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EMPLOYMENT AGREEMENT
THIS
AGREEMENT ("Agreement") made as of the first day of February
8th, 2006, between MEDIFAST, INC., a Delaware corporation with
its principal office presently located at 11445 Cronhill
Drive, Owings Mills, Maryland 21117 ("Medifast"), and BRADLEY
T. MAC DONALD , an individual presently residing in Owings
Mills, Maryland (the "Executive").
W
I T N E S S E T H:
WHEREAS,
Medifast and the Executive desire to enter into a new
Agreement regarding, among other things, the employment of the
Executive by Medifast, all as hereinafter set
forth.
NOW,
THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1.
Employment .
Medifast hereby employs the Executive, and the Executive hereby
accepts employment with Medifast, on the terms and conditions set
forth in this Agreement.
2.
Duties of Employee .
The Executive will perform and discharge well and faithfully such
duties as an executive officer of Medifast as may be assigned to
him from time to time by the Board of Directors of Medifast
("Board"). The Executive will be employed as the CHIEF EXECUTIVE
OFFICER (CEO) and be prepared to assume the responsibilities of the
THE EXECUTIVE VICE PRESIDENT OF BUSINESS DEVELOPMENT of Medifast at
the discretion of the Board or the voluntary resignation of the CEO
position, reporting to the Executive Committee of the Board of
Directors and will hold such other titles as may be given to him
from time to time by the Board. The Executive will devote the
majority of his full time, attention and energies to the business
of Medifast and will not, during the Employment Period (as defined
in Section 3), be employed or involved in any other business
activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; provided, however, that this section
will not be construed as preventing the Executive from (a)
passively investing his personal assets, (b) acting as a member of
the Board of Directors or Trustees of Medifast or any other entity
not in competition with Medifast (or an affiliate of Medifast), or
(c) being involved in any community, civic or similar activity.
Except for reasonable travel requirements consistent with his
positions and except as otherwise provided herein, the duties of
the Executive shall be routinely discharged at Medifast's
facilities located on the Eastern Shore of Maryland, Ocean City,
Maryland or in Owings Mills, Maryland. The Executive will have
broad latitude to perform his duties in Markets Worldwide to
develop contacts that will assist in his business development
duties.
3.
Term of Employment .
The Executive's employment under this Agreement will be for a
period (the "Employment Period") commencing upon the date of this
Agreement and ending at the end of the term of this Agreement on
April 9
th 2011
pursuant to the terms and conditions of this agreement, unless the
Executive's employment is sooner terminated in accordance with
Section 5 or one of the following provisions:
(a)
Termination for Cause .
The Executive's employment under this Agreement may be terminated
at any time during the Employment Period for Cause, by action of
the Board, upon giving notice of such termination to the Executive
at least 15 days prior to the date upon which such termination is
to take effect. As used in this Agreement, "Cause" means any of the
following events:
(i)
the Executive is convicted of or enters a plea of guilty
or
nolo
contendere to
a felony, a crime of falsehood, or a crime involving fraud or moral
turpitude, or the actual incarceration of the
Executive.
(ii)
the Executive willfully and repeatedly fails to follow the
lawful instructions of the Board after the Executive's receipt
of written or email notice of such instructions, other than a
failure resulting from the Executive's incapacity because of
physical or mental illness;
(iii)
a government regulatory agency finally recommends or orders in
writing that Medifast terminate the employment of the
Executive; or
(iv)
the Executive violates the covenant not to compete contained
in Section 8 or the confidentiality provisions of Section
9.
Notwithstanding
the foregoing, the Executive's employment under this Agreement
will not be deemed to have been terminated for Cause under
Section 3(a)(i) or (ii) if such termination took place solely
as a result of:
(i)
questionable judgment on the part of the
Executive;
(ii)
any act or omission believed by the Executive, in good faith,
to have been in, or not opposed to, the best interests of
Medifast; or
(iii)
any act or omission in respect of which a determination could
properly be made that the Executive met the applicable
standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the Articles of
Incorporation or By-laws of Medifast or the directors' and
officers' liability insurance of Medifast, in each case as in
effect at the time of such act or omission.
If
the Executive's employment is terminated under the provisions
of this subsection, then all rights of the Executive under
Section 4 will cease as of the effective date of such
termination.
(b)
Termination Without Cause .
The Executive's employment under this Agreement may be terminated
at any time during the Employment Period without Cause, by action
of the Board, upon giving notice of such termination to the
Executive at least 30 days prior to the date upon which such
termination is to take effect. If the Executive's employment is
terminated under the provisions of this subsection, then the
Executive will be entitled to receive the compensation set forth in
Section 6.
(c)
Voluntary Termination, Retirement or Death .
If the Executive voluntarily terminates employment without "Good
Reason" (as defined in Section 5), retires or dies, the Executive's
employment under this Agreement will be deemed terminated as of the
date of the Executive's voluntary termination, retirement or death,
and all rights of the Executive under Section 4 will cease as of
the date of such termination and any benefits payable to the
Executive will be determined in accordance with the retirement and
insurance programs of Medifast then in effect.
