UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
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by
the Registrantþ
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a Party other than the Registrant
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appropriate box:
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Preliminary Proxy Statement
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Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
Medifast,
Inc.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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number of securities to which transaction applies:
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to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed
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Persons
who are to respond to the collection of information contained in
this form
are not required to respond unless the form displays a currently
valid OMB
control number.
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MEDIFAST,
Inc.
To
our
Stockholders:
You
are
cordially invited to attend our 2007 Annual Meeting of Stockholders on Friday,
September 7, 2007. This meeting will be held at 10:00 a.m., Eastern
Standard Time, at
the
Breakers Hotel, One South County Rd., Palm Beach, FL 33480. During the meeting,
we will discuss each item of business described in the accompanying Notice
of
Annual Meeting and Proxy Statement, update you on important developments in
our
business and respond to any questions that you may have about us.
Information
about the matters to be acted on at the meeting is contained in the accompanying
Notice of Annual Meeting and Proxy Statement.
I
would
like to take this opportunity to remind you that your vote is very important.
Please take a moment now to cast your vote in accordance with the instructions
set forth on the enclosed proxy card. In addition, if you would like to attend
the meeting in person, please see the admission instructions set forth in the
Notice of Annual Meeting of Stockholders accompanying this letter and on the
enclosed proxy card.
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I
look forward to seeing you at the meeting.
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Best
regards,
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Bradley
T. MacDonald
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Chairman
of the Board
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Medifast
Inc.
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To
Be Held Friday, September 7, 2007
To
the
Shareholders:
NOTICE
IS
HEREBY GIVEN that the 2007 Annual General Meeting of Shareholders of Medifast
Inc., a Delaware Corporation, or the Company, will be held on Friday, September
7, 2007 at 10:00 a.m., Eastern Standard Time, at
the
Breakers Hotel, One South County Rd., Palm Beach, FL 33480
for the
following purposes:
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1.
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Elect
three Class I directors for a three year term ending in
2010;
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2.
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Elect
three directors to a one year term ending in
2008;
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3.
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Ratify
the appointment of the Company’s independent registered public accountants
for fiscal 2007;
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4.
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Amend
the Bylaws of the Corporation to empower the Board of Directors to
elect a
Vice-Chairman of the Board.
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5.
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Act
upon such other matters as may properly come before the
meeting.
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The
foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. Only shareholders of record at the close of business
on July
16,
2007,
are
entitled to notice of and to vote at the meeting and any subsequent
adjournment(s) or postponement(s) of the meeting.
All
shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as
possible.
Shareholders attending the meeting may vote in person even if they have returned
a proxy card.
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By
Order of the Board of Directors,
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`
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Bradley
T. MacDonald
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Chairman
of the Board
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Owings
Mills, MD
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July
23, 2007
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Table
of Contents
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THE
ANNUAL GENERAL MEETING OF SHAREHOLDERS
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Information
Concerning Solicitation and Voting
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5
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PROPOSAL 1:
THE ELECTION OF DIRECTORS
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THE
BOARD OF DIRECTORS
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6
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Director
Independence
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9
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Board
Meetings
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Director
Compensation
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10
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Shareholder
Communications with the Board of Directors
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Committees
of the Board
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PROPOSAL 2:
THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
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12
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Audit
Committee Report
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Fees
to Independent Registered Public Accountants for Fiscal 2005 and
2006
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Pre-Approval
Policy
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14
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PROPOSAL
3: AMEND THE BYLAWS OF THE CORPORATION TO INCLUDE THE
VICE-CHAIRMAN
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POSITION
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Compensation
Discussion and Analysis
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15
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Summary
Compensation Table
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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ADDITIONAL
INFORMATION
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OTHER
MATTERS
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THE
ANNUAL GENERAL MEETING OF SHAREHOLDERS
Information
Concerning Solicitation and Voting
Place,
Time and Date of Meeting. This
Proxy Statement is being furnished to the Company’s shareholders in connection
with the solicitation of proxies on behalf of our Board of Directors for use
at
the Meeting to be held on Friday, September 7, 2007, at 10:00 a.m., Eastern
Standard Time, and at any subsequent adjournment(s) or postponement(s) of the
Meeting, for the purposes set forth herein and in the accompanying Notice of
Annual General Meeting of Shareholders. The Meeting will be held at
the
Breakers Hotel, One South County Rd., Palm Beach, FL 33480.
Record
Date and Voting Securities. Only
shareholders of record at the close of business on
July
16, 2007,
or the
Record Date, are entitled to notice of and to vote at the Meeting. The Company
has one series of Common Shares outstanding. As
of
July 16, 2007, 13,669,098
Common Shares were issued and outstanding and held of record by 170 registered
holders.
Voting. Each
shareholder is entitled to one vote for each Common Share held on the Record
Date on all matters submitted for consideration at the Meeting. A quorum,
representing the holders of not less than a majority of the issued and
outstanding Common Shares entitled to vote at the Meeting, must be present
in
person or by proxy at the Meeting for the transaction of business. Common Shares
that reflect abstentions are treated as Common Shares that are present and
entitled to vote for the purposes of establishing a quorum and for purposes
of
determining the outcome of any matter submitted to the shareholders for a vote.
Each issued and outstanding share of common stock entitles the holder to one
vote.
Directors are elected by a plurality vote of shares present at the meeting,
meaning that the director nominee with the most affirmative votes for a
particular slot is elected for that slot. In an uncontested election of
directors, the plurality requirement is not a factor. The holders of common
stock are not entitled to cumulate their votes in the election of directors.
Abstentions will not count as votes cast and will have no effect on the outcome
of this proposal. We expect that brokers will be entitled to vote on this
proposal, but any broker non-vote will have no effect on the outcome of the
proposal.
The
Company is not aware of any matter, other than as referred to in this proxy
statement, to be presented at the meeting.
Revocability
of Proxies. Any
proxy given pursuant to this solicitation may be revoked by the person giving
it
at any time before its use by either (a) delivering to the Corporate
Secretary of the Company a written notice of revocation or a duly executed
proxy
bearing a later date or (b) attending the Meeting and voting in person.
Solicitation
Expenses. This
solicitation of proxies is made by the Board of Directors and all related costs
will be borne by the Company. Proxies may be solicited by certain of our
directors, officers and regular employees, without additional compensation,
in
person, by telephone, facsimile or electronic mail. Except as described above,
we do not presently intend to solicit proxies other than by mail. We will,
upon
request, reimburse brokerage firms and others for their reasonable expenses
in
forwarding solicitation material to the beneficial owners of Common
Shares.
This
Proxy Statement contains summaries of certain documents, but you are urged
to
read the documents themselves for the complete information. The summaries are
qualified in their entirety by reference to the complete text of the document.
In the event that any of the terms, conditions or other provisions of any such
document is inconsistent with or contrary to the description or terms in this
Proxy Statement, such document will control. Each of these documents, as well
as
those documents referenced in this Proxy Statement as being available in print
upon request, are available upon request to the Company by following the
procedures described under “Annual Report, Financial and Additional
Information.”
THE
ELECTION OF DIRECTORS
The
number of directors in each class is determined by the Board of Directors and
consists of as nearly equal a number of directors as possible. These directors
are classified as Class I, Class II and Class III. The term of Class I Directors
which is up for re-election is up for a three-year term ending in 2010. The
term
of Class II Directors will expire in 2008. The term for Class III Directors
will
expire in 2009.
The
table
below sets forth the name of each Class of director nominated. The nominees
for
Class I directors are to be voted at the Meeting. The Board of Directors has
nominated Charles P. Connolly, Bradley T. MacDonald, and Donald F. Reilly for
election
as Class I directors to serve three-year terms expiring at the 2010 annual
general meeting. The Board has also nominated Dennis M. McCarthy to a one year
term and it is intended that he will be nominated as a Class II director in
2008. The Board of Directors has nominated Rich T. Aab to a one year term and
it
is intended that he will be nominated as a Class III director in 2009. In
addition, the Board of Directors has nominated Michael S. McDevitt to a one
year
term and it is intended that he will be nominated as a class III director in
2009.
Upon
shareholder approval for the election of the Chief Executive Officer, Michael
S.
