-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T8ATNaDzrCm+fwrHDrAklb+3hYUgBx9oXrDdtG/yQbk5mztZqOla+ur7Tyld1k/W NTUH0upQDJNT9uFWEghEBw== 0001144204-03-005087.txt : 20030826 0001144204-03-005087.hdr.sgml : 20030826 20030826105054 ACCESSION NUMBER: 0001144204-03-005087 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20030826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIFAST INC CENTRAL INDEX KEY: 0000910329 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 133714405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-108211 FILM NUMBER: 03865631 BUSINESS ADDRESS: STREET 1: 11445 CRONHILL DRIVE CITY: OWINGS MILLS STATE: MD ZIP: 21117 BUSINESS PHONE: 7327640619 MAIL ADDRESS: STREET 1: 11445 CRONHILL DRIVE CITY: OWINGS MILLS STATE: MD ZIP: 21117 FORMER COMPANY: FORMER CONFORMED NAME: HEALTHRITE INC DATE OF NAME CHANGE: 19951120 FORMER COMPANY: FORMER CONFORMED NAME: XX DATE OF NAME CHANGE: 19950619 FORMER COMPANY: FORMER CONFORMED NAME: 00 DATE OF NAME CHANGE: 19950619 S-3 1 medifast_s3.txt AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST ___, 2003. REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- MEDIFAST, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3714405 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 11445 CRONHILL DR. OWINGS MILLS, MD 21117 (410) 581-8042 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) -------------------------- BRADLEY T. MACDONALD MEDIFAST, INC. 11445 CRONHILL DR. OWINGS MILLS, MD 21117 (410) 581-8100 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) -------------------------- WITH COPIES TO: MARIO M. KRANJAC, ESQ. MICHAEL P. TANCZYN, ESQ. LAZARE POTTER GIACOVAS & KRANJAC LLP LAW OFFICES OF MICHAEL P. TANCZYN 950 THIRD AVENUE 606 BALTIMORE AVENUE SUITE 106 NEW YORK, NEW YORK 10022 TOWSON, MD 21204 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this registration statement becomes effective. 1 If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _______________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / _______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / --------------------------
CALCULATION OF REGISTRATION FEE TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE REGISTERED PER SHARE PRICE Common stock, $0.001 682,500 shares (1) $13.52 (2) $9,227,400 (2) $746.50 par value per share
(1) All the shares registered hereby are registered for the account of certain selling stockholders of Medifast, Inc. The selling stockholders may sell any or all of the shares, subject to federal and state securities laws, but are not obligated to do so. None of the shares registered pursuant to this registration statement (this "Registration Statement), will be offered for sale by Medifast, Inc. Of the total 682,500 shares being registered, (a) 550,000 shares of common stock were issued to two accredited investors (the "Private Placement Investors") in connection with a private placement of the Registrant's common stock and warrants for common stock that closed as of July 24, 2003 (the "Private Placement"), (b) 82,500 shares of common stock are issuable upon the exercise of warrants that were issued to the Private Placement Investors and (c) 50,000 shares of common stock are issuable upon the exercise of warrants issued to fourteen persons in connection with the consummation of that certain Asset Purchase Agreement (collectively the "Asset Sellers"). 2 (2) Estimated, pursuant to Rule 457(c), solely for the purpose of calculating the registration fee based on the average of the high and low prices of the Registrant's common stock, as reported by the American Stock Exchange on August 20, 2003. - ------------------------------------------------------------------------------- WE SHALL AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- PART I INFORMATION REQUIRED IN PROSPECTUS - ------------------------------------------------------------------------------- THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED ________, 2003 MEDIFAST, INC. 682,500 Shares Common Stock -------- This prospectus (this "Prospectus") relates to an aggregate of 682,500 shares of common stock, $0.001 par value each of Medifast, Inc. (the "Company" or "Registrant"), consisting of (a) 550,000 shares of common stock issued to two accredited investors (the "Private Placement Investors") in connection with a private placement of the Registrant's common stock and warrants for common stock that closed as of July 24, 2003 (the "Private Placement"), (b) 82,500 shares of common stock are issuable upon the exercise of warrants that were issued to the Private Placement Investors and (c) 50,000 shares of common stock are issuable upon the exercise of warrants issued to fourteen persons in connection with the consummation of that certain Asset Purchase Agreement (collectively the "Asset Sellers")that closed on June 16, 2003 (the "Asset Purchase Agreement"). The Private Placement Investors and the Asset Sellers are collectively referred to herein as, the "Selling Stockholders." (See "Selling Stockholders" on page 13). 3 Merrill Lynch acted as agent on behalf of the Registrant for the Private Placement. The Selling Stockholders may sell any or all of the shares, subject to federal and state securities laws, but are not obligated to do so. The Company will not sell any of the shares covered by this Prospectus and we will not receive any proceeds from the offering or sale of such shares; provided, however, that any proceeds from the exercise of the warrants on a cash basis will go to the Company. The price at which the Selling Stockholders may sell the shares of our common stock will be determined by the prevailing market for the shares or in negotiated transactions. Medifast, Inc.'s common stock is listed on the American Stock Exchange under the symbol "MED". INVESTING IN OUR COMMON STOCK INVOLVES RISKS. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 6 OF THIS PROSPECTUS BEFORE MAKING A DECISION TO PURCHASE OUR STOCK. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this Prospectus is August 22, 2003. TABLE OF CONTENTS PROSPECTUS ITEM / DESCRIPTION PAGE NUMBER Incorporation of Certain Information by Reference 5 Prospectus Summary 5 Risk Factors 6 Forward Looking Statements 9 The Company 10 The Offering 12 Use of Proceeds 13 Determination of Offering Price 13 Selling Stockholders 14 Plan of Distribution 17 Experts and Counsels 19 Material Changes 20 Available Information 20 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL 4 TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT IS ACCURATE ONLY ON THE DATE OF THIS DOCUMENT. In this Prospectus, the words, "Medifast," "we," "us" and "our" refer to Medifast, Inc. and its subsidiaries, unless the context otherwise requires. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The Securities and Exchange Commission (the "Commission") allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this Prospectus, and information that we file later with the Commission will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we have made and will make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, as amended (the "Exchange Act"). All filings pursuant to the Exchange Act after the date of this Registration Statement and prior to the termination of this offering shall also be deemed to be incorporated by reference into this Prospectus. The previously filed documents we incorporate by reference into this Prospectus are: (a) Our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002, as amended; (b) Our Quarterly Report on Form 10-QSB for the quarter ending June 30, 2003; (c) Our Quarterly Report on Form 10-QSB for the quarter ending March 31, 2003, as amended; (d) Our Current Report on Form 8-K filed July 31, 2003; (e) Our Current Report on Form 8-K filed July 25, 2003; (f) Our Current Report on Form 8-K filed June 11, 2003; and (g) Our Registration Statement on Form 8-A filed with the Commission on December 18, 2002, as amended. We will furnish to you without charge upon your request a copy of any of the documents incorporated in this Prospectus and any statement in, or incorporated in, this Prospectus by reference, other than the exhibits to those documents unless those exhibits are specifically incorporated by reference. For a copy of the documents you should contact Medifast, Inc. 11445 Cronhill Dr., Owings Mills, MD 21117, Attention: Corporate Secretary or by telephone at (410) 581-8042. PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS AND THE INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION, ESPECIALLY THE INFORMATION PRESENTED UNDER THE HEADING "RISK FACTORS." 5 Medifast, Inc. is engaged in the development, production and marketing of a wide range of clinically-tested meal replacement programs (the "Medifast Program") and products (the "Medifast Products"). The Medifast Program is a medically supervised weight loss program which specializes in multidisciplinary patient education and uses high quality meal replacement supplements. The Company has experienced tremendous growth during the last two years since it changed its name and implemented a vigorous development, manufacturing and marketing plan. To illustrate, its net sales were $12,764,000 (net income $1,455,000), $12,345,000 (net income $2,623,000)and $ 5,022,000 (net income $588,000) for the six months ending June 31, 2003 (unaudited), year ending December 31, 2002 and December 31, 2001, respectively. Medifast, Inc.'s shares of common stock are listed on the American Stock Exchange under the symbol MED. On July 24, 2003, the Company sold 550,000 shares of common stock to the Private Placement Investors pursuant to a Securities Purchase Agreement and issued warrants to the Private Placement Investors for the issuance of 82,500 shares of common stock. The Company agreed to register the shares sold and issuable upon exercise of the warrants. Separately, on June 16, 2003, the Company entered into an asset purchase agreement with a Delaware corporation for purchase of certain of its assets. As part of the consideration, the Company agreed to (i) issue to the Asset Sellers warrants to acquire 50,000 shares of common stock of the Company in the aggregate and (ii) include those warrants in any registration statement it files after the date thereof. This prospectus is made pursuant to the foregoing agreements entered into by the Company. The proceeds from the sale of shares offered herein, as and when made by the Selling Stockholders, shall go entirely to the Selling Stockholders and the Company shall receive no part of it; provided, however, that the proceeds from the exercise of the warrants on a cash basis will go to the Company. The price at which the Selling Stockholders sell, if and when they sell, the shares registered pursuant to this Prospectus, shall be market prices as established on the American Stock Exchange where shares of the same class are registered and to which exchange the Company has filed an additional listing application providing for the additional listing of these shares as and when the Registration Statement becomes effective. Investment in shares of the Company involves risk. Please see "Risk Factors" on page 6. Our principal executive offices are located at 11445 Cronhill Dr., Owings Mills, MD 21117. Our telephone number at that address is (410) 581-8042. RISK FACTORS An investment in our common stock involves risks. You should carefully consider in addition to the other information contained or incorporated by reference in this Prospectus, the risks described below before investing in our common stock. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we may currently believe are 6 immaterial may impair our business operations and financial condition. Regulatory: The Company's operations (formulation, processing, packaging, labeling and advertising of products) are subject to governmental regulations by several agencies. The primary regulator is the United States Food and Drug Administration ("FDA"). FDA regulations require that the Company comply with labeling and packaging standards for the marking and sale of vitamins and nutritional products. At any time the FDA could require the reformulation of a product in order for a product to meet a new standard, require the recall of a product, or have a product discontinued if it is not capable of being reformulated. During 2001, the Company was subject to an unannounced detailed inspection of its production facility. The FDA provided the Company with a letter stating that areas inspected appear to be in compliance with the applicable requirements of the Federal Food, Drug, and Cosmetics Act. Any unexpected changes to FDA regulations could negatively impact the Company's operations. A few states have implemented and other states may implement laws that limit the ability of physicians to buy and resell products within their own practices. Management, in response to the changing operating environment, implemented new programs, which provide for participating physicians to receive a monthly consultation fee on all orders placed by their patients. The Company's operations may be negatively impacted if physicians are not receptive to programs or states broaden or change existing laws. The Company is, and may in the future be, subject to laws of countries to which it exports the Medifast Program and the Medifast Products. These laws may change unexpectedly and adversely affect the Company. To the extent the Company's revenue is generated from exports, the Company may be affected by changes in laws of the countries to which it exports. Product Liability: The Company, like other producers and distributors of products that are ingested, face an inherent risk of exposure to product liability claims in the event that the use of its products results in injury. To mitigate this risk, the Company maintains insurance against product liability claims with respect to the products it produces. It is possible that the liability the Company may face may be unforeseen and therefore not covered by the insurance, or that the insurance may not be adequate to cover the liability. In either event, the Company will be adversely affected by an unforeseen or substantial product liability claim. Seasonality: The Company's weight management products and programs are subject to seasonality. Traditionally, the holiday season in November/December of each year is considered poor for diet control products and services. January and February generally show increases in sales as these months are considered the commencement of the "diet season." Although the Company has embarked on a robust 7 and vigorous export program to mitigate seasonality, there is no assurance that the Company's performance will remain unaffected by seasonality or that the export efforts shall succeed in mitigating it. Industry Growth: The Company is growing rapidly but remains a relatively small participant in its industry. The business of the Company is competitive, and some of the competitors have substantial marketing and financial resources. Competition: The weight loss industry as a whole is highly competitive. There are numerous methods of weight loss, including individual do-it-yourself diet plans, commercial weight loss programs, nutritionists, dieticians and the pharmaceutical industry. An increase in this competition or these competitors alone could result in decreased demand for our products. The meal replacement business is dominated by SlimFast Foods Company (Unilever), which has a strong foothold in retail markets. Medifast's management estimates that SlimFast retail sales are $1 Billion annually. SlimFast products generally have higher caloric and sugar content than comparative Medifast Products. Weight Watchers International and Jenny Craig, Inc. (privately held) sell low-calorie, prepackaged meals and preach the benefits of portion control. Weight Watchers helps to generate demand for its products and "winning points" program by hosting pay-as-you-go meetings, and it generates significant fees from those meetings. There are two other competitors making use of medical weight management. These companies include OptiFast, which is managed by Novartis Nutrition Corporation, and Robards, Inc., which is managed by Food Sciences Corporation, Inc. While we believe that we have certain advantages over existing competition, such as (i) our products are based on clinically proven studies conducted at the Johns Hopkins University School of Medicine, (ii) our weight and disease management products contain high quality meal replacement supplements, (iii) we have a large product line consisting of over 75 sku's of product that help us minimize or eliminate taste fatigue as an obstacle for a weight loss patient to overcome, and (iv) we are probably the only weight loss company that has touched on the belief that when it comes to weight loss, men and woman have different needs as well as requirements, the growing size of the market offers tremendous opportunity to new entrants and existing competitors to replicate our unique selling propositions. Breakthrough Technologies: A breakthrough in other weight loss technologies would seriously limit the potential of the meal replacement products such as those produced and marketed by Medifast. Raw Materials: The Company's margins may be impacted due to raw material costs since they are reliant on certain commodities that fluctuate in price. The price 8 fluctuations occur as the supply of such products changes throughout the year. Legal: The Company is a defendant in a lawsuit, in which its competitor, Robards, Inc. is alleging that the Company made slanderous and untrue statements to Robard's customers. Medifast has filed a counter-claim alleging conspiracy to damage the Company's business. Both claim damages in excess of $75,000, which could materially affect financial results. Marketing Programs: Some of the Company's new marketing programs have yet to be proven, and large advertising outlays may not turn out to be productive. Specifically, the Company has never used TV advertising to reach customers. But starting in January 2004, the Company proposes to run infomercial advertisements in a national TV campaign. Whether this form of advertising will prove to be successful remains to be determined. Price Volatility: Stocks in the Microcap segment of the market have many risks that are not as prevalent in Large-cap stocks, Blue Chip stocks or even Small-cap stocks. Often it is these risks that cause Microcap stocks to trade at discounts to their peers. The most common of these risks is liquidity risk, which is typically caused by small trading floats and very low trading volume, which can lead to large spreads and high volatility in stock price. In addition, Microcaps tend to have significant company specific risks that contribute to lower valuations. Investors need to be aware of the higher probability of financial default and higher degree of financial distress inherent in the microcap segment of the market. The foregoing risks are in addition to risks relating to the performance of the Company. Thus, if our operating results are below the expectations of public market analyst and investors, the price of our common stock could be materially adversely affected. Other: The Company's financial results and equity values are subject to other risks and uncertainties known and unknown, including but not limited to competition, operations, financial markets, regulatory risk, and/or other events. These risks may cause actual results to differ from expected results. FORWARD LOOKING STATEMENTS This prospectus contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements including. We may or may not identify these statements by the use of words such as believe, expect, anticipate, intend, potential, strategy, plan, and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those set forth in these forward-looking statements as a result of a number of different factors, including those described under the caption "Risk Factors" 9 and elsewhere in this Prospectus. These forward-looking statements include, among others, statements regarding (i) estimates relating to our cash resources, profitability, market share and the market price of our common stock; (ii) our ability to secure and defend intellectual property rights important to our business; (iii) the potential success of our research, development and marketing efforts; (iv) analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable; and (v) our future prospects, developments and business strategies. All statements in this Registration Statement on Form S-3 that are not historical are forward-looking statements and are subject to risks and uncertainties, including those set forth in the Risk Factors section, and actual results could differ materially from those expressed or implied in these statements. All forward-looking statements included in this Registration Statement on Form S-3 are made as of the date hereof. We assume no obligation to update any such forward-looking statement for subsequent events or any reason why actual results might differ, except as required by the Securities Act. THE COMPANY Medifast is engaged in the development, production, and distribution of the Medifast Program and Medifast Products. The Medifast Program is a medically supervised weight loss program which specializes in multidisciplinary patient education programs and uses high quality meal replacement supplements. Medifast offers a wide spectrum of weight management options depending on the amount of desired weight loss. The Medifast philosophy is meal replacement. The more meals replaced, the more weight is lost. Unlike other diets, Medifast provides life changing behavior modification programs and products that support a weight loss candidate through weight