(d)
Disability .
If the Executive is incapacitated by accident, sickness, or
otherwise so as to render the Executive mentally or physically
incapable of performing the essential duties required of the
Executive under Section 2, notwithstanding reasonable
accommodation, for a continuous period of six months, then, upon
the expiration of such period or at any time thereafter, by action
of the Board, the Executive's employment under this Agreement may
be terminated immediately upon giving the Executive notice to that
effect. If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the Executive
under Section 4 will cease as of the last business day of the week
in which such termination occurs, and the Executive will thereafter
be entitled to the benefits to which he is entitled under any
disability or other plan of Medifast in which he is then a
participant.
4.
Employment Period Compensation and Related Matters
.
(a)
Salary .
For services performed by the Executive under this Agreement,
Medifast will pay the Executive a salary, in the aggregate, during
the Employment Period, at the annualized rate of between $225,000
and $400,000 at the discretion of the Board of Directors payable at
the same times as salaries are payable to other executive employees
of Medifast. Medifast may, from time to time, increase (but not
decrease below the $225,000 salary level) the Executive's salary,
and any and all such increases will be deemed to constitute
amendments to this subsection to reflect the increased amounts,
effective as of the dates established for such increases by the
Board in the resolutions authorizing such increases.
(b)
Bonus .
For services performed by the Executive under this Agreement, he
shall be entitled to participate in such bonus or similar award
plan or program as may be maintained from time to time by Medifast
for its executive officers. In addition, Medifast may, from time to
time, pay such other bonus or bonuses to the Executive as the
Board, in its sole discretion, deems appropriate. The payment of
any such bonuses will not reduce or otherwise affect any other
obligation of Medifast to the Executive provided for in this
Agreement.
(c)
Pension and Welfare Benefits .
Medifast will provide the Executive, during the Employment Period,
with pension and welfare benefits (within the meaning of Section 3
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in the aggregate not less favorable than those received
by other employees of Medifast.
(d)
Fringe Benefits .
(i)
In General. Except as otherwise provided in this subsection,
Medifast will provide the Executive, during the Employment
Period, with such fringe benefits as may be provided generally
from time to time for its executive officers.
(ii)
Vacation. The Executive will be entitled to 4 weeks of
vacation per calendar year. The right to carry over unused
vacation days will be subject to the executive personnel
policies of Medifast from time to time in effect.
(iii)
Severance Benefits. The Executive will be entitled to Two
Hundred and Twenty Five Thousand Dollars of Severance
Compensation Per Annum for two years from the date of
Separation, Resignation and or Retirement from the Company.
The Executive will have the option to take the compensation in
a one lump sum payment or over 24 months.
(e)
Expense Reimbursement .
The Executive will be entitled to reimbursement of all expenses
incurred by him in the discharge of his duties hereunder, or
otherwise in furtherance of the business of Medifast, provided he
renders an accounting of such expenses in such manner as may be
required from time to time for employees generally.
(f)
Salary Deferral .
The Executive may request that the payment of any portion of his
base salary and/or bonus for any calendar year be deferred. Such
request must be made in writing to Medifast before the beginning of
such calendar year and must include the period of deferral
requested by the Executive (the "Deferral Period").
(g)
Stock Grant .
The Executive may be granted Stock based on the performance of the
Company and any new business developments that enhance the revenue
and profits of the company. The Board of Directors reserves the
right to adjust the vesting schedule on any Stock Grants as
business conditions change.
(h)
Stock Option. The Executive as an inducement to enter into a
five year agreement will be granted 100,000 stock options to
purchase common stock at the closing price as of this date and
to be earned over the 5 year period of this agreement
according to the Directors Stock Option Plan of the
Company
*
Amount subject to change.
5.
Resignation of the Executive for Good Reason
.
(a)
Events Giving Right to Terminate for Good Reason
.
The Executive may resign for Good Reason at any time during the
Employment Period, as hereinafter set forth. As used in this
Agreement, the term "Good Reason" means any of the
following:
(i)
any reduction in title or a material adverse change in the
Executive's responsibilities or authority which are
inconsistent with, or the assignment to the Executive of
duties inconsistent with, the Executive's status as Chief
Executive Officer of Medifast;
(ii)
any reassignment of the Executive to a principal office which
is more than 15 miles from Owings Mills,
Maryland;
(iii)
any removal of the Executive from office except for any
termination of the Executive's employment under the provisions
of Section 3(a) or (d);
(iv)
any reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time;
(v)
any failure by Medifast to provide the Executive with benefits
at least as favorable as those enjoyed by the Executive under
any of the pension or welfare plans (as such terms are defined
in ERISA Section 3) of Medifast in which the Executive is
participating on the date of this Agreement, or the taking of
any action that would materially reduce any of such benefits,
unless the change is part of a change applicable in any case
to employees generally; and
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