McDevitt, his father, Michael J. McDevitt plans to voluntarily remove himself
from the Board of Directors. Each nominee has consented to be named as a nominee
and, to the present knowledge of the Company, is willing to serve as a director,
if elected. Should any of the nominees not remain a nominee at the end of the
meeting (a situation which is not anticipated), solicited proxies will be voted
in favor of those who remain as nominees and may be voted for substitute
nominees. Unless contrary instructions are given on the proxy, the shares
represented by a properly executed proxy will be voted “FOR” the election of
nominated Charles P. Connolly, Bradley T. MacDonald, Donald F. Reilly, Dennis
M.
McCarthy, Richard T. Aab, and Michael S. McDevitt.
The
Company did not receive any shareholder nominations for director.
The
table
below sets forth information about the six nominees and the directors whose
terms of office continue beyond the Meeting.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” MESSRS. CHARLES P. CONNOLLY,
BRADLEY T. MACDONALD, DONALD F. REILLY, DENNIS M. MCCARTHY, RICHARD T. AAB,
AND
MICHAEL S. MCDEVITT
NOMINEES
Name
and Experience
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Class
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Director
Since
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Charles
P. Connolly, age
58,
is
currently an independent director focusing on bank relationships,
debt
refinancing, merger and acquisition strategy and executive compensation
design. Mr. Connolly spent 29 years at First Union Corp. that merged
with
Wachovia Bank in 2001. He retired in 2001 as the President and CEO
of
First Union Corp. Mr. Connolly serves on the Boards of numerous non-profit
organizations. He holds an MBA from the University of Chicago and
AB from
Villanova University.
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I
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2006
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Bradley
T. MacDonald, age
59, is the Chairman of the Board of Medifast, Inc. Mr.
MacDonald has been Chairman of the Board of Medifast, Inc. since
January
1998 and was also Chief Executive officer until March of 2007. He
was the principal architect of the turnaround of Medifast and formulated
the “Direct to Consumer” business models that are the primary drivers of
Revenue to this day. He also was the co-founder of Take Shape for
Life and
acquired the Clinic operations in 2002. During his time as CEO, he
managed
the company to 29 consecutive quarters of profits and improved
shareholders equity from negative $4 million to over $27 million
in less
than seven years. He also increased the Company’s market cap from less
than $1 million to over $100 million and listed the company on the
NYSE.
In 2006, Mr. MacDonald received the prestigious and audited Ernst
and
Young award of “Entrepreneur of the Year” for the state of Maryland in the
consumer products category. Also, he helped lead the Company to
national recognition in Forbes Magazine ranking Medifast 28th
of
the top 200 small companies in America .
From 1991 through 1994, Colonel MacDonald returned to active duty
to be
Deputy Director and Chief Financial Officer of the Retail, Food,
Hospitality and Recreation Businesses for the United States Marine
Corps. Prior thereto, Mr. MacDonald served as Chief Operating
Officer of the Bonneau Sunglass Company, President of Pennsylvania
Optical
Co., Chairman and CEO of MacDonald and Associates, which had major
financial interests in a retail drug, consumer candy, and pilot sunglass
companies. Mr. MacDonald was national president of the Marine Corps
Reserve Officers Association and retired from the United States Marine
Corps Reserve as a Colonel in 1997, after 27 years of service. He
has been appointed to the Defense Advisory Board for Employer Support
of
the Guard and Reserve (ESGR) Mr.
MacDonald serves on the Board of Directors of the Wireless Accessories
Group (AMEX: XWG). He also serves on the Board of Directors of the
Marine
Corps Reserve Toys for Tots Foundation and is on the Board of Trustees
of
Villa Julie College of Stevenson, Maryland and the Institute of Notre
Dame, the oldest Catholic girl’s urban high school in Maryland, located in
Baltimore. Mr. MacDonald is the father of Margaret MacDonald who
performs
the role of President and Chief Operating Officer at Medifast, Inc.
and
the brother of board member Michael C. MacDonald.
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I
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1996
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Donald
F. Reilly, OSA,
age
59, holds a Doctorate in Ministry (Counseling) from New York Theological
and an M.A. from Washington Theological Union as well as a B.A. from
Villanova University. Reverend Don Reilly was ordained a priest in
1974.
His assignments included Associate Pastor, Pastor at St. Denis, Havertown,
Pennsylvania, Professor at Villanova University, Personnel Director
of the
Augustinian Province of St. Thomas of Villanova, Provincial Counselor,
Founder of SILOAM Ministries where he ministers and counsels HIV/AIDS
patients and caregivers. He is currently on the Board of Directors
of
Villanova University, and is Board Member of Prayer Power. Fr. Reilly
was
recently re-elected Provincial of the Augustinian Order at Villanova,
PA.
He oversees more than 220 Augustinian Friars and their service to
the
Church, teaching at universities and high schools, ministering to
parishes, serving as chaplain in the Armed Forces and hospitals,
ministering to AIDS victims, and serving missions in Japan and South
America.
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I
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1998
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Dennis
M. McCarthy,
age
62, practiced law for 21 years as a civil litigator in tort and contract
cases. He was the founding member and managing partner of a Columbus,
Ohio
based law firm. Additionally, he served active duty in the U.S. Marine
Corps for 23 years and served 18 years in reserve service. Mr. McCarthy
retired from the Marine Corps in 2005 in the grade of Lieutenant
General
after four years in command of all Marine Reserve forces. Mr. McCarthy
is
currently the Executive Director of the Reserve Officers Association,
a
congressionally chartered association devoted to national defense.
In
addition to Medifast, he is a member of the Board of Directors of
Rivada
Networks.
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II
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2006
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Richard
T. Aab, age
58, co-founded
US LEC in June 1996 and has served as Chairman of the Board of
Directors since that time. He also served as Chief Executive Officer
from
June 1996 until July 1999. Between 1982 and 1997, Mr. Aab held
various positions with ACC Corp., an international telecommunications
company in Rochester, NY, including Chairman and Chief Executive
Officer,
and served as a director. Mr. Aab is a member of the Board of
Trustees of the University of Rochester, the University of Rochester
Medical Center, Rochester Institute of Technology and various private
corporate institutions.
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III
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2007
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Michael
S. McDevitt,
age 29, is the Chief Executive Officer and Chief Financial Officer
of
Medifast, Inc. Mr. McDevitt joined Medifast in 2002 as Controller
and was
promoted to Vice President of Finance in January 2004. In March of
2005 he
was promoted to President and subsequently promoted to the position
of
President and Chief Financial Officer in January of 2006. In March
of
2007, Mr. McDevitt was promoted to Chief Executive Officer. Prior
to
joining Medifast, Mr. McDevitt worked as a Financial Analyst for
The
Blackstone Group, an investment and advisory firm based in New York,
NY.
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III
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2007
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CONTINUING
DIRECTORS
Name
and Experience
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Class
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Director
Since
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Michael
C. MacDonald, age
53, is president of global accounts and marketing operations for
Xerox
Corporation, Stamford, Conn. He was named to this position in October
2004
and was appointed a corporate senior vice president in July 2000.
Mac
Donald is responsible for directing the company’s largest global accounts,
improving the customer experience, corporate marketing, xerox.com,
advertising, worldwide public relations and marketing communications.
Most
recently, Mac Donald was president, North American Solutions Group
responsible for all products, services and solutions sold by Xerox
direct
sales force in the United States and Canada. Prior to that, he served
as
the group’s senior vice president of marketing and chief of staff. Mac
Donald is on the board of directors of the Rochester Institute of
Technology, PAETEC, and the Jimmy V Foundation. He is also a board
member
of the CMO Council North American Advisory Board. Mr. MacDonald completed
executive business and management programs at Columbia University
in 1992
and the International Senior Management Program at Harvard University
in
1998
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II
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1998
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Mary
T. Travis,
age 56, is currently employed with Sunset Mortgage Company, L.P.
in
Pennsylvania as the Senior Vice President of wholesale operations
and was
formerly the Vice President of operations for the Financial Mortgage
Corporation. Mrs. Travis is an expert in mortgage banking with over
36
years of diversified experience. She is an approved instructor of
the
Mortgage Bankers Association Accredited School of Mortgage Banking.
Mrs.
