UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K/A



Amendment No. 1



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2014

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from                     
to                     .

Commission file number 001-31573



Medifast, Inc.

(Exact name of registrant as specified
in its charter)



|Delaware                                                       | 13-3714405                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)



3600 Crondall Lane, Owings Mills, Maryland
21117

(Address of principal executive offices) (Zip
code)



Registrant’s telephone number,
including area code:

(410) 581-8042



Securities registered pursuant to Section 12(b) of
the Act:



|Title
        of each class     |  | Name
        of each exchange on which registered
|------------------------------- |  | -------------------------------------------------
|Common Stock, par value $.001   |  | New York Stock Exchange                          
|Preferred Stock Purchase Rights |  | New York Stock Exchange                          



Securities registered pursuant to Section 12(g)
of the Act: None



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   ̈     No  x

Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes   ̈    No  x

Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  
 ̈

Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x    No  
 ̈



Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈



Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer   ̈    Accelerated
filer  x

Non-accelerated filer   ̈  (Do
not check if a smaller reporting company)            Smaller reporting
company   ̈



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act).

Yes   ̈    No  
x



As of June 30, 2014,
the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the
Registrant’s common stock (based on the closing sale price of $30.41, as reported by the New York Stock Exchange on such
date) held by non-affiliates was approximately $368 million based on the closing price as reported on the New York Stock Exchange.



The number of shares of common stock outstanding
as of April 28, 2015 was 12,140,069.











Table of Contents



|                                                                                                              | Page
|------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                              |     
|Explanatory Note                                                                                              | 2   
|                                                                                                              |     
|PART III                                                                                                     
|                                                                                                             
|Item 10.    Directors, Executive Officers And Corporate Governance                                            | 3   
|                                                                                                              |     
|Item 11.   Executive Compensation                                                                             | 10  
|                                                                                                              |     
|Item 12.   Security Ownership Of Certain Beneficial Owners And Management And
    Related Stockholder Matters | 30  
|                                                                                                              |     
|Item 13.    Certain Relationships And Related Transactions, And Director Independence                         | 31  
|                                                                                                              |     
|Item 14.   Principal Accountant Fees And Services                                                             | 31  
|                                                                                                              |     
|PART IV                                                                                                      
|                                                                                                             
|Item 15.      Exhibits And Financial Statement Schedules                                                      | 32  











MEDIFAST, INC.
FORM 10-K/A
EXPLANATORY NOTE



Medifast, Inc. (the “Company,” “we,”
“us.” or “our”) is filing this Amendment No. 1 on Form 10-K/A (the “Amendment No. 1”) to amend
our Annual Report on Form 10-K for the year ended December 31, 2014, originally filed with the Securities and Exchange Commission
(the “SEC”) on March 16, 2015 (the “Original Form 10-K”), to include the information required by Items
10 through 14 of Part III of Form 10-K. This information was previously omitted from the Original Form 10-K in reliance on General
Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in the Form 10-K
by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We
are filing this Amendment No. 1 to provide the information required in Part III of Form 10-K because a definitive proxy statement
containing such information will not be filed by the Company within 120 days after the end of the fiscal year covered by the Form
10-K. The reference on the cover of the Original Form 10-K to the incorporation by reference to portions of our definitive proxy
statement into Part III of the Original Form10-K is hereby deleted.



Pursuant to the rules of the SEC, Part IV Item 15 has also been
amended to contain the currently dated certifications from the Company's principal executive officer and principal financial officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The certifications of the Company's principal executive officer and
principal financial officer are attached to this Amendment No. 1 as Exhibits 31.1 and 31.2. Because no financial statements have
been included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307
and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. Part IV, Item 15 has also been amended
to include certain exhibits required to be filed as pa of this Amendment No. 1.



Except as described above, this Amendment No. 1 does not amend
any other information set forth in the Original Form 10-K, and we have not

updated disclosures included therein to reflect any segment
events. This Amendment No. 1 should be read in conjunction with the Original Form 10-K and with our filings with the SEC subsequent
to the Original Form 10-K.



2







PART III



| | ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
| | -------- | ------------------------------------------------------



Board
of Directors



The Board is currently composed
of twelve directors and divided into three classes, Class I, Class II or Class III. Pursuant to the terms of the
Cooperation Agreement the size of the Board will be reduced to 7 and all directors will stand for election annually
commencing at the 2015 annual meeting. In connection with the Cooperation Agreement, Jason L. Groves, John P. McDaniel,
Donald F. Reilly, OSA, Margaret Sheetz, Barry B. Bondroff and Catherine T. Maguire have agreed not to stand for reelection to
the Board. Additionally, Harvey C. Barnum, Jr. and Jerry D. Reece, who are also current members of the Board, will not stand
for reelection at the 2015 annual meeting because they have reached, or will reach, the Company’s mandatory retirement
age for non-management directors by December 31, 2015. Additionally, the amendment to the Bylaws discussed above provides
that commencing with the 2015 annual meeting the Board will be declassified and all directors will be elected annually for
one year terms that will expire at the next year’s annual meeting.



Current Class I
Directors






Charles P. Connolly, age
66, has been a director of the Company since 2006. Mr. Connolly is the Chairman of the Audit Committee and also serves as a member
of the Special Mergers & Acquisitions Committee. Mr. Connolly spent 29 years at First Union Corp., which merged with Wachovia
Bank in 2001. He retired in 2001 as the President and Chief Executive Officer of First Union Corp. of Pennsylvania and Delaware.
Mr. Connolly serves on the board of numerous profit and non-profit organizations. He holds an MBA from the University of Chicago
and AB from Villanova University.



Qualifications: Mr. Connolly brings
to the Board extensive executive experience and financial acumen derived from a lengthy executive career in the banking industry.
He possesses a unique financial and risk assessment perspective into the operations and financial management of the Company and
spends significant time with our executive team providing guidance and consultation on key metrics and performance objectives that
have served Medifast well in the past few years.



Jason L. Groves, Esq., age
44, has been a director of the Company since 2009. Mr. Groves serves as a member of the Executive Committee. Mr. Groves has served
as the Company’s Executive Vice President and General Counsel since November 2011. Prior to joining Medifast in November
2011, Mr. Groves served as Assistant Vice President of Government Affairs for Verizon Maryland, since 2003. Mr. Groves is also
an Army veteran. He was a direct commissioned Judge Advocate in the United States Army Judge Advocate General’s Corp (“JAG”).
As a JAG Officer, he practiced law and had the distinction of prosecuting criminal cases in the District Court of Maryland as a
Special Assistant United States Attorney. Over the course of three years, he received two Army Achievement Medals, and one Army
Commendation Medal. Mr. Groves also sits on several non-profit boards including Anne Arundel Medical Center and the Maryland Hospital
Association. Mr. Groves received his Bachelor of Science degree, cum laude, in Business with a concentration in Hospitality Management,
from Bethune-Cookman University. He also obtained his juris doctorate from North Carolina Central University School of Law and
is a member of the New Jersey and District of Columbia bars as well as several bar associations.





3







Qualifications: Mr. Groves was first
selected as a director in 2009 based on his military, business and legal background. In addition he has extensive experience with
government relations and knowledge of the healthcare and communications technology fields. His background as a federal prosecutor
gives him insight into the regulatory and legal issues the Company faces in today’s business climate.



John P. McDaniel, age 72,
has been a director of the Company since 2009. Mr. McDaniel serves as a member of the Audit Committee and the Special Mergers &
Acquisitions Committee. He is a seasoned healthcare executive with more than 36 years of experience as a chief executive officer,
most recently at MedStar Health Systems in Columbia, Maryland, one of the largest and most comprehensive healthcare delivery systems
in the mid-Atlantic region. He is presently Chair and Partner in The Hickory Ridge Group, an advisory, development and investment
company that focuses on emerging healthcare and technology related entities. He is also a member of the Executive Committee and
on the board of the Greater Washington Board of Trade, on the board of Wittenberg University, and is the Chair and member of the
board of the Washington Real Estate Trust, a New York Stock Exchange (“NYSE”) listed company. Mr. McDaniel has a degree
in Business Administration from Wittenberg University, an MHA in Health Management and Policy from the University of Michigan,
and an Honorary Doctorate of Humane Letters from Wittenberg University.



Qualifications: Mr. McDaniel brings
extensive healthcare executive and entrepreneurial experience to the Board. His extensive management and board knowledge concerning
the health care industry and health care policy  provides seasoned oversight.



Donald F. Reilly, OSA, age 67,
has been a director of the Company since 1998. Fr. Reilly serves as Chairman of the Nomination Committee. He 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. Fr. Reilly was ordained a priest in 1974. He is currently on the board of Villanova University. He also serves on the
board of trustees of Merrimack College, MA, St. Augustine Prep, NJ, and Malvern Prep, PA. Fr. Reilly was Prior Provincial of the
Augustinian Order at Villanova, PA from 2002 to 2010. He oversaw 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, Peru, and South Africa. Fr. Reilly is currently the President of St. Augustine
Preparatory School in Richland, New Jersey.



Qualifications: Father Reilly brings
to the Board a strong background in personnel and executive management. Father Reilly was present during the restructuring of the
Company in 1999 and has an extensive knowledge of the history of the Company. He was also instrumental in developing the current
business model in consultation with the Business School at Villanova University. A nationally known academic holding a Ph.D., Father
Reilly has been an invaluable asset providing guidance to the company and creating stockholder value. He has also been instrumental
in assisting the Nomination Committee in identifying and evaluating potential director candidates for the characteristics we consider
necessary to perform high performance, risk assessment and be transparent which are desirable characteristics for all potential
directors.



Carl E. Sassano, age
65, has been a director of the Company since 2013. Mr. Sassano serves as a member of the Compensation Committee and the
Special Mergers & Acquisitions Committee. He is a member of the board of Transcat, Inc. and the Lead Director. Mr.
Sassano was Chairman of the Board of Transcat from October 2003 until July, 2013. From April 2007 to May 2008, he also served
as executive chairman of the board. Mr. Sassano became President and Chief Executive Officer of Transcat in March 2002 and
was named Chairman of the board in October 2003. In May 2006, he ceased serving as president when Charles P. Hadeed assumed
that position. He ceased serving as CEO in April, 2007. Mr. Sassano was president and chief operating officer of Bausch &
Lomb Incorporated in 1999 and 2000. He also held positions in Bausch & Lomb as president-global vision care (1996-1999),
president-contact lens division (1994-1996), group president (1993-1994) and president-Polymer Technology (1983-1992), a
subsidiary of Bausch & Lomb. Mr. Sassano is a partner in CSW Equity Partners, a small private equity investment company.
He also serves as Chairman of the board of Voiceport, one of the companies in the CSW portfolio. He has a BA from Rochester
Institute of Technology and an MBA from the University of Rochester.



Qualifications: Mr. Sassano’s
brings to the Board leadership skills and significant public corporate experience from both small companies (Transcat) and large
corporations (Bausch & Lomb). He also brings a strong understanding of the issues organizations face in executing a growth
strategy.



Current Class II
Directors






Michael C. MacDonald, age
61, has been a director of the Company since 1998. Mr. MacDonald serves as a member of the Executive Committee. Mr. MacDonald
has served as Executive Chairman of the Board since November 2011, and was promoted to Chairman and Chief Executive Officer in
February 2012. Prior to this role, Mr. MacDonald was Executive Vice President of OfficeMax, overseeing the Contract Division, a
$3.6 billion division of the OfficeMax Company. Mr. MacDonald has spent an additional 33 years in sales, marketing, and general
management at Xerox Corporation. Among his most significant roles was leading the turnaround in North America from the years 2000-2004
as President of the North American Solutions Group, a $6.5 billion division of Xerox. In addition, Mr. MacDonald was President
of Global Accounts and Marketing from 2004-2007, where he led the re-branding of the Xerox Corporation. Mr. MacDonald also has
international experience in marketing, sales, and operations with both Xerox and OfficeMax. In addition to serving as Chairman
and Chief Executive Officer of the Company, Mr. MacDonald also serves on the Jimmy V Foundation and the Archdiocese of Baltimore
Catholic Community Foundation.



Mr. MacDonald received his Bachelor of
Arts, Political Science at Rutgers University, earned 44 MBA Credits at Iona College, and attended premier executive education
courses in leadership and management at Harvard and Columbia Universities. Mr. MacDonald is the uncle of Margaret Sheetz.





4







Qualifications: Mr. MacDonald brings to the Board leadership
skills and significant experience from large corporations. His significant leadership and management experience helps drive innovation
and results.



Margaret E. Sheetz, age
38, has been a director of the Company since 2008. Ms. Sheetz serves as a member of the Executive Committee. Ms. Sheetz has served
as the President and Chief Operating Officer of Medifast since 2008. In March 2011, Ms. Sheetz also became the Chief Executive
Officer of Take Shape for Life. Prior to joining the Company in 2000, she worked with the firm of Carrington, Coleman, Sloman
and Blumenthal in Dallas, Texas. Ms. Sheetz supports the efforts of the American Diabetes Association, the American Heart Association,
and Toys for Tots Foundation. She sits on the board for Stevenson University, the Greater Baltimore Committee, Siloam, and is
also a member of the Villanova President’s Leadership Circle. In addition, she is the managing trustee of the MacDonald
Family Foundation and the Take Shape for Life Foundation which focuses on grants to support educational programs for disadvantaged
students. She holds a Bachelor of Arts degree from Villanova University and received an Executive MBA from Loyola University.
Ms. Sheetz is the niece of Michael C. MacDonald.



Qualifications: As Medifast continues
to see strong year-over-year growth, Ms. Sheetz has provided the operational and technical leadership that has resulted in Medifast
providing the proper infrastructure to support the growth of the Company. Her accomplishments include making dramatic productivity
improvement in the Company’s operational capabilities, as well as building a strong infrastructure of distribution, manufacturing,
information systems and human resource operations necessary to support rapid business growth. Her leadership and oversight skills
are greatly admired, and she is recognized in the Company as a detail-oriented executive who builds high-performance teams. The
Board considers her the source person to get information pertinent to the oversight of Medifast’s operations.





Harvey C. Barnum, Jr., age 74,
has been a director of the Company since 2009. Mr. Barnum was the Deputy Assistant Secretary of the Navy for Reserve Affairs from
July 2001 to January 2009. In this capacity he was responsible for all matters regarding the Navy and Marine Corps Reserve including
manpower, equipment, policy and budgeting. In January 2009, Mr. Barnum was designated Acting Assistant Secretary of the Navy (Manpower
and Reserve Affairs), a position he held until May 2009. In 1962 MR. Barnum was commissioned as a Second Lieutenant and he retired
from the Marine Corps as a Colonel in August 1989 after more than 27 years of service. Upon retirement in 1989, Mr. Barnum served
as the principal director, Drug Enforcement Policy, Office of the Secretary of Defense. Mr. Barnum’s personal medals and
decorations include: the Medal of Honor; Defense Superior Service Medal; Legion of Merit; the Bronze Star Medal with Combat “V”
and gold star in lieu of a second award; Purple Heart; Meritorious Service Medal; Navy Commendation Medal; Navy Achievement Medal
with Combat “V”; Combat Action Ribbon; Presidential Unit Citation; Army Presidential Unit Citation; Joint Meritorious
Unit Award; Navy Unit Citation; two awards of the Meritorious Unit Citation; the Vietnamese Cross of Gallantry (silver) and the
Department of the Navy Distinguished Public Service Award. Mr. Barnum is the past president of the Congressional Medal of Honor
Society, Connecticut Man of the Year ’67, presented Honorary Legum Doctorem St. Anselm College; Rotary Paul Harris Fellow;
Abe Pollin Leadership Award ’03, Marine Corps League “Iron Mike” Award, Order of the Carabao Distinguished Service
Award, and Ted Williams Leadership Award. Mr. Barnum Holds a B.S. in Economics from St. Anselm College.



