Exhibit 10.1

 

MEDIFAST, INC.

EXECUTIVE SEVERANCE PLAN

 

Medifast, Inc., a Delaware corporation (the “Company”), has adopted this
Medifast, Inc. Executive Severance Plan (the “Plan”) to provide key employees of
the Company and its affiliates and subsidiaries with severance protection under
covered circumstances.

Article I.  

DEFINITIONS AND INTERPRETATIONS

Section 1.01 Definitions. Capitalized terms used in this Plan shall have the
following respective meanings, except as otherwise provided or as the context
shall otherwise require:

“Annual Base Salary” shall mean the base salary paid to a Participant on an
annual basis exclusive of any bonus payments, commission payments or additional
payments under any benefit plan of the Company.

“Administrator” shall mean be the Compensation Committee.  

“Board” shall mean the Board of Directors of the Company.

“Cause” shall mean (a) indictment or conviction for, or a please of guilty or
nolo contendere to, a felony or of a criminal act involving moral turpitude; (b)
gross misconduct or willful and continued failure to substantially perform
employment duties reasonably requested by the Company or an affiliate, after
thirty (30) days’ written notice by certified mail of such conduct or failure,
and the failure of the Participant to remedy such conduct or failure; (c) fraud,
 embezzlement, or misappropriation of any amounts of money or other assets or
property of the Company; (d) misconduct or negligence in connection with the
business of the Company or an affiliate which has a substantial adverse effect
on the Company or the affiliate; or (e) violation of any material policy of the
Company, including the Company’s Code of Conduct and Business Ethics.
Determination of Cause shall be made by the Compensation Committee in its sole
discretion. 

“Change in Control” shall have the meaning set forth in the Amended and Restated
2012 Share Incentive Plan or any successor to such plan.  

“Change in Control Period” shall mean the 24 month period beginning on the date
of a Change in Control.

“Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in
this Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.

“Compensation Committee” shall mean the Compensation Committee of the Company’s
Board of Directors.

“Effective Date” shall mean September 12, 2019.

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“Good Reason” shall mean a Participant’s resignation of employment upon the
occurrence (without the Participant’s prior written consent) of (a) a material
reduction in the Participant’s Annual Base Salary or Target Bonus, (b) a
material diminution in the Participant’s authority, duties or responsibilities,
(c) a relocation of the Participant’s principal work location by more than 50
miles, or (d) any other action or inaction that constitutes a material breach by
the Company of any written agreement under which the Participant provides
services; provided, however, that, notwithstanding the foregoing, the
Participant may not resign his or her employment for Good Reason unless (i) the
Participant has provided the Company with at least thirty (30) days prior
written notice of his or her intent to resign for Good Reason (which notice must
be provided within ninety (90) days following the occurrence of the event(s)
purported to constitute Good Reason); and (ii) the Company has not remedied the
alleged violation(s) within the thirty (30) day period following its receipt of
such notice.

“Participants” shall mean those employees of the Company or any of its
subsidiaries who are from time to time designated as Participants in accordance
with Section 2.01.

“Plan” shall mean this Medifast, Inc. Executive Severance Plan, as amended,
supplemented or modified from time to time in accordance with its terms.

“Qualifying Termination” shall mean a Participant’s Termination of Employment
(a) by the Company and its subsidiaries without Cause or (b) by the Participant
for Good Reason.

“Target Bonus” shall mean the Participant’s target annual incentive bonus.

“Termination Date” shall mean, with respect to any Participant, the actual date
of the Participant’s Termination of Employment.

“Termination of Employment” shall mean the time when the employee-employer
relationship between the Participant and the Company or any subsidiary of the
Company is terminated for any reason, with or without Cause, including, but not
by way of limitation, a termination by resignation, discharge, death, permanent
disability or retirement; provided, that such “Termination of Employment”
constitutes a “separation from service” within the meaning of Treasury
Regulation Section 1.409A-1(h).

Section 1.02 Interpretation.  In this Plan, unless a clear contrary intention
appears, (a) the words “herein,” “hereof” and “hereunder” refer to this Plan as
a whole and not to any particular Article, Section or other subdivision, (b)
reference to any Article or Section, means such Article or Section hereof and
(c) the words “including” (and with correlative meaning “include”) means
including, without limiting the generality of any description preceding such
term. The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.

 

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Article II.  

ELIGIBILITY AND BENEFITS

Section 2.01 Eligible Employees.  This Plan is only for the benefit of the
following Participants, and no other employees, personnel, consultants or
independent contractors shall be eligible to participate in this Plan or to
receive any rights or benefits hereunder:

(a)

Chief Executive Officer;

(b)

Chief Financial Officer; and

(c)

All other executive officers of the Company who are direct reports of the Chief
Executive Officer and are at the Executive Vice President-level or above (“Other
Executives”).

