payable at the Closing to
James Ramos, the Company’s broker in connection with this
transaction.
“Business Day” means any day except
Saturday, Sunday or any other day on which commercial banks located
in Phoenix, Arizona are authorized or required by Law to be closed
for business.
“Business Product” means any and
all products or services, including Software as a service (SaaS)
offerings, that are or have been prior to the Closing Date
marketed, offered, sold, licensed, provided or distributed by
Seller in respect of the Business.
“Contract” means any written or
oral agreement, contract, subcontract, settlement agreement, lease,
sublease, instrument, permit, concession, franchise, binding
understanding, note, option, bond, mortgage, indenture, trust
document, loan or credit agreement, license, sublicense, insurance
policy or other legally binding commitment or undertaking of any
nature.
“Disclosure Schedules” means the
Disclosure Schedules delivered by Seller and Buyer concurrently
with the execution and delivery of this Agreement and the term
“Schedule”
followed by a section reference refers to a specific section of the
Disclosure Schedule.
“Excluded Taxes” means (i) any and
all Taxes (or the non-payment thereof) of the Seller, (ii) any and
all Taxes of any member of an affiliated, consolidated, combined or
unitary group of which the Seller is or was a member on or prior to
the Closing Date, (iii) any and all Taxes of any Person imposed on
or with respect to the Seller as a transferee or successor,
pursuant to a Contract, or otherwise, (iv) any and all Taxes
incurred in connection with the consummation of the transactions
contemplated under this Agreement, and (vi) any and all amounts
that the Seller is responsible for pursuant to the terms of this
Agreement.
1
“Governmental Authority” means any
federal, state, local, or foreign government or political
subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any arbitrator, court, or
tribunal of competent jurisdiction.
“Intellectual Property” means all
of the following and any rights associated therewith in any
jurisdiction throughout the world: (i) all United States and
foreign patents and applications and patent disclosures and
inventions therefor (“Patents”); (ii) all copyrights,
copyright registrations and applications therefor, rights in
original works of authorship and all other rights corresponding
thereto throughout the world (“Copyrights”); (iii) trademarks,
service marks, trade dress rights, trade names, logos, slogans,
corporate names, Internet domain names and websites and similar
designation of origin and rights therein, social media sites and
accounts, together with all goodwill associated therewith
(“Marks”); (iv)
all rights in mask works, and all mask work registrations and
applications therefor; (v) rights in trade secrets and confidential
information (including research and development, know-how,
formulas, compositions, processes, techniques, technical data,
customer and supplier lists, potential customer lists, pricing and
cost information, and business and marketing plans and proposals);
(vi) Software; (vii) claims or causes of action arising out of or
related to infringement or misappropriation of any of the
foregoing, (viii) all rights in any Technology, and (ix) any other
intellectual property or proprietary rights or similar,
corresponding or equivalent rights to any of the foregoing anywhere
in the world.
“Knowledge” of the Seller, with
respect to any matter in question, means the actual knowledge of
Ethan Moeller after reasonable inquiry.
“Legal Proceeding” means any claim,
action, charge, lawsuit, litigation, audit, investigation (to the
Knowledge of the Seller, as used in relation to the Company) or
other legal proceeding brought by or pending before any
Governmental Authority, arbitrator, mediator or other
tribunal.
“Liabilities” means liabilities,
obligations, or commitments of any nature whatsoever, whether
asserted or unasserted, known or unknown, absolute or contingent,
accrued or unaccrued, matured or unmatured, or
otherwise.
“Person” means an individual,
corporation, partnership, joint venture, limited liability company,
Governmental Authority, unincorporated organization, estate, trust,
firm, association or other entity.
“Registered Intellectual Property”
means all United States, international and foreign (i) Patents and
Patent applications (including provisional applications); (ii)
registered Marks and applications to register Marks (including
intent-to-use applications, or other registrations or applications
related to Marks); and (iii) registered Copyrights and applications
for Copyright registration.
“Representative” means, with
respect to any Person, any and all directors, officers, employees,
consultants, financial advisors, counsel, accountants and other
agents of such Person.
2
“Seller Intellectual Property”
means any Intellectual Property that is owned or purported to be
owned by the Seller or otherwise is used in, held for use in, or
necessary for the conduct of the Business.
“Seller Registered Intellectual
Property” means all of the Registered Intellectual
Property owned by, or filed in the name of, the
Seller.
“Software” means any and all
computer programs, including any and all software implementations
of algorithms, models and methodologies, whether in Source Code,
object code, executable code, binary code or other form, including
maintenance releases, beta releases, error corrections, upgrades,
enhancements, additions, improvements, extensions, modifications,
successor versions, predecessor versions, functionally equivalent
replacements, and substitutions thereof, and all related
documentation, data, and databases.
“Source Code” means computer
Software, in form other than object code or machine readable form,
including related programmer comments and annotations, help text,
data and data structures, instructions and procedural,
object-oriented and other code comprising such Software, in each
case, which may be printed out or displayed in human readable
form.
“Taxes” means all federal, state,
local, foreign, and other income, gross receipts, sales, use,
production, ad valorem, transfer, documentary, franchise,
registration, profits, license, withholding, payroll, employment,
unemployment, excise, severance, stamp, occupation, premium,
property (real or personal), customs, duties, or other taxes, fees,
assessments, or charges of any kind whatsoever, together with any
interest, additions, or penalties with respect
thereto.