Travis was also formally a delegate and 2nd Vice president of the
Mortgage
Bankers Association of Greater Philadelphia and the Board of Governors
of
the State of Pennsylvania.
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II
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2002
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Joseph
D. Calderone,
age 58, is the Associate Director of Campus Ministry at Villanova
University. He formerly spent over eight years with the Loyola University
Medical Center as the hospital Chaplain and taught multiple courses
including Introduction to the Practice of Medicine and Business Ethics.
Rev. Calderone recently retired as a Captain in the US Navy Reserves.
He
served as the Wing Chaplain for the 4th Marine Aircraft Wing.
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III
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2003
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George
Lavin, Jr, Esq.,
age 78, is a senior partner at Lavin, Oneil, Ricci, Ceprone & Disipio.
Mr. Lavin is a 1951 graduate of Bucknell University. He attended
the
University of Pennsylvania School of Law, receiving an LL.B. in 1956,
and
then served as a Special Agent, Federal Bureau of Investigation,
United
States Department of Justice, until 1959. Mr. Lavin is one of the
dominant
product liability defense attorneys in the nation. He has had regional
responsibilities in several automotive specialty areas, and has been
called upon to try matters throughout the county on behalf of his
clients.
Mr. Lavin's present practice and specialty emphasizes his commitment
to
defending the automotive industry. Mr. Lavin is admitted to practice
before the Supreme Court of Pennsylvania, the United States Court
of
Appeals for the Third Circuit and the United States District Courts
for
the Eastern and Middle Districts of Pennsylvania. He is a member
of the
Faculty Advisory Board of the Academy of Advocacy, the Association
of
Defense Counsel, The Defense Research Institute, The American Board
of
Trial Advocates, and the Temple University Law School faculty. He
has also
been elected a fellow of the American College of Trial Lawyers. On
March
1, 1994, Mr.Lavin assumed the title of Counsel to The
Firm.
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III
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2005
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Michael
J. McDevitt, age
58, is a retired FBI Special Agent with over 29 years of government
service with the United States Marine Corps and the FBI. He had attained
Senior Executive status within the FBI's Investigative Technology
Branch
and is currently providing consulting services, focusing on physical
threat and risk assessments and conducting specialized training for
law
enforcement and US Government entities. Mr. McDevitt is the father
of the
Company’s Chief Executive Officer and Chief Financial Officer, Michael S.
McDevitt.
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III
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2002
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ADDITIONAL
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
Director
Independence
The
Board
consists of 9 members of which 8 are non-management directors. Determination
as
to the qualifications of an independent directors are determined
under
section 303A.02 of the New York Stock Exchange, or the NYSE, Listed Company
Manual and the Company’s Categorical Standards of Independence. The NYSE’s
independence guidelines and the Company’s categorical standards include a series
of objective tests, such as the director is not an employee of the Company
and
has not engaged in various types of business dealings involving the Company,
which would prevent a director from being independent. The Board of Directors
has affirmatively determined that none of the Company’s independent directors
had any relationships with the Company.
The
Board, in applying the above referenced standards has affirmatively determined
the Company’s current independent directors are: Joseph D. Calderone, Charles P.
Connolly, George Lavin, Jr. Esq., Dennis M. McCarthy, Donald F. Reilly, and
Mary
T. Travis.
Board
Meetings
It
is the
policy of the Board of Directors to hold four regularly scheduled meetings,
each
of which include an executive session of non-management directors without the
presence of management. Additional meetings of the Board of Directors and
executive sessions of non-management directors may be held from time to time
as
required. Mr. Donald F. Reilly serves as the presiding director at the
executive sessions of non-management directors.
2006
Director Compensation
The
table
below summarizes the compensation paid by the Company to non-employee directors
for the fiscal year ended December 31, 2006.
Name
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Fees
Earned or Paid in Cash ($)
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Stock
Awards
($)(1)
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Option
Awards
($)
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Non-Equity
Incentive
Plan
Compensation
($)
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Change
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
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All
other
Compensation
($)
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Total
($)
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Joseph
D. Calderone
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-
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$
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9,375
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$
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9,375
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Charles
P. Connolly
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-
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3,206
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3,206
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George
Lavin, Esq.
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-
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9,375
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|
|
|
|
|
|
|
|
9,375
|
|
Michael
C. MacDonald
|
|
|
-
|
|
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,375
|
|
Dennis
M. McCarthy
|
|
|
-
|
|
|
3,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,206
|
|
Michael
J. McDevitt
|
|
|
-
|
|
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,375
|
|
Rev.
Donald F. Reilly, OSA
|
|
|
-
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
Mary
T. Travis
|
|
|
-
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
Employee
Directors do not receive any additional compensation for their services as
director.
Additional
fees are paid to the Chairman of each committee which in fiscal 2006 amounted
to
an additional 500 shares of Medifast, Inc. stock granted to the Chairman of
each
committee.
|
|
|
(1)
|
|
Amounts
are calculated based on provisions of Statement of Financial Accounting
Standards, or SFAS, No 123R, “Share Based Payments.” See note 1
of the consolidated financial statement of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006 regarding
assumptions underlying valuation of equity
awards.
|
The
table
below summarizes the equity based awards held by the Company’s non-employee
directors as of December 31, 2006:
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#)
|
|
Number
of Securities Underlying Unexercised Options (#)
|
|
Option
Exercise
|
|
Option
Expiration
|
|
Number
Shares or Units of Stock That Have Not Vested
|
|
Market
Value of Shares or Units of Stock that have not
Vested
|
|
|
|
Exercisable
|
|
Un-Exercisable
|
|
Price
($)
|
|
Date
|
|
Vested
(#)
|
|
($)
|
|
Joseph
D. Calderone
|
|
|
2,500
|
|
|
-
|
|
$
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Charles
P. Connolly
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
George
Lavin, Esq.
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
Michael
C. MacDonald
|
|
|
2,500
|
|
|
-
|
|
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Dennis
M. McCarthy
|
|
|
2,500
|
|
|
-
|
|
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Michael
J. McDevitt
|
|
|
2,500
|
|
|
-
|
|
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Rev.
Donald F. Reilly, OSA
|
|
|
2,500
|
|
|
-
|
|
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Mary
T. Travis
|
|
|
2,500
|
|
|
-
|
|
|
4.80
|
|
|
4/4/2008
|
|
|
-
|
|
|
-
|
|
Shareholder
Communications with the Board of Directors
Shareholders
and other parties interested in communicating directly with the Board of
Directors, non-management directors as a group or individual directors,
including Mr. Donald F. Reilly in his capacity as the presiding director of
executive sessions of non-management directors, may do so by writing to
Medifast, Inc., c/o Corporate Secretary, 11445 Cronhill Drive, Owings
Mills, MD 2111, indicating to whose attention the communication should be
directed. Under a process approved by the Board of Directors for handling
letters received by the Company and addressed to non-management directors,
the
Corporate Secretary of the Company reviews all such correspondence and forwards
to members of the Audit Committee a summary and/or copies of any such
correspondence that, in the opinion of the Corporate Secretary, deal with the
functions of the Board of Directors or committees thereof, or that he otherwise
determines requires their attention. Directors may at any time review a log
of
all correspondence received by the Company and addressed to members of the
Board
of Directors and request copies of any such correspondence.
Committees
of the Board
Our
Board
of Directors has a standing audit committee, nominating and corporate governance
committee, compensation committee, and executive committee.
Audit
Committee
Our
audit
committee consists of Joseph Calderone, Charles Connolly, George Lavin, and
Mary
Travis, each of whom are independent as discussed above under “— Director
Independence.” As required by Rule 303A.07 of the NYSE Listed Company
Manual, the Board of Directors has affirmatively determined that each audit
committee member is financially literate, and that Mr. Connolly is an
“audit committee financial expert,” as defined in Item 407(d)(5) of
Regulation S-K.