 

Article III.  

SEVERANCE AND RELATED TERMINATION BENEFITS

Section 3.01 Qualifying Termination. Except as set forth in Section 3.02, in the
event that a Participant incurs a Qualifying Termination, then, subject to
Section 3.03, such Participant shall be entitled to receive the severance
benefits set forth on Exhibit A attached hereto.

Section 3.02 Qualifying Termination Following Change in Control. In the event
that, during the Change in Control Period, a Participant incurs a Qualifying
Termination, then in lieu of the benefits payable pursuant to Section 3.01 and
subject to Section 3.03, the Participant will be entitled to receive the
severance benefits set forth on Exhibit B attached hereto.

Section 3.03 Conditions to Receipt of Severance Benefits.  A Participant’s
receipt of any payment or benefits under this Article III shall be conditioned
on and subject to such Participant’s execution and non-revocation of a general
waiver and release of claims in favor of the Company, within the applicable time
periods for execution following the Termination Date, as set forth in such
agreements.

Section 3.04 Other Terminations of Employment.  For the avoidance of doubt, in
no event shall the Participant be entitled to any benefit under this Plan in the
event that the Participant resigns without Good Reason or otherwise terminates
employment due to death, permanent disability, or retirement, or is terminated
by the Company for Cause.

Section 3.05 No Duplication of Benefits.  Notwithstanding anything to the
contrary in this Plan, in the event that a Participant is entitled to severance
benefits under any other employment agreement, severance agreement or similar
agreement between the Participant and the Company, no benefits shall be payable
under this Plan.

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Section 3.06 Plan Unfunded; Participant's Rights Unsecured. The Company shall
not be required to establish any special or separate fund or make any other
segregation of funds or assets to assure the payment of any benefit
hereunder.  The right of any Participant to receive the benefits provided for
herein shall be an unsecured claim against the general assets of the Company.

 

Article IV.  

CLAIMS PROCEDURES

Section 4.01 Initial Claims. A Participant who believes he or she is entitled to
a payment under the Plan that has not been received may submit a written claim
for benefits to the Plan within 60 days after the Participant's Qualifying
Termination. Claims should be addressed and sent to:

Medifast, Inc.

Chair of the Compensation Committee

100 International Drive

Baltimore, MD 21202

If the Participant's claim is denied, in whole or in part, the Participant will
be furnished with written notice of the denial within 90 days after the
Administrator's receipt of the Participant's written claim, unless special
circumstances require an extension of time for processing the claim, in which
case a period not to exceed 180 days will apply. If such an extension of time is
required, written notice of the extension will be furnished to the Participant
before the termination of the initial 90-day period and will describe the
special circumstances requiring the extension, and the date on which a decision
is expected to be rendered. Written notice of the denial of the Participant's
claim will contain the following information:

(a)

the specific reason or reasons for the denial of the Participant's claim;

(b)

references to the specific Plan provisions on which the denial of the
Participant's claim was based;

(c)

a description of any additional information or material required by the
Administrator to reconsider the Participant's claim (to the extent applicable)
and an explanation of why such material or information is necessary; and

(d)

a description of the Plan's review procedures and time limits applicable to such
procedures, including a statement of the Participant's right to bring a civil
action under Section 502(a) of ERISA following a benefit claim denial on review.

Section 4.02 Appeal of Denied Claims. If the Participant's claim is denied and
he or she wishes to submit a request for a review of the denied claim, the
Participant or his or her authorized representative must follow the procedures
described below:

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(a)

Upon receipt of the denied claim, the Participant (or his or her authorized
representative) may file a request for review of the claim in writing with the
Administrator. This request for review must be filed no later than 60 days after
the Participant has received written notification of the denial.

(b)

The Participant has the right to submit in writing to the Administrator any
comments, documents, records or other information relating to his or her claim
for benefits.

(c)

The Participant has the right to be provided with, upon request and free of
charge, reasonable access to and copies of all pertinent documents, records and
other information that is relevant to his or her claim for benefits.

(d)

The review of the denied claim will take into account all comments, documents,
records and other information that the Participant submitted relating to his or
her claim, without regard to whether such information was submitted or
considered in the initial denial of his or her claim.

Section 4.03 Administrator's Response to Appeal. The Administrator will provide
the Participant with written notice of its decision within 60 days after the
Administrator's receipt of the Participant's written claim for review. There may
be special circumstances which require an extension of this 60-day period. In
any such case, the Administrator will notify the Participant in writing within
the 60-day period and the final decision will be made no later than 120 days
after the Administrator's receipt of the Participant's written claim for review.
The Administrator's decision on the Participant's claim for review will be
communicated to the Participant in writing and will clearly state:  

(a)

the specific reason or reasons for the denial of the Participant's claim;

(b)

reference to the specific Plan provisions on which the denial of the
Participant's claim is based;

(c)

a statement that the Participant is entitled to receive, upon request and free
of charge, reasonable access to, and copies of, the Plan and all documents,
records, and other information relevant to his or her claim for benefits; and

(d)

a statement describing the Participant's right to bring an action under Section
502(a) of ERISA.