loss and weight maintenance. The Medifast Program attempts to teach how to lose weight and keep it off for life. The Medifast brand has been recommended by over several thousand physicians nationwide and used by more than 750,000 customers. Medifast offers more than 50 years of combined knowledge and experience, with world-class customer service, and technical and medical support. The Medifast Products are produced to exacting specifications in our state-of-the-art production facility in Owings Mills, Maryland. Product labeling, quality control, and manufacturing processes and equipment are subject to regulations and inspections mandated by the Food & Drug Administration (FDA), the Maryland State Department of Health and Hygiene, and Baltimore County Department of Health. Our plant strictly adheres to all applicable good manufacturing practices and has proudly maintained its status as an "OU" (Orthodox Union) Kosher-approved facility since 1982. Obesity is a complex, multi-factorial chronic disease and is the second leading cause of preventable death in the United States. According to the World Health Organization's 2000 statistics, more than 1 Billion individuals are overweight. The International Obesity Task Force has estimated that 60% of the U.S. population is overweight, and a 2001 survey by market researcher NPD Foodworld reported that 63% of U.S. people are clinically obese (defined as 10 having 25 to 40 pounds of excess weight), and an additional 15% are morbidly obese (40 or more pounds of excess weight). Research has linked obesity to serious diseases, including some forms of cancer, diabetes, infertility, liver disease and heart disease. MEDIFAST STRENGTHS: CLINICALLY PROVEN. Medifast is based on clinically tested studies conducted by the Johns Hopkins University School of Medicine and the National Institutes of Health. In the study conducted by Dr. Cheskin and Dr. Crowell at the Johns Hopkins School of Medicine, males lost an average of 67.41 pounds and females lost an average of 47.5 pounds over a sixteen week period by using Medifast. Medifast has been chosen by premier medical/ research institutions including: Johns Hopkins Weight Management Center, The University of Vermont at Burlington and the William A. Shands Teaching Hospital in Gainesville, Florida. The Surgeon General estimates that over 97 million Americans are obese. Likewise, clinical obesity is a major epidemic in the U.S. adversely affecting over half of the population. The Company continues to expand its product line over the health and wellness market space. In 2002, the Company manufactured and produced four new disease management products designed to provide affordable alternatives to traditional drug therapy. Medifast brand awareness continues to evolve through product development, line extensions, and the Company's emphasis on quality customer service, technical support and publications developed by the Company's marketing staff. BUSINESS MODEL. During the recent past, the Company has implemented a new business model that focuses on the clinical weight management business and leverages the potential of the Internet to market the Medifast Program and the Medifast Products. The change of the Company's name, from Healthrite to Medifast, Inc., two years ago signified the Company's focus on its branded clinical weight management business. The business model implemented at that time has attracted medical practitioners and patients. RECENT HIGH CONTRIBUTION MARGINS. Gross Margins increased to 70% in fiscal 2002 from 56% in fiscal 2001, due to higher margins derived from the Medifast Products. The increase is attributed to the increased margin of Medifast direct and Internet sales directly to patients via the Lifestyles and Take Shape for Life Programs. GROWTH STRATEGY. The growing weight loss market provides us with significant growth potential. In 2002, the Company implemented Take Shape for Life, a comprehensive, medically supervised virtual clinic designed to assist in long term weight loss and disease and lifestyle management. Presently, it has over 2000 qualified health advisors and the Company plans to expand the health advisor network to continue to grow sales. Also in 2002 the Company entered into a joint venture with Elken International of Malaysia in which the Company will manufacture products for the Asian Market. Additionally, the Company signed a joint venture and distribution agreement with Hi-Tech Pharmacal to develop and produce retail diabetic meal replacement products under the DiabetiTrim brand 11 name. In 2003, the Company acquired the assets of Consumer Choice Systems, Inc. ("CCS"). CCS assembles and distributes its products for women ages 14-84 to over 18,000 chain food and drug stores across the United States. CCS and Amazon.com have an agreement to market CCS's products to Amazon's vast online customer base, which currently exceeds 30 million customers worldwide. Last, Medifast's advertising initiatives will continue to increase. Radio and print advertising have been successful and cable television advertising are expected to be launched in 2004. Medifast's Management proposes to develop strategic marketing relationships with third parties (i) that have existing relationships with the medical community, in an effort to reach the significant population of Americans who need nutritional disease management solutions, and (ii) to secure international distribution in Europe and Asia. GROWING PRODUCT SALES. Consolidated net sales of the Company and its subsidiaries (Jason Pharmaceuticals, Inc., Take Shape for Life, Inc., Seven Crondall Associates, LLC., Jason Properties, LLC, and Jason Enterprises, Inc.) are set forth below: Six months Years ending December 31 Parameter ended June 30, (audited) 2003 2002 2001 (unaudited) Net sales $12,764,000 $12,345,000 5,022,000 Cost of sales $3,311,000 3,687,000 2,211,000 Gross profit $9,453,000 8,658,000 2,811,000 Net income $1,455,000 2,623,000 588,000 There has been an unaudited increase of $419,000 in net sales in the first six months of 2003 from all of 2002. This follows an unaudited increase of 146% in net sales during 2002 as compared to the net sales in 2001. The revenue increase for the Company is attributed to, among other things, the following: (a) increased Direct Patient Sales via the internet's Physician Lifestyles Program; (b) increased advertising support via national print and radio that stimulated increased sales, and (c) the Take Shape for Life health network sales. THE OFFERING A total of 682,500 shares of Medifast common stock, $0.001 par value each (the "Common Stock"), are offered by the Selling Stockholders pursuant to this Prospectus. This includes (a) 550,000 shares of Common Stock, (b) 82,500 shares of Common Stock issuable to the Private Placement Investors upon the exercise of warrants, and (c) 50,000 shares of Common Stock issuable to the Asset Sellers upon the exercise of warrants. This prospectus also covers any additional shares of Common Stock that may be issuable to the Private Placement Investors by reason of any stock split, stock dividend or similar transaction involving the Common Stock. 12 A total of 10,642,768 shares Common Stock shall be outstanding after this offering, including shares issuable upon exercise of warrants. The foregoing is based on the number of shares outstanding as of July 31, 2003. This number excludes (i) 336,161 shares of our Common Stock issuable upon exercise of outstanding stock options, and (ii) 472,845 shares of our Common Stock reserved for future issuance under our existing stock option plan. USE OF PROCEEDS The proceeds from the sale of shares, as and when made by the Selling Stockholders, shall go entirely to the Selling Stockholders and the Company shall receive no part of it. The Company shall receive all proceeds from the exercise of the warrants by the Selling Stockholders unless certain warrants are exercised on a cashless basis. The Company shall not receive any proceeds from the sale of shares issuable upon the exercise of the warrants and all such proceeds shall go to the Selling Stockholders. The proceeds received from the exercise of warrants (to the extent it is not a cashless exercise of those warrants) are expected to be used for general corporate purposes and to fund the Company's expansion, which may include purchasing a new distribution center, purchasing new brands, funding the Company's export business or increase in the Company's advertising programs to expand the Company's revenue growth. DETERMINATION OF OFFERING PRICE THE PRICE AT WHICH THE SELLING STOCKHOLDERS MAY SELL THE SHARES WILL BE DETERMINED BY THE PREVAILING MARKET FOR THE SHARES OR IN NEGOTIATED TRANSACTIONS. The offering price set forth on the cover page of this Registration Statement is the offering price calculated pursuant to Rule 457(c) of the Securities Act solely for the purpose of calculating the registration fee and is based on the average of the high and low prices of the Company's common stock, as reported by the American Stock Exchange on August 20, 2003. The price range within which the shares of common stock of the Company have recently traded on the American Stock Exchange is set forth below: PRICE RANGE OF COMMON STOCK LOW HIGH ---- ---- Last 52 weeks, as of August 20, 2003 $1.20 $17.80 2002 Fourth Quarter................................. $1.77 $6.04 2003 First Quarter.................................. $3.79 $6.10 Second Quarter................................. $4.80 $17.21 13 SELLING STOCKHOLDERS As of July 24, 2003, the Company entered into that certain Securities Purchase Agreement (the "Securities Purchase Agreement") with two accredited investors, namely Mainfield Enterprises, Inc. and Portside Growth & Opportunity Fund (collectively, the "Private Placement Investors") and sold (i) an aggregate of 550,000 shares of Common Stock, $0.001 par value each, and (ii) warrants for the issuance of 82,500 shares of Common Stock. The sales were made in reliance of the exemption provided under Rule 506 of Regulation D promulgated under the Securities Act. Separately, on June 16, 2003, the Company entered into an asset purchase agreement (the "Asset Purchase Agreement") with Consumer Choice Systems, Inc. ("CCS"), a Delaware corporation, pursuant to which the Company acquired certain assets and business of CCS. As part of the consideration for the purchase of the assets, the Company agreed to (i) issue to the stockholders of CCS (the "Asset Sellers") warrants to acquire 50,000 shares of common stock of the Company and (ii) to include those warrants in any registration statement it files after the date thereof. This prospectus relates to the shares and warrants sold pursuant to the Securities Purchase Agreement and the warrants issued pursuant to the Asset Purchase Agreement. The Private Placement Investors and the Asset Sellers are collectively referred to herein as the "Selling Stockholders." The Securities Purchase Agreement provided that the Private Placement Investors shall be eligible to sell or dispose of any and all of the securities pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from such registration complying with federal and state securities laws. The Company agreed to include in any registration statement, and includes herein, a copy of that certain Plan of Distribution setting forth the Selling Stockholders' plan for the sale of the shares acquired pursuant to the Securities Purchase Agreement. See "Plan of Distribution" on page 15. The following table sets forth certain information regarding the Selling Stockholders as of July 24, 2003, including the names of the Selling Stockholders, the number of share beneficially owned by each of the Selling Stockholders, the number of shares being registered for the Selling Stockholders and the percentage ownership of shares held by the Selling Stockholders as of such date. The Selling Stockholders may sell any or all of the shares, subject to applicable federal and state securities laws, but are under no obligation to do so. 14
SHARES BENEFICIALLY OWNED PRIOR TO SHARES BENEFICIALLY OWNED IF BENEFICIAL OWNER REGISTRATION NUMBER OF ALL REGISTERED SHARES ARE SHARES BEING SOLD REGISTERED NUMBER OF NUMBER OF SHARES PERCENTAGE (1) SHARES PERCENTAGE A. PRIVATE PLACEMENT INVESTORS - ------------------------------ Mainfield Enterprises, Inc. 488,750 (2) 4.59% 488,750 (2),(3) 0 0.00% C/o Sage Capital Growth, Inc. 660 Madison Avenue New York, New York 10022 (4) Portside Growth & Opportunity 143,750 (5) 1.35% 143,750 (5),(3) 0 0.00% Fund C/o Ramius Capital Group, LLC 666 Third Avenue, 26th Floor New York, New York 10017 (6) TOTAL PRIVATE PLACEMENT INVESTORS 632,500 5.94% 632,500 0 0% B. ASSET SELLERS - ---------------- Evelyn Barron 720(7) * 240 480 * 3815 Carr Pl N Seattle, WA 98103 Arnoldo Barros 4,687(8) * 1,562 3,125 * 62 West 47th Street, Room 803 New York, New York 10036 Margie Chassman 65,088(9) * 30,363 34,725 * 445 West 23rd Street, Apt. 16E New York, New York 10011 David Blech 810(10) * 270 540 * 445 West 23rd Street, Apt. 16E New York, NY 10011 The Harbor Trust 34,688 (11) * 11,563 23,125 * C/o Margie Chassman as Trustee, 445 West 23rd Street, Apt. 16E, New York, New York 10011
15 Frank O'Connor 1,417(12) * 472 945 * 6 Tarman Ct. Rondolph, NJ 07869 Joseph Penner 690(13) * 230 460 * 115 East 61st Street, New York, New York 10021 Mark Germain 1,155(14) * 385 770 * 6 Olmsted Road Scarsdale, NY 10583 Martin Blech 427(15) * 142 285 * 205 Van Nostrand Avenue Englewood, NJ 07631 New Millenium Biotech, Inc. 4,928(16) * 1,643 3,285 * C/o David Blech 445 West 23rd Street, Apt. 16E New York, NY 10011 Stanley Shapiro 1,440(17) * 480 960 * 111 John Street, Room 800 New York, NY 10038 Stelios Papadopoulos 2,392(18) * 797 1,595 * 1221 Sixth Avenue New York, NY 10020 Tehillah Harris 428(19) * 143 285 * 205 Van Nostrand Avenue Englewood, NJ 07631 Terry Kelly 6,130(20) * 1,710 4,420 * 8407 NE Woodland Cove Drive Kirkland, WA 98034 TOTAL ASSET SELLERS 1.17% 50,000 75,000 * GRAND TOTAL (A+B) 682,500
* Less than one percent (1%). (1) A total of 10,642,768 shares Common Stock shall be outstanding after this offering, including shares issuable upon exercise of warrants. The foregoing is based on the number of shares outstanding as of July 31, 2003. This number excludes (i) 336,161 shares of our Common Stock issuable upon exercise of outstanding stock options, and (ii) 472,845 shares of our Common Stock reserved for future issuance under our existing stock option plan. (2) Represents 425,000 shares of Common Stock and warrants to acquire 63,750 shares of Common Stock. (3) This prospectus also covers any additional shares of Common Stock that may be issuable to the Private Placement Investors by reason of any stock split, stock dividend or similar transaction involving the common stock. 16 (4) DISCLAIMER OF BENEFICIAL OWNERSHIP: Pursuant to an investment management agreement Avi Vigder has voting discretion and investment control over the shares held by Mainfield Enterprises, Inc. Avi Vigder disclaims beneficial ownership of such shares. (5) Represents 125,000 shares of Common Stock and warrants to acquire 18,750 shares of Common Stock. (6) DISCLAIMER OF BENEFICIAL OWNERSHIP: The Investment Advisor to Portside Growth and Opportunity Fund is Ramius Capital Group, LLC. The Managing Member of Ramius Capital Group, LLC is C4S & Co., the Managing Members of which are Peter Cohen, Morgan Stark and Thomas Strauss. As such, Messrs. Cohen, Stark and Strauss may be deemed beneficial owners of shares issued and issuable to Portside Growth and Opportunity Fund. Messrs. Cohen, Stark and Strauss disclaim beneficial ownership of all of such shares. (7) Represents 480 shares of Common Stock and warrants to acquire 240 shares of Common Stock. (8) Represents 3,125 shares of Common Stock and warrants to acquire 1,562 shares of Common Stock. (9) Represents 34,725 shares of Common Stock and warrants to acquire 30,363 shares of Common Stock. (10) Represents 540 shares of Common Stock and warrants to acquire 270 shares of Common Stock. (11) Represents 23,125 shares of Common Stock and warrants to acquire 11,563 shares of Common Stock. (12) Represents 945 shares of Common Stock and warrants to acquire 472 shares of Common Stock. (13) Represents 460 shares of Common Stock and warrants to acquire 230 shares of Common Stock. (14) Represents 770 shares of Common Stock and warrants to acquire 385 shares of Common Stock. (15) Represents 285 shares of Common Stock and warrants to acquire 142 shares of Common Stock. (16) Represents 3,285 shares of Common Stock and warrants to acquire 1,643 shares of Common Stock. (17) Represents 960 shares of Common Stock and warrants to acquire 480 shares of Common Stock. (18) Represents 1,595 shares of Common Stock and warrants to acquire 797 shares of Common Stock. (19) Represents 285 shares of Common Stock and warrants to acquire 143 shares of Common Stock. (20) Represents 4,420 shares of Common Stock and warrants to acquire 1,710 shares of Common Stock. PLAN OF DISTRIBUTION The Private Placement Investors may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at 17 fixed or negotiated prices. The Private Placement Investors may use any one or more of the following methods when selling shares: - ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; - block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; - purchases by a broker-dealer as principal and resale by the broker-dealer for its account; - An exchange distribution in accordance with the rules of the applicable exchange; - privately negotiated transactions; - short sales; - broker-dealers may agree with the Private Placement Investors to sell a specified number of such shares at a stipulated price per share; - a combination of any such methods of sale; and - any other method permitted pursuant to applicable law. The Private Placement Investors may also sell shares under Rule 144 under the Securities Act, if available, rather than under this Prospectus. The Private Placement Investors may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades. Broker-dealers engaged by the Private Placement Investors may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Private Placement Investors (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Private Placement Investors do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The Private Placement Investors may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act. The Private Placement Investors may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this Prospectus after we have filed an amendment to this Prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of Private Placement Investors to include the 18 pledgee, transferee or other successors in interest as Private Placement Investors under this Prospectus. The Private Placement Investors also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this Prospectus and may sell the shares of common stock from time to time under this Prospectus after we have filed an amendment to this Prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of Private Placement Investors to include the pledgee, transferee or other successors in interest as Private Placement Investors under this Prospectus. The Private Placement Investors and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the Private Placement Investors against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. The Private Placement Investors have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this Prospectus. If the Private Placement Investors use this Prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act. The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the Private Placement Investors. EXPERTS AND COUNSELS Wooden and Benson Chartered, independent accountants, a member of the BDO-Siedman alliance, have audited our consolidated financial statements included in our Annual Report on Form 10-KSB for the year ended December 31, 2002. They have also served as our auditor for our consolidated financial statements included in our Annual Report for the year ended December 31, 2001. Our 2002 Annual Report is incorporated herein by reference in reliance on Wooden & Benson Charterted's report, given on their authority as experts in accounting and auditing. The validity of shares of common stock issued pursuant to the Securities Purchase Agreement has been passed upon by Michael P. Tanczyn, P.A. Lazare Potter Giacovas & Kranjac LLP has served as special counsel to the 19 Company in connection with the Securities Purchase Agreement and this Registration Statement. MATERIAL CHANGES The Company filed its Annual Report on Form 10-KSB, as amended, on March 25, 2003 for the year ending December 31, 2002. Thereafter the Company filed its latest quarterly report for the period ending June 30, 2003 on August 14, 2003. There have been no material changes in the Registrant's affairs since the date of filing of the last quarterly report. AVAILABLE INFORMATION We are subject to the informational requirements of the Exchange Act. We therefore file periodic reports, proxy statements and other information with the Commission. Such reports may be obtained by visiting the Public Reference Room of the Commission at 450 Fifth Street, NW, Washington, D.C. 20549, or by calling the Commission at 1-800-732-0330. In addition, the Commission maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically. Our internet address is www.medifast.net. The information on our website does not constitute part of this Prospectus. We make available, free of charge, through our internet website copies of our annual report on Form 10-K and quarterly reports on Form 10-Q and amendments to those reports, if any, filed or furnished pursuant to Section 13 (a) or 15 (d) of the Securities Exchange Act, in due course after filing such material electronically or otherwise furnishing it to the Commission. We have filed a registration statement on Form S-3 regarding this offering with the Commission under the Securities Act. This prospectus, which constitutes a part of the registration statement, does not contain all the information contained in the registration statement, which contains, in addition to documents incorporated by reference, certain exhibits. Statements made in this Prospectus as to the content of any contract, agreement or other document are not necessarily complete and you should refer to the contracts, agreements and other documents attached as exhibits to the registration statement or incorporated by reference for a more complete description of the agreements, contracts and other documents. - -------------------------------------------------------------------------------- 20 -------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS -------------------------------------------------------------------------- OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following are the estimated expenses to be incurred in connection with the issuance and distribution of the shares registered under this Registration Statement: Securities and Exchange Commission Registration Fee $ 746.50 Legal Fees and Expenses $10,000.00 Accounting Fees and Expenses $10,000.00 Miscellaneous $ 3,500.00 - ------------------------------------------------------------------------ Total $24,246.50 We will pay all such expenses. All amounts are estimated except the Commission registration fee. INDEMNIFICATION OF DIRECTORS AND OFFICERS Our Amended and Restated Articles of Incorporation, our by-laws require us to indemnify our directors, officers, employees and agents to the fullest extent permitted by Delaware law. These provisions may be interpreted to provide for the indemnification of directors, officers, employees and agents against liability and the entitlement to reimbursement of expenses incurred, under certain circumstances, for claims arising under the Securities Act. In so far as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. We currently maintain an insurance policy on behalf of our directors and officers against any liability asserted against them or which they incur acting in such capacity or arising out of their status as our director or officer. 