The
principal duties of the audit committee are as follows:
|
Ÿ
|
have
the sole authority and responsibility to hire, evaluate and, where
appropriate, replace the independent auditors;
|
|
Ÿ
|
meet
and review with management and the independent auditors the interim
financial statements and the Company’s disclosures under Management’s
Discussion and Analysis of Financial Condition and Results of Operations
prior to the filing of the Company’s Quarterly Reports on Form 10-Q;
|
|
Ÿ
|
meet
and review with management and the independent auditors the financial
statements to be included in the Company’s Annual Report on Form 10-K
(or the annual report to shareowners) including (i) their judgment
about the quality, not just acceptability, of the Company’s accounting
principles, including significant financial reporting issues and
judgments
made in connection with the preparation of the financial statements;
(ii) the clarity of the disclosures in the financial statements; and
(iii) the Company’s disclosures under Management’s Discussion and
Analysis of Financial Condition and Results of Operations, including
critical accounting policies;
|
|
Ÿ
|
review
and discuss with management, the internal auditors and the independent
auditors the Company’s policies with respect to risk assessment and risk
management;
|
|
Ÿ
|
review
and discuss with management, the internal auditors and the independent
auditors the Company’s internal controls, the results of the internal
audit program, and the Company’s disclosure controls and procedures, and
quarterly assessment of such controls and procedures;
|
|
Ÿ
|
establish
procedures for handling complaints regarding accounting, internal
accounting controls and auditing matters, including procedures for
confidential, anonymous submission of concerns by employees regarding
accounting and auditing matters; and
|
|
Ÿ
|
review
and discuss with management, the internal auditors and the independent
auditors the overall adequacy and effectiveness of the Company’s legal,
regulatory and ethical compliance programs.
|
Our
Board
of Directors has adopted a written charter for the audit committee which is
available on the Company’s website at
www.choosemedifast.com
by
following the links through “Investor Relations” to “Corporate
Governance.” In
fiscal
2006, the audit committee met five times.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee consists of Joseph Calderone,
Donald F. Reilly, and George Lavin, all of whom are independent as discussed
above under “— Director Independence.”
The
principal duties of the nominating and corporate governance committee are as
follows:
|
|
|
|
•
|
to
recommend to our Board of Directors proposed nominees for election
to the
Board of Directors both at annual general meetings and to fill vacancies
that occur between general meetings; and
|
|
|
|
•
|
to
make recommendations to the Board of Directors regarding the Company’s
corporate governance matters and
practices.
|
Our
Board
of Directors has adopted a written charter for the nomination and corporate
governance committee which is available on the Company’s website at
www.choosemedifast.com
by
following the links through “Investor Relations” to “Corporate
Governance.” In
fiscal
2006, the nomination and corporate governance committee met four
times.
Compensation
Committee
The
compensation committee currently consists of George Lavin, Jr., Esq, Dennis
M.
McCarthy, Esq., Donald F. Reilly, and Mary Travis, all of whom were independent
as discussed above under “— Director Independence.”
The
principal duties of the compensation committee are as follows:
|
Ÿ
|
measure
the Chief Executive Officer’s performance against his goals and objectives
pursuant to the Company plans;
|
|
Ÿ
|
determine
the compensation of the Chief Executive Officer after considering
the
evaluation by the Board of Directors of his performance;
|
|
Ÿ
|
review
and approve compensation of elected officers and all senior executives
based on their evaluations, taking into account the evaluation by
the
Chief Executive Officer;
|
|
Ÿ
|
review
and approve any employment agreements, severance arrangements, retirement
arrangements, change in control agreements/provisions, and any special
or
supplemental benefits for each elected officer and senior executive
of the
Company;
|
|
Ÿ
|
approve,
modify or amend all non-equity plans designed and intended to provide
compensation primarily for elected officers and senior executives
of the
Company;
|
|
Ÿ
|
make
recommendations to the Board regarding adoption of equity plans;
and
|
|
Ÿ
|
modify
or amend all equity plans.
|
Our
Board
of Directors has adopted a written charter for the compensation committee which
is available on the Company’s website at
www.choosemedifast.com
by
following the links through “Investor Relations” to “Corporate Governance.” In
fiscal 2006, the compensation committee met four times.
Executive
Committee
Messrs.
Bradley T. MacDonald, Michael C. MacDonald, Michael J. McDevitt, and Dennis
M.
McCarthy, Esq. are members of the Executive Committee. The Executive Committee
has all the authority of the Board of Directors, except with respect to certain
matters that by statute may not be delegated by the Board of Directors. The
Committee meets periodically during the year to develop and review strategic
operational and management polices for the Company. The Committee
held
three
meetings
during fiscal 2006.
THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTANTS
The
audit
committee has selected Bagell, Josephs, Levine & Co, LLC as the Company’s
independent registered public accountants for the fiscal year ending
December 31, 2007. Services provided to the Company and its subsidiaries by
Bagell, Josephs, Levine & Co, LLC in fiscal 2005 and 2006 are described
under “— Fees to Independent Registered Public Accountants for Fiscal 2005
and 2006” below. Additional information regarding the audit committee is
provided in the Report of the Audit Committee below.
The
Company has been advised that representatives of Bagell, Josephs, Levine &
Co, LLC will be present at the Meeting where they will have an opportunity
to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
In
the
event shareholders do not ratify the appointment of Bagell, Josephs, Levine
& Co, LLC, the appointment will be reconsidered by the audit committee and
the Board of Directors.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF
BAGELL, JOSEPHS, LEVINE & CO., LLC AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS FOR FISCAL 2007.
Audit
Committee Report
The
audit
committee is responsible for monitoring our financial auditing, accounting
and
financial reporting processes and our system of internal controls, and selecting
the independent public accounting firm on behalf of the Board of Directors.
Our
management has primary responsibility for our internal controls and reporting
process. Our independent registered public accounting firm, Bagell, Josephs,
Levine & Company, LLC, is responsible for performing an independent audit of
our consolidated financial statements, management’s assessment of the
effectiveness of our internal control over financial reporting and the
effectiveness of our internal control over financial reporting in accordance
with the standards of the Public Company Accounting Oversight Board (United
States) and issuing an opinion thereon. In this context, the audit committee
met
regularly and held discussions with management and Bagell, Josephs, Levine
&
Company, LLC. Management represented to the audit committee that the
consolidated financial statements for the fiscal year 2006 were prepared in
accordance with U.S. generally accepted accounting principles.
The
audit
committee hereby reports as follows:
|
|
|
|
•
|
The
audit committee has reviewed and discussed the audited consolidated
financial statements and accompanying management’s discussion and analysis
of financial condition and results of operations with our management
and
Bagell, Josephs, Levine & Co, LLC. This discussion included Bagell,
Josephs, Levine & Co., LLC’s judgments about the quality, not just the
acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
|
|
|
|
•
|
The
audit committee also discussed with Bagell, Josephs, Levine & Company,
LLC the matters required to be discussed by the applicable Statements
on
Auditing Standards, including SAS No. 61 and No. 90, as amended
(Communication with Audit
Committees).
|
|
|
|
|
•
|
Bagell,
Josephs, Levine & Company, LLC also provided to the audit committee
the written disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees), and the audit committee has discussed with Bagell, Josephs,
Levine & Company, LLC the accounting firm’s independence. The audit
committee also considered whether non-audit services provided by
during
the last fiscal year were compatible with maintaining the accounting
firm’s independence.
|
Based
on
the reviews and discussions referred to above, the audit committee has
recommended to the Board of Directors that the audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2006, for filing with the Securities and Exchange Commission,
or the SEC. The audit committee also selected, subject to shareholder
ratification, Bagell, Josephs, Levine & Company, LLC to serve as our
independent registered public accounting firm for the year ending
December 31, 2007.
AUDIT
COMMITTEE OF
THE
BOARD OF DIRECTORS
Charles
P. Connolly,
Chairman
Joseph
D.
Calderone
George
Lavin, Jr., Esq.
Mary
T.
