QSII Quality Systems, Inc. (delisted)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported):

June 3, 2015

 

 

QUALITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

CALIFORNIA		001-12537		95-2888568
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification Number)

18111 Von Karman, Suite 700

Irvine, California 92612

(Address of Principal Executive Offices)

(949) 255-2600

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01

Entry into a Material Definitive Agreement.

Entry into Employment Agreement with John (“Rusty”) Frantz

On June 3, 2015, Quality Systems, Inc. (the “Company”) entered into an Executive Employment Agreement (the “Frantz Employment Agreement”) with John (“Rusty”) Frantz, effective July 1, 2015. A description of the Frantz Employment Agreement is contained in Item 5.02 below and incorporated by reference into this Item 1.01.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Retirement of Steven T. Plochocki as President and Chief Executive Officer

On June 3, 2015, Steven T. Plochocki informed the Company’s Board of Directors (the “Board”), and on June 4, 2015, the Company announced, that he will be retiring from his positions as President and Chief Executive Officer of the Company, effective June 30, 2015. Mr. Plochocki, who also serves as a member of the Board, will serve out the remainder of his current term on the Board, but will not stand for reelection at the Company’s Annual Shareholders’ Meeting on August 11, 2015 (the “2015 Annual Meeting”). The Company is in the process of negotiating a separation agreement and general release of claims with Mr. Plochocki concerning the conclusion of Mr. Plochocki’s services with the Company, the terms of which will be disclosed in an amendment to this Form 8-K when finalized.

Appointment of John (“Rusty”) Frantz as President and Chief Executive Officer

On June 3, 2015, the Board appointed Mr. Frantz to succeed Mr. Plochocki as President and Chief Executive Officer of the Company, effective July 1, 2015.

Mr. Frantz, age 48, served as Senior Vice President and General Manager, Global Dispensing Division, of CareFusion Corp., a San Diego-based global corporation serving the health care industry, providing products and services that assist hospitals in improving the safety and quality of care, from 2011 until March 2015, when CareFusion was acquired by Becton, Dickinson and Company. He also served from 2010 to 2011 as Vice President, Research and Development, for CareFusion’s Pyxis business unit, from 2008 to 2010 as General Manager of CareFusion’s Pyxis Perioperative Solutions, and from 2007 to 2008 as CareFusion’s Vice President, Marketing, Supply Technologies. Prior to his employment with CareFusion, Mr. Frantz served as Vice President, Marketing, at Cerfidia Solutions, Vice President, Marketing and Product Management, at Amphire Solutions, Co-Founder and Vice President, Engineering, at OutPurchase, and held various other management positions in the health care industry. Mr. Frantz holds a Master of Science degree in engineering from Stanford University and a Bachelor of Science degree in engineering from the Maine Maritime Academy.

On June 3, 2015, in connection with Mr. Frantz’s appointment as President and Chief Executive Officer, Mr. Frantz and the Company entered into the Frantz Employment Agreement effective July 1, 2015. Under the terms of the Frantz Employment Agreement:

 

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Mr. Frantz shall serve as President and Chief Executive Officer of the Company on an “at will” basis.

 

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Mr. Frantz shall be paid an annual base salary of $600,000 for fiscal year 2016, prorated for the remainder of fiscal year 2016 from his July 1, 2015 start date.

 

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Mr. Frantz shall receive a signing nonqualified stock option grant to purchase 150,000 shares of the Company’s common stock (“Signing Options”). The Signing Options will be granted promptly following shareholder approval and registration of the Company’s 2015 Equity Incentive Plan (which will be presented to shareholders at the 2015 Annual Meeting), will have an exercise price equal to the fair market value of the Company’s common stock at the close of trading on the grant date, will have a term of eight years from the grant date, and will vest in five equal annual installments with the first vesting occurring on July 1, 2016.

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Mr. Frantz shall receive a signing restricted stock grant of 25,000 shares of the Company’s common stock (“Signing Restricted Stock”). The Signing Restricted Stock will be granted promptly following shareholder approval and registration of the Company’s 2015 Equity Incentive Plan. The Signing Restricted Stock will vest in three equal annual installments with the first vesting occurring on July 1, 2016; provided, however, that if Mr. Frantz is terminated by the Company without “cause” (as defined in the 2015 Equity Incentive Plan) prior to July 1, 2016, then all 25,000 shares of Signing Restricted Stock shall immediately vest in full.