“Technology” means all (a) all
algorithms, application programming interfaces, gameplay and other
data, databases, data collections, data structures, diagrams and
formulae, (in any form, including Source Code and executable or
object code), (b) routines and subroutines, techniques, user
interfaces, firmware listings, assemblers, applets, compilers, net
lists, design tools, documentation, design documents, annotations,
comments, system build software, hardware, firmware and platforms,
(c) published and unpublished works of authorship, including
audiovisual works, animations, collective works, designs, Software,
compilations, databases, derivative works, literary works, logos,
marks, mask works, virtual reality platforms, and sound recordings;
(d) inventions and discoveries, including articles of manufacture,
business methods, compositions of matter, improvements, machines,
methods, and processes and new uses for any of the preceding items
(whether or not patentable); (e) information and materials that are
not generally known, whether tangible or intangible, including
algorithms, application program interfaces, business or technical
information, concepts, customer lists, data collections, diagrams,
formulae, ideas, know-how, metadata, methods, network
configurations and architectures, processes, programs, protocols,
prototypes, schematics, specifications, systems, techniques and
trade secrets; and (f) all other forms of technology and technical
and other information, and tangible and electronic embodiments
thereof, regardless of form; provided that Technology shall not
include Trademarks.
3
“Transaction Documents” means this
Agreement, the Bill of Sale, the Assignment and Assumption
Agreement, the Intellectual Property Assignments, the Stock Option
Agreements, and the other agreements, certificates, instruments and
documents required to be delivered at the Closing.
The following terms have the meanings set forth in the location in
this Agreement referenced below:
|
Term
|
Section
|
|
Accounts Receivable
|
Section 1.01(a)
|
|
Actions
|
Section 3.14(a)
|
|
Affiliate
|
Section 1.03(b)
|
|
Agreement
|
Preamble
|
|
Assigned Contracts
|
Section 1.01(b)
|
|
Assignment and Assumption Agreement
|
Section 2.02(a)(ii)
|
|
Assumed Liabilities
|
Section 1.03(a)
|
|
Balance Sheet
|
Section 3.03
|
|
Balance Sheet Date
|
Section 3.03
|
|
Bill of Sale
|
Section 2.02(a)(i)
|
|
Books and Records
|
Section 1.01(k)
|
|
Business
|
Recitals
|
|
Buyer
|
Preamble
|
|
Buyer Indemnitees
|
Section 6.02
|
|
Closing
|
Section 2.01
|
|
Closing Date
|
Section 2.01
|
|
Confidential Information
|
Section 5.02(a)
|
|
Encumbrance
|
Section 3.02
|
|
Excluded Assets
|
Section 1.02
|
|
Excluded Liabilities
|
Section 1.03(b)
|
|
Financial Statements
|
Section 3.03
|
|
Governmental Authority
|
Section 1.01(k)
|
|
Governmental Order
|
Section 3.02
|
|
Indemnified Party
|
Section 6.04
|
|
Indemnifying Party
|
Section 6.04
|
|
Law
|
Section 3.02
|
|
Losses
|
Section 6.02
|
|
Material Customers
|
Section 3.13(a)
|
|
Material Suppliers
|
Section 3.13(b)
|
|
Purchased Assets
|
Section 1.01
|
|
Purchase Price
|
Section 1.04
|
|
Representatives
|
Exhibit A
|
|
Restricted Business
|
Section 5.02(a)
|
|
Restricted Period
|
Section 5.02(a)
|
|
Seller
|
Preamble
|
|
Seller Stockholder
|
Preamble
|
|
Seller Indemnitees
|
Section 6.03
|
|
Tangible Personal Property
|
Section 1.01(g)
|
|
Taxes
|
Exhibit A
|
|
Tax Returns
|
Section 1.05
|
|
Territory
|
Section 5.02(a)
|
|
Third-Party Claim
|
Section 6.02(e)
|
4
Exhibit B –
Bill of Sale
Exhibit C –
Assignment and Assumption Agreement
Exhibit D-1
–
Seller Form of Intellectual Property Assignment
Exhibit D-2
–
Founder Form of Intellectual Property Assignment
Exhibit E-1
–
Form of Incentive Stock Option Agreement
Exhibit E-2
–
Form of Non-Statutory Stock Option Agreement
Exhibit F –
Form of Non-Compete Agreement
[EXHIBITS AND SCHEDULES INTENTIONALLY OMITTED]
CONFIDENTIAL
Exhibit 2.2
AT-WILL EMPLOYMENT, CONFIDENTIAL INFORMATION, NON-COMPETE/
NON-SOLICITATION, INVENTION ASSIGNMENT,
AND ARBITRATION AGREEMENT
In
consideration of your employment with Wrap Technologies, Inc. (the
"Company"), as well as the additional consideration described in
Section 7.E herein, ___________ (the “Employee”)
and the Company agree to the following provisions of this At-Will
Employment, Confidential Information, Non-Compete/Non-Solicitation,
Invention Assignment, and Arbitration Agreement (this
"Agreement"):
1.
At-Will Employment
EMPLOYEE
UNDERSTANDS AND ACKNOWLEDGES THAT EMPLOYEE’S EMPLOYMENT WITH
THE COMPANY IS FOR NO SPECIFIED TERM AND CONSTITUTES "AT-WILL"
EMPLOYMENT. EMPLOYEE ALSO UNDERSTANDS THAT ANY REPRESENTATION TO
THE CONTRARY IS UNAUTHORIZED AND NOT VALID UNLESS IN WRITING AND
SIGNED BY THE EXECUTIVE CHAIRMAN OR CHIEF EXECUTIVE OFFICER OF THE
COMPANY OR OTHER PERSON AUTHORIZED BY THE BOARD OF DIRECTORS.