Qualifications: Mr. Barnum was first selected to
be a director in 2009 because of his extensive distinguished government service at the Department of the Navy Executive level
and his distinguished military career. Mr. Barnum brings expertise to the Board in the area of public policy initiatives as
it relates to his knowledge of the Executive and Legislative Branch of the U.S. Government and his oversight of our
governmental relations and policy initiatives on obesity related to the Company’s products, protocols and clinical
studies. Mr. Barnum serves on the Company’s Compensation and the Nomination committees.





Kevin G. Byrnes, age 67,
has been a director of the Company since 2013. Mr. Byrnes serves as Chairman for the Special Mergers & Acquisitions Committee
and as a member of the Audit Committee. Mr. Byrnes has more than 40 years of financial experience working in the retail and commercial
banking industries. He is currently Chairman of the Board of Bay Bank, with assets of approximately $500 million and 12 branches
located in the Baltimore metropolitan area. Mr. Byrnes served as President/COO and Director of Provident Bank from 2002 to 2009.
Provident, acquired by M&T Bank in May 2009, was the largest independent financial institution in the Maryland and Northern
Virginia marketplaces at that time, with $6.5 billion in assets, 150 branches and 1,600 employees. Prior to Provident Bank, Mr.
Byrnes spent 25 years with the Chase Manhattan Bank in various executive management positions. Mr. Byrnes began his career at
Bankers Trust Co. in New York. He holds a BBA from Pace University.



Qualifications: Mr. Byrnes was selected
based on his extensive financial experience given his long career in the banking industry. Because of his public-company experience
and significant prior board experience, Mr. Byrnes is serving on the Company’s Audit Committee and Chairs the Special Mergers
& Acquisitions Committee.





Jerry D. Reece,age 75, has been a director of
the Company since 2009. Mr. Reece is Chairman Emeritus of Reece & Nichols, a Berkshire Hathaway Affiliate, and from January
2002 until July 2013 he served as their Chief Executive Officer. Reece and Nichols is involved in residential and commercial real
estate brokerage, mortgage origination, title insurance and insurance. Mr. Reece joined the United States Marine Corps and served
in Hawaii and Vietnam as a first lieutenant. Following completion of active duty service, he continued his service in the Marine
Corps Reserve until he retired with the rank of Colonel. His personal decorations include the Legion of Merit, the Navy Commendation
Medal with Combat "V" and the Combat Action Ribbon. Mr Reece was s a past member of the board of the Marine Toys for
Tots Foundation and was an Advisory Board Member of Commerce Bank, K.C., from 2003 to 2011. Mr. Reece holds a B.S. in Finance from
the University of Oregon.



Qualifications: Mr. Reece first selected to be a director
in 2009 because of his distinguished military service and his executive experience. Mr. Reece brings his leadership experience
to the Board having previously served as chief executive officer of a corporation. Mr. Reece is a member of the Compensation Committee.





Current Class III
Directors






Barry B. Bondroff, CPA,
age 66, has been a director of the Company since 2008. Mr. Bondroff serves as a member of the Audit Committee, the Executive Committee
and the Special Mergers & Acquisitions Committee. On July 22, 2013, the Board appointed Mr. Bondroff as Lead Director. Mr.
Bondroff is an officer and director with Gorfine, Schiller & Gardyn, PA, a full-service certified public accounting firm offering
a wide range of accounting and consulting services. Previously, he was a Senior Managing Director with SMART, a diverse team of
business advisory professionals. Mr. Bondroff brings over 42 years of experience providing companies of all sizes and industries
with practical and cost-effective accounting, assurance, tax, business, technology and financial advisory services. Prior to managing
SMART, Mr. Bondroff was the Managing Director for Grabush, Newman & Co., P.A., which combined with SMART in May 2003. Mr.
Bondroff began his career with Grabush Newman in 1970, and in 1976 became Officer and was promoted to Managing Director in 1982.
He earned his Bachelor of Science degree in Accounting from the University of Baltimore. Additionally, Mr. Bondroff serves on
the board for First Mariner Bank of Maryland, a NASDAQ listed company. He is active with First Mariner serving on the executive
committee, loan committee, audit committee and as chairman of the compensation committee. In addition to his professional affiliations,
Mr. Bondroff served on the Executive Committee for Israel Bonds and was a Director of Cycle Across Maryland. He has served on
the National Jewish Medical and Research Center, the Jewish Center for Business Development and has assisted the Baltimore Symphony
Orchestra in its fundraising efforts. In addition, Mr. Bondroff was a past President and Treasurer of the Edward A. Meyerberg
Northwest Senior Center, and also served as a member of the Board for the Levindale Hebrew Geriatric Center and Hospital. Mr.
Bondroff is currently a member of the audit committee of the Associated. He was Treasurer for Special Olympics of Maryland, his
term ending in 2012 and was a Trustee for Stevenson University in Maryland. In May 2014 Mr. Bondroff was nominated as an Outstanding
Director by the Baltimore Business Journal.



Qualifications: Mr. Bondroff was
first selected as a director in 2008 because of his more than 36 years of experience as a CPA, and with corporate governance including
serving on the board of another public company. He utilizes that experience as a financial expert and his elected position of Vice
Chairman of the Board. His service on the Audit Committee and his availability as a local director in Baltimore provide for local
oversight and practical consulting in the area of financial management, risk assessment and Sarbanes-Oxley regulations. Mr. Bondroff
also serves on the Special Mergers & Acquisitions Committee and provides an extensive rolodex that assists Medifast’s
management team to find the best talent in the market to assist in our growth and development.



Catherine T. Maguire,
age 64 a Sister of Mercy, has been a director of the Company since 2009. Sr. Macquire serves as a member of the Compensation
Committee and Nomination Committee. Sr. Maguire has served as Executive Director at SILOAM, a Body, Mind, Spirit wellness center
for the HIV/AIDS community, from 2011 to present. Prior to this, Sr. Maguire worked in AIDS Ministry within the prison system in
Washington, DC. and served as a vocation director for her religious community for 8 years. She received a BS degree in Education/English
in 1972, a MS degree in Library Science in 1974 both from Villanova University, and a MA degree in Theology with an emphasis in
Pastoral Ministry & Spirituality in 1995 from St. Michael’s College in Vermont. She served on the board of the National
Religious Vocation Conference from 1990 to 1992.





5







Qualifications: Ms. Maguire was
first selected as a director in 2009 for her extensive executive experience with not for profit human services organizations and
her strong background in organizational ethics and human resources and personnel management. She has multiple advanced degrees
and assists in developing the women executives of Medifast. As a result of her extensive management and human resources background
she was elected to the Nomination Committee where she assists in screening and evaluating potential director candidates and insures
the corporate values related to diversity are implemented in the Company and on the Board.



INFORMATION CONCERNING OUR BOARD OF DIRECTORS



Director Independence



We are required to have a majority of independent
directors serving on our Board and may only have independent directors serving on each of our Audit, Compensation and Nomination,
Committees pursuant to the listing rules of the New York Stock Exchange (the “NYSE”) and, with respect to our Audit
Committee, the rules and regulations existing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).



Our Board undertook an annual review of
our directors. The purpose of this review was to determine whether any relationships or transactions involving our directors (including
their family members and affiliates) were inconsistent with a determination that such director is independent under the independence
standards prescribed by the NYSE’s listing rules and our Corporate Governance Guidelines. Our Board also considered whether
our Audit Committee members continue to satisfy the independence standards prescribed for audit committee members by the rules
and regulations of the Exchange Act.



In making its determination, the Board
considered not only the criteria for independence set forth in the listing rules of the NYSE but also any other relevant facts
and circumstances that may have come to the Board’s attention, after inquiry, relating to transactions, relationships or
arrangements between a director (or any member of their immediate family or any entity of which such director or one of their immediate
family members is an executive officer, general partner or significant equity holder) on the one hand, and Medifast or any of its
subsidiaries or affiliates, on the other hand, that might signal potential conflicts of interest, or that might bear on the materiality
of a director’s relationship to Medifast or any of its subsidiaries. The Board considered the independence issue not merely
from the standpoint of the director, but also from that of the persons or organizations with which the director is affiliated.



Based on its review, our Board determined
that each of the non-employee directors qualifies as independent under the independence standards prescribed by the listing rules
of the NYSE. Our Board also determined that Messrs. Bondroff, Byrnes Connolly, and McDaniel qualify as “independent”
under the independence standards for audit committee members adopted by the SEC.



Director Attendance



In 2014, our Board convened eight times,
including three telephonic meetings, and our Board Committees held the following number of meetings: (i) Audit Committee —
five meetings; (ii) Compensation Committee — five meetings; (iii) Nomination Committee — four meetings; and (iv) Special
Mergers & Acquisitions Committee — three meetings.



Under our Corporate Governance Guidelines,
directors are expected to regularly attend Board meetings and meetings of the Board committees on which they serve in person or
by conference telephone, and all directors are expected to attend the Company’s annual meeting of stockholders. All of our
current directors attended the 2014 Annual Meeting of Stockholders on June 17, 2014 and at least 90% of the aggregate of all meetings
of the Board and the Committees on which they served in 2014.



Board Leadership Structure



The Board is committed to strong corporate
governance and board independence. The Board recognizes that having the same person serve in the Chief Executive Officer and Chairman
positions can present an issue for some companies and some boards. However, the 2004 Blue Ribbon Commission of the National Association
of Corporate Directors found that separation of the roles of chairman and chief executive officer was not necessary for effective
board leadership. The Nomination Committee and the Board continue to consider the issue of board leadership and do not believe
there is any material corporate governance benefit to separating these positions at this time. Our Chairman of the Board does not
have any enhanced rights as a director, but has the same voting authority as any other director and the role of Chairman is one
which is principally that of presiding at meetings of the Board and taking the initiative on establishing the proposed agenda for
meetings of the Board, which is a role our senior management would play a significant part in regardless of which director serves
as Chairman. Our Board continues to believe that the current structure is in our best interests and our stockholders’ best
interests and allows Michael C. MacDonald, who serves as our Chairman and Chief Executive Officer, to focus on our strategy, business
and operations.



The Board believes that there is no one
best leadership structure model that is most effective in all circumstances. The Board retains the authority to separate the positions
of Chairman and Chief Executive Officer in the future if such change is determined to be in our best interests and those of our
stockholders. Thus, the Board remains flexible and committed to a strong corporate governance structure and board independence.
The Board is committed to adopting corporate management and governance policies and strategies that promote our effective and ethical
management. In this regard, the Board strongly believes that it should have maximum flexibility in deciding whether the offices
of Chairman and Chief Executive Officer are combined or separate and, if separate, whether the Chairman should be an independent
director or an employee.



Lead Director



As noted above, the Board appointed Barry
B. Bondroff, CPA, as Lead Independent Director effective July 22, 2013. The Lead Independent Director is responsible for facilitating
and coordinating the activities of the independent directors. For the purpose of balancing the interests of the stockholders and
management when the CEO also serves as the Chairman of the Board, the Lead Independent Director serves as Chairman for meetings
of the independent directors separate from management. The Lead Independent Director also represents the best practices regarding
corporate governance, provides independent leadership to the Board, and performs such other duties and responsibilities as the
Board may determine.





6







The principal responsibilities of the Lead
Independent Director are as follows:



| | · | Act as the principal liaison between the independent directors of the Board and the CEO and Chairman of the Board;
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | Develop the agenda for and preside at executive sessions of the Board’s independent directors;
| | - | ----------------------------------------------------------------------------------------------



| | · | Communicate to the Chairman any and all feedback from the executive sessions;
| | - | -----------------------------------------------------------------------------



| | · | Prepare minutes of the meeting of independent directors, share minutes with the full Board when appropriate, and deliver the
minutes to the Company for filing with the minutes of the Company;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Review and approve the agenda for the Board;
| | - | --------------------------------------------



| | · | Participate in the compensation committee’s evaluation of the CEO’s performance;
| | - | --------------------------------------------------------------------------------



| | · | Supervise the evaluations (self and otherwise) of the directors;
| | - | ----------------------------------------------------------------



| | · | Initiate a review of the independent Board members’ performances, discuss the results with the Chairman and make recommendations
for improvement, if required;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Handle difficult and underperforming directors to improve the functionality of the Board;
| | - | -----------------------------------------------------------------------------------------



| | · | Assist in Board succession plans;
| | - | ---------------------------------



| | · | Preside at all meetings at which the Chairman is not present;
| | - | -------------------------------------------------------------



| | · | Retain the authority to call meetings of the independent directors;
| | - | -------------------------------------------------------------------



| | · | Subject to the authority of any committee of the Board, recommend to the Board the retention of advisors and consultants who
report directly to the Board;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | As the Board determines, serve as a liaison and be available for consultation and direct communication with major stockholders;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | Make recommendations to the Board on behalf of the independent directors; and
| | - | -----------------------------------------------------------------------------



| | · | Undertake further such responsibilities that the independent directors may designate to the Lead Independent Director from
time to time.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



THE COMMITTEES OF THE BOARD



The Board has four standing committees:
the Audit Committee, the Compensation Committee, the Nomination Committee and the Special Mergers & Acquisitions Committee.
The Board has determined that each of the members of the Audit Committee, Compensation Committee and Nomination Committee meets
the standards of “independence” established by the NYSE as currently in effect. A description of each Board committee is set forth below.



Audit Committee



The present members of the Audit Committee
are Charles P. Connolly (Chairman), Barry B. Bondroff, Kevin G. Byrnes, and John P. McDaniel, all of whom have been determined
by the Board to be independent within the meaning of SEC rules and the applicable NYSE listing rules. The Board has also determined
that each member of the Audit Committee is “financially literate” as required by the NYSE rules and an Audit Committee
Financial Expert within the meaning of the SEC rules based on, among other things, the experience of such member, as described
under “Board of Directors”.



The Audit Committee is responsible for,
among other things, the review and oversight of the Company’s performance with respect to its financial responsibilities
and the integrity of the Company’s accounting and reporting practices. The Audit Committee, on behalf of the Board, also
appoints the Company’s independent auditors, subject to stockholder ratification, at the annual meeting of stockholders.



The Audit Committee operates under the
Audit Committee Charter adopted and approved by the Board. A copy of the charter can be obtained from the Company’s website
(http://ir.medifastnow.com/) or by sending a request to the Office of the General Counsel, Medifast, Inc., 3600 Crondall
Lane, Suite 100, Owings Mills, Maryland 21117.



Compensation Committee



The present members of the
Compensation Committee are Carl E. Sassano (Chairman), Jerry D. Reece, Harvey C. Barnum, Jr., and
Catherine T. Maguire, all of whom have been determined by the Board to be independent within the meaning of the applicable
NYSE listing rules.



The Compensation Committee is responsible
for, among other things, reviewing and approving annually the corporate goals and objectives applicable to the compensation of
our chief executive officer and determining the compensation of our chief executive officer based on the achievement of these goals,
approving the compensation of our other executive officers, overseeing our incentive compensation plans and equity-based plans,
and reviewing and recommending changes to the Board with respect to director compensation. For information regarding our Compensation
Committee, including its processes and procedures for determining executive compensation, see “How Compensation Decisions
are Made – Role of Compensation Committee.”





7







The Compensation Committee has the authority
to delegate any of its responsibilities under its charter, along with the authority to take action in relation to such responsibilities,
to one or more subcommittees as the Committee may deem appropriate in its sole discretion.