 

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Mr. Frantz is eligible to receive a fiscal year 2016 cash bonus of up to $506,250 (calculated as $675,000 prorated for the remainder of fiscal year 2016 from his July 1, 2015 start date) based on the Company’s consolidated revenue growth and consolidated non-GAAP earnings-per-share growth for fiscal year 2016 (“Cash Bonus”). The respective fiscal year 2016 consolidated revenue growth and consolidated non-GAAP earnings-per-share growth targets for the Cash Bonus are set forth in the “John R. Frantz Fiscal Year 2016 Compensation Program” attached as Exhibit A to the Frantz Employment Agreement (the “Frantz 2016 Compensation Program”).

 

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Mr. Frantz is eligible to receive a nonqualified stock option grant bonus to purchase 100,000 shares of the Company’s common stock (“Option Bonus”). The Option Bonus will be granted to Mr. Frantz on May 31, 2016 if he remains in good standing as a full time employee of the Company or a subsidiary of the Company through that date. The Option Bonus will have an exercise price equal to the fair market value of the Company’s common stock at the close of trading on the grant date, will have a term of eight years from the grant date, and will vest in five equal annual installments with the first vesting occurring on the first anniversary of the grant date.

 

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Mr. Frantz is eligible to receive a restricted performance share grant of up to 150,000 shares of the Company’s common stock (“Performance Shares”). The respective average stock price targets for the Performance Shares are set forth in the Frantz 2016 Compensation Program. The Performance Shares will be granted on May 31 after the relevant calculation period and will vest in full six months after the date of grant; provided, however, that the vesting of any earned and unvested Performance Shares will accelerate in full if Mr. Frantz is terminated without “cause” (as defined in the 2015 Equity Incentive Plan) during the six month period following the date of grant.

 

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Mr. Frantz must be in good standing as a full time employee of the Company or a subsidiary of the Company (i) on May 31, 2016 to be eligible to receive the Cash Bonus and the Option Bonus and (ii) on May 31 after the relevant calculation period to receive the related Performance Shares.

 

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The Signing Options and Signing Restricted Shares, as well as any earned Option Bonus and earned Performance Shares, will be subject to accelerated vesting in full (a) in accordance with the “double trigger” change in control provisions provided for under the 2015 Equity Incentive Plan if there is a qualifying termination of Mr. Frantz’s employment in connection with a “Change in Control” (as defined in the 2015 Equity Incentive Plan) or (b) if any successor to the Company in a Change in Control transaction does not assume, substitute or otherwise continue the Signing Options, Signing Restricted Shares, earned Option Bonus and earned Performance Shares held by Mr. Frantz at the time of the Change in Control.

 

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Mr. Frantz and his family will be eligible for participation in the Company’s health and welfare benefit plans to the same extent generally applicable to all executive officers of the Company.

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Mr. Frantz will be entitled to three weeks of paid vacation leave per year, prorated for calendar year 2015, and will be entitled to accrue a maximum of five weeks of paid vacation leave.

Mr. Frantz will also be required to acquire and hold shares of the Company’s common stock in accordance with the Company’s Executive Stock Ownership Program in order to better align his interests with the interests of the shareholders of the Company.

All compensatory arrangements in the Frantz Employment Agreement were approved by the Compensation Committee of the Board.

The foregoing summary of the Frantz Employment Agreement is qualified in its entirety by the text of the Frantz Employment Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

In accordance with the Company’s standard practices for executive officers, effective July 1, 2015, the Company will enter into an indemnification agreement with Mr. Frantz, which will be substantially consistent with the Company’s form of Indemnification Agreement, filed with the Securities and Exchange Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 28, 2013, and is incorporated herein by reference.