ACCORDINGLY, EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE’S EMPLOYMENT
RELATIONSHIP MAY BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD
CAUSE OR FOR ANY OR NO CAUSE, AT EMPLOYEE’S OPTION OR AT THE
OPTION OF THE COMPANY, WITH OR WITHOUT NOTICE. EMPLOYEE FURTHER
ACKNOWLEDGES THAT THE COMPANY MAY MODIFY EMPLOYEE’S JOB
TITLE, SALARY, AND BENEFIT FROM TIME TO TIME AS COMPANY DEEMS
NECESSARY.
2.
Confidentiality
A.
Definition of Company Confidential
Information. The Employee understands that "Company
Confidential Information" means information (including any and all
combinations of individual items of information) that the Company
has or will develop, acquire, create, compile, discover or own,
that has value in or to the Company's business which is not
generally known and which the Company wishes to maintain as
confidential. Company Confidential Information includes both
information disclosed by the Company to the Employee, and
information developed or learned by the Employee during the course
of the Employee’s employment with the Company. Company
Confidential Information also includes all information of which the
unauthorized disclosure could be detrimental to the interests of
the Company, whether or not such information is identified as
Company Confidential Information. By example, and without
limitation, Company Confidential Information is any and all
nonpublic information that relates to the actual or
anticipated business and/or products, research or development of
the Company, or to the Company's technical data, trade secrets, or
know-how, including, but not limited to, research, product plans,
or other information regarding the Company's products or services
and markets therefor, internal customer lists, software,
developments, inventions, discoveries, ideas, processes, formulas,
technology, designs, drawings, engineering, hardware configuration
information, marketing, finances, and other business information
disclosed by the Company either directly or indirectly in writing,
orally or by drawings or inspection of premises, parts, equipment,
or other Company property. Notwithstanding the foregoing, Company
Confidential Information shall not include any such information
which ·the Employee can establish (i) was publicly known or
made generally available prior to the time of disclosure by the
Company to the Employee; or (ii) becomes publicly known or made
generally available after disclosure by the Company to Employee
through no wrongful action or omission by the Employee. Employee
understands and agrees that the terms of this Agreement are Company
Confidential information, any may be disclosed only to
Employee’s spouse, legal advisor, or tax professionals,
subject to Section 11, below.
B.
Nonuse and Nondisclosure. Employee
agrees that during and after the Employee’s employment with
the Company, the Employee shall hold in the strictest confidence
and take all reasonable precautions to prevent any unauthorized use
or disclosure of Company Confidential Information. The Employee
will not (i) use Company Confidential Information for any purpose
whatsoever other than for the benefit of the Company in the course
of the Employee’s employment, or (ii) disclose Company
Confidential Information to any third party without the prior
written authorization of a named Officer of the Company. Prior to
disclosure, when compelled by applicable law, the Employee will
provide prior written notice to the CEO, CFO or General Counsel of
the Company (as applicable). The Employee agrees that the Employee
obtains no title to any Company Confidential Information, and that
the Company retains all Confidential Information as the sole
property of the Company. The Employee understands that the
Employee’s obligations under this Section 2.B shall continue
after termination of the Employee’s employment and also that
nothing in this Agreement prevents the Employee from engaging in
protected activity, as described in Section 11 below.
C.
Former Employer Confidential
Information. The Employee agrees that during the
Employee’s employment with the Company, the Employee shall
not improperly use, disclose, or induce the Company to use any
proprietary information or trade secrets of any former employer or
other person or entity with which the Employee has an obligation to
keep such proprietary information or trade secrets in
confidence.
D.
Third Party Information. The Employee
recognizes that if the Company receives confidential or proprietary
information from third parties, the Employee will treat that
information as Confidential Information subject to Section 2.B,
above.
3.
Ownership
A.
Assignment of Inventions. As between
the Company and the Employee, the Employee agrees that all right,
title, and interest in and to any and all copyrightable material,
notes, records, drawings, designs, logos, inventions, improvements,
developments, discoveries, ideas and trade secrets conceived,
discovered, authored, invented, developed or reduced to practice by
the Employee, solely or in collaboration with others, during the
Employee’s employment with the Company and within the course
of the Employee’s employment, or with the use of Company's
equipment, supplies, facilities, or Company Confidential
Information, and any copyrights, patents, trade secrets, mask work
rights or other intellectual property rights relating to the
foregoing, except as provided in Section 3.B below (collectively,
"Inventions"), are the sole property of the Company. The Employee
also agrees to promptly make full written disclosure to the Company
of any Inventions, and to deliver and assign and hereby irrevocably
assign fully to the Company all of the Employee’s right,
title and interest in and to Inventions. The Employee agrees that
this assignment includes a present conveyance to the Company of
ownership of Inventions that are not yet in existence. The Employee
further acknowledges that all original works of authorship that are
made by the Employee (solely or jointly with others) within the
scope of and during the period of the Employee’s employment
with the Company and that are protectable by copyright are "works
made for hire," as that term is defined in the United States
Copyright Act. The Employee understands and agrees that the
decision whether or not to commercialize or market any Inventions
is within the Company's sole discretion and for the Company's sole
benefit, and that no royalty or other consideration will be due to
the Employee as a result of the Company's efforts to commercialize
or market any such Inventions.