Section 4.04 Exhaustion of Administrative Remedies. The exhaustion of these
claims procedures is mandatory for resolving every claim and dispute arising
under the Plan. As to such claims and disputes: 

(a)

no claimant shall be permitted to commence any legal action to recover benefits
or to enforce or clarify rights under the Plan under Section 502 or Section 510
of ERISA or under any other provision of law, whether or not statutory, until
these claims procedures have been exhausted in their entirety; and

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(b)

in any such legal action, all explicit and implicit determinations by the
Administrator (including, but not limited to, determinations as to whether the
claim, or a request for a review of a denied claim, was timely filed) shall be
afforded the maximum deference permitted by law.

Article V.  

MISCELLANEOUS PROVISIONS

Section 5.01 No Mitigation. No Participant shall be required to mitigate the
amount of any payment provided for in this Plan by seeking or accepting other
employment following a termination of his or her employment with the Company or
otherwise.  The amount of any cash payment provided for in this Plan shall not
be reduced by any cash compensation earned by a Participant as the result of
employment by another employer or by retirement benefits.

Section 5.02 Amendment or Termination.  The Board may amend or terminate the
Plan at any time; provided, however, that no such termination or amendment may
materially and adversely affect any rights of any Participant who has incurred a
Qualifying Termination prior to the date of such termination or amendment; and
provided, further, that the Plan cannot be terminated or materially amended
during the Change in Control Period.  Notwithstanding the foregoing, the Plan
shall terminate when all of the obligations to Participants hereunder have been
satisfied in full.

Section 5.03 Enforceability.  The failure of a Participant or the Company or any
of its subsidiaries to insist upon strict adherence to any term of the Plan on
any occasion shall not be considered a waiver of such party's rights or deprive
such party of the right thereafter to insist upon strict adherence to that term
or any other term of the Plan.

Section 5.04 Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Maryland, without giving effect to its
conflict of laws rules, and applicable federal law.

Section 5.05 Tax Withholding. The Company shall have the right to deduct from
any payment or benefit hereunder all federal, state and local taxes which are
required to be withheld therefrom.

Section 5.06 Plan Administration.  The Compensation Committee shall have full
and final authority to make determinations with respect to the administration of
this Plan, to construe and interpret its provisions and to take all other
actions deemed necessary or advisable for the proper administration of this
Plan, but such authority shall be subject to the provisions of this Plan.

Section 5.07 Successors and Assigns.  This Plan shall be binding upon and inure
to the benefit of the Company and its successors and assigns. This Plan and all
rights of each Participant shall inure to the benefit of and be enforceable by
each such Participant and his or her personal or legal representatives,
executors, administrators, heirs and permitted assigns.  If any Participant
should die while any amounts are due and payable to such Participant hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Plan to such Participant’s devisees, legatees or other
designees or, if there be no such devisees, legatees or other

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designees, to such Participant’s estate.  No payments, benefits or rights
arising under this Plan may be assigned or pledged by any Participant, except
under the laws of descent and distribution.

Section 5.08 Notices. All notices and other communications provided for in this
Plan shall be in writing and shall be sent, delivered or mailed, addressed as
follows: (a) if to the Company, at the Company’s principal office address or
such other address as the Company may have designated by written notice to all
Participants for purposes hereof, directed to the attention of the Chief
Financial Officer of the Company (or such other officer as may be designated by
the Company), and (b) if to any Participant, at his or her residence address on
the records of the Company or to such other address as he or she may have
designated to the Company in writing for purposes hereof.  Each such notice or
other communication shall be deemed to have been duly given or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
except that any change of notice address shall be effective only upon receipt.

Section 5.09 No Employment Rights Conferred.  The Plan does not alter the status
of each Participant as an at-will employee of the Company. This Plan shall not
be deemed to create a contract of employment between any Participant and the
Company and/or any of its subsidiaries.  Nothing contained in this Plan shall
(a) confer upon any Participant any right with respect to continuation of
employment with the Company or any of its subsidiaries or (b) subject to the
rights and benefits of any Participant hereunder, interfere in any way with the
right of the Company or any of its subsidiaries to terminate such Participant's
employment at any time.

Section 5.10 Severability. If any provision of the Plan is, becomes, or is
deemed to be invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions of this Plan shall not
be affected thereby.

Section 5.11 Section 409A. 

