Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
Effective
February 21, 2022, Dr. Ben Lerner was appointed to be our Chief Operating Officer. He joins our senior management team together with
President Dr. Matthew C. Wallis (who resigned the title of Chief Operating Officer to bring in Dr. Lerner) and Chief Executive Officer
Jeffrey S. Ervin.
Dr.
Lerner, age 55, co-founded and served as the Chief Executive Officer of Maximized Living Inc., a national chiropractic consulting, franchising
and lifestyle brand company, from 1999 to December 2016, when the company was sold. As its Chief Executive Officer, he managed five interconnected
companies, opened more than 120 franchised locations with 500 licensees, and built and sustained a large supplement and spinal rehab
equipment manufacturing business. Following that company’s sale, in January 2017 he founded and currently serves as the President
and Chief Executive Officer of Ultimate Impact Group, a healthcare startup consisting of an amalgamation of several different companies,
including Velocity Consulting and Coaching and Vitalleo Health, drawing upon his 25 years of experience in business, franchising, healthcare,
real estate and product manufacturing. Dr. Lerner also currently serves as the Chief Investment Officer of CILA Labs, a technology incubator,
which he joined in September 2020.
Dr.
Lerner has served as the chiropractor and wellness advisor for the U.S. World Wrestling, Weightlifting and Judo teams at multiple World
Championships (1995, 1997-1999) and Olympic Games (1996, 2000, 2012, 2016). He is a two-time New York Times best-selling author who has
written more than 20 books on health and wellness. He served as the chairman of global wellness for the Billion Soul Initiative (2003-2020),
where his health curriculum has been translated into multiple languages.
Dr.
Lerner is a Doctor of Chiropractic and holds a bachelor’s degree in nutrition and a master’s degree in industrial and organizational
psychology. He is currently completing a doctorate in business administration and management.
With
Dr. Lerner’s appointment, we entered into an employment agreement which sets forth the terms and conditions of his employment with
our company. The employment agreement with Dr. Lerner extends for a three-year term expiring on February 21, 2025. Pursuant to the employment
agreement, Dr. Lerner has agreed to devote substantially all of his time, attention and ability to our business as our Chief Operating
Officer. The employment agreement provides that Dr. Lerner will receive a base salary during the term of his employment at an annual
rate of $300,000 for services rendered in such position.
As
part of Dr. Lerner’s compensation under his employment agreement, we agreed pay or issue to Dr. Lerner (i) a $25,000 signing bonus
on the commencement date of his employment, (ii) 100,000 restricted shares of our common stock under our 2020 Incentive Compensation
Plan, (iii) stock options to purchase 50,000 shares of our common stock under our 2020 Incentive Compensation Plan at an exercise price
of $1.06 per share (which is equal to the closing share price on the date prior to commencement of his employment), vesting over a two-year
period, (iv) a $2,500 bonus paid in shares of our common stock (using the closing share price on November 1, 2022) for each IMAC clinic
recording positive net income for the third quarter of 2022, (v) $5,000 per back company franchise fee collected (net of any applicable
cancelations or refunds), (vi) $2,500 per back company franchise fee collected for franchises Dr. Lerner directly sources, and (vii)
25% of net income from goods sold through any future retail channels. We have also agreed to pay or reimburse Dr. Lerner up to $100 per
month for the business use of each of his personal automobile and cell phone.
The
employment agreement provides for termination by us upon death or disability of Dr. Lerner, defined as 60 consecutive days or 90 aggregate
days of incapacity during any 12 consecutive months, or for Cause, which includes conviction of a felony crime of moral turpitude or
a material breach of his obligations to us. In the event the employment agreement is terminated by us without Cause, he will be entitled
to compensation for the balance of the term.
In
the event of a change in control of our company, Dr. Lerner may terminate his employment within six months after such event and will
be entitled to be paid pursuant to the terms of his employment agreement.
The
employment agreement contains covenants (a) restricting Dr. Lerner from engaging in any activities competitive with our business during
the term of his employment agreement, and from soliciting our company’s employees, customers and prospective customers for 180
days after the termination of the agreement, and (b) prohibiting him from disclosure of confidential information regarding us at any
time.
Other
than as described above, there are no related party transactions between our company and Dr. Lerner, and Dr. Lerner is not related to
any executive officer of our company or any member of our Board. There is no arrangement or understanding between Dr. Lerner and any
other persons or entities pursuant to which Dr. Lerner was appointed as our Chief Operating Officer.
Dr.
Wallis resigned as our Chief Operating Officer, effective February 21, 2022, in order to bring in Dr. Lerner in such position. Dr. Wallis
remains our President and a member of our Board of Directors, and there was no disagreement with regard to his resignation as our Chief
Operating Officer relating to our operations, policies or practices.