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B.
Exception to Assignments. The
provisions of this Agreement requiring assignment of Inventions to
the Company do not apply to any Invention that the Employee has
independently developed entirely on the Employee’s own time
without using the Company's equipment, supplies, facilities, trade
secret information or Confidential Information ("Other Invention"),
except that "Other Invention" does not include, and the provisions
of this Agreement requiring assignment of Inventions to the Company
do apply to, Inventions that either (i) relate at the time of
conception or reduction to practice of such Other Invention to the
Company's business, or actual or demonstrably anticipated research
or development of the Company or (ii) result from any work that the
Employee performed for the Company. The Employee will advise the
Company promptly in writing of any Invention that the Employee
believes constitutes an Other Invention. The Employee agrees that
the Employee shall not incorporate, or permit to be incorporated,
any Other Invention without the Company's prior written consent.
Notwithstanding the foregoing sentence, if, in the course of the
Employee’s employment with the Company, the Employee
incorporates into a Company product, process or service an Other
Invention owned by the Employee or in which the Employee has an
interest, the Employee hereby grants to the Company a nonexclusive,
royalty-free, perpetual, irrevocable, transferable worldwide
license (with the right to grant and authorize sublicenses) to
make, have made, use, import, offer for sale, sell, reproduce,
distribute, modify, adapt, prepare derivative works of, display,
perform, and otherwise exploit such incorporated or utilized Other
Inventions, without restriction, including, without limitation, as
part of or in connection with such Invention, and to practice any
method related thereto.
C.
Inventions Retained and Licensed. The
Employee will inform the Company, in writing, before incorporating
any inventions, discoveries, ideas, original works of authorship,
developments, improvements, trade secrets and other proprietary
information or intellectual property rights owned by the Employee
or in which the Employee has an interest prior to the
Employee’s employment with the Company ("Prior Inventions")
into any Invention or otherwise utilizing any Prior Invention in
the course of the Employee’s employment with the Company; and
the Company is hereby granted a nonexclusive, royalty-free,
perpetual, irrevocable, transferable worldwide license (with the
right to grant and authorize sublicenses) to make, have made, use,
import, offer for sale, sell, reproduce, distribute, modify, adapt,
prepare derivative works of, display, perform, and otherwise
exploit such incorporated or utilized Prior Inventions, without
restriction, including, without limitation, as part of or in
connection with such Invention, and to practice any method related
thereto. The Employee will not incorporate any inventions,
discoveries, ideas, original works of authorship, developments,
improvements, trade secrets and other proprietary information or
intellectual property rights owned by any third party into any
Invention without the Company's prior written permission. The
Employee executes the list describing all Prior Inventions that
relate to the Company's current or anticipated business, products,
or research and development or, if no such list is attached, the
Employee represents and warrants that there are no such Prior
Inventions hereto as Exhibit A. Furthermore, the
Employee represents and warrants that if any Prior Inventions are
included on Exhibit
A, they shall not materially affect the Employee’s
ability to perform all obligations under this
Agreement.
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D.
Moral Rights. Any assignment to the
Company of Inventions includes all rights of attribution,
paternity, integrity, modification, disclosure and withdrawal, and
any other rights throughout the world that may be known as or
referred to as "moral rights," "artist's rights," "droit moral," or
the like (collectively, "Moral Rights"). To the extent that Moral
Rights cannot be assigned under applicable law, the Employee hereby
waives and agrees not to enforce any and all Moral Rights,
including, without limitation, any limitation on subsequent
modification, to the extent permitted under applicable
law.
E.
Maintenance of Records. The Employee
agrees to keep and maintain adequate, current, accurate, and
authentic written records of all Inventions made by the Employee
(solely or jointly with others) during the Employee’s
employment with the Company. The records will be in the form of
notes, sketches, drawings, electronic files, reports, or any other
format that may be specified by the Company. As between the Company
and Employee, the records are and will be available to and remain
the sole property of the Company at all times.
F.
Further Assurances. The Employee agrees
to assist the Company, or its designee, at the Company's expense,
in every proper way to secure the Company's rights in the
Inventions in any and all countries, including the disclosure to
the Company of all pertinent information and data with respect
thereto, the execution of all applications, specifications, oaths,
assignments, and all other instruments that the Company shall deem
proper or necessary in order to apply for, register, obtain,
maintain, defend, and enforce such rights, and in order to deliver,
assign and convey to the Company, its successors, assigns, and
nominees the sole and exclusive rights, title, and interest in and
to all Inventions, and testifying in a suit or other proceeding
relating to such Inventions. The Employee further agrees that the
Employee’s obligations under this Section 3.F will continue
for twelve (12) months after the termination of this
Agreement.
G.
Attorney-in-Fact. The Employee agrees
that, if the Company is unable because of the Employee’s
unavailability, mental or physical incapacity, or for any other
reason to secure Employee’s signature with respect to any
Inventions, including, without limitation, for the purpose of
applying for or pursuing any application for any United States or
foreign patents or mask work or copyright registrations covering
the Inventions assigned to the Company in Section 3.A, then the
Employee hereby irrevocably designates and appoints the Company and
its duly authorized officers and agents as the Employee’s
agent and attorney-in-fact, to act for and on my behalf to execute
and file any papers and oaths, and to do all other lawfully
permitted acts with respect to such Inventions to further the
prosecution and issuance of patents, copyright and mask work
registrations with the same legal force and effect as if executed
by the Employee. This power of attorney shall be deemed coupled
with an interest, and shall be irrevocable.