The Compensation Committee operates under
the Compensation Committee Charter adopted and approved by the Board. A copy of the charter can be obtained from the Company’s
website (http://ir.medifastnow.com/) or by sending a request to the Office of the General Counsel, Medifast, Inc., 3600
Crondall Lane, Suite 100, Owings Mills, Maryland 21117.



Nomination Committee



The present members of the Nomination
Committee are Rev. Donald Francis Reilly, OSA (Chairman), Harvey C. Barnum, Jr., and Catherine T. Maguire, all of whom have been determined by the Board to be independent within the meaning of the applicable NYSE
listing rules.



The Nomination Committee is responsible
for, among other things, recommending to the Board potential director nominees for election to the Board, recommending to the Board
directors to serve on the various Board committees, advising the Board with respect to Board composition, procedures and committees,
developing and recommending to the Board corporate governance principles applicable to the Company, and evaluating and making recommendations
to the Board regarding the compensation of directors.



The Nomination Committee operates under
the Nomination Committee Charter adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s
website (http://ir.medifastnow.com/) or by sending a request to the Office of the General Counsel, Medifast, Inc., 3600
Condall Lane, Suite 100, Owings Mills, Maryland 21117.



Director Qualifications. Director
nominees are selected on the basis of, among other things, experience, knowledge, skills, expertise, integrity, ability to make
independent analytical inquiries, understanding the Company’s global business environment and willingness to devote adequate
time and effort to Board responsibilities so as to enhance the Board’s ability to oversee and direct the affairs and business
of the Company.



Diversity. The Company does not
maintain a separate policy regarding the diversity of the Board. However, the charter of the Nomination Committee requires that
the Committee review the composition of the Board to ensure it has the “appropriate balance” of experience, skills,
expertise and diversity for the Board as a whole. Consistent with these guidelines, both the Nomination Committee and the full
Board seek director nominees with distinct professional backgrounds, experience and perspectives so that the Board as a whole has
the range of skills and viewpoints necessary to fulfill its responsibilities. As part of our annual Board self-evaluation process,
the Board evaluates whether or not the Board as a whole has the skills and backgrounds for the current issues facing the Company.
The Board also evaluates its effectiveness with regard to specific areas of expertise.



Director Nomination Process. Pursuant
to our Corporate Governance Guidelines, our Nomination Committee reviews the qualifications of proposed director nominees to serve
on our Board and recommends director nominees to our Board for election at the Company’s annual meeting of stockholders.
The Board proposes a slate of director nominees to the stockholders for election to the Board, using information provided by the
Nomination Committee.



In certain instances, a third party may
assist the Nomination Committee or the Board in identifying potential director nominees. The Nomination Committee also considers
potential nominations for director provided by the Company’s stockholders and submits any such suggested nominations, when
appropriate, to the Board for approval. Stockholder nominees for director are evaluated using the same criteria described above.
Stockholders wishing to recommend persons for consideration by the Nomination Committee as nominees for election to the Board can
do so by writing to the Office of the Corporate Secretary, Medifast, Inc., 3600 Crondall Lane, Suite 100, Owings Mills, Maryland
21117 and providing the information and following the additional procedures set forth in the Bylaws.



Special Mergers & Acquisitions Committee



The present members of the Special Mergers
& Acquisitions Committee are Kevin G. Byrnes (Chairman), Barry B. Bondroff, Charles P. Connolly and John P. McDaniel.



The Special Mergers & Acquisitions
Committee is responsible for reviewing and overseeing all mergers, acquisitions, investment transactions and similar transactions
being considered by the Company and making recommendations to the Board.



The Special Mergers & Acquisitions
Committee operates under the Special Mergers & Acquisitions Committee Charter adopted and approved by the Board. A copy of
the charter can be obtained from the Company’s website (http://ir.medifastnow.com/) or by sending a request to the
Office of the General Counsel, Medifast, Inc., 3600 Crondall Lane, Suite 100, Owings Mills, Maryland 21117.



Cooperation Agreement
With Stockholder



As previously disclosed, the Company entered
into a Cooperation Agreement, dated April 3, 2015 (the “Cooperation Agreement”), with Engaged Capital, LLC, Engaged
Capital Master Feeder I, L.P., Engaged Capital Master Feeder II, L.P., Engaged Capital I, L.P., Engaged Capital I Offshore, LTD,
Engaged Capital II, L.P., Engaged Capital II Offshore LTD., Engaged Capital Holdings, LLC and Glenn W. Welling (collectively,
the “Engaged Group”). Pursuant to the terms of the Cooperation Agreement, the Company agreed to (i) amend the Amended
and Restated Bylaws (the “Bylaws”) to, commencing with the 2015 annual meeting of stockholders, eliminate the classification
of the board and provide for the annual election of all directors to the company’s board of directors (the “Board”)
and (ii) adopt a resolution, effective as of the 2015 annual meeting of stockholders, to decrease the size of the Board from twelve
directors to seven directors (subject to increase to nine directors when the additional independent directors have been elected
or appointed).



The foregoing is not a complete description
of the Cooperation Agreement. For a further description of the Cooperation Agreement and a copy of the Cooperation Agreement,
please see our Current Report on Form 8-K filed with the SEC on April 6, 2015.



EXECUTIVE OFFICERS



Except for Michael C. MacDonald, Jason
Groves and Margaret Sheetz who are presently also directors of the Company, the biographical information of the Company’s
current executive officers is below.



Timothy G. Robinson, CPA,
age 52, has served as the Company’s Chief Financial Officer since February 2013. Prior to joining the Company, Mr. Robinson
was Vice President, Business Operations for Canon Business Solutions, Inc., from 2008 to 2013, where he served as a key member
of the executive team for this national office products subsidiary of Canon U.S.A. From 1995 to 2008, Mr. Robinson was Vice President,
Finance & Administration for Canon Business Solutions-East, Inc. Mr. Robinson was Controller of Dupli-Fax, Inc. from 1989 to
1995 and was a Senior Emerging Business Consultant for Deloitte & Touche from 1985 to 1989. Mr. Robinson received his Bachelor
of Science degree in accounting from Villanova University.





8









Mehrnaz
Mona Ameli, age 44, is the President of Take Shape For Life and is responsible for providing day-to-day leadership and
direction to Take Shape for Life in order to optimize performance and profitability. Ms. Ameli’s focus is on helping to develop
and implement effective and creative plans for the long-term growth of the business and providing leadership, direction, and coaching
to Field Marketing, Field Operations, and Field Business development. She is also responsible for driving TSFL’s strategic
initiatives while insuring their alignment with Medifast’s overall strategic goals.



Ms.
Ameli brings over 20 years of progressive and successful executive leadership, management, and cross functional international expertise
in the direct selling industry covering all major regions of the world: North America, Western and Eastern Europe, Middle East,
Asia Pacific and Latin America. Before joining Medifast, Ms. Ameli held the role of General Manager, United States Division of
Belcorp, the ninth largest direct selling company in the world with $2B in sales across 15 markets. Prior to joining Belcorp, Ms.
Ameli was the Vice President of Marketing & Business Development at CGT in California where she managed the development and
execution of their business strategy, market segmentation, branding, and budget and product portfolio. In addition, Ms. Ameli has
had leadership positions at Shaklee Corporation, Natural Alternatives International, and Herbalife.



Ms.
Ameli has a proven track record of results-driven leadership in opening new markets as well as growing and enhancing sales and
profitability for both established companies as well as start-ups. Her expertise in building multi-national consumer packaged goods
brands, developing new products, and expanding new business units internationally with a special focus in the direct-to-consumer
and direct selling industries makes her a valuable addition to the Medifast Team.



Ms.
Ameli serves on the Direct Selling Association Diversity Council and was honored in 2012 as one of the most influential
women in the direct selling industry by Direct Selling News. She earned her Diploma of Economics and Master of Business
Management from the University of Paris - Dauphine.



Donald Gould, age 56,
has served as the Company’s Executive Vice President for Information Technology since January 2011. Prior to joining the
Company, Mr. Gould worked in information technology at Godiva Chocolatier, Inc. and Campbell Soup Company. Mr. Gould has 30 years
of information technology experience with the majority being in the consumer products industry. Mr. Gould has managed a variety
of projects both in the United States and internationally, mostly focusing on supply chain and retail operations. Mr. Gould holds
a Bachelor of Science degree from Slippery Rock University and a Master of Business Administration degree from Saint Joseph’s
University.



Brian Kagen, age 42, has
served as the Company’s Executive Vice President & Chief Marketing Officer since August 2012. Prior to this he served
as the Company’s Executive Vice President, Marketing, Sales & Business Development since June 2011. In his current role,
Brian oversees all marketing across the organization, driving day-to-day execution and initiating long-term plans to build awareness,
drive revenue and profit growth all while working to expand the Medifast brand. Brian’s responsibilities include brand strategy,
product marketing, channel management, creative services, pricing and promotion, consumer insights, public relations, social media,
and marketing communications. Brian came to Medifast in June 2011 after a 14-year career with Fortune 500 Company, Stanley Black &
Decker, where he held the position of Global Vice President of Marketing. In this position, Brian was charged with leadership
for the company’s largest consumer products business segment. Brian earned his Bachelor of Arts degree from the University
of Pennsylvania and his Masters of Business Administration degree from the Sellinger School of Business at Loyola University of
Maryland where he serves as a guest lecturer. Brian is a graduate of Leadership Baltimore County and is active in the community
as a youth football and basketball coach.





Joseph Kelleman,
age 60, is the Vice President of Finance, Corporate Controller. Mr. Kelleman joined Medifast as Director of Finance
– Supply Chain in February 2012 with over 30 years of experience in finance at Stanley Black & Decker, Inc. Prior
to joining Medifast, Mr. Kelleman was the Global Operations Controller – CDIY Business at Stanley Black & Decker,
Inc. from 2010 to 2012. From 2009 through 2010, Mr. Kelleman held the position of Director of Finance – Asian
Operations having financial oversight for all Power Tool manufacturing in Asia and the global sourcing operations for the
Company. From 2001 to 2009, Mr. Kelleman held the position of Director of Finance for the North American Power Tool
Commercial Operations of Black & Decker and prior to that role held numerous positions of increasing responsibility over
his career within the company. Mr. Kelleman received his Bachelor of Science Degree in Accounting from Mount St. Mary’s
University.



Code of Conduct and
Business Ethics and Corporate Governance Guidelines



Our Board has adopted a corporate Code
of Conduct and Business 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 Conduct and Business Ethics and Corporate Governance Guidelines
are available on our website at http://ir.medifastdiet.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 Conduct and Business 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, http://ir.medifastdiet.com/.



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 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. We have reviewed copies of reports provided to us,
as well as other records and information. Based on that review, we concluded that all reports were timely filed in 2014, except
as follows: (i) Mr. Barnum had 2 late Form 4 reports, which resulted in 2 stock grants by the Company (for an aggregate of 1,101
shares) being untimely reported; (ii) Mr. Bondroff had 2 late Form 4 reports, which resulted in 2 stock grants by the Company (for
an aggregate of 1,201 shares) being untimely reported; (iii) Mr. Byrnes had 1 late Form 4 report, which resulted in 1 stock grant
by the Company for 750 shares being untimely reported; (iv) Mr. Connolly had 2 late Form 4 reports, which resulted in 2 stock grants
by the Company (for an aggregate of 1,224 shares) being untimely reported; (v) Mr. Gould had 2 late Form 4 reports, which resulted
in 1 stock grant by the Company for 1,875 shares and 1 forfeiture of shares for tax withholdings of 657 shares being untimely reported;
(vi) Mr. Kagen had 2 late Form 4 reports, which resulted in 1 stock grant by the Company for 1,875 shares and 1 forfeiture of shares
for tax withholdings of 657 shares being untimely reported; (vii) Mr. MacDonald had 2 late Form 4 reports, which resulted in 1
stock grant by the Company for 30,000 shares and 1 forfeiture of shares for tax withholdings of 2,334 shares being untimely reported;
(viii) Ms. Maguire had 2 late Form 4 reports, which resulted in 2 stock grants by the Company (for an aggregate of 915 shares)
being untimely reported; (ix) Mr. McDaniel had 2 late Form 4 reports, which resulted in 2 stock grants by the Company (for an aggregate
of 1,101 shares) being untimely reported; (x) Ms. Mills had 3 late Form 4 reports, which resulted in 1 stock grant by the Company
for 1,094 shares and 2 forfeiture of shares for tax withholdings (for an aggregate of 1,083 shares), being untimely reported; (xi) Mr. Reece had 2 late Form 4 reports, which resulted in 2 stock grants
by the Company (for an aggregate of 1,142 shares) being untimely reported; (xii) Mr. Reilly had 1 late Form 4 report, which resulted
in 1 stock grant by the Company for 750 shares being untimely reported; (xiii) Mr. Robinson had 2 late Form 4 reports, which resulted
in 1 stock grant by the Company for 3,750 shares and 1 forfeiture of shares for tax withholdings of 467 shares being untimely reported;
(xiv) Mr. Sassano had 2 late Form 4 reports, which resulted in 2 stock grants by the Company (for an aggregate of 915 shares) being
untimely reported; and (xv) Ms. Sheetz had 7 late Form 4 reports, which resulted in in 1 stock grant by the Company for 15,000
shares, 1 forfeiture of shares for tax withholdings of 1,167 shares, 1 initial reporting of indirect ownership of 95 shares, 2
indirect ownership stock grants by the Company (for an aggregate of 5,875 shares) and 2 indirect ownership forfeiture of shares
for tax withholdings (for an aggregate of 2,071 shares) being untimely reported.





9







ITEM 11. EXECUTIVE COMPENSATION



EXECUTIVE COMPENSATION



Compensation Discussion and Analysis
(“CD&A”)



Introduction



This Compensation Discussion and Analysis discusses our 2014
compensation program as it relates to our “named executive officers.” For 2014, our named executive officers are:



| | Ø | Michael MacDonald – our Chief Executive Officer and Chairman of the Board
| | - | -------------------------------------------------------------------------

| | Ø | Timothy Robinson – our Chief Financial Officer
| | - | ----------------------------------------------

| | Ø | Margaret Sheetz – our President and Chief Operating Officer
| | - | -----------------------------------------------------------

| | Ø | Brian Kagen- our Executive Vice President, Chief Marketing Officer
| | - | ------------------------------------------------------------------

| | Ø | Don Gould- our Executive Vice President of Technology
| | - | -----------------------------------------------------

| | Ø | Jeannette Mills – our former Executive Vice President, Take Shape for Life
| | - | --------------------------------------------------------------------------



Executive Summary



2014 was a year of transition for our company.
We took actions during 2014 that we believe will position us for long-term profitability and growth. During 2014, we transitioned
company-owned centers to a franchise model and expanded our product line. However, due in part to these actions, our revenue and
net income decreased over 2013 levels, and certain other financial results did not reach our budgeted levels for 2014. Specifically,
our financial results for 2014 included one-time charges related to our exit from the MWCC corporate center model and the sale
of 41 centers to existing franchise partners, as well as the write-off of a franchise loan and certain legal expenses. Despite
these results, we have delivered strong returns for our shareholders, as our one and three-year total stockholder return are approximately
28% and 144%, respectively.



We believe that it is important, during
this time of transition, to retain the talented executives who can lead us to become a stronger company and to deliver value to
our shareholders, but also to ensure that our executives are rewarded in line with the results that they deliver. In light of these
challenges and of the negative results of the “say on pay” advisory vote held at our annual meeting of stockholders
in 2014, we have focused in 2014 on assessing and improving our executive compensation policies and programs to effectively achieve
our compensation goals: to attract, retain and motivate these highly qualified executives, and to align their interests with the
interests of our stockholders. This assessment has resulted in the implementation of several new policies that help to align executive
interests with the interests of our stockholders, which will ensure that our executives continue to be focused on long-term results.
Our assessment of our compensation programs has continued into 2015, and we expect that we will continue to make changes to our
programs to further achieve our compensation goals.



