Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
As
previously disclosed in the Current Report on Form 8-K filed on March 23, 2022 with the Securities and Exchange Commission by Novo Integrated
Sciences, Inc. (the “Company”), on March 17, 2022, the Company entered into a Membership Interest Purchase Agreement (the
“Purchase Agreement”) by and among the Company, Clinical Consultants International LLC (“CCI”), each of the members
of CCI as set forth on the signature pages thereto (the “Members”), and Dr. Joseph Chalil as the representative of the Members
(the “Members’ Representative”). Pursuant to the terms of the Purchase Agreement, the parties thereto agreed to enter
into a business combination transaction (the “Business Combination”), pursuant to which, among other things, the Members
would sell and assign to the Company all of their membership interests of CCI, in exchange for a total of 800,000 restricted shares of
the Company’s common stock (the “Exchange Shares”). The Exchange Shares would be apportioned among the Members pro
rata based on their respective membership interest ownership percentage of CCI. Following the closing of the Business Combination (the
“Closing”), the Company would own 100% of the issued and outstanding membership interests of CCI, and the Members or their
designees will collectively own 800,000 restricted shares of the Company’s common stock.
On
April 5, 2022, the Business Combination closed. As a result, immediately after the Closing on April 5, 2022, the Company owned 100% of
the issued and outstanding membership interests of CCI.
In
connection with the Closing and pursuant to the terms of the Purchase Agreement, the Company named Dr. Chalil as the Company’s
Chief Medical Officer, and the President of Novomerica Healthcare Group, Inc., a wholly owned subsidiary of the Company formed for expansion
of certain medically related business in the U.S. (“NHG”). Pursuant to the terms of the Purchase Agreement, the Company expects
to appoint Dr. Chalil as a member of the Company’s Board of Directors in the near future.
Dr.
Chalil has served as Chairman of the Company’s Medical Advisory Board since April 2021. Dr. Chalil is an author of several scientific
and research papers in international publications. He is also the Chairman of the Complex Health Systems Advisory Board, H. Wayne Huizenga
College of Business and Entrepreneurship at Nova Southeastern University in Florida, and a member of Dr. Kiran C. Patel College of Allopathic
Medicine Executive Leadership Council. A veteran of the U.S. Navy Medical Corps, he is board certified in healthcare management. He has
been awarded a Fellowship by the American College of Healthcare Executives, an international professional society of more than 40,000
healthcare executives who lead hospitals, healthcare systems and other healthcare organizations. Dr. Chalil has held roles of increasing
responsibility at DBV Technologies, Boehringer Ingelheim, Abbott Laboratories, and Hoffmann-La Roche.
Additionally,
Dr. Chalil is the former Chairman of the Indo-American Press Club. He is an expert in U.S. healthcare policy and a strong advocate for
patient-centered care. A strong proponent of providing healthcare access to everyone, Dr. Chalil’s new book, Beyond the COVID-19
Pandemic: Envisioning a Better World by Transforming the Future of Healthcare, is on Amazon’s Best Sellers List.
Also
on April 5, 2022, in connection with Dr. Chalil’s appointment as the Company’s Chief Medical Officer and NHG’s President,
the Company entered into an executive agreement (the “Chalil Agreement”) with Dr. Chalil. Pursuant to the terms of the Chalil
Agreement, the Company agreed to pay Dr. Chalil an annual base salary of $400,000. In addition, the Company agreed to pay Dr. Chalil
an amount equal to 10% of the net income of CCI in excess of $450,000 for each calendar year during the term of the Chalil Agreement
(the “Revenue Share Payment”).
Dr.
Chalil will also receive bonuses based on increases in the Company’s market cap valuation (“MCV”) from the date of
the Chalil Agreement, with the following milestone bonus parameters:
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(a) |
For
each and every $50 million Company MCV increase sustained for a period of not less than 30 days (the “50M Bonus Event”),
Dr. Chalil will receive $250,000, or 0.5% of $50 million, in Company common stock. For the sake of clarity, Dr. Chalil will only
be issued compensation based on $50 million MCV increments; there will be no compensation issued for anything above $50 million until
the subsequent $50 million MCV milestone is achieved. This bonus will be capped at a Company MCV of $1 billion. The 50M Bonus Event
stock will be issued as (i) 50% restricted shares within 30 days of the respective 50M Bonus Event or at a later date as requested
by Dr. Chalil, and held as an allocation to Dr. Chalil, until the requisition date as provided in writing, by Dr. Chalil, to the
Company, and (ii) 50% registered shares from the Company’s current active incentive plan within 30 days of the respective 50M
Bonus Event. |
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(b) |
Upon
the Company sustaining a MCV of $2 billion for no less than 30 days (the “2B Bonus Event”), Dr. Chalil will receive $20
million, or 1% of $1 billion, in restricted shares of Company common stock. The 2B Bonus Event stock will be issued within 30 days
of the 2B Bonus Event or at a later date as requested by Dr. Chalil, and held as an allocation to Dr. Chalil, until Dr. Chalil provides
the Company with written instructions requesting the specific stock issuance date. |
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(c) |
For
each additional $1 billion MCV, beyond the 2B Bonus Event and commencing when the Company MCV reaches $3 billion sustained for no
less than 30 days, Dr. Chalil will receive $10 million, or 1% of $1 billion, in restricted shares of the Company’s common stock.
Dr. Chalil may choose to have this stock issued within 30 days of each additional $1 billion MCV event or at a later date as requested
by Dr. Chalil, and held as an allocation to Dr. Chalil, until Dr. Chalil provides the Company with written instructions requesting
the specific stock issuance date. |
The
Company may also issue to Dr. Chalil equity awards as determined by the Board of Directors.
The
term of the Chalil Agreement ends on the earlier of (i) April 5, 2025, and (ii) the time of the termination of Dr. Chalil’s employment
pursuant to the terms of the Chalil Agreement. The term of the Chalil Agreement will be automatically extended for one or more additional
terms of one year each unless either party provided notice to the other party of their desire to not renew at least 30 days prior to
expiration of the then-current term.
The
Company may terminate the Chalil Agreement at any time for Cause (as defined in the Chalil Agreement) or without Cause, and Dr. Chalil
may terminate the Chalil Agreement at any time with or without Good Reason (as defined in the Chalil Agreement. If the Company terminates
the Chalil Agreement without Cause or Dr. Chalil terminates the Chalil Agreement with Good Reason, (i) the Company will pay to Dr. Chalil
any base salary, bonuses, and benefits then owed or accrued, and any unreimbursed expenses incurred by Dr. Chalil in each case through
the termination date; (ii) the Company will pay to Dr. Chalil, in one lump sum, an amount equal to the greater of (1) the base salary
that would have been paid to Dr. Chalil for the remainder of the then-current term, and (2) the total base salary that would have been
paid to Dr. Chalil for a one year period based on the base salary as of the date of termination, and the Revenue Share Payment for the
calendar year in which such termination occurs; and (iii) any equity grant already made to Dr. Chalil will, to the extent not already
vested, be deemed automatically vested.
The
foregoing description of the Chalil Agreement is not complete and is qualified in its entirety by reference to the text of the Chalil
Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.