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4. Conflicting
Obligations
A.
Current Obligations. The Employee
agrees that during the Employee’s employment with the
Company, the Employee shall not engage in or undertake any other
employment, occupation, consulting relationship, or commitment that
is directly related to the business in which the Company is now
involved or becomes involved or has plans to become involved, nor
will the Employee engage in any other activities that conflict with
the Employee’s obligations or duty of loyalty to the
Company.
B.
Prior Relationships. Other than the
Employee’s relationship with NSENA, Inc., the Employee
represents and warrants that the Employee has no other agreements,
relationships, or commitments to any other person or entity that
conflict with the provisions of this Agreement, the
Employee’s obligations or duty of loyalty to the Company
under this Agreement, or the Employee’s ability to become
employed and perform the services for which the Employee is being
employed by the Company. Moreover, the Employee agrees to fully
indemnify the Company, its directors, officers, agents, employees,
investors, shareholders, administrators, affiliates, divisions,
subsidiaries, predecessor and successor corporations, and assigns
for all verdicts, judgments, settlements, and other losses incurred
by any of them resulting from the Employee’s breach of the
Employee’s obligations under any agreement with a third party
to which the Employee is a party or obligation to which the
Employee is bound, as well as any reasonable attorneys' fees and
costs if the plaintiff is the prevailing party in such an action,
except as prohibited by law.
5.
Return of Company Materials
The
Employee agrees that, at the time of leaving the employ of the
Company, the Employee will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and
all devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings blueprints, sketches,
materials, equipment, other documents or property, or reproductions
of any aforementioned items developed by the Employee pursuant to
the Employee’s employment with the Company or otherwise
belonging to the Company, its successors or assigns. Upon
separation from employment with the Company, the Employee agrees to
immediately sign and deliver to the Company a Certification that
the Employee has returned, or has made arrangements with the
Company to return, all Company materials.
6.
Notification of New Employer
Employee grants
Company consent to notify Employee’s new employer(s) about
Employee’s obligations under this Agreement if either party
terminates this Agreement.
7. Covenant Not
To Compete And Solicitation Restrictions
A. Covenant
Not to Compete.
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The
Employee agrees that during the course of the Employee’s
employment and for a period of twelve (12) months, unless an
adjudicator finds the twelve (12) month period to exceed a
reasonable length under the applicable circumstances, then for a
period of six (6) months immediately following the termination of
the Employee’s relationship with the Company (i) by the
Company for “Cause” (as defined below), or (ii) by the
Employee for any reason, with or without notice, the Employee shall
not, without the prior written consent of the Company actively
compete against the Company in areas that were explored or
experienced during the Employee’s employment with the Company
pertaining to remote restraining devices, virtual police training
technology, shield equipment and other related topics. This
includes that the Employee shall not compete through maintaining an
employment, contractual, or other business relationship, either
directly or indirectly, to provide services or products competitive
to those in which the Company was engaged, or planned to engage, at
the termination of the Employee’s employment. This
restriction covers the Employee’s activities in every part of
the Territory. For purposes of this Agreement, "Territory" shall
mean: (i) all states of the United States of America in which the
Company provided goods or services, had customers, or otherwise
conducted business at any time during the two-year period prior to
the date of the termination of my relationship with the Company;
and (ii) any other countries in which the Company maintains
non-trivial operations or facilities, provided goods or services,
had customers, or otherwise conducted business at any time during
the two-year period prior to the date of the termination of the
Employee’s relationship with the Company. Notwithstanding the
foregoing, this restriction does not prohibit the Employee from
owning securities of corporations listed on a national securities
exchange or regularly traded by national securities dealers. The
restrictions of this Section, whether in duration, geography or
scope, may be modified as set forth in Section 7.D below. As used
herein, “Cause” for purposes of this Agreement means
there exists (i) a reasonable and good faith finding by the Company
of a material and repeated failure of the Employee to provide his
full business time and attention to his reasonably assigned duties
for the Company (including, without limitation, unexcused failure
to report for work) for reasons other than the Employee’s
death or disability, or the Employee's gross negligence or willful
misconduct; which failure or deficiency remains uncured (if
curable) for a period of thirty (30) days following written notice
by the Company to the Employee which notice specifies the reasons
for the potential cause determination; (ii) the material breach by
the Employee of any of the provisions of that certain Asset
Purchase Agreement between the Company, Employee and NSENA, Inc.,
dated December 14, 2020; (iii) the conviction of the Employee of,
or the entry of a pleading of guilty or nolo contendere by the
Employee to, any felony; (iv) the Employee having committed any
theft, embezzlement, fraud or other intentional act of dishonesty
involving the business of the Company; or (v) any adjudication in
any civil suit, or written acknowledgment by the Employee in any
agreement or stipulation of the commission of any theft,
embezzlement, fraud or other intentional act of dishonesty
involving any other person.
B. No
Solicitation.