Other than the Frantz Employment Agreement, there are no arrangements or understandings between Mr. Frantz and any other person pursuant to which Mr. Frantz was appointed to serve as the President and Chief Executive Officer of the Company. There are no family relationships between Mr. Frantz and any director or executive officer of the Company, and Mr. Frantz has no direct or indirect material interest in any “related party” transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

 

Item 7.01

Regulation FD Disclosure.

The Company issued a press release on June 4, 2015, announcing the retirement of Mr. Plochocki and the appointment of Mr. Frantz to the positions of President and Chief Executive Officer of the Company. The press release making these announcements is attached hereto as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.		Description
10.1		Executive Employment Agreement, dated June 3, 2015, between Quality Systems, Inc. and John R. Frantz
99.1		Press Release dated June 4, 2015

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				QUALITY SYSTEMS, INC.
Date: June 4, 2015				By:		/s/ JOCELYN A. LEAVITT
						Jocelyn A. Leavitt
						Executive Vice President, General Counsel and Secretary

 

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EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

 

Exhibit No.		Description
10.1		Executive Employment Agreement, dated June 3, 2015, between Quality Systems, Inc. and John R. Frantz
99.1		Press Release dated June 4, 2015

 

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EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and entered into on June 3, 2015, to be effective as of July 1, 2015 (the “Effective Date”), by and between Quality Systems, Inc. (“Company”) and John R. Frantz (“Executive”) (collectively the “Parties”).

RECITALS

A. Company desires to retain the services of Executive, and Executive is willing to provide such services to Company.

B. Company and Executive enter into this Agreement to provide for Executive’s employment by Company, upon the terms and conditions set forth herein.

The Parties agree as follows:

1. Duties.

1.1. Position. Executive shall serve as President and Chief Executive Officer of Company and shall have the duties and responsibilities incident to such positions and such other duties as may be determined in consultation with Company’s Board of Directors (the “Board of Directors”), reporting to the Board of Directors. Executive shall perform faithfully, cooperatively and diligently all of his job duties and responsibilities.

1.2. Best Efforts. Executive shall devote his full productive time and best efforts on behalf of Company, and will abide by all policies and decisions Company makes, to the extent not inconsistent with this Agreement, as well as all applicable federal, state and local laws, regulations or ordinances. Executive will act in Company’s best interest at all times.

2. At-Will Employment. The employment of Executive shall be “at-will” at all times. Company may terminate Executive’s employment with Company at any time for any reason or no reason at all. Executive may likewise terminate employment at any time for any reason or no reason. No one other than the Chairman of the Board of Directors has the authority to alter this arrangement, or to enter into an agreement for employment for a specified period of time, and any such agreement must be in writing and must be signed by the Chairman of the Board of Directors and by Executive.

3. Compensation.

3.1. FY 2016 CEO Compensation Program. Attached hereto as Exhibit A, which is incorporated herein, is the FY 2016 CEO Compensation Program for Executive. Executive is not entitled to any compensation for FY 2016 except as set forth in Exhibit A. Executive’s compensation for future periods shall be determined by the Compensation Committee of the Board of Directors pursuant to its charter (as may be amended or modified from time to time) and such other authority as may be conferred upon the Compensation Committee by the Board of Directors from time to time.

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3.2. Health and Welfare Benefit Plans. Executive and his family will be eligible for participation in Company’s health and welfare benefit plans, including health, dental, and vision, to the extent generally applicable to employees of Company.

3.3. Vacation. Executive shall be entitled to three (3) weeks of paid vacation leave each calendar year, pro-rated for calendar year 2015. Executive shall be entitled to accrue a maximum of five (5) weeks of paid vacation leave. Once Executive has accrued the maximum of five (5) weeks of paid vacation leave, paid vacation leave will stop accruing until Executive uses some of his paid vacation. Notwithstanding the foregoing, if Company adopts a new or modified vacation policy of general applicability to Company’s executive officers, Executive shall thereafter be subject to the terms and conditions of such new or modified policy.

4. Business Expenses. Executive shall receive reimbursement for all necessary and reasonable out-of-pocket business expenses incurred in the performance of his duties on behalf of Company, pursuant to policies and procedures the Board of Directors adopts. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company’s policies.