Travis
Fees
to Independent Registered Public Accountants for Fiscal 2005 and
2006
The
following services were provided by Bagell, Josephs, Levine & Co during
fiscal 2005 and 2006:
|
|
2005
|
|
2006
|
|
|
|
|
|
|
|
Audit
Fees(1)
|
|
$
|
90,000
|
|
$
|
179,000
|
|
Tax
fees(2)
|
|
|
10,000
|
|
|
21,000
|
|
All
other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
100,000
|
|
$
|
200,000
|
|
|
|
|
(1)
|
|
Audit
fees consist of fees for professional services rendered for the audit
of
the Company’s consolidated financial statements included in the Company’s
Annual Report on Form 10-K, including the audit of internal controls
required by Section 404 of the Sarbanes-Oxley Act of 2002, and the
review of financial statements included in the Company’s Quarterly Reports
on Form 10-Q, and for services that are normally provided by the
auditor
in connection with statutory and regulatory filings or
engagements.
|
|
|
(2)
|
|
Tax
fees were billed for tax compliance
services
|
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The
Audit
Committee pre-approves all audit and permissible non-audit services provided
by
the independent auditors. These services may include audit services,
audit-related services, tax services and other services. The Audit Committee
has
adopted a policy for the pre-approval of services provided by the independent
auditors.
Under
the
policy, pre-approval is generally provided for work associated with the
following:
·
registration statements under the Securities Act of 1933 (for example, comfort
letters or consents);
·
due
diligence work for potential acquisitions or dispositions;
·
attest services not required by statute or regulation;
·
adoption of new accounting pronouncements or auditing and disclosure
requirements and accounting or regulatory consultations;
·
internal control reviews and assistance with internal control reporting
requirements;
·
review of information systems security and controls;
·
tax compliance, tax planning and related tax services, excluding any tax service
prohibited by regulatory or other oversight authorities; expatriate and other
individual tax services; and
·
assistance and consultation on questions raised by regulatory agencies.
For
each
proposed service, the independent auditors are required to provide detailed
back-up documentation at the time of approval to permit the Audit Committee
to
make a determination whether the provision of such services would impair the
independent auditors’ independence.
The
Audit
Committee has approved in advance certain permitted services whose scope is
routine across business units, including statutory or other financial audit
work
for non-U.S. subsidiaries that is not required for the 1934 Act audits.
PROPOSAL 3:
AMEND
THE BYLAWS OF THE CORPORATION TO
INCLUDE
THE VICE-CHAIRMAN POSITION
Medifast’s
shareholders are being asked to approve the amendment of the Bylaws of the
Corporation to empower the Board of Directors to elect a Vice-Chairman of the
Board who will assume the duties of the Chairman in his absence and provide
Board succession planning.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE AMENDMENT OF THE BYLAWS TO
EMPOWER THE BOARD OF DIRECTORS TO ELECT A VICE-CHAIRMAN FO THE
BOARD.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Our
Compensation Committee of the Board of Directors has responsibility for
establishing, implementing and continually monitoring adherence with the
Company’s compensation philosophy. The Compensation Committee ensures that the
total compensation paid to our named executive officers is fair, reasonable
and
competitive. Generally, the types of compensation and benefits provided to
our
named executive officers are similar to those provided to other officers and
employees of the Company.
Throughout
this discussion, the individuals who served as our CEO and CFO during Fiscal
2006, as well as the other individuals included in the Summary Compensation
Table on page 10, are referred to as the “named executive officers.”
The
main
objective of our executive compensation program is to create a competitive
total
rewards package based on the attainment of short-term performance objectives
and
long-term strategic goals. Accordingly, our executive compensation program
consists of the following three principal elements: base salary, cash bonus
and
equity grants in the form of stock options and restricted stock, with an
emphasis on incentive compensation rather than base salary. Our executives
are
also eligible to participate in employee benefit and retirement plans offered
by
the Company, which currently include defined contribution and 401(k) plans,
and
health care and other insurance programs. The benefit programs available to
executives are the same as those available to all other eligible employees.
The
Compensation Committee of our Board of Directors is comprised solely of
non-affiliate independent Directors who meet the independence requirements
of
the NYSE. Our Compensation Committee makes all decisions regarding the
compensation of our CEO, including establishing the performance goals and
objectives for our CEO, evaluating our CEO’s performance in light of the goals
and objectives that were set, and determining and recommending to our Board
the
CEO’s compensation based on that evaluation.
Our
CEO
makes recommendations to our Compensation Committee for the compensation of
our
Chief Operating Officer and all other named executive officers. Our Compensation
Committee and Board may accept or adjust such recommendations as they determine
in the best interests of the Company and its stockholders and has final approval
over all such compensation decisions. To the extent not established by our
Board
of Directors, our Compensation Committee is also authorized to establish
compensation and benefits for our Chairman and for new and existing
non-affiliate independent Directors.
Our
Chairman, CEO, and Vice President of Human Resources provide advice, analysis
and recommendations to our Compensation Committee.
Elements
of Executive Compensation
Our
Compensation Committee also evaluates the achievement of corporate, individual
and organizational objectives for each executive officer during the prior fiscal
year. Each element of compensation is chosen in order to attract and retain
the
necessary executive talent, reward corporate performance and provide incentive
for the attainment of long-term strategic goals. The allocation of each element
of compensation is determined by our Compensation Committee for each executive
based on the following factors:
|
•
|
|
Performance
against corporate, individual and organizational objectives for the
fiscal
year;
|
|
•
|
|
Importance
of particular skill sets and professional abilities to the achievement
of
long-term strategic goals; and
|
|
•
|
|
Contribution
as a leader, corporate representative and member of the senior management
team.
|
These
elements support our overall compensation philosophy by creating a balanced
focus on shorter-term corporate performance and the achievement of longer-term
business goals and stockholder value. While we believe in structuring executive
compensation plans that give our executives incentive to deliver certain
objective elements of corporate financial performance over specified time
periods, we do not believe in a purely mechanical approach. Instead, part of
our
executive compensation philosophy includes an element of reward for
non-quantitative achievements demonstrated by our executives in the actions
and
decisions they have taken throughout the year. When establishing our executive
compensation plans for a given year, it is not possible to foresee all of the
challenges and demands that will be made of our executives, both as a management
team and in their areas of individual responsibility. We believe that by
rewarding the quality of our decision-making and leadership, in addition to
the
achievement of quantifiable results, we are building a management team capable
of creating stockholder value over the longer-term, while remaining disciplined
in delivering shorter-term financial results. Accordingly, there is no
pre-established policy or target for the allocation between either cash and
non-cash or short-term and long-term incentive compensation. Rather, the
Compensation Committee reviews information provided by its compensation
consultant, industry surveys and peer company data to determine appropriate
level and mix of incentive compensation. Income from such incentive compensation
is realized as a result of the performance of the Company and the individual,
depending on the type of award, compared to established goals.
Base
Salary
Our
base
salary determinations principally reflect the skills and performance levels
of
individual executives, the needs of the Company, and pay practices of comparable
public companies. It is not our policy to pay our executive officers at the
highest base salary level. Instead, we establish executive base salaries
conservatively at or below a midpoint level relative to an appropriate set
of
peers. We believe this policy sets a prudent and fiscally responsible tone
for
the Company’s overall base salary compensation programs.
Target
Bonus
Cash
bonuses principally reflect the Company’s financial performance and achievement
of corporate objectives established by our Board prior to the fiscal year.
The
executive bonus plan is designed to reward our executives for the achievement
of
shorter-term financial goals, predominantly revenue growth and profitability,
with cash flow and other operating ratios also considered. The allocation of
the
bonus pool among the employees, including senior executives, is at the
discretion of the Compensation Committee. The Chief Executive Officer, Chief
Financial Officer and other senior executives discuss and jointly develop
recommended bonus allocations among the staff within the various functional
areas of the Company. In addition, the Chief Executive Officer prepares an
allocation of bonus payments among the senior executive group. In consultation
with the Chief Executive Officer, the Compensation Committee evaluates, adjusts
and approves the amount and allocation of the bonus pool. In determining the
cash bonus allocation among senior executives, the Compensation Committee and
the Chief Executive Officer consider each executive’s a) contribution to current
and long-term corporate goals, and b) value in the labor market.
Equity
Compensation
Stock
option and restricted stock awards principally reflect the responsibilities
to
be assumed by each executive in the upcoming fiscal year, the responsibilities
of each executive in prior periods, the size of awards made to each executive
in
prior years relative to the Company’s overall performance, available stock for
issuance under our Option Plan, and potential grants in future years. The
Committee believes that stock option and restricted stock grants (1) align
the interests of executives with long-term stockholder interests, (2) give
executives a significant, long-term interest in the Company’s success, and
(3) help retain key executives in a competitive market for executive
talent. The Company does not plan on issuing stock options as part of
compensation in 2007 and beyond.