We spent a majority of the 2014 year following
the “say on pay” advisory vote analyzing our compensation programs, and based on our analysis and the feedback we received,
we made changes that we believe were necessary to strengthen the overall executive compensation program and address the concerns
of our stockholders. The following is a summary of compensation actions taken during 2014.



|2014 Actions
|------------
|ü           
|ü           
|ü           
|ü           



In addition to the above actions, we have
continued our policies which are what we consider to be our ongoing “best practices” with respect to compensation.



|Compensation Best Practices
|---------------------------
|ü                          
|ü                          
|ü                          
|ü                          
|ü                          
|ü                          
|ü                          





10







2014 Say on Pay Advisory Vote Results and 2014 Compensation
Actions



As required by the Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank”), we held a “say on pay” advisory vote on executive compensation
at our annual meeting of stockholders in 2014. At that meeting, only 28% of our stockholders voted in favor of our executive compensation
proposal. Since that time, we have conducted an in-depth review of our compensation policies and programs, and have adopted several
new policies to promote good governance and an alignment of the interests of our executives with our stockholders. We have also
engaged in discussions with several of our stockholders, in order to better understand their concerns with our executive compensation
policies and programs. These discussions were informative, and assisted us in understanding how our compensation programs can be
better structured and how we can improve the understanding of our compensation programs by our stockholders. The chart below summarizes
the main concerns raised by our stockholders and how we have responded to such concerns.



|Stockholder Feedback | Medifast Response                                                       
|-------------------- | ------------------------------------------------------------------------
|Ø                    | Annual cash bonus awards assumed to be discretionary.                   
|Ø                    | Restricted share awards to our CEO in 2013 were thought to be excessive.
|Ø                    | Perceived disconnect between CEO pay and Company performance.           
|Ø                    | Lack of stock ownership guidelines.                                     
|Ø                    | Lack of a clawback policy.                                              
|Ø                    | Lack of anti-pledging policy.                                           



The discussions we have engaged in with
our stockholders have helped us understand the concerns with our compensation programs, and we hope to keep this dialogue open
during our ongoing assessment of our compensation programs. Our “say-on-pay” advisory vote on executive compensation
is required to be held no later than at our annual meeting of stockholders in 2017.



Compensation Philosophy



In today’s rapidly changing marketplace,
it is important to locate and secure the talented individuals who will be able to steer our company to long-term success and to
provide positive returns for our stockholders. Our executive compensation program is designed to attract, retain and motivate these
highly qualified executives, and to align their interests with the interests of our stockholders.



| | Ø | Attract: We compete with other companies in our industry for talent, and many of these companies
are much larger and have higher revenues. We offer our executives competitive compensation packages, including sign-on awards,
so that we can attract the talent needed to deliver quality results and position our company to succeed now and into the future.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Ø | Retain: A stable management team benefits our strategic long-term goals, and ensures that
we are managed by executives who have a deep knowledge and understanding of our company and the ability to make well informed decisions.
We retain our executives by providing them competitive on-going pay packages, and tying a portion of their compensation to their
long-term service with the company.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Ø | Motivate: We believe in pay for performance. A large percentage of our executives’
compensation is based on our performance. The only fixed element of compensation for our executives is base salary, with the remainder
of compensation based on our financial performance (our executive cash bonus plan and performance-based deferred shares) and the
value of our stock (the retention awards granted to our senior executives periodically, stock options granted to our Executive
Vice Presidents annually, and performance-based deferred shares). Placing the value of a portion of our executives’ pay at
risk ensures that our executives will work to achieve our stated business objectives and create stockholder value.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





11







| | Ø | Align Interests with Stockholder Interests: It is vital for our executives to make decisions
that will create positive results for our stockholders. We believe that the best way to ensure our executives understand the pressing
concerns of stockholders is for our executives to be stockholders themselves, and to have a meaningful proportion of their compensation
paid in shares. Since the value of the executive’s compensation is dependent on our share price, the executive is motivated
to increase long-term company value.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Pay for Performance



Executive compensation at Medifast is focused
on executive performance keyed to results. We provide fair and equitable compensation to our executives by combining conservative
base pay, annual incentive awards paid based on our performance (consisting of both cash and performance-based deferred shares),
and stock-based long-term incentives. The Compensation Committee has designed our executive compensation program so that performance-based
and other variable pay elements (annual incentive awards and equity-based awards) constitute a significant portion of the targeted
annual compensation that each executive is eligible to earn during the year. The total amount of compensation each executive could
receive with respect to a fiscal year is variable based on our performance, which motivates our executives to focus on creating
value for our stockholders.



The following charts demonstrate that these
performance-based and variable pay elements comprised at least 80% of the targeted annual compensation for the Chief Executive
Officer, 70% of the targeted annual compensation for the Chief Operating Officer/President, and 60% of the targeted annual compensation
for the Chief Financial Officer.







For purposes of these charts, “fixed”
compensation is the executive’s base salary, and “variable” is a combination of the target cash bonus, the grant
date fair value of the deferred shares granted in connection with 2014 performance (assuming performance at the target level),
and the grant date fair value of the portion of the restricted share awards that our CEO, President and CFO each received in 2013
that were scheduled to vest during 2014. We have included the grant date fair value of the restricted share awards granted in 2013
that vested during the 2014 because this is the amount the Compensation Committee took into consideration for compensation planning
purposes when it granted the restricted share awards.



Realized Compensation



The amounts included in the
Summary Compensation Table are calculated based on SEC regulations and do not reflect the actual amounts that our named
executive officers will receive during the year – the totals in the Summary Compensation Table are much higher than the
amounts each named executive officer will actually receive in the applicable year. The amounts included in the Summary
Compensation Table are particularly misleading with respect to restricted share awards granted to our named executive
officers, since the full grant date fair value of the awards are reported in the year of grant, and we have not historically
granted restricted share awards to our named executive officers on an annual basis. Instead, we have historically made one-time
grants of restricted share awards that vest over a long vesting period. As a result, our Summary Compensation Table is
required to show a larger “total compensation” in the year in which a restricted share award is granted, and
lower “total compensation” in the years in which no such awards are made. To illustrate the disconnect between
the amounts reported in the 2014 Summary Compensation Table and the actual amounts realized by our CEO, the table below shows
the amounts realized by our CEO, Michael MacDonald, in the applicable year, and the amount reported in the 2014 Summary
Compensation Table.





12







Realized Compensation







The amounts in the “Summary Compensation
Table” columns are as reported in the Total column of the 2014 Summary Compensation Table. The amounts in the “Realized
Compensation” column include (a) base salary, (b) actual cash bonus earned for the applicable year, (c) the value on vesting
of deferred shares that vest and are paid during the applicable year (which relate to performance in the prior year), (d) the value
on vesting of restricted shares that vest during the year, (e) the value realized from the exercise of stock options during the
year, and (f) all other compensation paid (or earned) during the applicable year (which is included in the “All Other Compensation”
column of the Summary Compensation Table for the applicable year). The Summary Compensation Table amounts for 2013 and 2014 reflect
the re-grant of certain restricted share and deferred share awards in 2014, discussed below under “Long-Term Compensation
Correction During 2014.”



CEO Compensation and Company Results



Our focus on pay for performance can best
be demonstrated through a comparison of our total stockholder return and our CEO’s realized pay over the same period. Since
our CEO took the position in February 2012, we have delivered excellent returns for our stockholders. Our one and three-year total
stockholder return are approximately 28% and 144%, respectively. The realizable pay for our CEO is directly linked to the value
of our stock and to the positive returns for our stockholders. Due to the increase in the value of our stock, our CEO’s realized
compensation for this period has increased as well.



To demonstrate the linkage between CEO
pay and Company performance, the chart below compares our CEO’s realized pay (as disclosed above) for the last three fiscal
years to our total stockholder return for that period. The total stockholder return is based on the amount that a stockholder would
have at the end of each fiscal year, assuming $100 was invested in the beginning of 2012.









13







How Compensation Decisions are Made



Role of Compensation Committee



The Compensation Committee is responsible
for developing and approving the executive compensation program for all executive officers, including the named executive officers,
and for reviewing, approving and, where appropriate, recommending to the full Board for approval, our incentive compensation and
equity-based plans. The Compensation Committee is also responsible for the creation and periodic review of the overall executive
compensation philosophy, the analysis and assessment of any material risk to the Company related to our compensation programs,
and the determination of the components and levels of executive compensation.



Role of Management



The Compensation Committee
works closely with members of our management team in designing our executive compensation programs, including Mr. MacDonald,
our CEO, and Mr. Robinson, our CFO and Jeanne Uphouse, Executive Vice President, Human Resources. Our management team evaluates the performance of our executives (other than our CEO), and makes
recommendations as to the compensation levels of our executives and the goals for our short-term incentives. The advice of
our management is important in order for the Compensation Committee to design compensation programs that align to corporate
goals and our strategic direction. All compensation decisions are made by the Compensation Committee in its sole
discretion.



Use of Peer Group



The Compensation Committee measures the
total direct compensation (which includes base pay, annual cash and stock-based incentives and stock-based long-term incentives)
of each executive against other organizations in the general weight-loss industry. There is a wide variety of diet products and
programs which comprise the weight loss industry, which include a wide variety of commercial weight loss programs, pharmaceutical
products, weight loss books, self-help diets, dietary supplements, appetite suppressants and meal replacement shakes and bars.
Some of our competitors are substantially larger than we are, and have considerably greater financial resources than we have. Our
ability to remain competitive depends, in significant part, on our success in recruiting and retaining executive leadership with
an attractive compensation package. The Company targets total direct compensation for each executive near median for organizations
in the general weight-loss industry, with the mix of pay (base pay, annual cash incentives and long-term incentives) designed to
reflect a strong bias towards pay for performance by placing a majority of target compensation at risk.



Each year, the Compensation Committee compares
the total direct compensation for our executives to compensation paid by an industry peer group approved by the Compensation Committee.
The criteria used to identify the peer group were: (1) industry — Medifast competes for talent with other healthy living
and wellness companies and general weight-loss industry companies of similar and larger size; and (2) financial scope — our
management talent should be compensated similar to that of companies of a similar and larger size in terms of revenues.



For 2014, the peer group was comprised
of the following five corporations. The peer group revenue range is from $214 million to $4.9 billion.



| | · | NutriSystem Inc.,
| | - | -----------------

| | · | Nutraceutical, Inc.,
| | - | --------------------

| | · | Herbalife Ltd.,
| | - | ---------------

| | · | USANA Health Sciences, and
| | - | --------------------------

| | · | Weight Watchers International Inc.
| | - | ----------------------------------



Role of Compensation Consultants and Survey Data



During Fiscal 2013, the Compensation Committee
engaged an independent executive compensation consultant firm, Keating Advisors, LLC. (“Keating”), to advise and make
recommendations regarding Medifast’s executive compensation program. Keating provided advice with respect to compensation
through June 2014. The Compensation Committee has evaluated the independence
of Keating and concluded that no conflict of interest exists that would prevent Keating from independently advising the Compensation
Committee.



In addition to advice provided by Keating
the Compensation Committee utilized the following materials, along with other resources and tools, to render compensation decisions
for 2014: (i) surveys and reports of executive compensation paid by other public companies with characteristics similar to ours
and (ii) professionally published surveys from Towers Watson, WTPF Compensation Survey, Direct Selling Association Management Compensation
& Benefits Survey, Economic Research Institute Salary Assessor, and HRA-NCA. These materials and other resources help to provide
us with solid benchmarks for each component of our executive compensation package as well as a general understanding of best practices
of companies in our industry who are competing for with us for top talent.



Elements of Executive Compensation



Our executive compensation program has
three main elements: base salary, annual incentive bonus (cash and equity), and long-term equity awards.





14







Base Salary



Base salary is the only element of fixed
compensation that we provide to our executives. Our base salary determinations principally reflect the skills and performance levels
of our individual executives, the needs of the Company, and pay practices of comparable public companies within the general health
and wellness diet industry.



It is not our policy to pay our executive
officers at the highest base salary level. Instead, we establish executive base salaries below the midpoint level relative to our
peers. The Compensation Committee evaluates our executives’ base salaries on an annual basis and asks for input and recommendations
from the CEO and CFO and then considers (i) the particular executive’s role and responsibilities; (ii) his or her level of
performance, achievements, and contributions to the Company; (iii) current market data and salary levels for such executive’s
particular position; and (iv) the total compensation paid to such executive. We believe this policy sets a prudent and fiscally
responsible tone for the Company’s overall base salary compensation program.



In 2014, the salary increases were based on Keating engaged in a general market study
of base salaries in our industry, and base salaries were adjusted to be in line with the median salary level as determined in
the study. Base salary for 2014 for each named executive officer is illustrated below:



|Name          | 2014 Base Salary
|------------- | ----------------
|Mr. MacDonald | $635,400        
|Mr. Robinson  | $317,700        
|Ms. Sheetz    | $423,600        
|Mr. Kagen     | $266,400        
|Mr. Gould     | $220,000        
|Ms. Mills     | $242,050        



Annual Incentive Bonus



Our annual incentive bonus awards are paid
to participants in a combination of cash and performance-based deferred shares. These bonus awards principally reflect the Company’s
financial performance and achievement of corporate objectives approved by our Board. The executive cash bonus plan and the performance-based
deferred share awards are designed to reward our executives for the achievement of shorter-term financial goals, predominantly
revenue growth, profitability, and cash flow. In consultation with the Chairman and CEO, the Compensation Committee evaluates,
adjusts and approves the target cash bonus and the amount of deferred shares to be granted to each executive officer. In determining
the target amounts for each executive, the Compensation Committee and the Chairman and CEO consider each executive’s contribution
to current and long-term corporate goals, and value in the labor market.



The financial targets for the annual cash
and equity incentives are set based on the annual budget approved by the Board during the first quarter of 2014, and are intended
to reward executives if the financial performance projections are met.



For 2014, the financial targets were based
on corporate revenue, income before tax, and cash flow. The performance targets were the same for both the cash and the deferred
share components of the annual incentive bonus. However, as discussed below, the deferred shares have an additional service requirement,
and only vest if the executive remains employed for an additional year after the end of the performance period.



The Compensation Committee set the target
for pre-tax profit at $40.7 million, the target for corporate revenue at $388.2 million, and net increase in cash and cash equivalents
at $26.2 million (excluding adjustments from / to investment accounts, treasury stock repurchases and change in year over year
deferred income tax and Income tax payable balances versus last year). The target performance level is set to promote solid performance
in line with our budget for the year. The executive is eligible to receive an amount greater than the target if performance is
greater than the target level. The components of the incentive plan outlined below are in place to focus the organization towards
achieving growth/improved market share, shareholder value, and the effective use of cash.