21 EXHIBITS EXHIBIT DESCRIPTION OF EXHIBIT NUMBER 3.1 Registrant's Certificate of Incorporation, as amended 3.2 Registrant's by-laws, as amended 4.1 Specimen certificate for Registrants registered common stock 4.2 (1) Form of Warrant issued to Private Placement Investors as of July 24, 2003 4.3 Form of Warrant issued to the Asset Sellers as of June 16, 2003 10.1 (2) Securities Purchase Agreement as of July 24, 2003 by and between the Registrant and the Private Placement Investors 10.2 Asset Purchase Agreement as of June 16, 2003 by and between the Registrant and Consumer Choice Systems, Inc. 23.1 Consent of Wooden & Benson, Chartered 23.2 (3) Opinion of Michael P. Tancyzn, P.A. regarding the validity of shares issued to Selling Stockholders (1) Incorporated by reference to Registrant's Current Report on Form 8-K filed on July 25, 2003. (2) Incorporated by reference to Registrant's Current Report on Form 8-K filed on July 25, 2003. (3) Incorporated by reference to Registrant's Current Report on Form 8-K filed on July 25, 2003. UNDERTAKINGS We hereby undertake: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; 22 (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed or furnished to the Commission by us pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. We hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of our employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described in section entitled "Indemnification of Directors and Officers" or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Medifast, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Owings Mills, State of Maryland, as of August 20, 2003. Medifast, Inc. By: /s/ Bradley T. MacDonald Name: Bradley T. MacDonald Title: Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated, as of August 21, 2003. /s/ Bradley T. MacDonald, Chairman and Chief Executive Officer EX-3.1 3 medifast_ex3-1.txt CERTIFICATE OF INCORPORATION OF THM Associates Inc. Section 1. Name. The name of the corporation is THM Associates Inc. The corporation is hereinafter referred to as the "Company". Section 2. Registered Office and Agent. The address of the Company's registered office in the State of Delaware is 229 South State Street, City of Dover, County of Kent. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. Section 3. Purpose. The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. Section 4. Stock. The total number of shares of stock which the Company shall have authority to issue is one thousand (1,000) shares, consisting of one class of common stock of the par value of one cent ($.01) per share. Section 5. Incorporator. The name and mailing address of the incorporator is as follows: Name Address John L. Teeger c/o Founders Equity, Inc. 200 Madison Avenue New York, New York 10016 Section 6. By-Laws. The Board of Directors may make, alter or repeal the By-Laws of the Company, subject only to such limitations, if any, as may from time to time be imposed by the By-Laws. Section 7. Election of Directors. The election of directors need not be by written ballot, except as may otherwise be provided in the By-Laws. Section 8. Limitation of Liability of Directors. To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same now exists or may hereafter be amended, a director of the Company shall not be liable to the Company or its stockholders or any of them for monetary damages for breach of fiduciary duty as a director. Section 9. Amendments. The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter provided by law, and all rights conferred herein on stockholders, directors and officers are subject to this reserved power; provided that any amendment, alteration, change or repeal which reduces or limits the exculpation or indemnification of the persons referred to herein, or which adversely affects (from the point of view of the director) any limitation on the personal liability of a director, shall apply prospectively only and shall not be given retroactive effect. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, makes this certificate, hereby declaring and certifying that this is the act and deed of the undersigned and that the facts herein stated are true, and accordingly has hereunto set such person's hand on April 28, 1989. /s/ John L. Teeger John L. Teeger, Incorporator STATE OF OELALJARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:29 pm 05/13/1993 931335411 - 2195565 Certificate of Renewal and Restoration of THM Associates Inc. under Section 312 of the General Corporation Law Of the State of Delaware THM Associates, Inc., a corporation organized under the Laws of Delaware, the charter of which was voided for nonpayment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follows: 1. The name of the corporation is THM Associates Inc. 2. Its registered office in the Stats of Delaware is located at 32 Loockerman Square, Suite L--100, City of Dover, County of Kent. The name and address of its registered agent is The Prentice--Hall Corporation System, Inc. 3. The date of filing of the original Certificate of Incorporation in Delaware was May 5, 1989. 4. This corporation was duly organized and carried on the business authorized by its charter until March 1, 1992, at which time its charter became inoperative and void for nonpayment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. 5. The date when restoration, renewal, and revival of the character of this company is to commence is February 29, 1992, being the date prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual. IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charter, Warren L. Haber, the last acting Chairman of the Board, and John L. Teeger the last acting Secretary of TRIM Associates Inc., hay executed this certificate day of May, 1993. /s/ Warren L. Haber Warren L. Haber Last and Acting chairman of the Board Attest: /s/ John Teeger - ------------------------------- John L. Teeger Last and Acting Secretary STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:30 P11 05/13/1993 931335412 -- 2195555 Certificate of Amendment of the Certificate of Incorporation of THM Associates Inc. Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware It is hereby certified that: 1. The name of the corporation (hereinafter called the company") is THM Associates Inc. 2. The Certificate of Incorporation of the Company is hereby amended by deleting the first sentence of Section 1 thereof and by substituting in lieu of said sentence the following new sentence: "Section 1. Name. The name of the corporation is Vitamin Specialties Corp." 3. The Certificate of Incorporation of the Company is hereby further amended by deleting Section 4 thereof and by substituting in lieu of said Section the following new Section: "Section 4. Stock. Section 4.1. Authorized Shares. The Company shall have the authority to issue 500,000 shares of Preferred Stock having a par value of $.001 per share and 5,000,000 shares of common stock, initially consisting of two classes-- a class of 4,250,000 shares of Common Stock and a class of 750,000 shares of Class A Stock, with each class having a par value of $0.001 per share. Section 4.2. Preferred Stock. The shares of Preferred Stock may be issued from time to time and in such amounts and for such consideration as may be determined by the Board of Directors of the corporation. The Board of Directors is authorized to establish and designate series and to fix the number of shares and the relative rights, preferences and limitations as between series, subject only to such limitations as may be prescribed by law. In particular, the Board of Directors may take the following actions with respect to each series of Preferred Stock: establish and specify a designation of such series; fix the dividend rights of holders of shares of each such series; fix the terms on which shares of each such series may be redeemed if the shares of such series are to be redeemable; fix the rights of the holders of shares of each such series upon dissolution or any distribution of assets; fix the terms or amount of the sinking fund, if any, to be provided for the purchase or redemption of shares of each such series; fix the terms, if any, upon which the shares of each such series may be converted into or exchanged for shares of any other class or of any other security issued by the Company; fix the voting rights, if any of the shares of each such series; and establish any other relative rights, preferences or limitations of shares of the series consistent herewith and with applicable the General Corporation Law of the State of Delaware. Section 4.3. Common Stock. (a) The holders of Common Stock and the holders of Class A Stock shall have all the rights of the holders of capital stock of the corporation, subject to the rights of the holders of Preferred Stock, as if the shares of both classes were one class, except that holders of shares of Class A Stock shall not be entitled to any voting power, to participate in or vote at any meeting of stockholders, or to express consent or dissent to corporate action authorized in writing without a meeting, unless such rights are otherwise provided to the class under the General Corporation Law of the State of Delaware. (b) On the ninetieth (90th) day following the closing of the first sale of the shares of Common Stock or Class A Stock of the Company either registered under the Securities Act of 1933, as amended (the "1933 Act") or exempt from registration thereunder pursuant to the exemption afforded by Regulation A promulgated under the 1933 Act: (i) the outstanding shares of Class A Stock without requiring any action of the Corporation or the holders of such shares shall automatically be converted into shares of Common Stock on a share for share basis; and (ii) the authorized and unissued shares of Class A Stock shall be changed into a like number of authorized and unissued shares of Common Stock." 4. Each of the 200 shares of capital stock of the Company outstanding immediately prior to the effectiveness of the amendments of the Certificate of Incorporation of the Company herein certified shall upon the effectiveness of such amendments be converted into 7,500 shares of Common Stock. 5. The amendments of the Certificate of Incorporation of the Company herein certified have been duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware by the unanimous written Consent of the board of directors followed by the unanimous written consent of the stockholders of the Company. IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by Warren H. Haber, its Chairman of the Board and by John L. Teeger, its Secretary, hereby declaring and certifying that this is the act and deed of the Company and that, to the best of their knowledge, the facts stated herein are true. Dated as of May 13, 1993. /s/ Warren H. Haber ----------------------- Warren H. Haber Chairman of the Board Attest: /s/ John L. Teeger John L. Teeger Secretary STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:00 PM 08/19/1994 944155797 -- 2195555 Certificate of Amendment of the Certificate of Incorporation of Vitamin Specialties Corp. Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware It is hereby certified that: 1. The name of the corporation (hereinafter called the "Company") is Vitamin Specialties Corp. 2. The Certificate of Incorporation of the Company is hereby amended by deleting Section 4 thereof and by substituting in lieu of said Section the following new Section: "Section 4. Stock. Section 4.1. Authorized Shares. The Company shall have the authority to issue 1,500,000 shares of Preferred Stock having a par value of $.001 per share and 10,000,000 shares of common stock having a par value of $.00l per share. Section 4.2. Preferred Stock. The shares of Preferred Stock may be issued from time to time and in such amounts and for such consideration as may be determined by the Board of Directors of the corporation. The Board of Directors is authorized to establish and designate series and to fix the number of shares and the relative rights, preferences and limitations as between series, subject only to such limitations as may be prescribed by law. In particular, the Board of Directors may take the following actions with respect to each series of Preferred Stock: establish and specify a designation of such series; fix the dividend rights of holders of shares of each such series; fix the terms on which shares of each such series may be redeemed if the shares of such series are to be redeemable; fix the rights of the holders of shares of each such series upon dissolution or any distribution of assets; fix the terms or amount of the sinking fund, if any, to be provided for the purchase or redemption of shares of each such series; fix the terms, if any, upon which the shares of each such series may be converted into or exchanged for shares of any other class or of any other security issued by the Company; fix the voting rights, if any, of the shares of each such series; and establish any other relative rights, preferences or limitations of shares of the series consistent herewith and with applicable the General Corporation Law of the State of Delaware." 3. The amendment of the Certificate of Incorporation of the Company herein certified has been duly adopted in accordance with the provisions of section 242 of the General Corporation Law of the State of Delaware by the board of directors and stockholders of the Company. IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by Warren H. Haber, its Chairman of the Board and by John L. Teeger, its Secretary, hereby declaring and certifying that this is the act and deed of the Company and that, to the best of their knowledge, the facts stated herein are true. Dated as of August l9, 1994. /s/ Warren H. Haber Warren H. Haber Chairman of the Board Attest: /s/ John L. Teeger ------------------- John L. Teeger Secretary STATE OF OELAUARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 02:01 PM 07/17/1995 950 158958 -- 2195555 Certificate of Amendment of the Certificate of Incorporation of Vitamin Specialties Corp. Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware It is hereby certified that: 1. The name of the corporation (hereinafter called the "Company") is Vitamin Specialties Corp. 2. The Certificate of Incorporation of the Company is hereby amended by deleting the first sentence of Section 1 thereof and by substituting in lieu of said sentence the following new sentence: "Section 1. Name. The name of the corporation is HealthRite Inc." IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by Warren H. Haber, its Chairman of the Board and by John L. Teeger, its Secretary, hereby declaring and certifying that this is the act and deed of the Company and that, to the best of their knowledge, the facts stated herein are true. Dated as of July 17, 1995 /s/ Warren H. Haber --------------------- Warren H. Haber Chairman of the Board Attest: /s/ John L. Teeger - ------------------ John L. Teeger Secretary CERTIFICATE SETTING FORTH RESOLUTIONS OF THE BOARD OF DIRECTORS OF HEALTHRITE INC. PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE We, the undersigned. Warren H. Haber and John L Teeger, Chairman of the Board of Directors and Secretary, respectively, of HeathRite Inc., a Delaware corporation, the Certificate of Incorporation of which was tiled in die office of the Secretary of State of Delaware and recorded in the office of the Recorder of Kent County. Delaware, on May 5, 1989. DO HEREBY CERTTFY: That by a written consent of at least a majority of the Directors of the Corporation the following resolutions were duly adopted: The designation, preferences and the relative, participating, optional and other special rights and qualifications, limitations and restrictions of the Preferred Stock Series A are as follows: 1. Number and Designation. The number of shares to constitute the total authorized amount of the first series of Preferred Stock, par value $.001 per share of the Corporation shall be 450.000 shares and the designation of such shares shall be "Series A Preferred Stock." All shares of the Preferred Stock Series A shall be identical with each other in all respects. 2. Dividend Rights. The holders of shares of the Preferred Stock Series A shall be entitled to receive, prior to any payment to be made to the holders of shares of Common Stock or any other series or class of shares of capital stock which rank junior to the shares of Series A Preferred Stock, dividends out of any funds of the Corporation legally available therefor In an amount equal to eight percent (8%) per annum of the Liquidation Value as defined in Section 4 per share of Series A Preferred Stock payable In cash in annual installments on July 31 of each year with the first installment due on July 31, 1997 (the "Payment Date") to holders of record on the immediate previous July 15. Such dividends shall accrue from the date of receipt of payment for such shares and shall accrue from day to day, whether or not earned or declared. The dividend rights of the holders of the Series A Preferred Stock shall be cumulative, so that if in any year or years dividends upon the outstanding Series A Preferred Stock at the rate of eight percent (8%) per annum of the Liquidation Value thereof shall not have been paid thereon or declared and set apart for payment, the amount of she deficiency shall be fully paid and set aside for payment, but without interest, before any distribution whether by way of dividend or otherwise shall be declared or paid upon, or set apart, for shares of Common Stock or other classes or series of Preferred Stock. 3. Voting Rights. (a) Except as provided under Section 3(b) and Section 3(c) and the applicable provisions of the Delaware General Corporation Law, the holders of shares of the Preferred Stock Series A shall not be entitled to any voting rights. (b) In the event the Company has failed to pay any dividend installment within ninety (90) days after a Payment Date, the holders of shares of Series A Preferred Stock shall be entitled so long as such payment has not been made to the holders to elect a Director by a vote as a class with the holders of the Series A Preferred Stock entitled to one vote for each share held. To implement such tight, the number of Directors to constitute the Board shall be deemed increased as of such ninetieth day by the additional Director; and to the extent the number of Directors as so increased shall be in excess of the number of Directors authorized by the By-law of the Company, the related By-laws provision or provisions shall be deemed amended to authorize such number of Directors as to permit the election of the additional Director. (c) In addition to any approval required under the applicable provisions of the Delaware General Corporation Law or other provisions of the Certificate of Incorporation, the following transactions shall require the approval of the holders of at least a majority of the outstanding shares of the Series A Preferred Stock, voting as one class, with each share entitled to one vote: (i) An amendment to the Certificate of Incorporation, which, by its terms, would have a material adverse effect on the rights and privileges of the holders of the shares of Series A Preferred Stock. (ii) The authorization or the issuance of any shares of Preferred Stock ranking senior or in parity, with respect to dividends or liquidation preferences, to the shares of Series A Preferred Stock. (iii) A sale of substantially all the assets of the Corporation requiring a vote of the stockholders of the Corporation pursuant to Section 271 of the General Corporation Law of Delaware. (iv) A merger or consolidation of the Corporation other than with a wholly-owned subsidiary of the Corporation. 