Equity
Ownership by Executives
We
do not
currently have a formal equity ownership requirement for our executives.
However, we encourage our executives to own equity in the Company on a voluntary
basis. All of our named executive officers own stock, restricted stock and
vested and unvested stock options. We periodically review the vested and
unvested equity holdings of our executives and evaluate whether these holdings
sufficiently align the interests of our executives with the long-term interests
of our stockholders. We may consider adopting equity ownership requirements
in
the future.
Compensation
Committee Report
We
have
reviewed and discussed with management certain Compensation Discussion and
Analysis provisions to be included in this proxy statement. Based on the reviews
and discussions referred to above, we recommend to the Board of Directors that
the Compensation Discussion and Analysis referred to above be included in this
proxy statement.
COMPENSATION
COMMITTEE OF
THE
BOARD OF DIRECTORS
Donald
F.
Reilly, Chairman
George
Lavin, Jr., Esq.
Dennis
M.
McCarthy, Esq.
Mary
Travis
2006
Summary Compensation Table
The
following table sets forth the annual and long-term compensation for the fiscal
year ended December 31, 2006, of the Company’s Chief Executive Officer and
Chief Financial Officer and each of the three other most highly compensated
executive officers. These individuals, including the Chief Executive Officer
and
Chief Financial Officer are collectively referred to in this proxy statement
as
the Named Executive Officers.
|
|
|
|
Salary
|
|
Stock
Awards
|
|
Option
Awards
|
|
Bonus
|
|
Nonqualified
Deferred Compensation Contributions
|
|
All
Other
|
|
Total
|
|
Name
and Pricipal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)(3)
|
|
($)
|
|
Bradley
T. MacDonald
|
|
|
2006
|
|
$
|
225,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
100,000
|
|
$
|
6,600
|
|
$
|
331,600
|
|
Chief
Executive Officer, Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
S. McDevitt
|
|
|
2006
|
|
|
99,000
|
|
|
289,000
|
|
|
-
|
|
|
27,500
|
|
|
|
|
|
3,800
|
|
|
419,300
|
|
President,
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo
Williams
|
|
|
2006
|
|
|
125,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
3,800
|
|
|
128,800
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
MacDonald
|
|
|
2006
|
|
|
81,000
|
|
|
237,000
|
|
|
-
|
|
|
4,000
|
|
|
|
|
|
2,400
|
|
|
324,400
|
|
Executive
VP of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan
N. Connors
|
|
|
2006
|
|
|
80,000
|
|
|
47,000
|
|
|
-
|
|
|
4,000
|
|
|
|
|
|
1,400
|
|
|
132,400
|
|
VP
of Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts
are calculated based on provisions of SFAS, No 123R, “Share Based
Payments.” See note 1
of
the consolidated financial statements of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006 regarding
assumptions underlying valuation of equity awards.
|
|
|
(2)
|
|
Bonus
amounts determined as more specifically discussed above under
“—Compensation Discussion and Analysis”
|
|
|
|
(3)
|
|
The
amounts represent the Company’s matching contributions under the 401(K)
plan.
|
2006
Grants of Plan-Based Awards
There
were no grants of plan-based awards to the Named Executive Officers for the
fiscal year ended December 31, 2006.
Outstanding
Equity Awards at Fiscal Year-End Table
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
|
|
Number
of Securities Underlying Unexercised Options (#)
|
|
Option
Exercise
|
|
Option
Expiration
|
|
Number
Shares or Units of Stock That Have Not Vested
|
|
Market
Value of Shares or Units of Stock that have not
Vested
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
rights
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other rights That Have Not Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
Un-Exercisable
|
|
Price
($)
|
|
Date
|
|
Vested
(#) (1)
|
|
($)
(2)
|
|
(#)
|
|
($)
|
|
Bradley
T. MacDonald
|
|
-
|
|
|
100,000
|
|
$
|
6.25
|
|
|
2/8/2011
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Chief
Executive Officer, Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
S. McDevitt
|
|
100,000
|
|
|
-
|
|
|
2.87
|
|
|
3/31/2010
|
|
|
226,666
|
|
|
2,849,191
|
|
|
-
|
|
|
-
|
|
President,
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo
Williams
|
|
6,666
|
|
|
3,333
|
|
|
3.83
|
|
|
10/28/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
MacDonald
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
185,000
|
|
|
2,325,450
|
|
|
-
|
|
|
-
|
|
Executive
VP of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan
N. Connors
|
|
26,667
|
|
|
|
|
|
2.87
|
|
|
3/31/2010
|
|
|
37,000
|
|
|
465,090
|
|
|
-
|
|
|
-
|
|
VP
of Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each
option has a five year life and an exercise price per share equal to 100% of
the
estimated fair value of our common stock on the date of grant.
(1)
|
The
restricted stock grants vest over five and six years of service as
described below under “Narrative
Disclosure to Summary Compensation Table and Grants of Plan-Based
Awards”
|
(2)
|
The
market value of shares of stock that have not vested is based on
the
closing price of our common stock on December 29, 2006, or $12.57
per
share.
|
2006
Option Exercises and Stock Vested Table
The following
table sets forth information regarding option exercises and stock vesting for
the Named Executive Officers during 2006.
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number
of
Shares
Acquired
on
Exercise
|
|
Value
Realized
on
Exercise
|
|
Number
of
Shares
Acquired
on
Vesting
|
|
Value
Realized
on
Vesting
|
|
Name
|
|
(#)
|
|
($)(1)
|
|
(#)
|
|
($)(2)
|
|
Bradley
T. MacDonald
|
|
|
26,667
|
|
$
|
172,002
|
|
|
-
|
|
|
-
|
|
Chief
Executive Officer, Chairman
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
S. McDevitt
|
|
|
7,696
|
|
|
149,553
|
|
|
15,000
|
|
|
81,000
|
|
President,
Chief Financial Officer
|
|
|
-
|
|
|
-
|
|
|
33,333
|
|
|
208,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo
Williams
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
MacDonald
|
|
|
16,667
|
|
|
126,669
|
|
|
15,000
|
|
|
81,000
|
|
Executive
VP of Operations
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
|
156,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan
N. Connors
|
|
|
10,176
|
|
|
183,473
|
|
|
3,000
|
|
|
16,200
|
|
VP
of Finance
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
31,250
|
|
(1)
Represents the difference between the exercise price and the fair market value
of the common stock on the date of exercise, multiplied by the number of options
exercised.
(2)
Represents the number of restricted shares vested, and the number of shares
vested multiplied by the fair market value of the common stock on the vesting
date.
Equity
Compensation Plan Information at Fiscal Year Ended December 31,
2006
|
|
|
|
|
|
|
|
Plan
category
|
|
Number
of
securities to be
issued
upon
exercise
of
outstanding
options, warrants
and
rights
|
|
Weighted
average exercise
price
of
outstanding
options,
warrants
and
rights
|
|
Number
of
securities
remaining available
for
future issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
524,079
(1
|
)
|
$
|
6.12
|
|
|
928,421
|
|
Equity
compensation plans not approved by security
holders
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1)
Consists of 321,579 shares of common stock issuable upon the exercise of
outstanding options and 202,500 shares of common stock issuable upon the
exercise of outstanding warrants.
2006
Non-Qualified Deferred Compensation Table
The
following table sets forth all non-qualified deferred compensation of the Named
Executive Officers for the fiscal year ended December 31, 2006.
|
|
Executive
Contributions
in
Last FY
|
|
Company
Contributions
in
Last FY
|
|
Aggregate
Earnings
in
Last
FY
|
|
Aggregate
Withdrawals/
Distributions
|
|
Aggregate
Balance
at
Last
FYE
|
|
|
|
($)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
($)
|
|
Bradley
T. MacDonald
|
|
|
|
|
$
|
100,000
|
|
$
|
80,120
|
|
|
-
|
|
$
|
933,921
|
|
Chairman,
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
S. McDevitt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
President,
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo
Williams
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
MacDonald
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Executive
VP of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan
N. Connors
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
VP
of Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All
amounts are reported in compensation on the “2006 Summary Compensation
Table”
|
Deferred
Compensation Plans
We
maintain a non-qualified deferred compensation plan, effective September 10,
2003, for Senior Executive management. Currently, Bradley MacDonald is the
only
participant in the plan. Under the deferred compensation plan that became
effective in 2003, executive officers of the Company, including the Named
Executive Officers, may defer a portion of their salary and bonus
(performance-based compensation) annually. A participant may elect to receive
distributions of the accrued deferred compensation in a lump sum or in
installments upon retirement
Each
participating officer may request that the deferred amounts be allocated among
several available investment options established and offered by the Company.