The financial targets for annual cash and
equity incentives are divided into three components as follows:



| | · | Corporate Revenue: 25% of the total target
payout is based on the achievement of our corporate revenue target. For 2014, the corporate revenue target was $388.2 million
in net revenue, an increase of 8.8% over 2013 net revenue of $356.9 million.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Income Before Tax (“IBT”): 50%
of the total target payout is based on a pre-tax profit target of $40.7 million, an increase of 19.0% over 2013 IBT of $34.2 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Cash Flow: 25% of the total target payout is
based an increase in cash and cash equivalents of $26.2 million. Cash flow is defined as total cash generated adjusted for treasury
stock repurchases and the change in year over year deferred income tax and income tax payable year end balances versus last year
or adjustments from/to investment accounts.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





15







Each performance goal was assigned a target,
as described above, along with a threshold level and a maximum level, which increase or decrease the payout for executives. The
financial targets, along with the threshold and maximum level for each of these goals and the actual performance are set forth
below.



|Goal                                         | Percentage of Total Bonus Payout | Threshold     | Target         | Maximum for EVPS | Maximum for CEO, President and CFO
|-------------------------------------------- | -------------------------------- | ------------- | -------------- | ---------------- | ----------------------------------
|Net Revenue                                  | 25%                              | $340 million  | $388.2 million | $402.8 million   | $410.8 million                    
|Income Before Tax (1)                        | 50%                              | $34 million   | $40.7 million  | $48 million      | $52.0 million                     
|Net Increase in Cash and Cash Equivalents(2) | 25%                              | $21.5 million | $26.2 million  | $30.2 million    | $34.2 million                     



(1) Income Before Tax, for purposes of determining payouts under
the executive cash bonus plan, may be adjusted for certain non-recurring items as approved by the Compensation Committee.



(2) Defined as total cash generated adjusted
for treasury stock purchases and the change in year over year deferred income tax and income tax payable year end balances versus
2013 or adjustments from/to investment accounts.



To the extent that the actual performance
with respect to a performance goal is above or below the target, the portion of the bonus attributable to that performance goal
is increased or decreased accordingly. After the end of the fiscal year, our Compensation Committee reviews our financial results,
and determines the final achievement of each of the performance goals and the actual bonus amount that was earned and is payable
to each of our executives. The Compensation Committee has the discretion to increase or decrease the award payable to any executive
in its sole discretion, based on the Compensation Committee’s assessment of that executive’s individual performance
during the year.



Our financial results for 2014
included certain one-time charges which were outside of the control of our executive team related to our exit from the MWCC
corporate center model and the sale of 41 centers to existing franchise partners, as well as the write-off of a franchise
loan and certain expenses related to 13D filers. In December 2014, our Compensation Committee examined our financial results
to date, both including and excluding the assets, liabilities, operating results and cash flows relating to these one-time
expenses, which were expected to be included in the Company’s financial statements in December 2014. The Compensation Committee determined that these expenses could not
have been anticipated at the beginning of the performance period, and should not be included in the determination of the
actual performance for purposes of the annual incentive bonus. The Compensation Committee also determined that the executive
team had performed admirably during the 2014 fiscal year. The Compensation Committee amended the 2014 annual incentive cash
and equity incentives such that the threshold payout would be the minimum payment that the executives would receive with
respect to 2014.



The actual results with respect to 2014
performance (including discontinued operations as well as non-GAAP adjustments) are set forth in the table below:



|Goal                                          | Actual Performance(In Millions)
|--------------------------------------------- | -------------------------------
|Net Revenue                                   | $307.8                         
|Income Before Tax (1)                         | $32.7                          
|Net Increase in Cash and Cash Equivalents (2) | $25.0                          



(1) Income before tax was adjusted to exclude
certain one-time expenses recorded in 2014, including the Company’s gain/loss on the sale of corporate centers, the write-off
of a franchise loan, and certain legal expenses.



(2) Cash flow was adjusted to exclude certain
one-time impacts on cash recorded in 2014 to include the cash impact the Company realized regarding the gain/loss on the sale of
corporate centers, the write-off of a franchise loan, and certain legal expenses.



Cash Component



The target incentive cash bonus amount
for each of our named executive officers for 2014 is set forth below, along with the minimum amount they were entitled to, the
maximum amount that each executive would have been entitled to for above-target performance, and the actual bonus amount for 2014.



|Name          | Minimum Payout | Target Payout | Maximum Payout | Actual Payout
|------------- | -------------- | ------------- | -------------- | -------------
|Mr. MacDonald | $317,700       | $635,400      | $1,906,200     | $317,700     
|Mr. Robinson  | $95,310        | $190,620      | $571,860       | $95,310      
|Ms. Sheetz    | $211,800       | $423,600      | $1,270,800     | $211,800     
|Mr. Kagen     | $53,280        | $106,560      | $213,120       | $53,280      
|Mr. Gould     | $46,596        | $93,192       | $186,384       | $46,596      
|Ms. Mills     | $48,410        | $96,800       | $193,640       | $0(1)        



(1) Ms. Mills did not earn an annual incentive cash bonus due
to her termination of employment on September 12, 2014.





16







Performance-Based Deferred Share Component



The equity portion of our annual
incentive bonus is composed of performance-based deferred shares. The performance goals and targets are the same as the goals
and targets for the cash portion of the annual incentive bonus. At the end of the year, the Compensation Committee reviews
our results and determines the number of performance-based deferred shares that will be deemed “earned.” The
earned deferred shares are paid to the executives as restricted shares with a one year vesting period. The target number of
performance-based deferred shares for each of our named executive officers for 2014 is set forth below, along with the
minimum number of shares they are entitled to, the maximum number that each executive would have earned for above-target
performance, and the actual amount earned with respect to 2014 performance, which will vest in full December 31, 2015.



|Name          | Minimum Number of Deferred Shares | Target Number of Deferred Shares | Maximum Number of Deferred Shares | Actual Number of Deferred Shares
|------------- | --------------------------------- | -------------------------------- | --------------------------------- | --------------------------------
|Mr. MacDonald | 20,000                            | 40,000                           | 80,000                            | 20,000                          
|Mr. Robinson  | 5,000                             | 10,000                           | 20,000                            | 5,000                           
|Ms. Sheetz    | 10,000                            | 20,000                           | 40,000                            | 10,000                          
|Mr. Kagen     | 1,250                             | 2,500                            | 5,000                             | 1,250                           
|Mr. Gould     | 1,250                             | 2,500                            | 5,000                             | 1,250                           
|Ms. Mills     | 1,250                             | 2,500                            | 5,000                             | 0(1)                            



(1) The Deferred Shares held by Ms. Mills
were forfeited upon her termination of employment on September 12, 2014.



Long-Term Compensation



Our Compensation Committee
provides long-term compensation to our executives in the form of equity or equity-based awards, in order to incentivize them
to create stockholder value, and to align their interests with the interests of our stockholders. We generally grant these
awards in the form of restricted shares or stock options, as described below. Other than with respect to the corrective
action discussed below under the heading “Long-Term Compensation Correction During 2014”, we granted only
performance-based deferred shares (described above under “Annual Incentive Bonus”) and stock options to our
named executive officers during 2014, and we did not grant any restricted shares to our named executive officers. The
description of restricted share awards and retention awards below relates to awards granted in 2013.



Restricted Share
Awards



We have not historically made
grants of restricted shares on an annual basis to our named executives officers. Instead, our Compensation Committee has
generally made one-time grants of restricted shares that vest over long periods. We grant restricted shares as sign-on
awards, long-term retention awards, or, in some cases, rewards for exceptional performance. We believe that these larger
one-time restricted share awards with long vesting schedules assist us in retaining our executives and encourage our
executives to create long-term stockholder value.



With the exception of the restricted shares
granted to our CEO as a result of the corrective actions described below in the section titled “Long-Term Compensation Correction
During 2014”, we did not grant any restricted shares to any of our named executive officers in 2014. However, each of our
CEO, President and CFO received a grant of retention shares in 2013, as described below.



Retention Shares



During 2013, our Compensation Committee
made grants of restricted shares to Mr. MacDonald (100,000), Ms. Sheetz (50,000), and Mr. Robinson (12,000) that are referred to
herein as Retention Shares. These grants have a particularly long vesting schedule. The Retention Shares are meant to retain the
services of these executives over the seven year vesting schedule (five years for Mr. Robinson), and to reward them for their performance
over that period. Retention Shares are not granted on an annual basis to our executives. The vesting schedule of the Retention
Shares is nested in such a way as to be the equivalent of making a smaller grant each year for five years (three years for Mr.
Robinson) that vests over three years. The Compensation Committee determined that, rather than making an award each year, the award
should be granted at one time. This would give the executives some certainty as to their compensation and incentivize them to create
long-term stockholder value to increase the value of their awards. Taking this unique vesting schedule into account, the value
of the Retention Shares in each tranche was comparable to similar annual grants made to CEOs of our peer companies.



The Retention Shares granted to Mr. MacDonald
and Ms. Sheetz vest in five equal tranches, with each tranche vesting over a three year period, as illustrated below:



|              | Total Shares In Tranche | Year of Vesting
|------------- | ----------------------- | ---------------
|2014          | 2015                    | 2016           
|Mr. MacDonald | 20,000                  | 6,666          
|              | 20,000                  |                
|              | 20,000                  |                
|              | 20,000                  |                
|              | 20,000                  |                
|Ms. Sheetz    | 10,000                  | 3,333          
|              | 10,000                  |                
|              | 10,000                  |                
|              | 10,000                  |                
|              | 10,000                  |                





17







The Retention Shares granted to Mr. Robinson
vest in three equal tranches, with each tranche vesting over a three year period, as illustrated below:



|             | Total Shares In Tranche | Year of Vesting
|------------ | ----------------------- | ---------------
|2014         | 2015                    | 2016           
|Mr. Robinson | 4,000                   | 1,333          
|             | 4,000                   |                
|             | 4,000                   |                



Other Restricted Share Grants



Our Compensation Committee also made certain
restricted share grants in 2013 to executives in addition to the grants set forth above.



| | · | Mr. MacDonald received a restricted share grant of 100,000 shares in January 2013, in recognition
of his performance during 2012 and in consideration of his stepping into the CEO role during 2012. These restricted shares were
meant to serve as a sign-on grant for Mr. MacDonald even though they were not granted until 2013, and the number of restricted
shares was determined to be reasonable based on our competition for talent in the market and Mr. MacDonald’s experience.
These restricted shares vest in equal annual installments over a five year period.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Ms. Mills received a restricted share grant of 10,000 shares in June 2013, in connection with her
stepping into the role of Executive Vice President, Take Shape for Life. These shares vest in equal annual installments over a
five year period. In connection with her termination on September 12, 2014, we accelerated a pro-rata portion of the restricted
shares that would have vested had she remained employed through the next vesting date, and the remaining restricted shares were
forfeited.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Options



Our Compensation Committee granted stock
options to our Executive Vice Presidents in both 2013 and 2014, but stock options have not been granted to our CEO, President,
or CFO. The Compensation Committee determined that our CEO, President and CFO hold adequate equity awards, as described above,
to align their interests with stockholders, to retain their services, and to reward them for positive results that they have created.
Stock options help us maintain a competitive level of total compensation for our Executive Vice Presidents, and are an important
part of our effort to attract, retain, and motivate high-quality talent in key positions.



We grant stock options to our Executive
Vice Presidents rather than restricted shares in order to incentivize them to create stockholder value and to retain their services.
Stock options are granted with an exercise price equal to the fair market value of our shares on the date of grant, and have value
only if the stock price increases from that date. We generally intend for our stock options to qualify as “incentive”
stock options, which provide certain tax benefits for the grantee. Stock options vest 33% each year on the anniversary of the date
of grant and have a term of 10 years from the date of grant. The number of stock options granted to each Executive Vice President
is determined on a discretionary basis, rather than by a formula. We do not time the grant of our options to coincide with the
announcement of any financial results.



Long-Term Compensation Correction During
2014



Following a review in 2014 of our compensation
awards and procedures, our Compensation Committee determined that it had inadvertently exceeded the limit on grants of awards of
restricted shares and deferred shares to an individual during a 12-month period under the 2012 Plan with respect to grants made
to Mr. MacDonald during 2013 and 2014 and to Ms. Sheetz during 2014.



We promptly took corrective action. Mr.
MacDonald and Ms. Sheetz agreed that the portion of the award of 100,00 restricted shares granted to Mr. MacDonald on January 2,
2013, the award of 100,000 restricted shares granted to Mr. MacDonald on February 19, 2013, the award of 80,000 performance-based
deferred shares granted to Mr. MacDonald on February 19, 2013, the award of 80,000 performance-based deferred shares granted to
Mr. MacDonald on February 5, 2014, and the award of 40,000 performance-based deferred shares granted to Ms. Sheetz on February
5, 2014 exceeded the limit on grants of awards under the 2012 Plan, and would be cancelled and forfeited. The amount of the remaining
awards did not exceed the limits on grants to an individual during a 12-month period.



The Board amended the 2012 Plan to provide
that no participant may be granted more than 150,000 restricted shares or deferred shares during a calendar year, as disclosed
on the Form 8-k filed on June 17, 2014.



The Compensation Committee determined that,
while the awards were mistakenly made in excess of the limits in the 2012 Plan, the awards themselves were reasonable and in line
with the compensation philosophy described above. The Compensation Committee thereafter granted new awards of restricted shares
and deferred shares to Mr. MacDonald and Ms. Sheetz, subject to the same vesting schedules and performance criteria as the cancelled
awards. These awards were granted in compliance with the limits on grants of restricted shares or deferred shares to an individual
during a calendar year under the amended 2012 Plan. The Compensation Committee has taken actions since the date of the corrective
action to strengthen its internal controls and procedures, to ensure that no similar mistakes occur in the future.





18







As a result of the cancellation and re-grant
of these awards during 2014, the Summary Compensation Table disclosure with respect to 2014 shows a level of compensation for Mr.
MacDonald that is much larger than the amount the Compensation Committee intended to award him in 2014. SEC rules require that
we include the value of the replacement grants in the 2014 compensation of Mr. MacDonald, even though the Compensation Committee
did not intend to grant these awards in 2014. Conversely, we have adjusted the 2013 compensation in the Summary Compensation Table
so that the value of the portion of the grants made in 2013 that were cancelled and forfeited as a result of corrective action
taken by our Compensation Committee are not included in Mr. MacDonald’s 2013 compensation amounts, since the portions of
the grants that are in excess of the limits in the plan are deemed ineffective under the terms of the 2012 Plan. We have included
an additional column in for Mr. MacDonald in the Summary Compensation Table, as well as an illustrative table in the “Narrative
to Summary Compensation Table and Grants of Plan-Based Awards Table” below, which displays what Mr. MacDonald’s 2013
and 2014 Summary Compensation Table disclosure would have been had there been no need for the corrective action with respect to
his equity and equity-based awards.



Retirement Benefits



Executives may participate in the Company
401(k) retirement plans on the same terms and conditions, including Company matching provisions, as other employees.



Perquisites



It is our general practice not to provide
significant perquisites or personal benefits to our executives. The Compensation Committee considers and awards reasonable perquisites
or personal benefits to executives as necessary to accomplish the objectives under our compensation philosophy. In 2014, the Compensation
Committee decided to provide perquisite allowances in an amount equal $10,000 net of all tax obligations. The amount of the perquisite
allowance for each of our executives is set forth below. This perquisite allowance is intended to cover the basic perquisites that
a typical executive would expect to receive.



|              | 2014 Perquisite Allowance
|------------- | -------------------------
|Mr. MacDonald | $14,185                  
|Mr. Robinson  | $17,141                  
|Ms. Sheetz    | $15,656                  
|Mr. Kagen     | $18,211                  
|Mr. Gould     | $17,928                  
|Ms. Mills     | $18,293                  



Severance Benefits



We have entered into severance agreements
generally only with our senior executives, including our CEO, President and CFO. The severance agreements contain provisions regarding
severance benefits upon certain terminations of employment, including a termination by the Company without “cause”
or by the executive for “good reason”. The severance benefits provided to our CEO, President and CFO under these agreements
consist of one year of continued payment of base salary, the annual bonus (cash and stock) that he or she would have been entitled
to receive for the year of termination if the performance goals are reached (paid at the target level at the time such bonuses
are paid to other employees), and continued participation in our health and welfare plans for one year. Severance benefits provide
some security for our executives during times of uncertainty, and allow them to focus their attention on leading the Company. Severance
benefits are typical for executives in these senior positions in our industry, and it is necessary for us to offer such benefits
in order to attract the talent needed for our success. We believe that these severance benefits are an important factor in the
retention of our executives, while still remaining modest in the overall marketplace.