5. Confidentiality and Proprietary Rights. Concurrent with the execution of this Agreement and as a condition of Executive’s employment with Company, Executive shall execute the Company’s standard Proprietary Information and Inventions Agreement in the form previously presented to Executive for review.

6. Nondisparagement. During the term of Executive’s employment with the Company, Executive agrees not to defame or make any negative or critical public statements, whether verbally or in writing, regarding the personal or business reputation, technology, products, practices or conduct of Company or any of Company’s officers or directors.

7. Concurrent Board Resignation. As a condition to Executive’s employment with the Company, Executive agrees to resign from any and all positions Executive may hold as a member of the Board of Directors, or as a member of the board of directors or similar governing body of any and all subsidiaries of the Company, as well as any committees of any of the foregoing, concurrent upon the termination of Executive’s employment with the Company for any reason (including, without limitation, whether with or without cause, by voluntary resignation, or due to death, disability or other circumstances).

8. Other Boards. During the term of Executive’s employment with the Company, Executive shall not serve on the board of directors, board of advisors, board of managers or any similar governing or advisory body of any “for-profit” entity (other than the Company and its subsidiaries), organization, foundation or association (a “For-Profit Board”). In addition, during the term of Executive’s employment with the Company, Executive shall not serve on the board of directors, board of advisors, board of managers or any similar governing or advisory body of any “non-profit” entity, organization, foundation or association (a “Non-Profit Board”) without the prior approval of the Board of Directors (which approval shall not be unreasonably withheld). Executive acknowledges and agrees that, prior to the effective date of this Agreement, he has (a) duly and validly resigned from any and all For-Profit Boards, if any, and (b) disclosed to the Board of Directors in writing the name of each Non-Profit Board, if any, on which Executive is currently serving or has applied to serve.

 

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9. Section 280G. If any payment or benefit Executive would receive from the Company or otherwise in connection with a change in control of the Company or other similar transaction (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this Section 9, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

Notwithstanding the foregoing, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A of the Code shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A of the Code. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant for Executive’s equity awards. If two or more equity awards are granted on the same day, the equity awards will be reduced on a pro-rata basis. For the avoidance of doubt, Executive shall not have any discretion as to the ordering of any such Reduction Method or Pro Rata Reduction Method.

Unless Executive and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the change of control transaction triggering the Payment shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change of control transaction, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company and the Executive shall provide the

 

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accounting firm with such information as the accounting firm may reasonably request in order to make the determinations hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company within fifteen (15) calendar days after the date on which Executive’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company. The accounting firm’s determinations shall be final and binding on the Company and Executive.

If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of the first paragraph of this Section and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive shall promptly return to the Company a sufficient amount of the Payment after reduction pursuant to clause (x) of the first paragraph of this Section so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) in the first paragraph of this Section, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

10. Legal Fees. The Company shall pay reasonable legal fees and charges (not to exceed $10,000 in the aggregate) of counsel that you directly or indirectly incur in connection with negotiating, documenting, implementing and the ability to accept this Agreement, which shall be paid no later than thirty (30) days after presentation of an acceptable invoice for such fees and/or charges. The Company agrees to treat the reimbursement of such legal fees as a non-taxable working condition fringe benefit under Internal Revenue Code Section 132(d).

11. General Provisions.

11.1. Successors and Assigns. Company may assign this Agreement to any company that may succeed to the business and assets of Company, and any such successor company may similarly assign this Agreement. The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement.

11.2. Severability. In the event any provision of this Agreement is found to be unenforceable, invalid or illegal by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the Parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable, invalid or illegal provision shall be deemed deleted, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby.

 

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11.3. Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review the Agreement and has had it reviewed and negotiated by legal counsel acting on his behalf, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

11.4. Governing Law; Arbitration. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California. Concurrent with the execution of this Agreement and as a condition of Executive’s employment with Company, Executive shall execute the Mutual Agreement to Arbitrate Claims in the form previously presented to Executive for review (the “Arbitration Agreement”). The Parties agree that any controversy, claim or dispute between the them arising out of or relating to this Agreement will be subject to the Arbitration Agreement.