These investment options provide market rates of return and are not subsidized
by the Company. The benefit payable under the plan at any time to a participant
following termination of employment is equal to the applicable deferred amounts,
plus or minus any earnings or losses attributable to the investment of such
deferred amounts. The amount of compensation in any given fiscal year that
is
deferred by each Named Executive Officer is included in the Summary Compensation
Table under the column headings “Salary” or “Non-Equity Incentive Plan
Compensation”, as appropriate.
The
Company has established a trust for the benefit of participants in the deferred
compensation plan. Pursuant to the terms of the trust, as soon as possible
after
any deferred amounts have been withheld from a plan participant, the Company
will contribute such deferred amounts to the trust to be held for the benefit
of
the participant in accordance with the terms of the plan and the trust.
Retirement
payouts under the plan upon an executive officer’s retirement from the Company
are payable either in a lump-sum payment or in annual installments over a period
of up to ten years. Upon death, disability or termination of employment, all
amounts shall be paid in a lump-sum payment as soon as administratively
feasible. In 2006, the Company made a $100,000 contribution to Bradley
MacDonald’s deferred compensation plan as a performance bonus.
Narrative
Disclosure to Summary Compensation Table and Grants of Plan-Based
Awards
We
have
entered into employment agreements with certain Named Executive Officers,
certain terms of which are summarized below.
Bradley
T. MacDonald.
Mr.
MacDonald entered into a five year employment agreement effective February
8,
2006. Mr. MacDonald was granted 100,000 options over a five year vesting period
beginning on February 8, 2007 in consideration for his five year commitment
and
to align his interest with the interests of long-term shareholders. Upon
termination of Mr. MacDonald’s employment by the Company without cause, or upon
his resignation for good reason, he would be entitled to receive an amount
equal
to one and a half times the sum of his highest annualized salary payable in
equal monthly installments 30 days after his termination of employment for
a
period of one year.
Michael
S. McDevitt.
Mr.
McDevitt entered into a six year employment agreement effective February 8,
2006. Mr. McDevitt was granted 200,000 shares of Medifast, Inc. restricted
common stock over a six year vesting period beginning on February 8, 2006 in
consideration for his six year commitment and to align his interests with the
interests of long-term shareholders. Upon termination of Mr. McDevitt’s
employment by the Company without cause, or upon his resignation for good
reason, he would be entitled to receive an amount equal to one and a half times
the sum of his highest annualized salary payable in equal monthly installments
30 days after his termination of employment for a period of one
year.
Margaret
MacDonald. Ms.
MacDonald entered into a six year employment agreement effective February 8,
2006. Ms. MacDonald was granted 150,000 shares of Medifast, Inc. restricted
common stock over a six year vesting period beginning on February 8, 2006 in
consideration for his six year commitment and to align her interests with the
interests of long-term shareholders. Upon termination of Ms. MacDonald’s
employment by the Company without cause, or upon her resignation for good
reason, she would be entitled to receive an amount equal to one and a half
times
the sum of his highest annualized salary payable in equal monthly installments
30 days after her termination of employment for a period of one
year.
Brendan
N. Connors.
Mr.
Connors entered into a six year employment agreement effective February 8,
2006.
Mr. Connors was granted 30,000 shares of Medifast, Inc. restricted common stock
over a six year vesting period beginning on February 8, 2006 in consideration
for his six year commitment and to align his interests with the interests of
long-term shareholders. Upon termination of Mr. Connors’ employment by the
Company without cause, or upon his resignation for good reason, he would be
entitled to receive an amount equal to one and a half times the sum of his
highest annualized salary payable in equal monthly installments 30 days after
his termination of employment for a period of one year.
Potential
Payments upon Termination or Change in Control
As
of
December 31, 2006, the Company had entered into employment agreements with
each of the Named Executive Officers. As described in more detail above under
“Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based
Awards” The employment agreements with the Named Executive
Officers generally provide for the payment of benefits if the executive’s
employment with the Company is terminated either by the Company without Cause
or
by the executive for Good Reason. The employment agreements with the Named
Executive Officers do not provide for any additional payments or benefits upon
a
termination of employment by the Company for Cause, upon the executive’s
resignation other for Good Reason, as applicable, or upon the executive’s death
or disability. Upon termination by the Company without cause, or upon his or
her
resignation for good reason, all of the Named Executive officers are entitled
to
receive an amount equal to one and a half times his or her highest annualized
base salary payable in equal monthly installments 30 days after his or her
termination of employment. If a named executive had been terminated without
cause of December 31, 2006 they would have received the following
amounts:
|
Severance
($)(1)
|
Bradley
T. MacDonald
|
$337,500
|
Michael
S. McDevitt
|
$148,500
|
Margaret
MacDonald
|
$121,500
|
Brendan
N. Connors
|
$120,000
|
(1)
Based
on 2006 salary
If
there
were a change in control, which is defined as a sale of the majority of the
assets of the company or a change of control of the Board of Directors as a
result of a third party shareholder acquiring or holding over 10% of the common
stock and attempting to nominate a majority of the Board of Directors in favor
of his/her shareholder block, the executives would have received the following
amounts as of December 31, 2006:
|
|
Severance
($)(1)
|
|
Accelerated
Vesting
of
Stock
Awards
($)(2)
|
|
Total
|
|
Bradley
T. MacDonald
|
|
$
|
337,500
|
|
$
|
632,000
|
|
$
|
969,500
|
|
Michael
S. McDevitt
|
|
|
148,500
|
|
|
2,849,192
|
|
|
2,997,692
|
|
Margaret
MacDonald
|
|
|
121,500
|
|
|
2,325,450
|
|
|
2,446,950
|
|
Brendan
N. Connors
|
|
|
120,000
|
|
|
465,090
|
|
|
585,090
|
|
(1) |
Based
on 2006 salary.
|
(2)
|
Accelerated
vesting of stock awards were based on NYSE close price of the
Common
Shares on
December 29, 2006 of $12.57 per share, and for option awards
the
difference between $12.57 and the exercise or base price of
the
award.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows as of December 31, 2006, the amount and percentage of
our outstanding common stock beneficially owned by each person who is known
by
us to beneficially own more than 5% of our outstanding common stock.
|
|
|
|
|
|
Name
and Address of
5%
Beneficial Owner
|
|
Shares
Beneficially
Owned (1)
|
|
Percent
of
Outstanding
Common Stock
|
|
|
|
|
Bjurman,
Barry & Associates (2)
10100
Santa Monica Blvd. Suite 1200
Los
Angeles, CA 90067
|
|
739,538
|
|
5.4
|
%
|
The
following table shows as of April 24, 2007 the amount and percentage of our
outstanding common stock beneficially owned (unless otherwise indicated) by
each
of our (i) directors and nominees for directors, (ii) Named Execurtive Officers
and (iii) our directors, nominees for director and executive officers as a
group.