4. Liquidation Rights. (a) In the event of any voluntary or involuntary dissolution, distribution of the assets, liquidation or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and any preferential amounts payable with respect to shares of the Corporation ranking prior to the Preferred Stock Series A, the holders of shares of the Series A Preferred Stock shall be entitled to receive, prior to any payment to be made pursuant to the liquidation rights of the holders of shares of the Common Stock and any other class or series of capital stock which ranks junior to the shares of Series A Preferred Stock out of the assets of the Corporation whether from capital or surplus or both) Two Dollars ($2.00) per share (the "Liquidation Value"), together with an amount equal to all dividends accrued and unpaid to the date fixed for distribution to the holders of the shares of Series A Preferred Stock (the "Redemption Price"). (b) If upon any such dissolution, distribution of the assets, liquidation or winding up of the affairs of the Corporation, the assets of the Corporation distributable among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to them of the full preferential amounts to which they are entitled, then the entire assets of the Corporation so to be distributed shall be distributed ratably among the holders of the Series A Preferred Stock, to the exclusion of the holders of shares of Common Stock and the holders of any other shares of the Corporation ranking junior to the Series A Preferred Stock. Except as provided in Section 4(c), the foregoing provisions of this paragraph shall not, however, be deemed to require the distribution of assets among the holders of shares of the Series A Preferred Stock or the holders of shares of any class or series of capital stock or the Common Stock, in the event of a consolidation, merger, lease or sale of substantially all the assets, which does not in fact result in the liquidation or winding up of the business of the Corporation. (c) For the purposes of Section 4, a liquidation of the Corporation shall be deemed to include a merger or consolidation of the Corporation in which, after such merger or consolidation, the outstanding shares of Common Stock and Preferred Stock of the Corporation immediately prior to the effectiveness of such merger or consolidation will not, pursuant to the terms of the merger or consolidation, he converted to or exchanged for in whole or in part, capital stock of the surviving corporation with the same rights and limitations as the corresponding shares of Common Stock and Preferred Stock of the Corporation. 5. Redemption. The Corporation shall redeem on July 31, 2001 all outstanding shares of the Series A Preferred Stock by paying hi cash therefor Two Dollars ($2.00) per share and an amount in cash equal to all dividends on Series A Preferred Stock unpaid and accumulated as provided above, whether earned or declared or not, to July 31, 2001 or, if later, the date the funds necessary for redemption at the Redemption Price have been made available therefore. 6. Conversion. (a) Each of the holders of the Series A Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (i) Right to Convert. Each share of the Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series A Preferred Stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the per share Liquidation Value plus all declared but unpaid dividends per share on the date of conversion by the Conversion Price at the time in effect for such shares. The initial Conversion Price for Series A Preferred Stock shall be Two Dollars ($2.00) per share; provided, however, that the Conversion Price shall be subject to adjustment as set forth in subparagraphs 5(a)(iii) hereof. (ii) Mechanics of Conversion. Before any holder of the Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrendered the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such Series A Preferred Stock, and shall give written notice by mail, postage prepaid, to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Series A Preferred Stock or to the nominee or nominees of such bolder, a certificate or certificates for the number of shares of Common Stock to which such bolder shall be entitled as aforesaid. Such conversion shall be deemed to have been made Immediately prior to the close of business on the date of such surrender of the shares of the Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. (iii) Conversion Price Adjustments. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as follows: (1) In the event the Corporation should at any time or from time to time after June 30, 1996 fix a record date for (x) the effectuation of a split or subdivision of the outstanding shares of Common Stock, or (y) the determination of holders of Common Stock entitled to receive a dividend or other distribution payable hi additional shares of Common Stock or ocher securities or rights convertible into, or emitting the holder thereof to receive, directly or indirectly, additional shares of, Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents, including the additional shares of Common Stock issuable upon conversion or exercise thereof, then, as of such record date (or the date of such dividend, distribution, split or subdivision or determination if no record dare is fixed), the Conversion Price shall be appropriately decreased to an amount equal to the Conversion Price in effect on the record date (or the date of such dividend, distribution, split, subdivision or determination) times a fraction, the numerator of which shall be the number of shares of Common Stock and Common Stock Equivalents outstanding before the dividend, subdivision, distribution or spilt, and the denominator of which shall be the number of shares of Common Stock outstanding before the dividend, subdivision, distribution or split. (2) If the number of shares of Common Stock outstanding at any time after June 30, 1996 is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series A. Preferred Stock shall be appropriately increased to an amount equal to the Conversion Price In effect on the record date (or the date of such combination) times a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before the combination, and the denominator of which shall be the number of shares of Common Stock outstanding after the combination. (3) If at the time the first Registration Statement of the Corporation filed under the Securities Act of 1933, as amended, which registers shares of the Series A Preferred Stock or shares of Common Stock issued or issuable upon conversion of shares of Series A Preferred Stock for the account of a holder of the Series A Preferred. Stock or such shares of Common Stock, which registration was effected pursuant to the "Piggy Back Registration" rights provided by the Stock Purchase Agreement between the Corporation and the purchasers of Series A Preferred Stock, is declared effective by the United States Securities and Exchange Commission the "Market Price" of the Common Stock of the Corporation is less than the then Conversion Price, Conversion Price shall be adjusted to such Market Price. Market Price shall mean the average of the closing sale prices of the Common Stock of the Corporation on the largest trading market on which the Common Stock of the Corporation has been traded for the immediate preceding such twenty (20) day period. The trading markets for the purposes of this Section shall be considered largest in the following order of priorities: New York Stock Exchange, Nasdaq National Market, American Stock Exchange and Nasdaq SmallCap Stock Market. If the Common Stock of the Corporation is not listed or traded on any of the foregoing exchanges or markets during any day of the foregoing twenty (20) day period, the Market Price shall be average of the high bid and low asked prices or each of the twenty (20) days as set forth on the "Bulletin Board" of the National Association of Securities Dealers. (iv) Issuance of Common Stock Certificates. The issuance of certificates for shares of Common Stock upon conversion of Series A Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Preferred Stock which is being converted. (v) Stock Transfer Books to Remain Open. The Corporation will at no time close its stock transfer books against the transfer of any Series A Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series A Preferred Stock in any mariner which interferes with the timely conversion of such Series A Preferred Stock, except as may otherwise be required to comply with applicable securities laws. (vi) Common Stock Definition. As used in this Paragraph 5, the term "Common Stock" shall mean and include the Corporation's authorized Common Stock, par value $.00l per share, as constituted on the date of filing of the Certificate of this Resolution of the Board of Directors with the Department of State of Delaware, and shall also include any capital stock of any class of die Corporation thereafter authorized which shall neither be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends nor be entitled to a preference in the distribution of assets upon the voluntary or Involuntary liquidation, dissolution or winding up of the Corporation; provided that the shares of Common Stock receivable upon conversion of shares of Series A Preferred Stock shall include only shares designated as Common Stock of the Corporation on the date of filing of this instrument, or in case of any reorganization or reclassification of the outstanding shares thereof, the stock, securities or assets to be Issued in exchange for such Common Stock pursuant thereto. (vii) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences or indebtedness issued by the Corporation or other persons, assets (excluding cash dividends), then, in each such case, the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation Into which their shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution. (viii) Recapitalization. In the case of a recapitalization of the Corporation affecting its outstanding shares of Common Stock, the Series A Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock, other securities, or property receivable upon such recapitalization by a holder of the number of shares of Common Stock into which such Series A Preferred Stock might have been converted immediately prior to such recapitalization. (ix) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Paragraph 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment, (x) No Fractional Shares and Certificate auto Adjustment. (1) No fractional shares shall be issued upon conversion of the Series A Preferred Stock and the number of shares of Common Stock to be issued shall be rounded up to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the beneficial holder is at the time converting into Common Stock arid the number of shares of Common Stock Issuable upon such aggregate conversion. (2) Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series A Preferred Stock pursuant to this Paragraph 6, the Corporation, at Its expense, shall promptly compute such adjustment or readjustments in accordance with the terms hereof and prepare and furnish to each holder of the Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such of the Board of Directors adjustment and readjustment. (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A Preferred Stock. (xi) Notice of Record Date. In the event of any taking by the Corporation a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or properly, or to receive any ether right, the Corporation shall mail to each holder of Series A Preferred Stock, at least fifteen (15) days prior to the date specified therein, a notice specifying the dare on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (xii) Reservation of Stock issuable Upon Conversion. The Corporation shall at all times reserve and keep available our of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock, such number of its shares of Common Stock as shall from tune to time be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series A Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of s hares as shall be sufficient for such purposes. IN WITNESS WHEREOF, we have singed this Certificate as of the 5th day of August , 1996 /s/ John Teeger ------------------- John Teeger, Secretary /s/ Warren H. Haber ------------------- Warren H. Haber, Chairman of the Board State of Delaware Secretary of the State Division of Corporations Filed 09:00 AM 08/08/1996 960232264 - 2195555 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION * * * * * * * HEALTHRITE INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY. FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, filed with the minutes of the Board, adopted a resolution proposing and declaring advisable the following amendment to the restated Certificate of Incorporation of said corporation. RESOLVED, that the restated Certificate of Incorporation of HealthRite. Inc. be amended by deleting the first sentence of Section 1 thereof and by Substituting in lieu of said sentence the following new sentence: "Section 1. Name. The name of the corporation is Medifast, Inc." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporate Law of the State of Delaware and written notice of the adoption of the amendment has been given as provided in Section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice. THIRD: That the aforesaid amendment was duly adopted in accordance With the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said the Company has caused this certificate to be signed by Bradley T. MacDonald, its Chairman of the Board of Directors, this 11th day of January, 2001. /s/ Bradley T. MacDonald Bradley T. MacDonald Chairman of the Board of Directors STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:30 PM 01/11/2001 010018738 -- 2195555 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 01/21/2000 001035047 -- 2195555 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HEALTHRITE, INC. It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is HealthRite Inc. 2. Section 4 of the certificate of incorporation of the Corporation is hereby amended by adding the following designation of preferred stock: "The designation, preferences and the relative, participating optional and other special rights and qualifications limitations and restrictions of the Series B Convertible Preferred Stock are as follows: 1. Number and Designation. The number of shares to constitute the total authorized amount of the series of Series B Convertible Preferred Stock, par value $.00l per share of the Corporation shall be 600,000 shares and the designation of such shares shall be "Series B Convertible Preferred Stock." All shares of the Series B Convertible Preferred Stock shall be identical with each other in all respects. This series of Preferred Stock shall rank junior in all aspects to the previously authorized and issued shares of Series A Preferred Stock. 2. Dividend rights. The holders of shares of the Series B Convertible Preferred Stock shall be entitled to receive, prior to any payment to be made to the holders of shares of Common Stock or any other series or class of shares of capital stock which ranks junior to the shares of Series B Convertible Preferred Stock, dividends out of any fluids of the Corporation legally available therefor in an amount equal to ten percent (10%) per annum of the Liquidation Value as defined in Section 4 per share of Series B Convertible Preferred Stock payable in cash in annual installments on July 31 of each year, with the first installment due on July 31, 2000 (the "Payment Date") to holders of record on the immediate previous July 15. Such dividends shall accrue from the date of receipt of payment for such shares and shall accrue from day to day, whether or not earned or declared. The dividend rights of the holders of the Series B Convertible Preferred Stock shall be cumulative, so that if in any year or years dividends upon the outstanding Series B Convertible Preferred Stock at the rate often percent (10%) per annum of the Liquidation Value thereof shall not have been paid thereon or declared and set apart for payment, the amount of the deficiency shall be fully paid and set aside for payment, but without interest, before any distribution whether by way of dividend or otherwise shall be declared or paid upon, or set apart, for shares of Common Stock or other classes or series of Preferred Stock. 3. Voting Rights. The holders of shares of the Series B Convertible Preferred Stock shall be entitled to four (4) votes per share in all corporate matters in which holders of the Company's Common Stock are entitled to vote. 4. Liquidation Rights. (a) In the event of any voluntary or involuntary dissolution, distribution of the assets, liquidation or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and any preferential amounts payable with respect to shares of the Corporation ranking prior to the Series B Convertible Preferred Stock, the holders of shares of the Series B Convertible Preferred Stock shall be entitled to receive, prior to any payment to be made pursuant to the liquidation rights of the holders of shares of' the Common Stock and any other class or series of capital stock which ranks junior to the shares of Series B Convertible Preferred Stock out of the assets of the Corporation whether from capital or surplus or both, One dollar ($1.00) per share or securities of equal value at the option of the holder (the "Liquidation Value"), together with an amount equal to all dividends accrued and unpaid to the date fixed for distribution to the holders of the shares of Series B Convertible Preferred Stock (the "Redemption Price"). (b) If upon any such dissolution, distribution of the assets, liquidation or winding up of the affairs of the Corporation, the assets of the Corporation distributable among the holders of the Series B Convertible Preferred Stock shall be insufficient to permit the payment to them of the full preferential amounts to which they are entitled, then the entire assets of the Corporation to be distributed shall be distributed ratably among the holders of the Series B Convertible Preferred Stock, to the exclusion of the holders of shares of Common Stock and the holders of any other shares of the Corporation ranking junior to the Series B Convertible Preferred Stock. Except as provided in Section 4(c), the foregoing provisions of this paragraph shall not, however, be deemed to require the distribution of assets among the holders of shares of the Series B Convertible Preferred Stock or the holders of shares of any class or series of capital stock or the Common Stock, in the event of a consolidation, merger, lease or sale of substantially all the assets, which does not in fact result in the liquidation or winding up of the business of the Corporation. (c) For the purposes of Section 4, a liquidation of the Corporation shall be deemed to include a merger or consolidation of the Corporation in which, after such merger or consolidation, the outstanding shares of Common Stock and Preferred Stock of the Corporation immediately prior to the effectiveness of such merger or consolidation will not, pursuant to the terms of the merger or consolidation, be converted to or exchanged for in whole or in part, capital stock of the surviving corporation with the same rights and limitations as the corresponding shares of Common Stock and Preferred Stock of the Corporation. 5. Redemption. The Corporation shall redeem on January 15, 2005 all outstanding shares of the Series B Convertible Preferred Stock by paying in cash therefor One Dollar ($1.00) per share and an amount in shares of Common Stock equal to all dividends on Series B Convertible Preferred Stock unpaid and accumulated as provided above, whether earned or declared or not, to January 15, 2005 or, if later, the date the funds necessary for redemption at the Redemption Price have been made available therefor. The number of shares of Common Stock payable will be calculated by a fraction of which the sum of all dividends payable is the numerator and the market price of a share of Common Stock on the day prior to redemption is the denominator. 