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EMPLOYMENT AGREEMENT
THIS
AGREEMENT ("Agreement") made as of February 8, 2006, between
MEDIFAST, INC., a Delaware corporation with its principal
office presently located at 11445 Cronhill Drive, Owings
Mills, Maryland 21117 ("Medifast"), and MICHAEL SEAN MCDEVITT,
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 President of Medifast,
and be prepared to assume the responsibilities of the Chief
Executive Officer of the Company at the discretion of the Board of
Directors and will hold such other senior positions and or titles
as may be given to him from time to time by the Board. The
Executive will report to the Chairman of the Board of Medifast Inc.
The Executive will devote 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, all duties
of the Executive shall be routinely discharged at Medifast's
facilities located in Owings Mills, Maryland.
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
February 8, 2012 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 $100,000, 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) 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 not less than
three 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.
(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"). If the Board
approves such request, the Executive will be entitled to receive,
at the end of the Deferral Period, the deferred portion of his base
salary and/or bonus plus interest at a compounded rate of 6% per
annum. Any salary and/or bonus which is deferred as described
herein will be credited to an account on the books of Medifast
established in the name of the Executive. However, this account
will not be funded, and Medifast shall not be deemed to be a
trustee for the Executive with respect to any deferred amount. The
Executive will be a general unsecured creditor of Medifast for any
amount due him under this section. Medifast will not be required to
segregate any funds representing such deferred amounts, and nothing
herein will be construed as providing for such
segregation.
(g)
Stock Grant .
The Executive has been granted and will receive
200,000* shares
of Medifast, Inc. common stock to be vested over the term of this
Agreement. The Executive will receive 33,333* shares of common
stock per year over the next six years, providing the Executive is
performing his duties in accordance with this Agreement. The Board
of Directors reserves the right to adjust the vesting schedule as
business conditions change.
*
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
(vi)
any material breach of this Agreement by Medifast, coupled
with the failure to cure the same within 30 days after receipt
of a written
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