Name
of Beneficial Owner
|
|
Shares
Beneficially Owned (1)(3)
|
|
Shares
Acquirable Within 60 days (4)
|
|
Percent
of Outstanding Common Stock (%)
|
|
|
|
|
|
|
|
|
|
Bradley
T. MacDonald (5)
|
|
|
829,550
|
|
|
-
|
|
|
6.09
|
%
|
Michael
S. McDevitt
|
|
|
264,118
|
|
|
-
|
|
|
1.94
|
%
|
Margaret
MacDonald
|
|
|
139,900
|
|
|
-
|
|
|
1.03
|
%
|
Donald
F. Reilly
|
|
|
58,350
|
|
|
-
|
|
|
*
|
|
Michael
C. MacDonald
|
|
|
56,119
|
|
|
-
|
|
|
*
|
|
Brendan
N. Connors
|
|
|
51,509
|
|
|
-
|
|
|
*
|
|
Mary
Travis
|
|
|
20,200
|
|
|
-
|
|
|
*
|
|
Michael
J. McDevitt
|
|
|
17,400
|
|
|
-
|
|
|
*
|
|
Joseph
D. Calderone
|
|
|
9,200
|
|
|
-
|
|
|
*
|
|
Leo
Williams
|
|
|
8,436
|
|
|
-
|
|
|
*
|
|
Charles
P. Connolly
|
|
|
6,575
|
|
|
-
|
|
|
*
|
|
George
Lavin, Jr., Esq.
|
|
|
3,200
|
|
|
-
|
|
|
*
|
|
Dennis
M. McCarthy, Esq.
|
|
|
1,575
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
All
directors, nominees for directors and executive officers as a
group
|
|
1,466,132
|
|
|
|
|
|
10.76
|
%
|
(13
persons)
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities
and
Exchange Commission. Under those rules and for purposes of the table
above
(a) if a person has decision making power over either the voting or
the disposition of any shares, that person is generally deemed to
be a
beneficial owner of those shares; (b) if two or more persons have
decision making power over either the voting or the disposition of
any
shares, they will be deemed to share beneficial ownership of those
shares,
in which case the same shares will be included in share ownership
totals
for each of those persons; and (c) if a person held options to
purchase shares that were exercisable on, or became exercisable within
60
days of, April 24, 2007, that person will be deemed to be the beneficial
owner of those shares and those shares (but not shares that are subject
to
options held by any other stockholder) will be deemed to be outstanding
for purposes of computing the percentage of the outstanding shares
that
are beneficially owned by that person. Information supplied by officers
and directors.
|
(2)
|
This
information is based on Schedule 13G filed with the SEC on December
27,
2006.
|
(3)
|
The
shares set forth as beneficially owned by our executive officers
and
directors do not include the following outstanding options because
they
are not exercisable within 60 days of April 24, 2007: Mr. Bradley T.
MacDonald (80,000); and Mr. Leo Williams (3,333);
|
(4)
|
Unless
otherwise noted, reflects the number of shares that could be purchased
by
exercise of options available at April 24, 2007, or within 60 days
thereafter under our stock option plans.
|
(5)
|
The
shares set forth as beneficially owned by Mr. Bradley T. MacDonald
include 396,402 shares owned by his wife Shirley MacDonald, and 46,447
shares owned by the MacDonald Family Trust. His daughter, Margaret
MacDonald, beneficially owns 139,900 shares which added to Bradley
T.
MacDonald’s 829,500 beneficially owned shares results in 969,450 shares
owned by the MacDonald family.
|
ADDITIONAL
INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires the Company’s directors and executive officers and
persons who beneficially own more than ten percent of a registered class of
the
Company’s equity securities to file with the SEC and the NYSE initial reports of
ownership and reports of changes in ownership of equity securities of the
Company. Directors, officers and greater-than-ten-percent beneficial owners
are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms filed by them. In 2006, to the Company’s knowledge,
based solely on a review of the copies of such filings on file with the Company
and written representations from the Company’s directors and executive officers,
no Section 16(a) filing requirements were applicable to the Company’s
directors, executive officers and greater-than-ten-percent beneficial owners
in
fiscal 2006.
Shareholder
Proposals for the 2008 Annual General Meeting
Shareholders
interested in submitting a proposal for inclusion in the proxy statement and
form of proxy for the 2008 annual general meeting of shareholders may do so
by
following the procedures prescribed in SEC Rule 14a-8 promulgated under the
Exchange Act. To be eligible for inclusion, notice of shareholder proposals
must
be received by the Company’s Corporate Secretary no later than December 1, 2007.
Proposals should be sent to Corporate Secretary, Medifast, Inc., 11445 Cronhill
Dr., Owings Mills, MD 21117.
Codes
of Business Conduct and Ethics and Corporate Governance
Guidelines
Our
Board
of Directors has adopted a corporate Code of Business Conduct and Ethics
applicable to our directors, officers, including our principal executive
officer, principal financial officer and principal accounting officer, and
employees, as well as Corporate Governance Guidelines, in accordance with
applicable rules and regulations of the SEC and the NYSE. Each of our Code
of
Business Conduct and Ethics and Corporate Governance Guidelines are available
on
our website at
www.choosemedifast.com
by
following the links through “Investor Relations” to “Corporate
Governance.”
Any
amendment to, or waiver from, a provision of the Company’s Code of Business
Conduct and Ethics with respect to the Company’s principal executive officer,
principal financial officer, principal accounting officer or controller will
be
posted on the Company’s website,
www.choosemedifast.com.
Annual
Report, Financial and Additional Information.
The
Annual Financial Statements and Review of Operations of the Company for fiscal
year 2006 can be found in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006. A copy of the Company’s Annual Report on
Form 10-K is being mailed concurrently with this Proxy Statement to each
shareholder of record on the Record Date.
The
Company’s filings with the SEC are all accessible by following the links to
“Investor Relations” on the Company’s website at www.choosemedifast.com.
The
Company will furnish without charge a copy of the Company’s Annual Report on
Form 10-K, including the financial statements and schedules thereto, to any
person requesting in writing and stating that he or she is the beneficial owner
of Common Shares of the Company.
Requests
and inquiries should be addressed to:
Investor
Relations
Medifast,
Inc.
11445
Cronhill Dr.
Owings
Mills, MD 21117
OTHER
MATTERS
The
management of the Company knows of no other business to be presented at the
Meeting. If, however, other matters properly come before the Meeting, it is
intended that the persons named in the accompanying proxy will vote thereon
in
accordance with their best judgment.
By
Order
of the Board of Directors
Dated:
July 23, 2007
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD SEPTEMBER 7, 2007
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Bradley T. MacDonald with full power of
substitution, as attorneys for and in the name, place and stead of the
undersigned, to vote all the shares of the common stock of MEDIFAST, INC.,
owned
or entitled to be voted by the undersigned as of the record date, at the Annual
Meeting of Shareholders of said Company scheduled to be held at the Breakers
Hotel, One South County Rd., Palm Beach, FL 33480 on Friday, September 7, 2007,
at 10:00 A.M., Eastern Standard Time, and at any adjournment, postponement
or
continuation thereof, as follows:
1a.
The
re-election of three class I directors of the Company, each of whom is to hold
office for three years ending in 2010.
Class
I
Directors: Charles P. Connolly, Bradley T. MacDonald, and Donald F. Reilly
o FOR
All
nominees (except as marked to the contrary below)
|
o WITHHOLD
|
1b.
To
elect three directors to one-year terms ending in 2008.
Directors:
Richard T. Aab, Dennis M. McCarthy, Michael S. McDevitt
o FOR
All nominees (except as
marked to the contrary below)
|
o WITHHOLD
|
INSTRUCTION:
To
withhold authority to vote for any individual nominee, write that nominee's
name
in the space provided below.
2.
To
approve the re-appointment of Bagell, Josephs, Levine & Company, LLC, an
independent member of the RSM McGladrey alliance, as the Company's independent
auditors for the fiscal year ending December 31, 2007.
o FOR
|
o AGAINST
|
o ABSTAIN
|
3.
To
Amend the Bylaws of the Corporation to empower the Board of Directors to elect
a
Vice-Chairman of the Board of Directors who will assume the duties of the
Chairman in his absence and provide Board succession planning.
o FOR
|
o AGAINST
|
o ABSTAIN
|
4.
To
transact such other business as may properly come before the meeting or any
adjournment thereof. (Please date and sign on reverse side).
This
proxy, if properly executed and returned will be voted in accordance with the
directions specified hereof. If no directions are specified, this proxy will
be
voted FOR the election of the directors named above or their substitutes as
designated by the Board of Directors.
This
proxy will be voted as specified. If a choice is not specified, the shares
represented by this proxy will be voted “FOR” each director nominee.
This
proxy should be dated, signed by the stockholder(s), and returned promptly
to us
in the enclosed envelope. Persons signing in a fiduciary capacity should so
indicate.
DATE:
,
2007