(1)
Non-Solicitation of Customers. The
Employee agrees that for a period of twelve (12) months, unless an
adjudicator finds the twelve (12) month period to exceed a
reasonable length under the applicable circumstances, then for a
period of six (6) months immediately following the termination of
the Employee’s relationship with the Company (i) by the
Company for Cause, or (ii) by the Employee for any reason, with or
without notice, the Employee shall not contact, or cause to be
contacted with any Customer for the purposes of conducting business
that is competitive to that of the Company or for the purpose of
disadvantaging the Company's business in any way. For purposes of
this Agreement, "Customer" shall mean all persons or entities that
have used or inquired of the Company's services at any time during
the two-year period preceding the termination of my employment with
the Company. The Company and Employee may agree to use good faith
efforts to craft a mutually-acceptable announcement regarding the
Employee’s employment termination. The restrictions of this
Section, whether in duration or scope, may be modified as set forth
in Section 7.D below.
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(2)
Non-Solicitation of Employees and
Others. The Employee agrees that for a period of twelve (12)
months, unless an adjudicator finds the twelve (12) month period to
exceed a reasonable length under the applicable circumstances, then
for a period of six (6) months immediately following the
termination of the Employee’s relationship with the Company
(i) by the Company for Cause, or (ii) by the Employee for any
reason, with or without notice, the Employee will not deliberately
directly or indirectly recruit or solicit any employee of the
Company to leave their employment with the Company, nor will the
Employee contact any supplier, vendor or contractor who conducted
business with the Company at any time during the two-year period
preceding the termination of my employment with the Company, to
terminate or adversely modify any business relationship with the
Company or not to proceed with, or enter into, any business
relationship with the Company, nor shall the Employee otherwise
interfere with any business relationship between the Company and
any such franchisee, joint venture, supplier, vendor or contractor.
The restrictions of this Section, whether in duration or scope, may
be modified as set forth in Section 7.D below.
C.
Acknowledgements. The Employee
acknowledges that the Employee shall derive significant value from
the Company's agreement to provide the Employee with Company
Confidential Information to enable the Employee to optimize the
performance of the Employee’s duties to the Company. The
Employee further acknowledges that the Employee’s fulfillment
of the obligations contained in this Agreement, including, but not
limited to, the Employee’s obligation neither to disclose nor
to use Company Confidential Information other than for the
Company's exclusive benefit and the Employee’s obligations
not to compete and not to solicit contained in subsections (A) and
(B) above, is necessary to protect Company Confidential Information
and, consequently, to preserve the value and goodwill of the
Company. The Employee also acknowledges the duration, geographic
and scope limitations of the Employee’s obligations under
subsections (A) and (B) above are fair and reasonable in all
respects, and are narrowly tailored to protect the Company’s
legitimate business interests, especially in light of the Company's
nationwide and international business dealings and its need to
protect Company Confidential Information and the scope and nature
of the Company's business, and that the Employee shall not be
precluded from gainful employment if the Employee is obligated not
to compete with the Company or solicit its customers, employees, or
others during the period and within the Territory as described
above.
D.
Separate Covenants. The covenants
contained in Sections 7.A and 7.B, above, will be construed as a
series of separate covenants. If an adjudicator finds the duration,
geography or scope of any of the restrictions set forth in Sections
7.A or 7.B, above, to be unreasonable under the applicable
circumstances, then the adjudicator may remove such restriction in
favor of an alternative restriction written into the subsection. If
an adjudicator finds any alternative restriction to be unreasonable
under the circumstances, or no alterative restriction is written,
then the Employee and the Company expressly agree that unreasonable
restriction may be removed by the adjudicator, and if appropriate,
modified to one that the adjudicator believes is reasonable in
light of the circumstances and consideration paid in Section 7.E,
below. In the event that the adjudicator does not exercise the
power granted to it in the prior sentences that allow for
modification of the time limits and/or Territory, the Company and
Employee agree to replace such invalid or unenforceable term or
provision with a valid and enforceable term or provision that will
achieve, to the extent possible, the economic, business and other
purposes of such invalid or unenforceable term.
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E.
Additional Consideration. As additional
consideration supporting the provisions of this Agreement, and
particularly for the restrictions set forth in Sections 7.A and
7.B, above, the Company has issued ________ stock options to the Employee
on December 14, 2020. The Employee understands that this
consideration is not otherwise owed to Employee, but is granted in
exchange for Employee’s agreement with the provisions and
covenants of this Agreement.
8.
Conflict of Interest Guidelines
The
Employee agrees to diligently adhere to all policies of the Company
adopted during the Employee’s employment, and recognize that
these policies may be revised from time to time during the
Employee’s employment.
9. Dispute
Resolution
Any
dispute concerning this Agreement for the employment relationship
shall be resolved through arbitration conducted by the American
Arbitration Association (“AAA”) and according to the
AAA’s Employment Arbitration Rules then in effect or, if the
Employment Arbitration Rules are no longer in effect, then
according to the AAA’s commercial dispute resolution
procedures. The arbitration shall proceed in Arizona unless the
Company and Employee (the “Parties”) agree to an
alternative forum. The prevailing party in any dispute pertaining
to this Agreement shall be entitled to recover its/his costs and
attorney's fees. The Employee understands that an application for
injunctive relief may, however, be filed in Arizona state and
federal courts as set forth in Section 10.A, below.
10.
Miscellaneous
A.
Governing Law; Consent to Personal
Jurisdiction. This Agreement will be
governed by the laws of the State of Arizona without regard to
Arizona’s conflicts-of-law rules that may result in the
application of the laws of any jurisdiction other than Arizona. To
the extent that any lawsuit is permitted or filed relating to this
Agreement, I hereby expressly consent to the personal and exclusive
jurisdiction and venue of the state and federal courts located in
Arizona.