11.5. Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt); or (ii) received by the addressee, if sent by a nationally recognized overnight delivery service, if sent to the addresses below, or as a Party may later designate:

 

If to Company:		Quality Systems, Inc. Attention: General Counsel 18111 Von Karman, Ste. 700 Irvine, California 92612

 

If to Executive:		John R. Frantz ##### ########## ####### ##########, ########## #####

11.6. Counterparts; Facsimile. This Agreement may be executed in one or more counterparts, all of which when fully executed and delivered by all Parties and taken together shall constitute a single agreement, binding against each of the Parties. To the maximum extent permitted by law or by any applicable governmental authority, any document may be signed and transmitted by facsimile, .pdf or other electronic format with the same validity as if it were an ink-signed document. Each signatory below represents and warrants by his or her signature that he or she is duly authorized to execute and deliver this instrument and any other document related to this transaction, thereby fully binding each such Party.

12. Entire Agreement. This Agreement, including the Compensation Program attached as Exhibit A, the Proprietary Information and Inventions Agreement and the Arbitration Agreement, each of which are incorporated herein by reference, constitute the entire agreement between the Parties relating to this subject matter and supersedes all prior or simultaneous

 

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representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of Executive and the Chairman of the Board of Directors of Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

13. Background Check. Notwithstanding anything in this Agreement to the contrary, this Agreement shall immediately terminate and be of no force or effect, without liability to either party, if the results of the background check being performed by the Company on Executive are not satisfactory to the Company’s Board of Directors in its reasonable discretion and the Board of Directors notifies Executive of such determination in writing prior to July 1, 2015.

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

Dated: June 3, 2015				/s/ John R. Frantz
				John R. Frantz
				Quality Systems, Inc.
Dated: June 3, 2015				By:		/s/ Jocelyn Leavitt
				Name:		Jocelyn Leavitt
				Title:		EVP, General Counsel and Secretary

 

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EXHIBIT A

FY 2016 CEO Compensation Program

[attached hereto]

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Quality Systems, Inc.

John R. Frantz Fiscal Year 2016 Compensation Program

Base Salary

The following table sets forth the cash salary for John R. Frantz from Quality Systems, Inc. (the “Company”) for his role as chief executive officer (the “CEO”) as approved by the Compensation Committee of the Company’s Board of Directors (the “Board”). Note that all annual salary and bonus calculations will be pro-rated as a percentage of days of fiscal year 2016 that John R. Frantz is actually employed:

 

Name		Anticipated Start Date				Fiscal Year 2016 Salary
John R. Frantz			July 1, 2015			$	600,000

Signing Equity Grants

John R. Frantz shall receive a non-qualified stock option grant of shares of the Company’s common stock (“Option Grant Shares”) as set forth below, to be granted upon the effectiveness of the Company’s 2015 Equity Incentive Plan. The exercise price of the Option Grant Shares will be the closing price of the Company’s shares on the date of the grant.

 

Name		Signing Option Grant Shares
John R. Frantz			150,000

The Option Grant Shares will be issued upon or promptly following shareholder approval of the Company’s 2015 Equity Incentive Plan, will have a term of 8 years from the grant date, and vest in five equal, annual consecutive installments with the first vesting date occurring on the first anniversary of the employment start date.

John R. Frantz shall also receive a restricted shares grant of the Company’s common stock (“Restricted Shares”) as set forth below.

 

Name		Signing Restricted Shares
John R. Frantz			25,000

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The Restricted Shares will be issued upon or promptly following shareholder approval of the Company’s 2015 Equity Incentive Plan, and vest in three equal, annual consecutive installments with the first vesting date occurring on the first anniversary of the employment start date; provided, however, that the Restricted Shares shall accelerate and vest in full if John R. Frantz is terminated without Cause (as defined in the Company’s 2015 Equity Incentive Plan) prior to the first anniversary of the employment start date.