We provided severance payments and benefits
to Ms. Mills upon her termination of employment on September 12, 2014, which are set forth in greater detail under the heading
“Potential Payments Upon Termination” below.



Our other named executive officers do not
have severance agreements, and would be entitled to severance benefits only under any general severance policy that we may put
in place from time to time or as are determined at the time of their termination.



Other Compensation



We do not currently provide pension arrangements,
post-retirement health coverage, or similar benefits for our executives or employees. In 2014, we paid health, life, and disability
insurance premiums on behalf of our executives, all on the same terms as those that we provided to all of the Company’s employees.



Anti-Hedging Policy



Our insider trading policy contains a strict
anti-hedging policy. Our executives and directors are prohibited from engaging in hedging, monetization transactions or similar
arrangements involving our stock, including short sales, margin transactions, and buying put or call options.





19







Compensation Committee Interlocks and Insider Participation



No member of our Compensation Committee
was an officer or employee while serving on the Compensation Committee during Fiscal 2014, or has ever been an officer of Medifast
or its subsidiaries. No executive officer of Medifast has served as a director or a member of the Compensation Committee of another
entity that has one or more executive officers who are also members of our Board or Compensation Committee.



Compensation Committee Report



We have reviewed and discussed with management
certain Compensation Discussion and Analysis provisions to be included in the Company’s Annual Report on Form 10-K. Based
on the review and discussions referred to above, we recommend to the Board that the Compensation Discussion and Analysis referred
to above be included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2014.



COMPENSATION COMMITTEE OF THE BOARD

Carl E. Sassano, Chairman

Jerry D. Reece

Harvey C. “Barney” Barnum

Catherine T. Maguire



ANALYSIS OF RISK INHERENT IN OUR COMPENSATION
POLICIES AND PRACTICES



The Compensation Committee has conducted
a risk assessment of all of our compensation policies and practices to ensure that they do not foster risk taking above the level
of risk associated with our business model. Based upon that review and a review by management of the Company’s internal controls,
the Compensation Committee has concluded that the Company’s compensation programs do not encourage executives or other employees
to take inappropriate risks that are reasonably likely to have a material adverse effect on the Company.



The Compensation Committee based its conclusion
on a variety of factors, including the following specific aspects of the Company’s compensation practices:



| | • | Our annual incentive compensation program is based
on balanced performance metrics that promote disciplined progress towards longer-term Company goals;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | We do not offer significant short-term incentives
that might drive high-risk investments at the expense of long-term Company and shareowner value;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | • | At the senior management and executive levels, our
compensation programs are weighted towards offering incentives that reward sustainable performance by requiring continued service
to receive payment; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | All of our compensation awards are capped at reasonable
and sustainable levels, as determined by a review of our economic position and prospects, as well as the compensation offered
within our peer group and by comparable companies.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20







2014 Summary Compensation Table



The following table sets forth the annual
and long-term compensation for the last three fiscal years of the Company’s Chairman of the Board and Chief Executive Officer,
the Chief Financial Officer, the Chief Operating Officer and President, the Executive Vice President and Chief Marketing Officer,
the Executive Vice President of Technology and the former Executive Vice President of Take Shape For Life. These individuals are
our “Named Executive Officers” for fiscal year 2014.



|                                |  |      |  | Salary |         |  | Bonus |  |   | Stock Awards |  |  | Option Awards |     |  | Non-Equity Incentive
    Plan Compensation |        |     | All Other Compensation |  |         | Total |  | 
|------------------------------- |  | ---- |  | ------ | ------- |  | ----- |  | - | ------------ |  |  | ------------- | --- |  | ------------------------------------------ | ------ | --- | ---------------------- |  | ------- | ----- |  | 
|Name and
    Principal Position |  | Year |  | ($)    |         |  | ($)   |  |   | ($)(1)       |  |  | ($)(2)        |     |  | ($)                                        |        |     | ($)(3)                 |  |         | ($)   |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Michael C.
    MacDonald        |  | 2014 |  |        | 635,400 |  |       |  | - |              |  |  | 5,039,300     | (4) |  |                                            | -      |     |                        |  | 317,700 |       |  | 
|Chairman of the Board           |  | 2013 |  |        | 600,000 |  |       |  | - |              |  |  | 1,273,900     | (4) |  |                                            | -      |     |                        |  | 675,000 | (8)   |  | 
|Chief Executive Officer         |  | 2012 |  |        | 344,231 |  |       |  | - |              |  |  | -             |     |  |                                            | -      |     |                        |  | 815,150 | (8)   |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Timothy G. Robinson             |  | 2014 |  |        | 317,700 |  |       |  | - |              |  |  | 132,600       |     |  |                                            | -      |     |                        |  | 95,310  |       |  | 
|Chief Financial Officer         |  | 2013 |  |        | 285,000 |  |       |  | - |              |  |  | 382,095       |     |  |                                            | -      |     |                        |  | 202,500 | (8)   |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Margaret Sheetz                 |  | 2014 |  |        | 423,600 |  |       |  | - |              |  |  | 265,200       | (5) |  |                                            | -      |     |                        |  | 211,800 |       |  | 
|Chief Operating Officer         |  | 2013 |  |        | 400,000 |  |       |  | - |              |  |  | 1,576,900     |     |  |                                            | -      |     |                        |  | 450,000 | (8)   |  | 
|President                       |  | 2012 |  |        | 247,115 |  |       |  | - |              |  |  | -             |     |  |                                            | -      |     |                        |  | 582,500 | (8)   |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Brian Kagen                     |  | 2014 |  |        | 266,400 |  |       |  | - |              |  |  | 33,150        |     |  |                                            | 30,740 |     |                        |  | 53,280  |       |  | 
|Executive Vice President        |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Chief Marketing Officer         |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Don Gould                       |  | 2014 |  |        | 232,980 |  |       |  | - |              |  |  | 33,150        |     |  |                                            | 30,740 |     |                        |  | 46,596  |       |  | 
|Executive Vice President        |  | 2013 |  |        | 220,000 |  |       |  |   |              |  |  | 45,488        |     |  |                                            | 28,659 |     |                        |  | 55,000  |       |  | 
|Technology                      |  | 2012 |  |        | 220,000 |  |       |  | - |              |  |  | -             |     |  |                                            | -      |     |                        |  | 174,900 | (8)   |  | 
|                                |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 
|Jeannette Mills (6)             |  | 2014 |  |        | 383,091 |  |       |  | - |              |  |  | 55,141        |     |  |                                            | 30,740 |     |                        |  | -       |       |  | 
|Executive Vice President,       |  | 2013 |  |        | 132,000 |  |       |  | - |              |  |  | 343,987       |     |  |                                            | 19,629 | (7) |                        |  | 34,271  | (8)   |  | 
|Take Shape For Life             |  |      |  |        |         |  |       |  |   |              |  |  |               |     |  |                                            |        |     |                        |  |         |       |  | 



(1) Amounts shown represent the aggregate
grant date fair value of the stock awards in the year indicated, computed in accordance with FASB ASC Topic 718. For a discussion
of the assumptions made in the valuation reflected in these columns, see Note 2 of the Notes to Consolidated Financial Statements
included in the Company’s Annual Report. The values do not correspond to the actual value that will be recognized by the
named executives at the time such awards vest. With respect to the award of performance-based deferred shares to each of our named
executive officers during 2014, the amount included in the grant date fair value of the number of deferred shares that were earned
based on our performance for 2014 (or, for Ms. Mills, the number of deferred shares that would have been earned had she remained
employed for the full year). The maximum value of such deferred shares were: $2.1 million, $0.5 million, $1.1 million, $0.1 million,
$0.1 million and $0.1 million for Mr. MacDonald, Mr. Robinson, Ms. Sheetz, Mr. Kagen, Mr. Gould, and Ms. Mills, respectively. Ms.
Mills forfeited the deferred shares upon her termination on September 12, 2014. For information with respect to the individual
performance-based awards made in fiscal year 2014, please see the 2014 Grants of Plan-Based Awards Table.



(2) Amounts shown represent the
aggregate grant date fair value of the option awards in the year indicated, computed in accordance with FASB ASC Topic 718.
The values do not correspond to the actual value that will be recognized by the named executives at the time such awards are
exercised. For information with respect to the  stock option awards made in fiscal year 2014, please see the 2014
Grants of Plan-Based Awards Table.



(3) The amounts reported in this column
represent the perquisite allowances, Company’s matching contributions under the 401(K) plan and contributions to group term
life insurance and health savings accounts. Mr. MacDonald’s all other compensation total includes group term life insurance
contributions, $11,500 in matched 401(K) plan contributions made by the Company and a $14,200 perquisite allowance. Mr. Robinson’s
all other compensation total includes group term life insurance contributions, health savings account contributions, matched 401(K)
plan contributions and a $17,141 perquisite allowance. Ms. Sheetz’s all other compensation total includes group term life insurance
contributions, matched 401(K) plan contributions, and a $15,656 perquisite allowance. Mr. Kagen’s all other compensation total
includes group term life insurance contributions, health savings account contributions, matched 401(K) plan contributions, and
a $18,211 perquisite allowance. Mr. Gould’s all other compensation total includes group term life insurance contributions, health
savings account contributions, matched 401(K) plan contributions, and a $17,928 perquisite allowance. Ms. Mills’ all other
compensation total includes group term life insurance contributions, matched 401(K) plan contributions, a $18,293 perquisite allowance,
and $256,015 in severance benefits.





21







(4) The amount in Mr. MacDonald’s
Stock Awards column for 2013 does not include the value of certain restricted share and deferred share awards granted to him during
2013 that were determined to be in excess of the limits on individual grants under the 2012 Plan and are not considered to be effective.
The amount in Mr. MacDonald’s Stock Awards column for 2014 does not include the grant of performance-based deferred shares
that was determined to be in excess of the limits on individual grants under the 2012 Plan and was not considered to be effective.
These awards were re-granted in 2014, and the value of the re-grants are included in the Stock Awards column for 2014. For more
information on these awards, please see the section titled “Long-Term Compensation Correction During 2014” above.



(5) The amount in Ms. Sheetz’s
Stock Awards column for 2014 does not include the grant of performance-based deferred shares that was determined to be in excess
of the limits on individual grants under the 2012 Plan and was not considered to be effective. This award was re-granted in 2014,
and the value of the re-grant is included in the Stock Awards column for 2014. For more information on this award, please
see the section titled “Long-Term Compensation Correction During 2014” above.



(6) Ms. Mills resigned from the Company effective September
12, 2014 and the unvested portion of her awards were forfeited.



(7) The stock options awarded to Ms.
Mills on May 31, 2013 were inadvertently not included in the 2013 Summary Compensation Table. This was due to an accounting issue
regarding the date of grant. The 2013 amount has been updated.



(8) These amounts reflect cash bonus
payments in accordance the compensation plan. The balances were improperly reflected in the “Bonus” column on the prior
years’ Summary Compensation Table and have been corrected in this filing.



22







2014 Grants of Plan-Based Awards Table



The following table outlines all stock
awards granted to named executive officers during fiscal 2014. All awards were granted under the 2012 Share Incentive Plan, which
was approved by stockholders.



|Name                      |  | Grant
    Date |  | Estimated
                                         Future Payouts Under Non-Equity
                                         Incentive Plan |         |  | Estimated
                                         Future Payouts Under Equity
                                         Incentive Plan Awards |  |         | All
                                         Other Stock Awards: Number of Shares of Stock or Units (#) |  |  | All
                                         Other Option Awards: Number of Securities Underlying Options (#) |      |  | Exercise
    or Base Price of Option Awards ($/Sh) |        |  | Grant
    Date Fair Value of Stock and Option Awards | 
|------------------------- |  | -------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------------- | ---- |  | -------------------------------------------------- | ------ |  | ---------------------------------------------------- | 
|                          |  |                |  | Threshold ($)                                                                                                                              |         |  | Target ($)                                                                                                                                    |  |         | Maximum ($)                                                                                             |  |  | Threshold (#)                                                                                                 |      |  | Target (#)                                         |        |  | Maximum (#)                                          | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Michael C.
    MacDonald  |  | 2/5/2014       |  |                                                                                                                                            | 317,700 |  |                                                                                                                                               |  | 635,400 |                                                                                                         |  |  | 1,906,200                                                                                                     |      |  |                                                    |        |  |                                                      | 
|Chairman of the Board     |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 20,000 |  |                                                      | 
|Chief Executive Officer   |  | 6/17/2014      |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 20,000 |  |                                                      | 
|                          |  | 6/17/2014      |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|                          |  | 6/17/2014      |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Timothy G. Robinson       |  | 2/5/2014       |  |                                                                                                                                            | 95,310  |  |                                                                                                                                               |  | 190,620 |                                                                                                         |  |  | 571,860                                                                                                       |      |  |                                                    |        |  |                                                      | 
|Chief Financial Officer   |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 5,000  |  |                                                      | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Margaret Sheetz           |  | 2/5/2014       |  |                                                                                                                                            | 211,800 |  |                                                                                                                                               |  | 423,600 |                                                                                                         |  |  | 1,270,800                                                                                                     |      |  |                                                    |        |  |                                                      | 
|Chief Operating Officer,  |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 10,000 |  |                                                      | 
|President                 |  | 6/17/2014      |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 10,000 |  |                                                      | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Brian Kagen               |  | 2/5/2014       |  |                                                                                                                                            | 53,280  |  |                                                                                                                                               |  | 106,560 |                                                                                                         |  |  | 213,120                                                                                                       |      |  |                                                    |        |  |                                                      | 
|Executive Vice President  |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 1,250  |  |                                                      | 
|Chief Marketing Officer   |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Don Gould                 |  | 2/5/2014       |  |                                                                                                                                            | 46,596  |  |                                                                                                                                               |  | 93,192  |                                                                                                         |  |  | 186,384                                                                                                       |      |  |                                                    |        |  |                                                      | 
|Executive Vice President  |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 1,250  |  |                                                      | 
|of Technology             |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|                          |  |                |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 
|Jeannette Mills           |  | 2/5/2014       |  |                                                                                                                                            | 48,410  |  |                                                                                                                                               |  | 96,820  |                                                                                                         |  |  | 193,640                                                                                                       | (13) |  |                                                    |        |  |                                                      | 
|Executive Vice President, |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    | 1,250  |  |                                                      | 
|Take Shape For Life       |  | 2/5/2014       |  |                                                                                                                                            |         |  |                                                                                                                                               |  |         |                                                                                                         |  |  |                                                                                                               |      |  |                                                    |        |  |                                                      | 



(1) The reflected grant is for deferred
shares for 2014 performance that was erroneously granted in excess of the allowed limits in the 2012 Share Plan Agreement. These
shares were cancelled and re-granted on June 17, 2014, see note (2) below.



(2) The reflected grant is a regrant
of the deferred shares granted for 2014 performance that were made in excess of the allowed limits in the 2012 Share Plan Agreement.
The requirements for receiving these shares are outlined in the “Target Bonus” section outlined above. This award will
vest in entirety on December 31, 2015. Upon regrant, the terms of the grant did not materially change; and therefore, the grant
date fair value is based on the stock price as of the original grant date, February 5, 2014.



(3) On February 19, 2013, a deferred
shares performance grant was issued and on February 5, 2014 it was approved that the payout under the plan would be 30,000 shares.
The grant was made in excess of the 2012 Share Plan Agreement allowances and was therefore cancelled and reissued as
deferred shares on June 17, 2014. These shares vested in full on December 31, 2014.



