Item 5.02. Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective October 3, 2016, the board of directors of Medifast,
Inc. (the “Company”) appointed Daniel Chard to serve as Chief Executive Officer of the Company and as a member of the
board of directors. Mr. Chard will succeed Michael C. MacDonald, who previously served as Chief Executive Officer of the Company.
Mr. MacDonald will continue to serve as Executive Chairman to facilitate a smooth transition.
Mr. Chard, age 52, previously served as President and Chief
Operating Officer at PartyLite, an affiliate of a portfolio company of The Carlyle Group, from October 2015 to August 2016. Prior
to that, Mr. Chard served as the President, Global Sales & Operations at Nu Skin Enterprises, Inc. (“Nu Skin”)
from May 2009 to September 2015, Executive Vice President of Distributor Success of Nu Skin from February 2006 to May 2009, and
President of Nu Skin Europe from April 2004 to February 2006, and in various other roles of increasing responsibility since he
joined Nu Skin in 1998. He holds a Bachelor of Arts in Economics from Brigham Young University and received his Masters of Business
Administration from the University of Minnesota.
Qualifications: Mr. Chard brings to the Company’s board
leadership skills and experience across operations, international, and marketing. He possesses extensive direct selling industry
experience along with a strong background in consumer products.
In connection with Mr. Chard’s appointment as Chief Executive
Officer, the Company entered into an offer letter with Mr. Chard, effective October 3, 2016, setting forth the terms of his employment
(the “Offer Letter”). Pursuant to the terms of the Offer Letter, Mr. Chard:
|
·
|
will receive an annual base salary of $650,000 (subject to annual review and adjustment);
|
|
·
|
has a target annual bonus equal to 100% of his base salary, as then in effect (the “Target Bonus”), as determined
by the board of directors, beginning with a pro rata annual bonus for calendar year 2016;
|
|
·
|
will be eligible to participate in the Company’s health, dental, vision, prescription plans, life, disability and 401(k)
plans on the same basis as comparably situated employees;
|
|
·
|
will receive a relocation reimbursement of up to $175,000 for qualified moving expenses, as described in the Offer
Letter (which
reimbursement must be repaid to the Company if Mr. Chard’s employment terminates within 12 months of his start
date for any reason other than a termination without Cause (as defined in the Offer Letter) or a resignation with Good
Reason (as defined in the Offer Letter));
and
|
|
·
|
will receive an inducement award consisting of (i) a restricted share award with a grant date fair value of $600,000 that
will vest 1/3 per year on each of the first, second and third anniversaries of the grant date, and (ii) a deferred share
award entitling Mr. Chard to receive up to 210,000 shares of common stock of the Company based on the Company’s
achievement of certain pre-established performance goals over a three-year performance period (which may be extended by six
months in certain circumstances) (the “Performance Award”), generally as described below:
|
|
o
|
70,000 shares will vest upon achievement of an average annual TSR of at least 15% at the end of the performance period or
a
stock price of $56.82;
|
|
o
|
an additional 70,000 shares will vest upon achievement of an average annual TSR of at least 25% at the end of the performance period or
a stock price of $72.96; and
|
|
o
|
an additional 70,000 shares will vest upon achievement of an average annual TSR of at least 35% at the end of the performance period or
a stock price of $91.91.
|
The inducement award is intended to qualify as an employment
inducement grant under Rule 303A.08 of the New York Stock Exchange Listed Company Manual.
The Offer Letter provides that in the event
Mr. Chard’s employment is terminated by the Company without Cause, by Mr. Chard with Good Reason, or by Mr. Chard or
the Company within six months following a Change in Control (as defined below), Mr. Chard will be entitled to receive,
subject to his executing a general release of claims against the Company: (i) a payment equal to one year of his annual base
salary, as then in effect, plus the Target Bonus, (ii) all outstanding equity awards will accelerate and vest (other than
the Performance Award, which shall accelerate and vest based on performance through the termination date only upon a
termination by Mr. Chard or the Company within six months following a Change in Control), and (iii) medical and dental
benefit continuation for one year.
Under the Offer Letter, a Change in Control is deemed to have
occurred if there is a material change in Mr. Chard’s title and/or job duties and one of the following occurs: (i) there
is a merger or other business transaction where the members of the Board prior to the transaction do not make up a majority of
the board after the transaction or where shareholders no longer hold 51% or more of the voting power of the resulting company;
(ii) there is a disposition of substantially all of the assets of the Company; (iii) a plan of liquidation or dissolution of the
Company is approved; (iv) during a two year period, the members of the Board at the beginning of such period cease to be a majority
of the Board (unless the election of any new director is approved by the other members of the Board); or (v) there is a merger,
consolidation or other business combination that causes a material change in Mr. Chard’s duties, responsibilities, title
and reporting responsibilities.
The Offer Letter contains one year non-competition and non-solicitation
provisions, and customary non-disclosure and confidentiality provisions.
The foregoing descriptions of Mr. Chard’s compensation
arrangements and equity awards do not purport to be complete descriptions and are qualified in their entirety by reference to the
full text of the agreements filed as an exhibit to this Current Report on Form 8-K and are incorporated herein by reference.
There are no family relationships between Mr. Chard and any
director or executive officer of the Company, or any person nominated or chosen by the Company to become a director or executive
officer. There are no arrangements or understandings between Mr. Chard and any other persons pursuant to which he was selected
as Chief Executive Officer and a member of the board of directors. Mr. Chard has no direct or indirect material interest in any
transaction or currently proposed transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.