6. Conversion. (a) Each of the holders of the Series B Convertible Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (i) Right to Convert. Each share of the Series B Convertible Preferred Stock shall be convertible, at the option of the holder thereof within one (1) year after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series B Convertible Preferred Stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the per share Liquidation Value plus all declared but unpaid dividends per share on the date of conversion by the Conversion Price at the time in effect for such shares. The initial Conversion Price for Series B Convertible Preferred Stock shall be 75% of the market value of the Company's Common Stock on the day prior to conversion with a. maximum conversion price of $0.50 per share; provided, however, that the Conversion Price shall be subject to adjustment as set forth in subparagraphs 5(a)(iii) hereof. (ii) Methods of Conversion. Before any holder of the Series B Convertible Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such Series B Convertible Preferred Stock, and shall give written notice by mail, postage prepaid, to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Series B Convertible Preferred Stock or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on tire date of such surrender of the shares of the Series B Convertible Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. (iii) Conversion Price Adjustments. The Conversion Price of the Series B Convertible Preferred Stock shall be subject to adjustment from time to time as follows: (1) In the event the Corporation should at any time or horn time to time after January 24, 2000 fix a record date for (x) the effectuation of a split or subdivision of the outstanding shares of Common Stock, or (y) the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional share' of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalent") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents, including the additional shares of Common Stock issuable upon conversion or exercise thereof, then, as of such record date (or the date of such dividend, distribution, split or subdivision or determination if no record date is fixed), the Conversion Price shall be appropriately decreased to an amount equal to the Conversion Price in effect on the record date (or the date of such dividend, distribution, split, subdivision or determination) times a fraction, the numerator of which shall be the number of shares of Common Stock and Common Stock Equivalents outstanding before the dividend, subdivision, distribution or split, and the denominator of which shall be the number of shares of Common Stock outstanding before the dividend, subdivision, distribution or split. (2) If the number of shares of Common Stock outstanding at any time after January 24, 2000 is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series B Convertible preferred Stock shall be appropriately increased to an amount equal to the Conversion Price in effect on the record date (or the date of such combination) times a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before the combination, and the denominator of which shall be the number of shares of Common Stock outstanding after the combination. (iv) Issuance of Common Stock Certificates. The issuance of certificates for shares of Common Stock upon conversion of Series B convertible preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof; provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series B Convertible preferred Stock which is being converted. (v) Stock Transfer Books to Remain Open. The Corporation will at no time close its stock transfer books against the transfer of any Series B Convertible Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series B Convertible preferred Stock in any manner which interferes with the timely conversion of such Series B Convertible Preferred Stock, except as may otherwise be required to comply with applicable securities laws. (vi) Common Stock Definition. As used in this Paragraph 5, the term "Common Stock" shall mean and include the Corporation's authorized Common Stock, par value $.001 per share, as constituted on the date of filing of the Certificate of this Resolution of the Board of Directors with the Department of State of Delaware, and shall also include any capital stock of any class of the Corporation thereafter authorized which shall neither be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends nor be entitled to a preference in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided that the shares of Common Stock receivable upon conversion of shares of Series B Convertible Preferred Stock shall include only shares designated as Common Stock of the Corporation on the date of filing of this instrument, or in case of any reorganizations or reclassification of the outstanding shares thereof, the stock, securities or assets to be issued in exchange for such Common Stock pursuant thereto. (vii) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences or indebtedness issued by the Corporation or other persons, assets (excluding cash dividends), then, in each such case, the holders of the Series B Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series B Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution. (viii) Recapitalization. In the case of a recapitalization of the Corporation affecting its outstanding shares of Common Stock, the Series B Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock, other securities, or property receivable upon such recapitalization by a holder of the number of shares of Common Stock into which such Series B Convertible Preferred Stock might have been converted immediately prior to such recapitalization. (ix) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidations, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this paragraph 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Convertible Preferred Stock against impairment. (x) No Fractional Shares and Certificate as to Adjustment. (1) No fractional shares shall be issued upon conversion of the Series B Convertible Preferred Stock and the number of shares of Common Stock to be issued shall be rounded up to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series B Convertible Preferred Stock the beneficial holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (2) Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series B Convertible Preferred Stock pursuant to this paragraph 6, the Corporation, at its expense, shall promptly compute such adjustment or readjustments in accordance with the terms hereof and prepare and furnish to each holder of the Series B Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock (xi) Notice of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series B Convertible Preferred Stock, at least fifteen (15) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or light. (xii) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Convertible Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series B Convertible Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series B Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 3. The amendment of the certificate of incorporation of the Corporation herein certified was duly adopted, pursuant to the provisions of Section 242 of the General Corporation Law of the State of Delaware, by at least a majority of the directors who have been elected and qualified. Signed on January 21, 2000 /s/ Bradley T. MacDonald ------------------------ Bradley T. MacDonald, CEO STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:00 PM 03/20/2002 020186483 -- 2195555 AMENDEDED CERTIFICATE SETTING FORTH RESOLUTIONS OF THE BOARD OF DIRECTORS OF MEDIFAST, INC. PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ------------------------- I, Bradley T. MacDonald, Chairman of the Board of Directors of Medifast, Inc., a Delaware corporation, the Certificate of Incorporation of which was filed in the office of the Secretary of State of Delaware and recorded in the office of the Recorder of Kent County, Delaware, on March 8, 2002, DO HEREBY CERTIFY: That by unanimous approval and consent, the following resolutions were duly adopted by the Directors of the Corporation: The designation, preferences and the relative, participating, optional and other special right and qualifications, limitations and restrictions of the Series B Preferred Convertible Stock are as follows: 1. Number and Designation. The number of shares to constitute the total authorized amount of the series of Series B Preferred Convertible Stock, par value $.001 per share of the Corporation shall be 600,000 shares and the designation of such shares shall be "Series B Convertible Preferred Stock." All shares of the Series B Convertible Preferred Stock shall be identical with each other in all respects. This series of Preferred Stock shall rank junior in all aspects to the previously authorized and issued shares of Series A Preferred Stock. 2. Dividend rights. The holders of shares of the Series B Convertible Preferred Stock shall be entitled to receive, prior to any payment to be made to the holders of shares of Common Stock or any other series or class of shares of capital stock which ranks junior to the shares of Series B Convertible Preferred Stock, dividends out of any funds of the Corporation legally available therefore in an amount equal to ten percent (10%) per annum of the Liquidation Value as defined in Section 4 per share of Series B Convertible Preferred Stock payable in cash in annual installments on July 31 of each year, with the first installment due on July 31, 2000 (the "Payment Date") to holders of record on the immediate previous July 15. Such dividends shall accrue from the date of receipt of payment for such shares and shall accrue from day to day, whether or not earned or declared. The dividend rights of the holders of the Series B Convertible Preferred Stock shall be cumulative, so that if in any year or years dividends upon the outstanding Series B Convertible Preferred Stock at the rate of ten percent (10%) per annum of the Liquidation Value thereof shall not have been paid thereon or declared and set apart for payment, the amount of the deficiency shall be fully paid and set aside for payment, but without interest, before any distribution whether by way of dividend or otherwise shall be declared or paid upon, or set apart, for shares of Common Stock or other classes or series of Preferred Stock. 3. Voting Rights. The holders of shares of the Series B Convertible Preferred Stock shall be entitled to two (2) votes per share in all corporate matters in which holders of the Company's Common Stock are entitled to vote 4. Liquidation Rights. (a) In the event of any voluntary or involuntary dissolution, distribution of assets, liquidation or winding up of the affairs of the Corporation, after payment of provision for payment of the debts and other liabilities of the Corporation and any preferential amounts payable with respect to shares of the Corporation ranking prior to the Series B Convertible Preferred Stock, the holders of shares of the Series B Convertible Preferred Stock shall be entitled to receive, prior to any payment to be made pursuant to the liquidation rights of the holders of shares of the Common Stock and any other class or series of capital stock which ranks junior to the shares of Series B Convertible Preferred Stock out of the assets of the Corporation whether from capital or surplus or both, One dollar ($1.00) per share or securities of equal value at the option of the holder (the "Liquidation Value"), together with an amount equal to all dividends accrued and unpaid to the date fixed for distribution to the holders of the shares of Series B Convertible Preferred Stock (the "Redemption Price"). (b) If upon any such dissolution, distribution of the assets, liquidation or winding up of the affairs of the Corporation, the assets of the Corporation distributable among the holders of the Series B Convertible Preferred Stock shall be insufficient to permit the payment to them of the full preferential amounts to which they are entitled, then the entire assets of the Corporation to be distributed shall be distributed ratably among the holders of the Series B Convertible Preferred Stock, to the exclusion of the holders of shares of Common Stock and the holders of any other shares of the corporation ranking junior to the Series B Convertible Preferred Stock. Except as provided in Section 4(c), the foregoing provisions of this paragraph shall not, however, be deemed to require the distribution of assets among the holders of shares of the Series B Convertible Preferred Stock or the holders of shares of any class or series of capital stock or the Common Stock, in the event of a consolidation, merger, lease or sale of substantially all the assets, which does not in fact result in the liquidation or winding up of the business of the Corporation. (c) For the purposes of Section 4, a liquidation of the Corporation shall be deemed to include a merger or consolidation of the Corporation in which, after such merger or consolidation, the outstanding shares of Common Stock and Preferred Stock of the Corporation immediately prior to the effectiveness of such merger or consolidation will not, pursuant to the terms of the merger or consolidation, be converted to or exchanged for in whole or in part, capital stock of the surviving corporation with the same rights and limitations as the corresponding shares of Common Stock and Preferred Stock of the Corporation. 5. Redemption. The Corporation shall redeem on January 15, 2005 all outstanding shares of the Series B Convertible Preferred Stock by paying in cash therefore One Dollar ($1.00) per share and an amount in shares of Common Stock equal to all dividends on Series B Convertible Preferred Stock unpaid and accumulated as provided above, whether earned or declared or not, to January 15, 2005 or, if later, the date the funds necessary for redemption at the Redemption Price have been made available therefore. The number of shares of common Stock payable will be calculated by a fraction of which the sum of all dividends payable is the numerator and the market price of a share of Common Stock on the 30 days average prior to redemption is the denominator. 6. Conversion. (a) Each of the holders of the Series B Convertible Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (i) Right to Convert. Each share of the Series C Convertible Preferred Stock shall be convertible, at the option of the holder thereof, within one (1) year after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series B Convertible Preferred Stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the per share Liquidation Value plus all declared but unpaid dividends per share on the date of conversion by the Conversion Price at the time in effect for such shares. The initial Conversion price of Series B Convertible Preferred Stock shall be $0.50 per share; provided, however, that the Conversion Price shall be subject to adjustment as set for the in subparagraphs 5(a)(iii) hereof. (ii) Methods of Conversion. Before any holder of the Series B Convertible Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefore, duly endorsed, at the office of the Corporation or any transfer agent for such Series B Convertible Preferred Stock, and shall give written notice by mail, postage prepaid, to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of the Series B Convertible Preferred Stock or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to close of business on the date of such surrender of the shares of the Series B Convertible Preferred Stock to be converted, and the person or persons entitled to receive the share of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. (iii) Conversion Price Adjustments. The Conversion Price of the Series B Convertible Preferred Stock shall be subject to adjustment from time to time as follows: (1) In the event the Corporation should at any time or from time to time after January 24, 2000 fix a record date for (x) the effectuation of a split or subdivision of the outstanding shares of common stock, or (y) the determination of the holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive, directly or indirectly, additional shares of, Common Stock (hereinafter referred to as "Common Stock Equivalent") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents, including the additional shares of Common Stock issuable upon conversion or exercise thereof, then, as of record date (or the date of such dividend, distribution, split or subdivision or determination if no record date (or the date of such dividend, distribution, split, subdivision or determination) times a fraction, the numerator of which shall be the number of shares of Common Stock and Common Stock Equivalents outstanding before the dividend, subdivision, distribution or split, and the denominator of which shall be the number of shares of Common Stock outstanding before the dividend, subdivision, distribution or split. (2) If the number of shares of Common Stock outstanding at any time after January 24, 2000 is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price of the Series B Convertible Preferred Stock shall be appropriately increased to an amount equal to the Conversion Price in effect on the record date (or the date of such combination) times a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before the combination, and the denominator of which shall be the number of shares of Common Stock outstanding after the combination. (iv) Issuance of Common Stock Certificates. The issuance of certificates for shares of Common Stock upon conversion of Series B Convertible Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series B Convertible Preferred Stock which is being converted. (v) Stock Transfer Books to Remain Open. The Corporation will at no time close its stock transfer books against the transfer of any Series B Convertible Preferred Stock or of any shares of common Stock issued or issuable upon the conversion of any shares of Series B Convertible Preferred Stock in any manner which interferes with the timely conversion of such Series B Convertible Preferred Stock, except as may otherwise be required to comply with applicable securities laws. (vi) Common Stock Definition. As used in this paragraph 5, the term "Common Stock" shall mean and include the Corporation's authorized Common Stock, par value $.001 per share, as constituted on the date of filing of the Certificate of this Resolution of the Board of Directors with the Department of State of Delaware, and shall also include any capital stock of any class of the Corporation thereafter authorized which shall neither be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends nor be entitled to a preference in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided that the shares of Common Stock receivable upon conversion of shares of Series B Convertible Preferred Stock shall include only shares designated as Common Stock of the Corporation on the date of filing of this instrument, or in case of any reorganizations or reclassification of the outstanding shares thereof, the stock, securities or assets to be issued in exchange for such Common Stock pursuant thereto. (vii) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences or indebtedness issued by the Corporation or other persons, assets (excluding cash dividends), then, in each such case, the holders of the Series B Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series B Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution. (viii) Recapitalization. In the case of a recapitalization of the Corporation affecting its outstanding shares of Common Stock, the Series B Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock, other securities, or property receivable upon such recapitalization by a holder of the number of shares of Common Stock into which such Series B Convertible Preferred Stock might have been converted immediately prior to such recapitalization. (ix) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidations, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this paragraph 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Convertible Preferred Stock against impairment. (x) No Fractional Shares and Certificate as to Adjustment. (1) No fractional shares shall be issued upon conversion of the Series B Convertible Preferred Stock and the number of shares of Common Stock to be issued shall be rounded up to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series B Convertible Preferred Stock the beneficial holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (2) Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series B Convertible Preferred Stock pursuant to this paragraph 6, the Corporation, at its expense, shall promptly compute such adjustment or readjustments in accordance with the terms hereof and prepare and furnish to each holder of the Series B Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock. (xi) Notice of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series B Convertible Preferred Stock, at least fifteen (15) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (xii) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Convertible Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series B Convertible Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series C Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. IN WITNESS WHEREOF, we have signed this Certificate as of the 8th day of March, 2002. MEDIFAST, Inc. /s/ Bradley T. MacDonald -------------------------- Bradley T. MacDonald Chairman of the Board and Chief Executive Officer Delaware The first State I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "MEDIFAST, INC.", FILED IN THIS OFFICE ON THE TENTH DAY OF JUNE, A.D. 2002, AT 3:30 O'CLOCK P.M. A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS. [SEAL] /s/ Harriet Smith Windsor 2195555 8100 Harriet Smith Windsor Secretary of State 020373084 AUTHENTICATION:1825305 DATE: 06--12--02 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF MEDIFAST, INC. Medifast, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors Of Medifast. Inc. resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, That the Certificate of Incorporation of this corporation be amended by changing the Second and Fourth Article thereof so that, as amended said Articles shall be and read as follows: Article Two: The name and address of its registered office and registered agent in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. Article Fourth: The amount of the total authorized capital shares of this corporation are 16,500,000 shares with a par value of $,001 of which 15,000,000 shares are deemed as common stock and 1,500,000 shares are deemed as preferred stock. STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 03:30 PM 06/10/2002 020373084 -- 2195555 SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Medifast, Inc. has caused this certificate to be signed by Bradley