(4) On January 2, 2013, a grant for
100,000 shares was made for 2012 performance and on February 19, 2013 a grant of 100,000 retention shares was made vesting in tranches
over a 7 year period. Both of these grants were erroneously made in excess of the 2012 Share Plan Agreement allowances and therefore
were cancelled and regranted as restricted stock on June 17, 2014. The regrant includes 70,000 shares related to the January 2,
2013 2012 performance grant and 80,000 shares related to the February 19, 2013 retention grant. The 70,000 shares will vest as
follows: 10,000 shares on January 2, 2015, 20,000 shares on January 2, 2016, 20,000 shares on January 2, 2017, and 20,000 shares
on January 2, 2018. The 80,000 shares will vest in accordance with the following schedule: 6,667 shares on February 19, 2015, 13,333
shares on February 19, 2016, 20,000 shares on February 19, 2017, 20,000 shares on February 19, 2018, 13,333 shares on February
19, 2019, and 6,667 shares on February 19, 2020. The terms of these grants did not materially change.



(5) As the terms of the grant did
not materially change, the grant date fair value is based on the original grant date, February 19, 2013, stock price of $24.26.





23







(6) As the terms of the grant did
not materially change, the grant date fair value is based on the stock price as of the original grant dates, January 2, 2013
($26.29) and February 19, 2013 ($24.26).



(7) The reflected grant is for deferred
shares for 2014 performance that was erroneously granted in excess of the allowed limits in the 2012 Share Plan Agreement. These
shares were cancelled and re-granted on June 17, 2014, see note (8) below.



(8) The reflected grant is a regrant
of the deferred shares granted for 2014 performance that were made in excess of the allowed limits in the 2012 Share Plan Agreement.
The requirements for receiving these shares are outlined in the “Target Bonus” section outlined above. This award will
vest in entirety on December 31, 2015. Upon regrant, the terms of the grant did not materially change; and therefore, the grant
date fair value is based on the stock price as of the original grant date, February 5, 2014.



(9) These awards are deferred shares
granted for 2014 performance and will vest in full on December 31, 2015. The requirements for receiving the awards are outlined
in the "Target Bonus" section outlined above.



(10) These options vest over a 3 year
period beginning on the anniversary of the grant date and have a 10 year term.



(11) The award is deferred shares granted
for 2014 performance that were forfeited by Ms. Mills on September 12, 2014 when she resigned from the Company. The requirements
for receiving the award are outlined in the “Target Bonus” section outlined above.



(12) These options vest over a 3 year
period beginning on the anniversary of the grant date and have a 10 year term. Ms. Mills forfeited all 2,000 options on September
12, 2014 when she resigned from the Company.



Narrative to Summary Compensation Table and Grants of Plan-Based
Awards Table



Employment Agreements



We do not have employment agreements with
any of our named executive officers. We have entered into severance agreements with Mr. MacDonald, Ms. Sheetz, and Mr. Robinson,
which provide for severance payments and benefits upon certain terminations of employment, which are described in further detail
below under the heading “Potential Payments Upon Termination or Change in Control.”



Annual Incentive Bonus



Our annual incentive bonus has a cash component
and a performance-based deferred share component, with the earned shares vesting one year after the end of the performance period.
For 2014, our named executive officers received 50% of their target cash bonus amounts based on our performance in 2014, which
is set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The performance-based
deferred shares were deemed to be earned at the minimum level based on our performance, and the value of such deferred shares are
included in the “Stock Awards” column of the Summary Compensation Table. These deferred shares will not be fully vested
until December 31, 2015, provided the executive remains employed through that date. Ms. Mills did not receive an annual cash bonus
and all performance-based deferred shares were forfeited upon her termination of employment. A more detailed discussion of our
annual incentive bonus is included above under the heading “Annual Incentive Bonus”.



Corrective Action With Respect to Certain Long-Term Compensation



As discussed above under the heading “Long-Term
Compensation Correction During 2014”, we took actions during 2014 to correct certain grants of restricted shares and performance-based
deferred shares made to Mr. MacDonald during 2013 and 2014 and Ms. Sheetz during 2014 that were in excess of the limit on grants
to an individual during a 12-month period under our 2012 Plan. The Summary Compensation Table reflects the value of these corrected
grants in the 2014 column entitled “Stock Awards.” For Mr. MacDonald, the values in the “Stock Awards”
column for 2013 have been adjusted to remove the value of the grants that were deemed to be ineffective due to this correction.



As a result of the corrective action, the
amounts in the “Total Compensation” column of the Summary Compensation Table for 2013 and 2014 do not reflect the intentions
of the Compensation Committee with respect to Mr. MacDonald’s compensation, as the amounts included in 2014 compensation
include amounts intended to be granted in 2013. The table below more accurately reflects the intention of the Compensation Committee
with respect to Mr. MacDonald’s compensation.



|                            |  |      |  | Salary |         |  | Stock Awards |  |           | Non-Equity Incentive Plan Compensation |  |  | All Other Compensation |  |  | Total |       
|--------------------------- |  | ---- |  | ------ | ------- |  | ------------ |  | --------- | -------------------------------------- |  |  | ---------------------- |  |  | ----- | ------
|Name and Principal Position |  | Year |  | ($)    |         |  | ($)          |  |           | ($)                                    |  |  | ($)                    |  |  | ($)   |       
|                            |  |      |  |        |         |  |              |  |           |                                        |  |  |                        |  |  |       |       
|Michael C. MacDonald        |  | 2014 |  |        | 635,400 |  |              |  | 530,400   |                                        |  |  | 317,700                |  |  |       | 27,071
|Chairman of the Board       |  | 2013 |  |        | 600,000 |  |              |  | 5,782,800 |                                        |  |  | 675,000                |  |  |       | 12,886
|Chief Executive Officer     |  |      |  |        |         |  |              |  |           |                                        |  |  |                        |  |  |       |       





24







As noted above, however, the “Total
Compensation” for 2014 for Mr. MacDonald does not reflect the value actually received by Mr. MacDonald during 2014, and “Total
Compensation” for 2013 includes the value of awards granted in 2013 that have a vesting period of up to seven years. For
a more accurate display of the value of compensation received by Mr. MacDonald with respect to 2014, see “Realized Compensation”
above.



Outstanding Equity Awards at 2014 Fiscal Year-End Table



|                                           |  | Option
    Awards                                           |     | Stock
    Awards |                                                             
|------------------------------------------ |  | ----------------------------------------------------------- | --- | ---------------- | ------------------------------------------------------------
|                                           |  | Number of Securities
    Underlying Unexercised Options (#) |     |                  | Number of Securities
    Underlying Unexcercised Options (#)
|Name                                       |  | Exercisable                                                 |     |                  | Unexercisable                                               
|                                           |  |                                                             |     |                  |                                                             
|Michael C. MacDonald                       |  |                                                             |     |                  |                                                             
|Chairman of the Board                      |  |                                                             |     |                  |                                                             
|Chief Executive Officer                    |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|Timothy G. Robinson                        |  |                                                             |     |                  |                                                             
|Chief Financial Officers                   |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|Margaret  Sheetz                           |  |                                                             |     |                  |                                                             
|Chief Operating Officer,
    President     |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|Brian Kagen                                |  |                                                             | 666 |                  |                                                             
|Executive Vice President                   |  |                                                             | -   |                  |                                                             
|Chief Marketing Officer                    |  |                                                             |     |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             
|Don Gould                                  |  |                                                             | 666 |                  |                                                             
|Executive Vice President
    of Technology |  |                                                             | -   |                  |                                                             
|                                           |  |                                                             |     |                  |                                                             



(1)The market value of shares of stock that have not vested is based on the closing price of our common stock
on December 31, 2014, or $33.55 per share.



(2)The deferred shares will vest in full on December 31, 2015.



(3)The deferred shares will vest in full on January 1, 2015.



(4)The restricted stock will vest according to the following schedule: 2,666 shares on February 19, 2015; 4,000 shares on February
19, 2016; 2,667 shares on February 19, 2017, and 1,334 shares on February 19, 2018.



(5)The restricted stock will vest according to the following schedule: 6,666 shares on February 19, 2015; 10,000 shares on
February 19, 2016; 10,000 shares on February 19, 2017, 10,000 shares on February 19, 2018, 6,667 shares on February 19, 2019, and
3,334 shares on February 19, 2020.



(6)The restricted stock is a regrant of two awards granted in 2013 which contained different vesting schedules. The vesting
schedules of the original awards were kept intact resulting in the following vesting schedule: 10,000 shares on January 2, 2015;
6,666 shares on February 19, 2015; 20,000 shares on January 2, 2016; 13,333 shares on February 19,2016; 20,000 shares on January
2, 2017; 20,000 shares on February 19, 2017; 20,000 shares on January 2, 2018; 20,000 shares on February 19, 2018; 13,334 shares
on February 19, 2019; and 6,667 shares on February 19, 2020.



(7)The restricted stock will vest on January 2, 2015.



(8)The restricted stock will vest 6,667 shares on February 19, 2015 and 6,667 shares on February 19, 2016.



25







2014 Option Exercises and Stock Vested Table



The following table sets forth information
regarding stock vesting for the Named Executive Officers during 2014 and the resulting value realized.



|                                              |  | Stock Awards                         |       
|--------------------------------------------- |  | ------------------------------------ | ------
|                                              |  | Number of Shares Acquired on Vesting |       
|Name                                          |  | (#)                                  |       
|                                              |  |                                      |       
|Michael C. MacDonald                          |  |                                      | 20,000
|Chairman of the Board                         |  |                                      | 20,000
|Chief Executive Officer                       |  |                                      | 30,000
|                                              |  |                                      | 6,666 
|                                              |  |                                      |       
|Timothy G. Robinson                           |  |                                      | 1,333 
|Chief Financial Officer                       |  |                                      |       
|                                              |  |                                      |       
|Margaret Sheetz                               |  |                                      | 20,000
|Chief Operating Officer                       |  |                                      | 3,333 
|President                                     |  |                                      |       
|                                              |  |                                      |       
|Brian Kagen                                   |  |                                      | 1,875 
|Executive Vice President                      |  |                                      |       
|Chief Marketing Officer                       |  |                                      |       
|                                              |  |                                      |       
|Don Gould                                     |  |                                      | 1,875 
|Executive Vice President of Technology        |  |                                      |       
|                                              |  |                                      |       
|Jeannette Mills                               |  |                                      | 2,000 
|Executive Vice President, Take Shape For Life |  |                                      | 667   



(1) Represents the number of shares
vested multiplied by the fair market value of the common stock on the vesting date.



Potential Payments upon Termination or Change in Control



Mr. MacDonald, Mr. Robinson and Ms.
Sheetz



On June 19, 2013, the Company executed
certain severance agreements with each of the Company’s Chairman and CEO; CFO; and President and COO.



Under the terms of these agreements, in
the event of a termination of employment by the Company without “Cause” or by any of these executives with “Good
Reason,” the officer would be eligible to receive the following as severance (in addition to receiving all accrued but unpaid
salary and accrued vacation as of the termination date):



| | i. | the executive’s then-current annual salary,
which will be paid in accordance with the Company’s regular payroll practices, for a period of one (1) year following the
date of termination;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | the annual bonus, including any cash or stock that
the executive would have been entitled to had he or she been employed for the entire calendar year (provided that the related
performance metrics are satisfied), at the target level, which will be paid when such consideration is normally paid to executives
in accordance with the Company’s regular practices; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | continued coverage under the Company’s health,
disability and other insurance benefits for a period of one (1) year following the termination date.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------



In addition, under the terms of these agreements,
and notwithstanding anything to the contrary in the Company’s 2012 Plan or in any other agreement between the executive and
the Company, upon the occurrence of a “Change of Control” as defined in the 2012 Plan, any and all awards previously
granted under the plan, will become immediately and fully vested and, to the extent applicable, exercisable as of the date immediately
prior to such Change of Control.





26







For purposes of these agreements, the Company
will have “Cause” to terminate the executive’s employment in the event that the executive violates any material
provision of the Company’s Code of Conduct and Business Ethics.



For purposes of these agreements, these
executives will be deemed to have “Good Reason” to terminate his or her employment if any of the following occur: (i)
a material diminution in title, status, authority, duties or responsibilities, including the imposition of any requirement that
the executive report to a person other than the CEO; (ii) any material reduction in compensation from the executive’s current
total compensation, including current base salary and bonuses; (iii) the Company’s breach of any of its obligations under
the agreement, provided, however, if cure is possible, the failure by the Company to cure the circumstance or breach within 30
days after receiving notice from the executive; (iv) the relocation of the executive’s work location by more than 50 miles
from the current location in Baltimore, Maryland; and (v) the failure by any successor of the Company to assume in writing the
Company’s obligations under this agreement.



The payments and benefits to be provided
under these agreements are subject to certain confidentiality, non-solicitation and non-disparagement provisions.



Mr. Kagen and Mr. Gould



We do not have employment agreements or
severance arrangements with Mr. Kagen or Mr. Gould. Upon a termination of employment, they would not be entitled to any cash severance
from the Company or the acceleration of any equity awards.



Ms. Mills



Ms. Mills left the Company
on September 12, 2014 to pursue other opportunities. We did not have any severance obligations to Ms. Mills under any
employment agreement or other severance policy. However, we agreed to continue to pay Ms. Mills’ base salary for a
period of 55 weeks following her termination of employment and to continue her participation in our medical, dental and/or
vision plans during that period. We also agreed to accelerate and vest on a pro-rata basis, the portion of the 10,000
restricted shares granted to her in connection with her hiring that would have vested on the next vesting date following her
termination. No adjustments were made to the restricted shares granted to her in 2013 in connection with her service to the
Board of Directors that will vest on January 1, 2015. All other unvested equity awards held by Ms. Mills were forfeited in
their entirety. Ms. Mills executed a general release of claims in favor of the Company and bound by a covenant not to compete
for six months following her termination.



27







Potential Payments Upon Termination
or Change in Control Table



The table below details the payments and
benefits that would be provided to each of our named executive officers if he or she was terminated by the Company without Cause
or terminated employment for Good Reason, or if a Change in Control occurred, in each case on December 31, 2014. For Ms. Mills,
the table details the payments and benefits actually received by her in connection with her termination of employment on September
12, 2014.



|Name                                         |  | Severance |         |  | Annual Cash Bonus (1) |  |         | Health, Disability and Insurance Benefits |  |  | Restricted Shares (2) (unvested) |  |  | Performance-Based Shares (2)  (unvested) |           |  | Stock Options (2) (unvested) | 
|-------------------------------------------- |  | --------- | ------- |  | --------------------- |  | ------- | ----------------------------------------- |  |  | -------------------------------- |  |  | ---------------------------------------- | --------- |  | ---------------------------- | 
|Michael C. MacDonald                         |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination Without Cause or for Good Reason |  |           | 635,400 |  |                       |  | 635,400 |                                           |  |  | 18,474                           |  |  |                                          | 5,815,356 |  |                              | 
|Change in Control                            |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | 5,815,356 |  |                              | 
|                                             |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Timothy G. Robinson                          |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination Without Cause or for Good Reason |  |           | 317,700 |  |                       |  | 190,620 |                                           |  |  | 15,818                           |  |  |                                          | 483,691   |  |                              | 
|Change in Control                            |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | 483,691   |  |                              | 
|                                             |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Margaret Sheetz                              |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination Without Cause or for Good Reason |  |           | 423,600 |  |                       |  | 423,600 |                                           |  |  | 29,501                           |  |  |                                          | 2,068,928 |  |                              | 
|Change in Control                            |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | 2,068,928 |  |                              | 
|                                             |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Brian Kagen                                  |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination Without Cause or for Good Reason |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | -         |  |                              | 
|Change in Control                            |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | -         |  |                              | 
|                                             |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Don Gould                                    |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination Without Cause or for Good Reason |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | -         |  |                              | 
|Change in Control                            |  |           | -       |  |                       |  | -       |                                           |  |  | -                                |  |  |                                          | -         |  |                              | 
|                                             |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Jeannette Mills                              |  |           |         |  |                       |  |         |                                           |  |  |                                  |  |  |                                          |           |  |                              | 
|Termination on September 12, 2014            |  |           | 256,015 |  |                       |  | -       |                                           |  |  | 11,360                           |  |  |                                          | 21,991    |  |                              | 



(1) The annual cash bonus reflects the
target cash bonus that the executive would have been entitled to receive under our 2014 Annual Incentive Bonus program, without
pro-ration since the assumed date of termination is also the last day of the fiscal year.