B.
Assignability. The rights and
obligations under this Agreement are personal and not assignable by
either party. The parties may agree to assign rights, but only in
writing and only before the rights are attempted to be
assigned.
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C.
Entire Agreement. This Agreement sets
forth the entire agreement and understanding between the Parties
with respect to the subject matter herein and supersedes all prior
written and oral agreements, discussions, or representations. For
clarification, this Agreement is in addition to and shall in no way
be construed as amending, superseding, limiting or otherwise
impacting the restrictive covenants, including the non-competition
and non-solicitation provisions contained in that certain Asset
Purchase Agreement, dated concurrently herewith, by and between
NSENA Inc., Ethan Moeller as a Seller Stockholder and the Company.
Any subsequent change or changes in the Employee’s duties,
salary, compensation, conditions or any other terms of employment
will not affect the validity or scope of this
Agreement.
D.
Headings. Headings are used in this
Agreement for reference only and shall not be considered when
interpreting this Agreement.
E.
Severability. If a court or other body
of competent jurisdiction finds, or the Parties mutually believe,
any provision of this Agreement, or portion thereof, to be invalid
or unenforceable, such provision will be enforced to the maximum
extent permissible so as to effect the intent of the Parties, and
the remainder of this Agreement will continue in full force and
effect.
F.
Modification, Waiver. No modification
of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in a writing signed
by a person authorized by the Board of Directors and the Employee.
Waiver by the Company of a breach of any provision of this
Agreement will not operate as a waiver of any other or subsequent
breach.
11.
Protected Activity Not Prohibited
The
Employee understands that nothing in this Agreement limits or
prohibits the Employee from filing a charge or complaint with, or
otherwise communicating or cooperating with or participating in any
investigation or proceeding that may be conducted by, any federal,
state or local government agency or commission, including the
Securities and Exchange Commission, the Equal Employment
Opportunity Commission, the Occupational Safety and Health
Administration, and the National Labor Relations Board ("Government
Agencies"), including disclosing documents or other information as
permitted by law, without giving notice to, or receiving
authorization from, the Company. Notwithstanding, in making any
such disclosures or communications, the Employee agrees to take all
reasonable precautions to prevent any unauthorized use or
disclosure of any information that may constitute Company
Confidential Information to any parties other than the Government
Agencies. The Employee further understands that the Employee is not
permitted to disclose the Company's attorney-client privileged
communications or attorney work product. In addition, the Employee
hereby acknowledges that the Company has provided the Employee with
notice in compliance with the Defend Trade Secrets Act of 2016
regarding immunity from liability for limited disclosures of trade
secrets. The full text of the notice is attached in Exhibit
B.
(Signature Page Follows)
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IN
WITNESS THEREOF, the Parties hereto each acting with understanding
and proper authority do hereby execute this Agreement effective as
of December 14, 2020.
EMPLOYEE: _______________
Signature:
_____________________________
Date:
_________________________________
WRAP TECHNOLOGIES, INC.
Signature:
________________________
Name:
JAMES A BARNES
Title:
CFO
Date:
____________________________
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EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
|
Title
|
Date
|
Identifying
Number or Brief Description
|
|
|
|
|
EMPLOYEE, attests:
__ No
inventions or improvements
__
Additional Sheets Attached
Signature:
________________________
Date:
____________________
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EXHIBIT B
SECTION 7 OF THE DEFEND TRADE SECRETS ACT OF 2016
Pursuant
to the Defend Trade Secrets Act of 2016, Employee understands
that:
An individual may not be held criminally or civilly liable for any
federal or state trade secret law for the disclosure of a trade
secret that: (A) is made (i) in confidence to a federal,
state, or local government official, either directly or indirectly,
or to an attorney; and (ii) solely for the purpose of reporting or
investigating a suspected violation of law; or (B) is made in a
complaint or other document that is filed under seal in a lawsuit
or other proceeding.
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Exhibit 99.1
WRAP Acquires Virtual Reality Training Provider, NSENA
Inc.
Acquisition Enhances BolaWrap Law Enforcement Training with
Immersive 3D Scenarios and
Creates New Opportunities for Fully-Integrated Training Solutions
for First Responders
WRAP’s new virtual reality law enforcement training
platform.
TEMPE, Arizona – December 16, 2020 – WRAP
Technologies, Inc. (the “Company” or
“WRAP”) (Nasdaq: WRAP), an innovator of modern policing
solutions, announced today that it has entered into and closed an
Asset Purchase Agreement with NSENA Inc., a developer and provider
of a law enforcement training platform employing immersive computer
graphics virtual reality with proprietary software, hardware and
content.
WRAP
will host a live webinar today at 5:00pm ET/ 2:00pm PT on Zoom to
discuss NSENA and its VR platform. To register for the webinar,
click
here.
“This
acquisition firmly positions WRAP in the
multi-hundred-billion-dollar virtual reality training market and
also complements our BolaWrap law enforcement training solution
being delivered by our master instructors and WRAP Training
Academy,” said Tom Smith, President and interim CEO of WRAP.
“We are excited to work with the NSENA team to add new
features and capabilities to our VR offering, expand our sales team
and grow the VR platform and BolaWrap revenues. With our previously
announced relationship with the
National Tactical Officers Association (NTOA), we plan to
offer a fully-integrated training and training record management
solution targeting agencies of all sizes that until now have
limited choices to meet the ever-growing public safety training
demands.”