(a)

The Plan is intended to comply with Section 409A of the Code or an exemption
thereunder and shall be construed and administered in accordance with Section
409A of the Code. Notwithstanding any other provision of the Plan, payments
provided under the Plan may only be made upon an event and in a manner that
complies with Section 409A of the Code or an applicable exemption. Any payments
under the Plan that may be excluded from Section 409A of the Code either as
separation pay due to an involuntary separation from service or as a short-term
deferral shall be excluded from Section 409A of the Code to the maximum extent
possible. For purposes of Section 409A of the Code, each installment payment
provided under the Plan shall be treated as a separate payment. Any payments to
be made under the Plan upon a termination of employment shall only be made upon
a "separation from service" under Section 409A of the Code. Notwithstanding the
foregoing, the Company makes no representations that the payments and benefits
provided under the Plan comply with Section 409A of the Code and in no event
shall the Company be liable for all or any portion of any taxes, penalties,
interest, or other expenses that may be incurred by a Participant on account of
non-compliance with Section 409A of the Code.

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(b)

Notwithstanding any other provision of the Plan, if any payment or benefit
provided to a Participant in connection with his or her Qualifying Termination
is determined to constitute "nonqualified deferred compensation" within the
meaning of Section 409A of the Code and the Participant is determined to be a
"specified employee" as defined in Section 409A(a)(2)(b)(i) of the Code, then
such payment or benefit shall not be paid until the first payroll date to occur
following the six-month anniversary of the Qualifying Termination or, if
earlier, on the Participant's death (the "Specified Employee Payment Date"). The
aggregate of any payments that would otherwise have been paid before the
Specified Employee Payment Date shall be paid to the Participant in a lump sum
on the Specified Employee Payment Date and thereafter, any remaining payments
shall be paid without delay in accordance with their original schedule.
Notwithstanding any other provision of the Plan, if any payment or benefit is
conditioned on the Participant's execution of a Release/Severance Agreement, the
first payment shall include all amounts that would otherwise have been paid to
the Participant during the period beginning on the date of the Qualifying
Termination and ending on the payment date if no delay had been imposed.

(c)

To the extent required by Section 409A of the Code, each reimbursement or
in-kind benefit provided under the Plan shall be provided in accordance with the
following: (i) the amount of expenses eligible for reimbursement, or in-kind
benefits provided, during each calendar year cannot affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other calendar
year; and (ii) any right to reimbursements or in-kind benefits under the Plan
shall not be subject to liquidation or exchange for another benefit.

 

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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of this Plan,
Medifast, Inc. has caused this Plan to be duly executed in its name and behalf
by its proper officer thereunto duly authorized as of the Effective Date.

 

/s/ DANIEL R. CHARD                        November 7, 2019

Daniel R. Chard,Date

Chief Executive Officer,

Medifast, Inc.

 

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EXHIBIT A

Qualifying Termination (General)

 

 

Cash Severance

Stock Options

Time-Based Restricted Shares or Deferred Shares

Performance-Based Restricted Shares or Deferred Shares

Chief Executive Officer

1.5 times the sum of the Annual Base Salary and the Target Bonus

Fully vest and remain exercisable for 90 days

Vest on a pro-rata basis, based on the number of months during the vesting
period the Participant was employed

Vest on a pro-rata basis, based on the number of months during the performance
period the Participant was employed, paid out at the end of the performance
period based on actual performance

Chief Financial Officer

1 times the sum of the Annual Base Salary and the Target Bonus

Other Executives

1 times the Annual Base Salary, and a pro-rated Target Bonus based on the number
of months during the year the Participant was employed

 

The Cash Severance shall be paid in a lump sum, no later than 30 days following
the Termination Date, subject to Section 3.03. 

 

 

 

 

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EXHIBIT B

Qualifying Termination Following Change in Control

 

 

Cash Severance

Stock Options

Time-Based Restricted Shares or Deferred Shares

Performance-Based Restricted Shares or Deferred Shares

Chief Executive Officer

2.5 times the sum of the Annual Base Salary and the Target Bonus

Fully vest and remain exercisable for 90 days

Fully vest

Vest on a pro-rata basis, based on the number of months during the performance
period the Participant was employed, at the target performance level

Chief Financial Officer*

1.5 times the sum of the Annual Base Salary and the Target Bonus

Other Executives

1.5 times the sum of the Annual Base Salary and the Target Bonus

 

Cash Severance shall be paid in a lump sum, no later than 30 days following the
Termination Date, subject to Section 3.03. 

*Notwithstanding, and in addition to, the foregoing or any other plan or
agreement, in the event of a Change in Control, the Chief Financial Officer’s
stock options shall fully vest and remain exercisable for 90 days; restricted
shares and time based equity awards shall fully vest; and performance based
equity awards shall be paid out no later than 30 days following the Change in
Control based on the target performance level.

 

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