(2) The value of the restricted shares,
performance-based shares, and stock options that would be accelerated upon a termination of employment is based on the value of
our common stock on December 31, 2014, which was $33.55. The restricted shares column represents the grants outlined in the Outstanding
Equity Awards table on page 25 except the unvested performance-based deferred shares that were granted in 2014 and earned based
on 2014 performance that are reflected in the Performance-Based Shares column.



28







Compensation of Directors



The non-employee directors of Medifast
receive an annual stock grant for their service on the Board. In Fiscal 2014, each non-employee director received 750 shares of
restricted stock and 5,000 stock options. The Lead Director received 850 shares of restricted stock. The number of shares and options
received was prorated for directors who joined the Board mid-year in 2013. Stock options are granted at the February meeting of the
Board and vest over a three year term, and restricted shares vest on January 1, 2016. In Fiscal 2014, directors also received a
meeting fee of $7,500 for attending a quarterly Board meeting and between $500 and $4,000 for attending a quarterly committee meeting
(depending on the committee and the position held). The committee fees and Board meeting fees may, at each director’s election,
be received in cash or common shares (equivalent in value to 120% of the cash value of the compensation based on the stock price
on the last day of the quarter). All common shares granted in lieu of compensation vest on the respective quarter-end date. For
additional committee meetings or board service, directors receive $1,500 per day or a pro rata portion thereof. Employee directors
do not receive any additional compensation for their services as director.



The following table contains information
concerning the compensation of our non-employee Directors during 2014.



|Name                          |  | Fees Earned or Paid in Cash  ($) |  |  | Stock Awards  ($) (1) |  |  | Option Awards 
    ($) (2) |  |  | Total  ($) | 
|----------------------------- |  | -------------------------------- |  |  | --------------------- |  |  | -------------------------- |  |  | ---------- | 
|Harvey C. Barnum              |  | 844                              |  |  | 60,761                |  |  | 76,851                     |  |  | 138,456    | 
|Barry B. Bondroff             |  | 3,719                            |  |  | 72,430                |  |  | 76,851                     |  |  | 153,000    | 
|Kevin G. Byrnes               |  | 35,219                           |  |  | 19,890                |  |  | 44,835                     |  |  | 99,944     | 
|Charles P. Connolly           |  | 2,156                            |  |  | 75,129                |  |  | 76,851                     |  |  | 154,136    | 
|Catherine T. Maguire          |  | 18,625                           |  |  | 39,749                |  |  | 76,851                     |  |  | 135,225    | 
|John P. McDaniel              |  | 1,313                            |  |  | 60,761                |  |  | 76,851                     |  |  | 138,925    | 
|Jerry D. Reece                |  | 938                              |  |  | 65,529                |  |  | 76,851                     |  |  | 143,317    | 
|Rev. Donald F. Reilly, O.S.A. |  | 34,563                           |  |  | 19,890                |  |  | 76,851                     |  |  | 131,304    | 
|Carl E. Sassano               |  | 18,521                           |  |  | 39,152                |  |  | 22,410                     |  |  | 80,093     | 



(1) Amounts are calculated based on
the aggregate grant date fair value of these awards computed in accordance with FASB ASC Topic 718, “Stock Compensation,”
excluding the effect of estimated forfeitures. The assumptions and methodologies used to calculate these amounts are discussed
in Note 2 to our Consolidated Financial Statements included in the Company’s Annual Report. Under generally accepted accounting
principles, compensation expense with respect to stock awards granted to our employees is recognized over the vesting periods of
the applicable rewards.



(2) Amounts are based on the aggregate
grant date fair value of the option awards, computed in accordance with FASB ASC Topic 718.



Our non-employee directors held the following
outstanding awards as of December 31, 2014:



|Name                          |  | Outstanding Restricted Stock Awards  (#) |  | Outstanding Stock Option Awards (#) | 
|----------------------------- |  | ---------------------------------------- |  | ----------------------------------- | 
|Harvey C. Barnum              |  | 1,500                                    |  | 5,000                               | 
|Barry B. Bondroff             |  | 1,600                                    |  | 5,000                               | 
|Kevin G. Byrnes               |  | 1,188                                    |  | 2,917                               | 
|Charles P. Connolly           |  | 1,500                                    |  | 5,000                               | 
|Catherine T. Maguire          |  | 1,500                                    |  | 5,000                               | 
|John P. McDaniel              |  | 1,500                                    |  | 5,000                               | 
|Jerry D. Reece                |  | 1,500                                    |  | 5,000                               | 
|Rev. Donald F. Reilly, O.S.A. |  | 1,500                                    |  | 5,000                               | 
|Carl E. Sassano               |  | 969                                      |  | 1,458                               | 



29







| | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
| | -------- | ----------------------------------------------------------------------------------------------



SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, AND EXECUTIVE OFFICERS



The following table sets forth, as of April
28, 2015, information with respect to the beneficial ownership of our common stock by:



| | · | each person known to us to be the beneficial owner of more than 5% of our common stock;
| | - | ---------------------------------------------------------------------------------------



| | · | each of our directors;
| | - | ----------------------



| | · | each of the NEOs set forth in the Summary Compensation Table; and
| | - | -----------------------------------------------------------------



| | · | all of our current directors and executive officers as a group.
| | - | ---------------------------------------------------------------



The number of shares beneficially owned
by each person, director, or NEO is determined under Rule 13d-3 of the Exchange Act; this information is not necessarily indicative
of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares for which the individual
has sole or shared voting power or investment power and also any shares with respect to which the person has the right to acquire
sole or shared voting or investment power on or before June 27, 2015 (60 days after April 28, 2015) through the exercise of any
stock option, warrant or other right. Unless we indicate otherwise, each person has sole investment and/or voting power with respect
to the shares set forth in the following tables.



Except as otherwise indicated, the address
for each person below is c/o Medifast, Inc., 3600 Crondall Lane, Suite 100, Owings Mills, Maryland 21117.



|Name of Beneficial Owner                                                                           |  | Title                                                     |  | Shares BeneficiallyOwned (1) |      | Percent of OutstandingCommon Stock (%) |      
|-------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------- |  | ---------------------------- | ---- | -------------------------------------- | -----
|Visium Asset Management, L.P. (2)c/o Visium Asset Management, L.P.888 7th AvenueNew York, NY 10019 |  |                                                           |  | 1,325,458                    |      |                                        | 10.93
|ModusLink Global Solutions, Inc. (3) 1601 Trapelo Road Waltham, MA 02154                           |  |                                                           |  | 1,260,925                    |      |                                        | 10.40
|BlackRock, Inc. (4)40 East 52nd StreetNew York, NY 10022                                           |  |                                                           |  | 1,098,074                    |      |                                        | 9.06 
|Engaged Capital, LLC (5)  610 Newport Center Drive, Suite 250  Newport Beach, CA 92660             |  |                                                           |  | 718,670                      |      |                                        | 5.93 
|Michael C. MacDonald (6)                                                                           |  | Director, Chairman of the Board & Chief Executive Officer |  | 340,988                      |      |                                        | 2.81 
|Margaret Sheetz (7)                                                                                |  | Director, President & Chief Operating Officer             |  | 416,912                      |      |                                        | 3.44 
|Donald F. Reilly (8)                                                                               |  | Director                                                  |  | 29,650                       |      |                                        | *    
|Charles P. Connolly                                                                                |  | Director                                                  |  | 46,030                       |      |                                        | *    
|Barry B. Bondroff, CPA (8)                                                                         |  | Director                                                  |  | 25,246                       |      |                                        | *    
|John P. McDaniel                                                                                   |  | Director                                                  |  | 21,289                       |      |                                        | *    
|Catherine T. Maguire (8)                                                                           |  | Director                                                  |  | 15,074                       |      |                                        | *    
|Harvey C. Barnum (8)                                                                               |  | Director                                                  |  | 8,742                        |      |                                        | *    
|Jerry D. Reece (8)                                                                                 |  | Director                                                  |  | 8,792                        |      |                                        | *    
|Jason L. Groves                                                                                    |  | Director, Executive Vice President & General Counsel      |  | 21,697                       |      |                                        | *    
|Kevin G. Byrnes                                                                                    |  | Director                                                  |  | 2,952                        |      |                                        | *    
|Carl E. Sassano                                                                                    |  | Director                                                  |  | 4,196                        |      |                                        | *    
|Timothy G. Robinson                                                                                |  | Chief Financial Officer                                   |  | 17,716                       |      |                                        | *    
|Jeannette M. Mills                                                                                 |  | Former Executive Vice President, Take Shape for Life      |  | 12,549                       |      |                                        | *    
|Brian Kagen                                                                                        |  | Executive Vice President, Chief Marketing Officer         |  | 5,054                        |      |                                        | *    
|Don Gould                                                                                          |  | Executive Vice President of Technology                    |  | 8,054                        |      |                                        | *    
|                                                                                                   |  |                                                           |  |                              |      |                                        |      
|All current directors and executive officers as a group (17 persons):                              |  | 979,392                                                   |  |                              | 8.08 | %                                     





30







| | * | Shares held represent less than 1% of the total number of outstanding shares of common stock of
the Company.
| | - | ------------------------------------------------------------------------------------------------------------



| | (1) | Based on 12,124,699 shares outstanding at April 28, 2015. In calculating the percentage of ownership,
all shares of common stock of which the identified person or group has the right to acquire beneficial ownership on or before June
27, 2015, are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by that
person or group. These shares are not, however, deemed to be outstanding for the purpose of computing the percentage of the shares
of common stock owned by any other person or group.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Based solely on information reported on Schedule 13G, as amended, filed by Visium Asset Management,
LP on April 8, 2014. As reported in such filing, Visium Asset Management, LP has shared voting power with respect to 1,274,351
shares and share dispositive power with respect to 1,325,458 shares and an aggregate beneficial ownership of 1,325,458 shares of
the Company’s common stock.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Based solely on information reported on Schedule 13D filed by ModusLink Global Solutions, Inc.
on August 14, 2014. As reported in such filing, ModusLink Global Solutions, Inc. has shared dispositive power with respect to 1,260,925
shares and an aggregate beneficial ownership of 1,260,925 shares of the Company’s common stock.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Based solely on information included in a Schedule 13G/A filed with the SEC by BlackRock, Inc.
(“BlackRock”) on January 15, 2015. In such filing BlackRock indicates that it has sole voting power with respect to
1,067,062 shares of our common stock and sole dispositive power with respect to 1,098,074 shares of our common stock.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Based solely on information included in a Schedule 13 D/A filed with the SEC by Glenn W. Welling
and Engaged Capital, LLC (“Engaged”) on April 7, 2015. In such filing Engaged indicates that it has sole voting and
dispositive power with respect to 718,670 shares of our common stock.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Includes 92,656 shares that are pledged as collateral for loans.
| | --- | ----------------------------------------------------------------



| | (7) | Includes 5,149 indirect shares owned by Ms. Sheetz’ spouse.
| | --- | -----------------------------------------------------------



| | (8) | The following shares are held in joint accounts: Mr. Reilly holds 289,1650 shares in joint accounts
with The Brothers of the Order of Hermits of St Augustine and has no pecuniary interest in the shares, Mr. Bondroff holds 23,046
shares in a joint account with his spouse, Ms. Maguire holds 15,074 shares in joint accounts with the Sisters of Mercy, Mr. Barnum
holds 1,869 shares in a living trust, and Mr. Reece holds 7,727 shares in a trust account.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
| | -------- | -------------------------------------------------------------------------



The Board has established a policy and
certain procedures that must be followed prior to any transaction, arrangement or relationship or series of similar transactions,
arrangements or relationships, including any indebtedness or guarantee of indebtedness, with a “related person” (as
defined by the SEC’s rules and regulations). Under this policy, the Nomination Committee monitors and reviews issues involving
potential conflicts of interest involving officers and directors of the Company, including reviewing all related party transactions
(generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest).



Please see “Item 10. Information
Concerning Our Board of Directors – Director Independence” for information concerning director independence.



| | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
| | -------- | --------------------------------------



The following table outlines the aggregate
fees billed to the Company for the fiscal years ended December 31, 2014 and 2013 by the Company’s principal accounting firm,
McGladrey.





31









|                    |  | 2014 |         |  | 2013 |  
|------------------- |  | ---- | ------- |  | ---- | -
|Audit Fees          |  | $    | 350,000 |  |      | $
|Audit- Related Fees |  |      | -       |  |      |  
|Tax Fees            |  |      | 99,000  |  |      |  
|All Other Fees      |  |      | 5,000   |  |      |  
|Total               |  | $    | 454,000 |  |      | $



Audit Fees: The amounts noted above
for Audit Fees include the aggregate fees billed for each of the last two fiscal years for professional services rendered by the
principal accountant for the audits of the Company’s consolidated annual financial statements and local subsidiaries’
annual financial statements, reviews of the Company’s quarterly financial statements, attestation of internal control over
financial reporting, as required by the Sarbanes-Oxley Act, Section 404 and comfort letters, consents and other services related
to SEC matters.



Tax Fees:The amounts noted above
for Tax Fees include tax compliance and advisory services.



All Other Fees:The amounts noted
above for All Other Fees include fees incurred for the review of the Company’s annual Franchise Disclosure Document and other
services not reported above.



Audit Committee Pre-Approval of Audit
and Permissible Non-Audit Services of the Independent Registered Public Accountant



The Audit Committee pre-approves all audit
and permissible non-audit services provided by the independent registered public accountant. 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 registered public accountant.



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
registered public accountant is 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 registered public accountant’s
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 Exchange Act audits.



The Audit Committee pre-approved all audit, audit-related, tax
and other services provided by McGladrey  LLP during fiscal year 2014 in accordance with this policy.



PART IV



| | ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| | -------- | ------------------------------------------



(a) The following documents are filed as part of this Report



1. The financial statements are included
in Item 8 of the Original Form 10-K.



2. Financial Statement Schedules are
included in Item 8 of the Original Form 10-K.



3. Exhibits



Reference is made to the
Exhibit Index on page 34 of this Form 10-K/A for a list of exhibits required by Item 601 of Registration S-K to be filed
as part of this report.





32







SIGNATURES



Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized on this  30th day of April 2015.



| | MEDIFAST, INC.                              
| | --------------------------------------------
| |                                             
| | /s/ Michael C. MacDonald                    
| | Michael C. MacDonald                        
| | Chief Executive Officer                     
| | (Principal Executive Officer)               
| | Dated: April 30, 2015                       
| |                                             
| | /s/ Timothy G. Robinson                     
| | Timothy G. Robinson                         
| | Chief Financial Officer                     
| | (Principal Financial and Accounting Officer)
| | Dated: April 30, 2015                       



33







INDEX TO EXHIBITS



| | No.  |                                                                                                                                                                               
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.1 | Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
| |      |                                                                                                                                                                               
| | 31.2 | Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).



34