NSENA’s
content library is one of the largest targeting law enforcement and
currently consists of 47 training modules. NSENA’s modules
are developed by and for police officers and cover a wide array of
skills and scenarios including de-escalation, conflict resolution
and all levels of use-of-force. NSENA has built a robust pipeline
of prospective customers, contractors and licensees resulting from
the growth in VR training and recognition of the modern features of
NSENA’s solution. The NSENA flexible platform takes advantage
of the most advanced virtual reality hardware available. NSENA
proprietary software features 360-degree situational awareness and
artificial intelligence allowing an instructor to control the
training environment to improve decision making.
“The
NTOA is thrilled and excited to collaborate with WRAP Reality to
deliver cutting edge training to the law enforcement
community,” said K. Thor Eells, Executive Director of the
National Tactical Officers Association. “The technological,
operational and instructional synergy of WRAP Reality and the NTOA
is unrivalled. Today’s operational environment demands the
very best from our men and women in uniform, and this partnership
will serve to ensure that they receive the very best training
available to secure their success in service to their
communities.”
According to a recent report published by Allied Market Research,
virtual training and simulation market size was valued at $204.41
billion in 2019, and is projected to reach $601.85 billion by
2027. Law enforcement and military are important segments of
this market and the rise in awareness regarding virtual training
and simulation drives market growth.
“We
are excited about the opportunity to deliver WRAP Reality to
agencies focused on improving their de-escalation and training
programs,” said NSENA founder and Chief Executive Officer
Ethan Moeller. “With our shared commitment to public safety
and officer preparedness, we expect to achieve success not only in
the market, but to also increase safety and wellness in our
communities.”
Under
the terms of the Asset Purchase Agreement the parties will rebrand
the VR business as WRAP Reality™. To learn more, please visit
wrap.com/reality.
About NSENA
NSENA was founded in 2016 with a mission to transform law
enforcement training through the use of immersive virtual reality
training simulators. The NSENA VR training platform is based on
combining law enforcement experts with virtual reality technology
that has experienced radical improvements in the last ten years.
NSENA believes the immersive power of virtual reality will
revolutionize training and that its number one job is to deliver
quality and realistic training from the best experts to its
customers.
About WRAP
WRAP
Technologies, Inc. is an innovator of modern policing solutions.
The Company’s BolaWrap 100 product is a patented, hand-held
remote restraint device that discharges an eight-foot bola style
Kevlar® tether to restrain an individual at a distance from 10
to 25 feet. Developed by award winning inventor Elwood Norris, the
Company’s Chief Technology Officer, the small but powerful
BolaWrap 100 assists law enforcement in safely and effectively
deescalating encounters, especially those involving an individual
in crisis. BolaWrap 100 has already been used to safely apprehend
suspects without injury in a number of cities including Los
Angeles, Sacramento, Fresno, Bell, Albuquerque, Minneapolis, West
Palm Beach, Fort Worth, and Oak Ridge. For information on the
Company, please visit www.wrap.com.
Follow WRAP here:
WRAP on
Facebook: https://www.facebook.com/wraptechnologies/
WRAP on
Twitter: https://twitter.com/wraptechinc
WRAP on
LinkedIn: https://www.linkedin.com/company/wraptechnologiesinc/
Trademark Information
BolaWrap
and Wrap are trademarks of WRAP Technologies, Inc. All other trade
names used herein are either trademarks or registered trademarks of
the respective holders.
Cautionary Note on Forward-Looking Statements – Safe Harbor
Statement
This
press release contains “forward-looking statements”
within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, including but
not limited to: statements regarding the Company’s overall
business; total addressable market; and, expectations regarding
future sales and expenses. Words such as “expect”,
“anticipate”, “should”,
“believe”, “target”, “project”,
“goals”, “estimate”,
“potential”, “predict”, “may”,
“will”, “could”, “intend”, and
variations of these terms or the negative of these terms and
similar expressions are intended to identify these forward-looking
statements. Moreover, forward-looking statements are subject to a
number of risks and uncertainties, many of which involve factors or
circumstances that are beyond the Company’s control. The
Company’s actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including but not limited to: the Company’s ability
to successful implement training programs for the use of its
products; the Company’s ability to manufacture and produce
product for its customers; the Company’s ability to develop
sales for its new product solution; the acceptance of existing and
future products; the availability of funding to continue to finance
operations; the complexity, expense and time associated with sales
to law enforcement and government entities; the lengthy evaluation
and sales cycle for the Company’s product solution; product
defects; litigation risks from alleged product-related injuries;
risks of government regulations; the business impact of health
crises or outbreaks of disease, such as epidemics or pandemics; the
ability to obtain export licenses for counties outside of the US;
the ability to obtain patents and defend IP against competitors;
the impact of competitive products and solutions; and the
Company’s ability to maintain and enhance its brand, as well
as other risk factors mentioned in the Company’s most recent
annual report on Form 10-K, quarterly report on Form 10-Q, and
other SEC filings. These forward-looking statements are made as of
the date of this press release and were based on current
expectations, estimates, forecasts and projections as well as the
beliefs and assumptions of management. Except as required by law,
the Company undertakes no duty or obligation to update any
forward-looking statements contained in this release as a result of
new information, future events or changes in its
expectations.
WRAP Contact:
Paul M.
Manley
VP
– Investor Relations
(612)
834-1804
pmanley@wrap.com