T. MacDonald, its CEO and Chairman of the Board, This tenth day of June, 2002. Medifast, Inc. By /s/ Bradley T. MacDonald ---------------------------------------- Name: Bradley T. MacDonald Title:CEO and Chairman of the EX-3.2 4 medifast_ex3-2.txt BY-LAWS OF VITAMIN SPECIALTIES CORP. (the "Company") (as Amended through May 12, 1995) BY-LAWS OF VITAMIN SPECIALTIES CORP. a Delaware Corporation (the "Company") (as Amended through May 12, 1995) TABLE OF CONTENTS Article I. STOCKHOLDERS..................................1 Section 1.1 Annual Meeting......................1 Section 1.2 Special Meeting.....................1 Section 1.3 Notice of Meetings..................1 Section 1.4 Quorum..............................1 Section 1.6 Presiding Officer and Secretary.....2 Section 1.7 Proxies.............................2 Section 1.8 List of Stockholders................2 Article II. DIRECTORS....................................2 Section 2.1 Number of Directors.................2 Section 2.2 Election and Term of Directors......3 Section 2.3 Vacancies and Newly Created Directorships...................................3 Section 2.4 Resignation.........................3 Section 2.5 Meetings............................3 Section 2.6 Quorum and Voting...................3 Section 2.7 Written Consents and Meetings by Telephone.....................................4 Section 2.8 Compensation........................4 Section 2.9 The "Whole Board"...................4 Article III. COMNITTEES OF THE BOARD.....................4 Section 3.1 Appointment and Powers..............4 Article IV. OFFICERS, AGENTS AND EMPLOYEES...............4 Section 4.1 Appointment and Qualification..........5 Section 4.2 Removal of Officers, Agents or Employees.....................................5 Section 4.3 Compensation and Bond...............5 Section 4.4 Chairman of the Board...............5 Section 4.5 President...........................5 Section 4.6 Vice Presidents.....................5 Section 4.7 Treasurer...........................5 Section 4.8 Secretary...........................6 Section 4.9 Assistant Treasurer.................6 Section 4.10 Assistant Secretaries..............6 Section 4.11 Delegation of Duties...............6 Article V. CAPITAL STOCK.................................6 Section 5.1 Certificates........................6 Section 5.2 Transfers of Stock..................6 Section 5.3 Lost, Stolen or Destroyed Certificates....................................7 Article VI. SEAL.........................................7 Section 6.1 Seal...............................7 Article VII. WAIVER OF NOTICE............................7 Section 7.1 Waiver of Notice....................7 Article VIII. INDEMNIFICATION............................8 Section 8.1 Indemnification...................8 Section 8.2 Determinations....................8 Section 8.3 Business Combinations.............9 Section 8.4 Advances of Expenses..............9 Section 8.5 Employee Benefit Plans............9 Article IX. AMENDMENTS...................................9 Section 9.1 Amendments..........................9 BY- LAWS OF VITAMIN SPECIALTIES CORP. a Delaware corporation (the "Company") (as Amended through May 12, 1995) Article I. Stockholders Section 1.1 Annual Meeting. The annual meeting of stockholders of the Company, for the election of directors and for the transaction of any other business which may properly be transacted at the annual meeting, shall be held at such hour on such day and at such place within or without the State of Delaware as may be fixed by the Board of Directors. Section 1.2 Special Meetings. A special meeting of the stockholders of the Company entitled to vote on any business to be considered at any such meeting may be called by the Chairman, President or the Secretary when directed to do so by resolution of the Board of Directors or at the written request of directors representing a majority of the Whole Board or at the written request of the holders of stock representing a majority of the voting power of the Company entitled to vote at such meeting. Any such request shall state the purpose or purposes of the proposed meeting. Section 1.3 Notice of Meetings. (a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. (b) Unless otherwise provided by law, and except as to any stockholder duly waiving notice, the written notice of any meeting shall be given personally or by mail, not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the stock records of the Company. (c) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.4 Quorum. Except as otherwise provided by law in respect of the vote of holders of stock that shall be required for a specified action, at any meeting of stockholders the holders of stock representing a majority of the voting power of the Company entitled to vote thereat, either present or represented by proxy, shall constitute a quorum for the transaction of any business, but the stockholders present, although less than a quorum, may adjourn the meeting to another time or place and, except as provided in Section 1.3(c) of these By-Laws; notice need not be given of the adjourned meeting. Section 1.5 Voting. (a) Whenever directors are to be elected at a meeting, they shall be elected by a plurality of the votes cast at the meeting by the holders of stock entitled to vote thereat. Whenever any corporate action, other than the election of directors, is to be taken by vote of stockholders at a meeting, it shall, except as otherwise required by law or by the certificate of incorporation or by these By-Laws, be authorized by a majority of the votes cast at the meeting by the holders of stock entitled to vote thereat. (b) Except as otherwise provided by law or by the certificate of incorporation, each holder of record of stock of the Company entitled to vote on any matter shall be entitled to one vote for each share of capital stock standing in the name of such holder on the stock ledger of the Company on the record date for the determination of the stockholders entitled to vote on such matter. Section 1.6 Presiding Officer and Secretary. At every meeting of stockholders the Chairman, or in the Chairman's absence the President, or in the President's absence a Vice President, if none be present, the appointee of the meeting, shall preside. The Secretary, or in the Secretary's absence, the appointee of the presiding officer of the meeting, shall act as secretary of the meeting. Section 1.7 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Every proxy shall be signed by the stockholder or by such stockholder's duly authorized attorney. A proxy that does not bear a date shall be deemed to be dated the date it was first delivered to one or more of the persons named to act under such proxy. Section 1.8 List of Stockholders. (a) The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in such stockholder's name. Such list shall be open to the examination of any stockholder entitled to vote at the meeting, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder entitled to vote at the meeting who is present. (b) The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this Section 1.8 or the books of the Company, or to vote in person or by proxy at any meeting of stockholders. Article II. Directors Section 2.1 Number of Directors. The Board of Directors shall consist of such number of persons, not less than two, as shall be determined from time to time by the affirmative vote at a meeting of the holders of stock representing a majority of the voting power of the Company or by resolution of the Board of Directors, adopted by a majority of the whole Board and provided that the number of directors shall not be reduced so as to shorten the term of any director at the time in office. Section 2.2 Election and Term of Directors. Directors shall be elected for terms of two-years at the annual meeting of stockholders in the year such term is to commence, except that after June 30, 1995, directors shall be elected annually at the annual meeting of stockholders. Each director shall hold office until such director's successor is elected and qualified or until such director's earlier resignation or removal for cause. If the annual election of directors is not held on the date designated therefor, the directors shall cause such election to be held as soon thereafter as convenient. The stockholders at any meeting called for the purpose, by vote of a majority of the outstanding stock entitled to vote, may remove from office any director for cause and elect such director's successor. Section 2.3 Vacancies and Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by election at a meeting of stockholders. Vacancies and such newly created directorships may also be filled by a majority of the-directors then in office, although less than a quorum, or by a sole remaining director. Section 2.4 Resignation. Any director may resign from office at any time either by oral tender of resignation at any meeting of the Board or by oral tender to the Chairman or by giving written notice to the Secretary of the Company. Any such resignation shall take effect at the time it specifies or, if the time be not specified, upon receipt, and the acceptance of such resignation, unless required by its terms, shall not be necessary to make such resignation effective. Section 2.5 Meetings. Meetings of the Board, regular or special, may be held at any place within or without the State of Delaware. An annual meeting of the Board for the appointment of officers and the transaction of any other business shall be held immediately following the annual meeting of stockholders at the same place at which such meeting shall have been held, and no notice thereof need be given. If the meeting is not so held, the annual meeting of the Board shall take place as soon thereafter as is practicable, either at the next regular meeting of the Board or at a special meeting. The Board may fix times and places for regular meetings of the Board and no notice of such meetings need be given. A special meeting of the Board shall be held whenever called by the Chairman or by any director (except that if more than one meeting be called by directors in any period of 180 days or less, each such meeting so called may be called only by a majority of the directors then in office) at such time and place as shall be specified in the notice or waiver thereof. Notice of each special meeting shall be given by the Secretary or by a person calling the meeting to each director by mailing the same, first class postage prepaid, not later than the second day before the meeting, or personally or by telegraphing, sending by telephone facsimile or telephoning the same not later than the day before the meeting. Section 2.6 Quorum and Voting. One-third of the Whole Board of Directors shall constitute a quorum for the transaction of business (except as otherwise provided by Section 2.3 hereof), but in no event shall a quorum consist of less than two directors. If there be less than a quorum at any meeting of the Board, a majority of the directors present may adjourn the meeting from time to time, and no further notice thereof need be give other than announcement at the meeting which shall be so adjourned. Except as otherwise provided by law or by these Bylaws, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.7 Written Consents and Meetings by Telephone. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. Members of the Board of Directors or any committee designated by the Board may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this sentence shall constitute presence in person at such meeting. Section 2.8 Compensation. Directors may receive compensation for services to the Company in their capacities as directors or otherwise in such manner and in such amounts as may be fixed from time to time by the Board. Section 2.9 The "Whole Board". As used in these ByLaws the term "the Whole Board" or "the Whole Board of Directors" means the total number of directors which the Company would have if there were no vacancies. Article III. Committees of the Board Section 3.1 Appointment and Powers. The Board of Directors may from time to time, by resolution passed by a majority of the Whole Board, designate an executive committee or such other committee or committees as it may determine, each committee to consist of one or more directors of the Company. Any such committee, to the extent provided in the resolution, shall have and may exercise any of the powers and authority of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it, all subject to the exceptions set forth in the General Corporation Law of the State of Delaware. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and of any alternate member designated by the Board, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee may adopt rtiles governing the method of calling and time and place of holding its meetings. Unless otherwise provided by the Board of Directors, a majority of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of the members of such committee present at a meeting at which a quorum is present shall be the act of such committee. Each such committee shall keep a record of its acts and proceedings and shall report thereon to the Board of Directors whenever requested so to do. Any or all members of any such committees may be removed, with or without cause, by resolution of the Board of Directors, adopted by a majority of the Whole Board. Article IV. Officers, Agents and Employees Section 4.1 Appointment and Qualification. The officers of the Company shall be a Chairman of the Board, a President, a Treasurer and a Secretary, and may include one or more Vice Presidents, one or more Assistant Treasurers and one or more Assistant Secretaries, all of whom shall be appointed by the Board of Directors. The Chairman shall be chosen from among the directors. Any number of offices may be held by the same person. Each officer shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. The Board may appoint, and may delegate power to appoint, such other officers, agents and employees as it may deem necessary or proper, who shall hold office for such period, have such authority and perform such duties as may from time to time be prescribed by the Board. Section 4.2 Removal of Officers, Agents or Employees. Any officer, agent or employee of the Company may be removed by the Board of Directors with or without cause at any time, and the Board may delegate such power of removal as to officers, agents and employees not appointed by the Board of Directors. Such removal shall be without prejudice to such person's contract rights, if any, but the appointment of any person as an officer, agent or employee of the Company shall not of itself create contract rights. Section 4.3 Compensation and Bond. The compensation of the officers of the Company shall be fixed by the Board of Directors, but this power may be delegated to any officer in respect of other officers under such officer's direction or control. The Company may secure the fidelity of any or all of its officers, agents or employees by bond or otherwise. Section 4.4 Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Company. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board at which the Chairman is present. Subject to the control of the Board, the Chairman shall have general charge of the business and affairs of the Company and shall keep the Board fully advised. The Chairman of the Board shall employ and discharge employees and agents of the Company, except such as shall be appointed by the Board, the Chairman may delegate these powers to the President or other officers. The Chairman of the Board shall have such powers and perform such duties as generally pertain to the office of the Chairman of the Board, as well as such further powers and duties as may be prescribed by the Board. The Chairman of the Board may vote the shares or other securities of any other domestic or foreign Company of any type or kind which may at any time be owned by the Company, may execute any stockholder or other consent in respect thereof and may in the Chairman's discretion delegate such powers by executing proxies, or otherwise, on behalf of the Company. The Board, by resolution from time to time, may confer like other powers upon any other person or persons. Section 4.5 President. The President shall be the chief operating officer of the Company. The President shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board at which the President is present. The President shall employ and discharge employees and agents of the Company, e5ccept such as shall be appointed by -the Board, and the President may delegate these powers to other officers. The President shall have such powers and perform such duties as generally pertain to the office of the President, as well as such further powers and duties as may be prescribed by the Board. The Board, by resolution from time to time, may confer like-other powers upon any other person or persons. Section 4.6 Vice President-s. Each Vice President shall have such powers and perform such duties as the Board of Directors, the Chairman or the President may from time to time prescribe. In the absence or inability to act of the President, unless the Board of Directors shall otherwise provide, or unless there shall be in office an Executive Vice President (who. shall have been determined by the Board of Directors to be senior to all other Vice Presidents), the Vice President who has served in that capacity for the longest time and who shall be present and able to act, shall perform all the duties and may exercise any of the powers of the President. The performance of any duty by a Vice President shall, in respect of any other person dealing with the Company, be conclusive evidence of such Vice President's power to act. Section 4.7 Treasurer. The Treasurer shall have charge of all funds and securities of the Company, shall endorse the same for deposit or collection when necessary and deposit the same to the credit of the Company in such banks or depositories as the Board of Directors may authorize. The Treasurer may endorse all commercial documents requiring endorsements for or on behalf of the Company and may sign all receipts and vouchers for payments made to the Company. The Treasurer shall have all such further powers and duties as generally are incident to the position of Treasurer or as may be assigned to the Treasurer by the Chairman, the President or the Board of Directors. Section 4.8 Secretary. The Secretary shall record all proceedings of meetings of the stockholders and directors in a book kept for that purpose and shall file in such book all written consents of directors to any action taken without a meeting. The Secretary shall attend to the giving and serving of all notices of the Company. The Secretary shall have custody of the seal of the Company and shall attest the same by signature whenever required. The Secretary shall have charge of the stock ledger and such other books and papers as the Board of Directors may direct, but may delegate responsibility for maintaining the stock ledger to any transfer agent appointed by the Board. The Secretary shall have all such further powers and duties as generally are incident to the position of Secretary or as may be assigned to the Secretary by the Chairman, the President or the Board of Directors. Section 4.9 Assistant Treasurer. In the absence or inability to act of the Treasurer, any Assistant Treasurer may perform all the duties and exercise all the powers of the Treasurer. The performance of any such duty shall, in respect of any other person dealing with the Company, be conclusive evidence of such Assistant Treasurer's power to act. An Assistant Treasurer shall also perform such other duties as the Treasurer or the Board of Directors may assign to such person. Section 4.10. Assistant Secretaries. In the absence or inability to act of the Secretary, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary. The performance of any such duty shall, in respect of any other person dealing with the Company, be conclusive evidence of such Assistant Secretary's power to act. An Assistant Secretary shall also perform such other duties as the Secretary or the Board of Directors may assign to such person. Section 4.11 Delegation of Duties. In case of the absence of any officer of the Company, or for any other reason that the Board may deem sufficient, the Board may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any director. Article V. Capital Stock Section 5.1 Certificates. Certificates for stock of the Company shall be in such forms as shall be approved by the Board of Directors and shall be signed in the name of the Company by the Chairman, the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Such certificates may be sealed with the seal of the Company or a facsimile thereof, and shall contain such information as is required by law to be stated thereon. Any of or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2 Transfers of Stock. Transfers of stock shall be made only upon the books of the Company by the holder, in person or by duly authorized attorney, and on the surrender of the certificate or certificates for such stock properly endorsed. The Board of Directors shall have the power to make all such rules and regulations, not inconsistent with the certificate of incorporation and these By-Laws, as the Board may deem appropriate concerning the issue, transfer and registration of certificates for stock of the Company. The Board may appoint one or more transfer agents or registrars of transfers, or both, and may require all stock certificates to bear the signature of either or both, which signature or signatures may be in facsimile form if the Board by resolution authorizes such procedure. Section 5.3 Lost, Stolen or Destroyed Certificates. The Company may issue a new stock certificate in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate or such owner's legal representative to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. The Board may require such owner to satisfy other reasonable requirements. Section 5.4 Stockholder Record Date. (a) In order that the Company may determine the stockholders entitled to notice of or-to -vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. Only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to express consent or dissent to corporate action in writing without a meeting, or to receive payment of such dividend or other distribution, or to exercise such rights in respect of any such change, conversion or exchange of stock, or to participate in such action, as the case may be, notwithstanding any transfer of any stock on the books of the Company after any record date so fixed. (b) If no record date is fixed by the Board of Directors, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, (ii) the record date for determin- - -ing stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessaryjshall be the day on which the first written consent is expressed, and (iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; Drovided, however, that the Board of Directors may fix a new record date for the adj ourned meeting. Article VI. Seal Section 6.1 Seal. The seal of the Company shall consist of a flat-faced circular die with the name of the Company in a circle and the word "Delaware" and the year of its incorporation in the center. Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Article VII. Waiver of Notice Section 7.1 Waiver of Notice. Whenever notice is required to be given by statute, or under any provision of the certificate of incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein~ shall be deemed equivalent to notice. In the case of a stockholder, such waiver of notice may be signed by such stockholder's attorney or a proxy duly appointed in writing. Attendance of a stockholder at a meeting of stockholders, or attendance of a director at a meeting of the Board of Directors or any committee thereof, shall constitute a waiver of notice of such meeting, except when such stockholder or director, as the case may be, attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. Article VIII. Indemnification Section 8.1 Indemnification. The Company shall indemnify each director, officer, employee and agent of the Company who is a natural person, such person's heirs, executors and administrators (whether or not natural persons) and all other natural persons whom the Company is authorized to indemnify under the provisions of the General Corporation Law of the State of Delaware (including but not limited to a person who is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent (or in a like capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise), to the fullest extent permitted by law, (i) against all expenses (including but not limited to attorneys' and other experts' fees and disbursements) , judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with an y actual or threatened action, suit or other proceeding, whether civil, criminal, administrative, investigative or an arbitration, or in connection with any appeal therein, or otherwise, and (ii) against all expenses (including but not limited to attorneys' and other experts' fees and disbursements) actually and reasonably incurred by such person in connection with the defense or settlement of any action, suit or other proceeding by or in the right of the Company, or in connection with any appeal therein,, or otherwise; and no provision of these By-Laws is intended to be construed as limiting, prohibiting, denying or abrogating any of the general or specific powers or rights conferred under the General Corporation Law of the State of Delaware upon the Company to furnish, or upon any court to award, such indemnification, or such other indemnification as may~otherwise be -authorized pursuant to the General Corporation Law of the State of Delaware or any other law now or hereafter in effect, including but not limited to indemnification of any employees or agents of the Company or of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The term "proceeding" shall be understood to include any inquiry or investigation that could lead to a proceeding. The indemnification provided for herein shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of such person's heirs, executors and administrators. Section 8.2 Determinations. If and to the extent such indemnification shall require a determination whether or not the relevant person met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, such determination shall be made expeditiously at the cost of the Company after a request for the same from the person seeking indemnification. If indemnification is to be given or an advance of expenses is to be made upon a determination by independent legal counsel, such counsel may be the regular counsel to the Company. In rendering such opinion, such counsel shall be entitled to rely upon statements of fact furnished to them by persons reasonably believed by them to be credible, and such counsel shall have no liability or responsibility for the accuracy of the facts so relied upon, nor shall such counsel have any liability for the exercise of their own judgment as to matters of fact or law forming a part of the process of providing such opinion. The fees and disbursements of counsel engaged to render such opinion shall be paid by the Company whether or not such counsel ultimately are able to render the opinion that is the subject of their engagement. Section 8.3 Business Combinations. Unless the Board of Directors shall determine otherwise with reference to a particular merger or consolidation or other business combination, for purposes of this Article VIII references to "the Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a merger or consolidation or other business combination which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, partner, trustee, employee, agent (or in a like capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. Section 8.4 Advances of Expenses. If a person who may be entitled to indemnification hereunder shall request that such person's expenses actually and reasonably incurred in connection with any action, suit, proceeding, arbitration or investigation or appeal therein be paid by the Company in advance of the final, disposition thereof, such request shall not be unreasonably refused, and a response to such request shall not be unreasonably delayed, - by -the Company. Section 8.5 Employee Benefit Plans. References herein to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include an y service as a corporate agent which imposes duties on, or involves services by, the corporate agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Company. Article IX. Amendments Section 9.1 Amendments. These By-Laws or any of them may be altered, amended or repealed, and new By-Laws may be adopted, at any annual meeting of the stockholders, or at any special meeting of the stockholders called for that purpose, by a vote of a majority of the voting power of the shares represented and entitled to vote thereat. The Board of Directors shall also have the power, by a majority vote of the Whole Board, to alter or amend or repeal the By-Laws or any of them, and to adopt new By-Laws; provided that (i) any such action of the Board of Directors may be amended or repealed by the stockholders at any annual meeting or any special meeting called for that purpose, (ii) the Board of Directors shall not have the power to alter or amend or repeal a specified By-Law if such By-Law is adopted by the stockholders and contains an express provision that such ByLaw may be altered or amended or repealed only by action of the stockholders and (iii) Article VIII hereof may be altered or amended by the Board of Directors to increase the indemnification of the persons referred to therein to the extent permitted by law, but such Article may be otherwise altered, amended or repealed only by action of the stockholders as provided above and, in that connection, any repeal, amendment or alteration which reduces or limits the indemnification of the persons referred to therein shall apply prospectively-only and shall not be given retroactive effect. This Article IX may be altered, amended or repealed only by action of the stockholders. * * * PROPOSED CHANGES TO CORPORATE BY-LAWS BOARD OF DIRECTORS MEETING WEDNESDAY, NOVEMBER 6,1996 1. Amend the Corporate By-Laws Section 4.4 Chairman of the Board. Proposed: The Chairman of the Board shall be the senior Board member. He shall ensure the Board uses their best judgment and independent discretion, and are responsible for the determination and execution of corporate policy, including supervision and vigilance for the welfare of the whole company. The Chairman shall preside at all meetings of the stockholders and of the Board at which the Chairman is present. The Chairman shall have such powers and perform such duties as generally pertain to the office of the Chairman of the Board, as well as such further powers and duties as may be prescribed by the Board. The Chairman may vote the shares or other securities of any other domestic or foreign Company of any type or kind which may at any time be owned by the Company, may execute any stockholder or other consent in respect thereof and may in the Chairman's discretion delegate such powers by executing proxies, or otherwise, on behalf of the Company. The Board, by resolution frouftime to time, may confer like other powers upon any other person or persons. 2. Addition to the Corporate By-Laws Section 4.5A Chief Executive Officer. Proposed: The Chief Executive Officer shall have general charge of the business and affairs of the Company and shall keep the Board fully advised. The Chief Executive Officer shall employ and discharge employees and agents of the Company, except such as shall be appointed by the Board, the Chief Executive Officer may delegate these powers to the other officers. EX-4.1 5 certificates.txt [REPRESENTATION OF STOCK CERTIFICATE] COMMON STOCK MEDIFAST INC. NUMBER - ----- CUSIP 58470H 10 1 INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT ------------ 9000000925 IS THE REGISTERED HOLDER OF **-----------------------------------------** FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001, OF MEDIFAST, INC. transferable on the books of the Corporation by the holder hereof, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation of the Corporation and any amendments thereof and the By-Laws copies of which are on file at the office of the Transfer Agent), to all of which the holder of this Certificate by acceptance hereof assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar WITNESS the facsimile seat of the Corporation and the facsimile signatures of its fuly authorized officers. Dated: -------- --, 2003 /s/ /s/ --------------------------- ---------------------------------- Secretary CHAIRMAN OF THE BOARD OF DIRECTORS MEDIFAST, INC. The following abbreviations when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations.
TEN COM -- as tenants in common UNIF GIFT MIN ACT-________Custodian________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants in common Act_______________________ (State)
Additional abbreviations may also be used though not inthe above list. - -------------------------------------------------------------------------------- For Value Received, _______________________________hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------------- - ------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Shares - ------------------------------------------------------------------------ of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint attorney-in-fact to - --------------------------------------------------------- transfer the said stock on the books of the within-named Corporation, with full power of substitition in the premises. Dates_____________ ------------------------------------------------------------ NOTICE: THE SIGNATURES TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAMES AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVENT PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER Sigantures(s) Guaranteed - ------------------------------------------- The Signature(s) should be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee Medallion Program), pursuant to SEC Rule 17Ad-15 EX-4.3 6 medifast_ex4-3.txt ------ NOTE: THIS IS A FORM OF WARRANT ISSUED TO ASSET SELLERS, AS THAT TERM IS DEFINED IN THE REGISTRATION STATEMENT ON FORM S-3. ALL ASSET SELLERS WERE ISSUED IDENTICAL WARRANTS, EXCEPT THAT THE NAMES, ADDRESSES AND NUMBER OF SHARES ISSUABLE TO EACH ASSET SELLER IS SET FORTH IN THE REGISTRATION STATEMENT. SEE "SELLING STOCKHOLDERS." - -------------------------------------------------------------------------------- COMMON STOCK PURCHASE WARRANT VOID AFTER 5:00 P.M. ON JUNE 16, 2006 WARRANT TO PURCHASE COMMON STOCK OF MEDIFAST, INC. AMEX: MED THIS IS TO CERTIFY THAT, for value received, David Blech of 445 W 23rd St, Apt. 16 E, New York, NY, 10011, (or his heirs or assigns, hereinafter called the "Holder") is entitled, subject to the terms, conditions and provisions of this Warrant, upon the due exercise hereof, to purchase from MEDIFAST, INC., a Delaware corporation (the "Company) at any time after the date hereof on or before June 16, 2006, 270 fully paid and non-assessable shares of the Company's Common Stock, par value $.001 per share ("Common Stock") at a purchase price of $10.00 per share, payable in cash, certifies or bank check or wire transfer. The number of shares of Common Stock to be received upon the exercise of the Warrant and the price to be paid for a share of common Stock may be adjusted from time to time as hereinafter set forth. All shares which may be issued upon the exercise of the Warrant shall be free from all taxes, liens and charges with respect to the issue thereof. The shares of the Common Stock or other securities deliverable upon the exercise of this Warrant, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock" and the purchase price to purchase a share of Common Stock, in effect at anytime, is hereinafter sometimes referred to as the "Exercise Price." 1 This Warrant is subject to the following further terms and conditions: 1. EXERCISE OF WARRANT 1.1 Notice by Holder. Subject to the provisions of Section 4 hereof, this Warrant may be exercised in whole or in part at any time from time to time after the date hereof on or before June 16, 2006, if such day is a day on which the Company is closed, then on the next succeeding day on which the Company is open, by presentation to the Company at its principal offices, or at the office of the transfer agent for the Common Stock, with the Purchase Form attached hereto duly executed and accomplished by payment of the Exercise Price for the number of shares specified in such Form. The Company shall note on the Warrant the exercise thereof (in whole or in part) and shall return the Warrant to the Holder, it being understood that certain provisions of the Warrant. 1.2 Rights Upon Exercise. Upon receipt of this Warrant by the Company or by the transfer agent for the Warrant Stock, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Warrant Stock issuable upon such exercise notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Warrant Stock shall not then be actually delivered to the Holder. 2. RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance or delivery upon exercise of this Warrant such number of shares Warrant Stock as shall be required for issuance or delivery upon exercise of this Warrant. 3. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. 2 4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES PURCHASEABLE. The Exercise Price and the number and kind of shares of Common Stock or other securities purchasable upon exercise of the Warrant shall be subject to adjustment from time to time as hereinafter provided, and the Company shall deliver to the Holder notice of any such adjustments as provided below in Section 6. 4.1 In the event that the Company shall at any time after the date hereof (i) declare a stick dividend on the shares of Common Stock, (ii) subdivide or split the outstanding shares of Common Stock, and (iii) combine the outstanding shares of Common Stock into a smaller number of shares. The Exercise Price and the number and kind of shares receivable upon exercise of this Warrant in effect at the time of the record date for such dividend or of the effective date of such subdivision, split shall be proportionately adjusted so that the Holder shall be entitled to receive the aggregate number and kind of shares upon exercise of this Warrant thereafter which, if such Warrant had been exercised immediately prior to such time, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision. Such adjustment shall be made successively whenever any event listed above shall occur. 4.2 In the event of (i) reorganization of the Company, (ii) the consolidation of the Company with or the merger of the Company with or into any other corporation or other entity or its division, or (iii) the sale of a majority of the properties or assets of the company to any other corporation or other entity, this Warrant shall, after such reorganization, consolidation, merger or sale, be exercisable upon the terms and conditions specified herein for the number of shares of stock or other securities or assets to which a holder of the 3 number of shares of Warrant Stock purchasable upon exercise of this Warrant would have been entitled to receive upon such reorganization, consolidation, merger, division or sale. 5. NO DILUTION OR IMPAIRMENT. The Company covenants that it will not amend of its articles of incorporation reincorporation outside of Delaware, or through recapitalization, reorganization, consolidation, merger or dissolution, issue or sale of securities, sale of assets, or by any other voluntary act or deed, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or condition to be observed or performed hereunder by it. Without limiting the generality of the foregoing, the Company will not increase the par value of any shares of stock receivable upon the exercise of this Warrant above the amount payable thereof upon such exercise, and at all times will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable stock or other securities upon the exercise of this Warrant. 6. NOTICE OF ADJUSTMENTS. At any time to time that the number or kind of shares or other securities purchasable hereunder or the Exercise Price are required to be adjusted as provided in Section 4, the company shall deliver to the Holder notification showing the facts requiring such adjustments and setting forth the number or kind of shares or other securities issuable upon exercise of this Warrant as a result of such adjustment. 7. CONTINUING VALIDITY OF WARRANTS. Irrespective of any adjustments in the number or kind of share of Common Stock or other securities purchasable upon the exercise of this Warrant, this Warrant may continue to express the same price and number and kind of shares as are initially stared in this Warrant. 4 8. RESTRICTION ON TRANSFER AND REGISTRATION RIGHTS. This Warrant and the shares of Common Stock or other securities purchasable upon the exercise hereof have not been registered under the Securities Act of 1933, as amended (the "1933 Act") and may not be transferred or otherwise disposed of except pursuant to a registration statement under the 1933 Act or pursuant to an exemption from registration hereunder. If the Company so requires, the Holder will not transfer this Warrant unless prior to the proposed transfer the Holder shall have received, and delivered a copy to the Company of, an opinion of counsel to the effect that no registration under the 1933 Act is required. If the Company so requires, the Holder will not transfer any Warrant Stock purchases upon the exercise hereof unless (i) registration statement under the1933 Act shall have become effective with respect thereto, or (ii) the Holder shall have received, and delivered a copy to the Company of, a written opinion of counsel to the effect that no such registration is required. 9. STOCKHOLDER'S RIGHTS. Until the exercise of the Warrant and except as provided herein, the Holder thereof shall not be entitled to any rights of a stockholder. Immediately upon exercise of this Warrant and payment as provided herein, the Holder hereof shall be deemed a stockholder of record of the Common Stock or other securities of the Company. 10. TRANSFERABILITY OF WARRANTS. This Warrant is issued upon the express condition, to which the Holder and each successive Holder hereof by accepting and holding the Warrant agrees, that, subject to the restrictions refers to in Section 8 hereof, title hereto is transferable, in whole and in part, in the same manner and with the same effect as in the case of a negotiable, instrument by deliver hereof by any person in possession of the same (however such possession 5 may have been acquired) if endorsed in blank or if, delivered to a specified person if endorsed to such person. 11. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon any successors or assigns of the Company and inure to the benefit of the Holder and its successors, assigns, heirs, executors, administrators, and other personal representatives. 12. NEUTER PRONOUN. The neuter pronoun, as used herein, includes the masculine, feminine and neuter gender. 13. AMENDENT, SUPPLEMENT OR WAIVER. No amendment, supplement or waiver of this Warrant shall be binding or enforceable unless in writing and signed by both the Company and the Holder. 14. GOVERNING LAW. This Warrant shall be governed by the laws of the State of Delaware applicable to contracts made and to be performed solely in Delaware. 15. COUNTERPARTS. This Warrant may be executed in one or more counterparts, each of which shall be deemed an original against the Company. Dated: June 16, 2003 MEDIFAST, INC. By:___________________________ Name: Bradley T. MacDonald Title: CEO 6 PURCHASE FORM MEDIFAST, INC. AMEX: MED The Holder hereby exercises the right, represented by the Warrant dated June 16, 2003, to purchase 270 shares of Common Stock or other securities covered by such Warrant and herewith tenders to Medifast, Inc., in coin, currency, or by check, the Exercise Price in the amount of $10.00. Please issue a certificate in the name of the Holder for the shares of Common Stock or other securities, unless otherwise instructed below. Dated: _________________ ____________________________________ Signature of Holder State name and address of Holder: ___________________________________________ - -------------------------------------------------------------------------------- State social security or employer identification number of Holder: _____________ 7 If any shares of Warrant Stock are not to be registered in the name of the holder, state below the name, address and social security or employer identification number of the person in whose name the shares of warrant Stock are to be registers: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8 EX-10.2 7 medifast_ex10-2.txt ASSET PURCHASE AGREEMENT THIS AGREEMENT (hereinafter "Agreement") is effective as of June 16, 2003 (hereinafter "Effective Date") by and between: MEDIFAST, INC's subsidiary JASON ENTERPRISES INC. . ("AMEX;MED"), a corporation organized and existing under the laws of the States of Texas, located at 11445 Cronhill Drive, Owings Mills, Maryland and 6116 N. Central Expressway, Suite 304B, Dallas, Texas 75206 (hereinafter "BUYER") and CONSUMER CHOICE SYSTEMS INC. , a corporation organized and existing under the laws of the State of Delaware, located at 2891, 152nd Avenue Northeast, Redmond, Washington 98052 in the United States, (hereinafter "SELLER"). WHEREAS, SELLER is the owner of CONSUMER CHOICE SYSTEMS INC., its assets to include all inventory, accounts receivable, equipment, patents, trademarks, copyrights on technical materials supporting the WOMANS WELLBEING PRODUCTS AND TEST KITS and all intellectual property related to the products and services, web sites, software, hardware, creative advertising and other marketing literature and all registrations related to the brand UTI, Menopausal Relief, Menopausal Relief and words or phrases derived from these marks, which may be amended and supplemented in writing during the due diligence period. (Hereinafter the "Assets" and "Marks"); WHEREAS, BUYER desires to obtain all the assets, as listed in the attached exhibits, of the CONSUMER CHOICE SYSTEMS INC BUSINESS that support their retail and international business to include the distribution rights in 18,000 Drug Stores and assume limited liabilities such as trade accounts payable, bank lines of credit on a work out schedule that allows the BUYER to accrue 10% of Net. Sales on a Monthly Basis of Consumer Choice Systems Inc. product sales and Jason Pharmaceuticals Products to their retail customers, Take Shape for Life Health Network Customers who purchase Woman's Wellbeing Products and Test Kits, under the Take Shape label and pay on a proportional basis these liabilities over a three year time frame or sooner until the liability is paid according to the work out agreements. The BUYER may, at its sole discretion accept a work out schedule of trade creditors as outlined in Exhibit "G". The SELLER must get written and signed consents from all parties that agree to the terms of this agreement from all Debt Holders to include short term and long term note holders to include shareholder and officer loans to the company and trade creditors to include lawyers, vendors and retailers that are owed over $5,000.00 as of the day of this agreement. The SELLER and the Officers of Consumers Choice Systems Inc. both corporately and individually warrant that the consents have been granted to the company and the officers to transfer the assets to the BUYER. If a creditor or debtor challenges the transfer of the Assets to the BUYER, the SELLER, the Officers and Directors, individually and collectively agree to pay all legal costs and fees associated with defending any lawsuit challenging the transfer of the assets of Consumer Choice Systems Inc. to the BUYER. The SELLER, its Officers, Directors and Note holders who are affiliated with the SELLER agree to pledge their Medifast restricted stock to 1 the BUYER as indemnification for the warrants, representations and promises of the SELLER to the BUYER during the restricted period as determined by SEC Rule 144. WHEREAS, BUYER AND SELLER pledge its active cooperation in and support of MEDIFAST'S AND CONSUMER CHOICE SYSTEMS INC. BUSINESS marketing and product development programs related to the Products, Marks, and formulas and proprietary product information, the spirit and intent of which are to maintain and enhance the value and significance of the Products, Brands and Marks of the company and enhance Shareholder Value of the parent Medifast Inc.. Jason Enterprises desires to enter into two-year NON-COMPETE agreements with one year renewable terms with Mr. Terry G. Kelley and Mr. Gary Franks and hire selected other employees important to operating the new business. The BUYER desires to operate the business in order to preserve the value of the assets during the period of which the SELLER is obtaining the final consents, and or finalizing the close of the Agreement. Should the Agreement not close by the set forth date of June 16, 2003, the SELLER authorizes the BUYER to operate the Business, including the receipt of all revenues, and control of all assets, until the closing has been finalized and or all of the consents have been signed. The BUYER agrees to pay the SELLER a royalty of 1% of net sales during the interim period prior to the final closing. It is also understood that the BUYER will not make payments to the trade creditors, until all consents are approved, and the Agreement is completed. WHEREAS, BUYER desires to purchase the assets of CONSUMER CHOICE SYSTEMS INC. For Seventy Five Thousand (76,120) shares of restricted Medifast Inc. Stock and provide working capital and the business opportunity to improve the operating performance of the products, brands and people of the SELLER. The BUYER will grant the SELLER 50,000 three year warrants priced at Ten Dollars ($10.00) per share which represents more than 100% of the closing price of the AMEX: MED stock on the day of the letter of intent that initiated this transaction. The BUYER will have fifteen business days from the execution of the complete document to produce the actual stock and warrant certificates. The BUYER will grant piggyback registration rights to these warrants only, and grant the SELLER the right to a cashless exercise of the warrants as attached in Exhibit "D". NOW, THEREFORE, in consideration of their mutual covenants, undertakings and promises contained herein, and other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, the parties agree as follows: 1. DEFINITIONS In this Agreement, the following terms shall have the meanings set forth below: 1.1 "COMPETITOR" shall mean those trademarks, trade names or other identifying words or symbols which are used on products which are similar to the SELLER AND BUYERS products in category, image, quality and price points, and which are sold through distribution channels of the same like and kind AS THE SELLER AND BUYER. 2 1.2 "INVENTORY" shall be any and all remaining (i.e. on hand or in stock) Products and tangible items bearing the Marks, including but not limited to, raw material, work in process, labels, tags, etc. 1.3 "NET SALES" shall mean the gross dollar amount of all sales by SELLER (hereinafter "Gross Sales") less the following items insofar as they are separately stated but included in the amounts invoiced to customers: usual trade discounts actually taken, returns and sales allowances. No costs incurred in the manufacture, sale, distribution, advertisement, promotion of the Products or in the payment by SELLER of any local, State or Federal, taxes of any nature whatsoever shall be deducted from Gross Sales when calculating Net Sales. 1.4 "NOTICE ADDRESS" shall be the addresses set forth for the parties at the beginning of this Agreement, or such other addresses as a party may hereafter designate to the other party in writing from time to time. 2. PAYMENT AND CLOSING 2.1 Seventy Five (76,120) Shares of restricted Medifast Stock and Fifty Thousand (50,000) restricted three year Medifast Warrants to purchase stock at $10.00 per share, which represents at least 100% of the Market Value of the stock at the execution of the letter of intent that initiated this transaction, as attached in Exhibit "D", will be issued to CONSUMER CHOICE SYSTEMS INC. or their designees at the time the tangible and intangible assets are transferred to the BUYER as follows: Customer Lists, Web Sites, Accounts Receivable, Petty Cash, Finished Goods and Parts Inventory as listed in Exhibit "A", Patents, Trademarks and Intellectual Property listed in Exhibit "B", the Equipment, Software, Hardware, Manufacturing or Assembly Equipment, Desks , Chairs and Common Property that support the business operations listed in Exhibit "C" and any other miscellaneous items to be listed in Exhibit "D". In addition the SELLER will provide legal consents of this transaction as required in this agreement and attached in Exhibit "F" and "G". Upon the transfer of the Assets which should take place no later that fifteen business days after the agreement is executed, Medifast will have American Stock Transfer issue 76,120 shares of Medifast Stock and 50,000 Medifast Warrants to the SELLER or the designees as listed in Exhibit "E" 3 3. DUE DILIGENCE, ACCOUNTING AND AUDITING 3.1 PROPER BOOKS AND RECORDS: The SELLER shall present to the BUYER all the appropriate books of account or computer records relating to the SELLERS Marketing Programs, Cost of Goods, Assembly and Finished Goods Products, in accordance with generally accepted accounting principles (including, without limitation, a sales journal, sales return journal, cash receipt book, general ledger, and to the extent reasonably available, purchase orders and Inventory records) SELLER shall transfer all books and records of the BUYER as part of the Asset Purchase Agreement. 3.2 ANNUAL FINANCIAL STATEMENTS: The SELLER shall present to the BUYER within 7 days of this agreement the SELLERS Year to Date Financial Results and their fiscal year-end, with the latest commercial credit report which is based on monthly, quarterly and annual financial statements prepared in accordance with generally accepted accounting principles consistently applied. 4. QUALITY STANDARDS 4.1 QUALITY STANDARDS: SELLER acknowledges that the continued maintenance of the great significance and value of the Marks and their associated goodwill, the continued maintenance of SELLERS quality standards, and the PROPER EXECUTION OF THE MEDICAL PROTOCOLS IN ACCORDANCE WITH FDA STANDARDS and the merchandising and coordination of the products associated with the Marks are all essential elements of this Asset Purchase by the BUYER. SELLER agrees that the nature and quality of all Uses of the Marks and Protocols by the SELLER shall be under the reasonable control of SELLER UNTIL CLOSING and shall conform to reasonable industry standards and be consistent with the quality level of competitive products of other companies. 5. THE MARKS 5.1 OWNERSHIP RIGHTS DEFINED: SELLER acknowledges the ownership of the Marks and will do nothing inconsistent with such ownership, and that all Use (and any other use thereof) of the Marks by SELLER and all good will developed there from shall inure to the benefit of and be on behalf of BUYER upon closing of this transaction. BUYER agrees that nothing in this Agreement shall give SELLER any right, title, or interest in the Marks in accordance with this Agreement and SELLER agrees that it will not attack the title of BUYER to the Marks, the validity of the Marks, any rights of BUYER that may have arisen from this Agreement, or the validity of this Agreement. 5.2 CONFIRMATION OF OWNERSHIP: Whenever requested by BUYER, SELLER shall execute such documents or applications BUYER may deem necessary to confirm SELLER'S ownership of all its rights, to maintain the validity of the Patents or Marks, and to obtain, or maintain any registration thereof. 5.3 LABELS/PACKAGING: All of SELLERS Products shall contain a label, hangtag and/or packaging (hereinafter collectively "labeling" or "label(s)"). SELLER understands the importance of maintaining the security and integrity of 4 all trademarked labeling used on the Products, and SELLER agrees to use its reasonable best efforts to maintain, and to require any subcontractors to maintain, a strict, accurate and current inventory of all labels throughout the manufacturing process of the Products so as to preclude any diversion of the labels, and, if any such diversion occurs, SELLER agrees to notify BUYER in writing immediately upon discovery thereof. 5.4 TRADEMARK REGISTRATION: The SELLER agrees to provide all copies of Patent, Trademark, Copyright or Patent Pending applications or legal documents related to registration to the BUYER prior to closing. 6. MARKETING AND DISTRIBUTION 6.1 PARTICIPATION PLEDGED: SELLER acknowledges that the marketing programs that may be developed by or for THE COMPANY are for the benefit of the Marks, and SELLERS cooperation and support thereof are an integral part of such program and this Agreement. Therefore, SELLER pledges its direct and active support of the programs that support the reputation of the brand and the integrity of the distribution system. 6.2 MARKETING, WHOLESALE & SHIPMENT POLICY: SELLER acknowledges that the availability and selection of product, formulas, and functions (i.e. the intended purpose of the Product such as DETECTION OF URINARY TRACT INFECTION) are an integral part of the high reputation and value which the trade and consumers have come to associate with the Marks. To further protect that reputation and value, SELLER agrees that its policy of sale, distribution, and exploitation shall be of the high standard established by COMPANY. The COMPANY WARRANTS that from time to time in its sole discretion reasonably applied, and any variance from such standards will be to comply with any applicable law, rule or regulation. The company also warrants that its retail distribution system is in place and offers the BUYER an opportunity to grow the business in the United States. 7. INFRINGEMENT 7.1 The parties shall notify each other promptly of any actual or threatened infringements, imitations, or unauthorized use of the Marks by third parties of which they may become aware. BUYER shall have the sole right, at its expense, to bring any action on account of any such infringements, imitations or unauthorized use, and SELLER shall cooperate with BUYER, as BUYER may reasonably request, in connection with any such action brought by BUYER. 8. INSURANCE AND INDEMNIFICATION 8.1 INDEMNIFICATION: 5 (A) SELLER hereby indemnifies and holds BUYER, its successors and assigns, and any entity owning or controlling SELLER and its officers, directors, employees, agents and representatives (hereinafter individually or collectively referred to as "SELLER Corporate") harmless from and against any and all liabilities, claims, causes of action, suits, damages, including without limitation, suits for personal injury or death of third parties, and expenses, including reasonable attorneys' fees and expenses, for which SELLER or SELER'S Corporate may become liable or may incur or be compelled to pay as a result of (i) SELLER'S performance of (or its failure to perform) its obligations or responsibilities hereunder, or (ii) SELLER'S breach of any of its covenants, representations and warranties under this Agreement, or (iii) any claim based upon allegations of negligence or strict liability which are attributable to any act of SELLER, or (iv) claims of infringement of any intellectual property right that would not be included under Section B) below. In the event there is a claim against BUYER for which indemnification from SELLER is sought hereunder, SELLER shall have the right to defend, settle or contest said claim, at SELLERS sole discretion, so long as the exercise of such discretion does not adversely affect BUYER in a substantial manner and does not affect the Marks in any way. This paragraph shall survive expiration or termination of the agreement. (B) BUYER hereby indemnifies and holds SELLER, its successors and assigns, and any entity owning or controlling BUYER and its officers, directors, employees, agents and representatives (hereinafter individually or collectively referred to as "BUYER Corporate") harmless from and against any and all liabilities, claims, causes of action, suits, damages, including without limitation, suits for personal injury or death of third Parties, and expenses, including reasonable attorneys' fees and expenses, for which BUYER may become liable or may incur or be compelled to pay as a result of the sale of BUYERS products under this agreement. This paragraph shall survive expiration or termination of the Licensed Term. 8.2 EFFECT OF APPROVAL: The approval by SELLER of any Product shall not be construed as a consent by BUYER to any infringement or violation of the rights of third parties occasioned by the approved Product or Use, nor as an indemnification by or assumption of any responsibility for any such claim beyond the indemnification set forth in Section 10.1 (B) above. 8.3 INSURANCE: SELLER WARRANTS THAT THE COMPANY HAS procured and has maintained in full force and effect at all times during their ownership of the brands, with a responsible insurance carrier or carriers reasonably acceptable to BUYER, at least one Million Dollars ($1,000,000) coverage through an umbrella general liability policy or a products liability insurance policy that specifically includes any and all risks related to the sale or Use of the Products, and that identifies the SELLER and any other party(ies) set forth in the Insurance Guidelines within the scope of "additional insured.". 6 9. TERMINATION 9.1 TERMINATION: Subject to the continuing obligations arising from a breach hereof and those terms and obligations that survive cessation of this Agreement by the clear import of their language, this Agreement and all rights relevant thereto shall cease upon the earlier of termination, for whatever reason, or expiration. This agreement will terminate within 30 days of this date if the transaction is not closed. 10. NOTICES 10.1 NOTICES: Any notice, demand, waiver, consent, approval or disapproval (collectively referred to as "notice") required or permitted herein shall be in writing and shall be given personally, by messenger, by air courier, by telecopy, or by prepaid registered or certified mail, with return receipt requested, addressed to the parties at their respective Notice Address. 10.2 A notice shall be deemed received on the date of receipt. 11. APPLICABLE LAW. THIS AGREEMENT IS SUBJECT TO THE LAWS OF THE STATE OF MARYLAND 11.1 WARRANTIES OF CORPORATE FITNESS: The parties each warrant the following: (1) that the delivery of this Agreement has been duly authorized by all requisite corporate action of its company; (2) that the execution and delivery of this Agreement does not violate its Articles of Incorporation or By-laws, or any contract or commitment to which it is a party or by which it is bound; and (3) that it is not a party to any suit, action, administrative proceeding, or investigation which, if successful, would have a material, adverse effect on its properties, financial conditions or business. 11.2 CONSTRUCTION: This Agreement's terms and conditions were freely negotiated. BUYER drafted the Agreement for the convenience of the parties only. IN WITNESS WHEREOF, the parties have first caused this Agreement to be executed as of the Effective Date. JASON ENTERPRISES, INC. By: /S/ Bradley T. MacDonald Name: Bradley T. MacDonald, CEO Date: 6/11/03 BUYER AND 7 CONSUMERS CHOICE SYSTEMS INC. By: /S/ Terry G. Kelley Name: Terry G. Kelly Title: CEO Date: 6/11/03 SELLER INDEMNATORS OFFICERS By: /s/ Terry G. Kelley ---------------------- Name: Terry G. Kelly Date: 6/11/03 By: /s/ Gary Frank --------------------- Name: Gary Frank Date: 6/11/03 DIRECTORS By: /s/ Terry G. Kelley ----------------------- Name: Terry G. Kelley Date: 6/11/03 By: /s/ Gary Frank ----------------------- Name: Gary Frank Date: 6/11/03 By: __________________________ Name: Date By: __________________________ Name: Date By: __________________________ Name: Date By: __________________________ Name: Date 8 EX-23.1 8 medifast_ex23-1.txt Consent of Wooden & Benson, Chartered, Independent Auditors We consent to the reference to our firm under the caption "Experts and Counsels" in the Registration Statement (Form S-3) and related Prospectus of Medifast, Inc. for the registration of 682,500 shares of its common stock and to the incorporation by reference therein of our report dated March 4, 2003, with respect to the consolidated financial statements of Medifast, Inc. included in its Annual Report on Form 10-KSB for the year ended December 31, 2002, filed with the Securities and Exchange Commission. /s/ Wooden & Benson, Chartered August 22, 2003 -----END PRIVACY-ENHANCED MESSAGE-----