Fiscal Year 2016 Cash and Options Bonuses

The fiscal year 2016 cash and options bonuses include performance targets based on: (i) increases in consolidated organic revenue and (ii) increases in consolidated organic non-GAAP EPS for fiscal year 2016. The following table sets forth the maximum target cash and options bonuses payable to the CEO based on his attainment during fiscal year 2016 of the targets described below:

 

Name		Cash Bonus Amount
John R. Frantz		75% of salary at target plus additional for exceeding target
Name		Options Bonus Amount
John R. Frantz		100,000 options granted for service through May 31, 2016

50% of the cash bonus will be based on the percentage increase, if any, of the Company’s organic consolidated revenues reported for the 2016 fiscal year over the Company’s organic consolidated revenues reported for the previous fiscal year (“Consolidated Revenue Growth”) and (ii) 50% of the cash bonus will be based on the percentage increase, if any, of the Company’s organic fully diluted non-GAAP earnings per share reported for the 2016 fiscal year over the Company’s organic consolidated fully diluted non-GAAP earnings per share reported for the previous fiscal year (“Consolidated non-GAAP EPS Growth”). The percentage of the potential bonus for each level of (i) Consolidated Revenue Growth and (ii) Consolidated non-GAAP EPS Growth are set forth below.

The non-qualified stock option grant of shares of the Company’s common stock (“Option Bonus Shares”) will be issued according to the Company’s 2015 Equity Incentive Plan and standard Company non-qualified option grant agreement, will have a term of 8 years from the initial grant date, and vest in five equal, annual consecutive installments with the first vesting date occurring on the first anniversary of the initial grant date. The non-qualified stock option grant will be made in full on May 31, 2016 if John R. Frantz is in good standing as a full time employee of the Company (or a wholly owned subsidiary thereof) through May 31, 2016. The non-qualified stock option grant will not be made, in whole or in part, if John R. Frantz is not in good standing as a full time employee of the Company (or a wholly owned subsidiary thereof) through May 31, 2016.

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Consolidated Revenue Growth		% of Target Cash Bonus Allocation (50%) Earned
< 6%		0%
6%		20%
7%		40%
8%		60%
9%		80%
10%		100%
11%		110%
12%		120%
13%		130%
14%		140%
³ 15%		150%
Consolidated Non-GAAP EPS Growth		% of Target Cash Bonus Allocation (50%) Earned
< 6%		0%
6%		20%
7%		40%
8%		60%
9%		80%
10%		100%
11%		110%
12%		120%
13%		130%
14%		140%
³ 15%		150%

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In order to receive the percentage award shown in the right hand column, the full amount of the minimum target amount in the left hand column must be achieved. Accordingly, there will be no partial credit, proration or extrapolation between levels. Notwithstanding anything contained herein to the contrary, all revenues, expenses, and dilutive shares associated with acquisitions or divestitures closed during fiscal year 2016 will be eliminated from revenues and expenses used to calculate bonus amounts.

To illustrate the calculation of the cash bonus, assume during fiscal year 2016; (i) 15.2% Consolidated Revenue Growth and (ii) 15.6% Consolidated non-GAAP EPS Growth:

 

Target		Example				Example % of Potential Cash Bonus Earned
Consolidated Revenue Growth			15.2	%		75% (150% x 50%)
Consolidated non-GAAP EPS Growth			15.6	%		75% (150% x 50%)
TOTAL %						150%

Based on this example, John R. Frantz could receive a cash bonus for fiscal year 2016 of $675,000 ($450,000 x 150%). Note that the cash bonus will be pro-rated for calendar days employed in FY 2016 (i.e. 75% of the above calculations if employed starting July 1).

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Equity Bonus

In addition to the cash and option bonuses described above, John R. Frantz will be eligible to receive a potential equity award in the form of restricted performance shares (“Performance Shares”) grants of the Company’s common stock over a 3 year period based on achievement of target average daily closing stock prices during the thirty calendar day period ending April 30^th following the applicable fiscal year as set forth below:

 

Fiscal Year		Average Daily Closing Stock Price During 30 Calendar Day Period Ending April 30th of the Subsequent Fiscal Year of No Less Than				Additional % of Performance Shares				Annual Cumulative % of Performance Shares
2016		$	20				10	%			10	%
		$	22				10	%			20	%
		$	24				10	%			30	%
2017		$	26				10	%			10	%
		$	28				10	%			20	%
		$	30				10	%			30	%
2018		$	32				10	%			10	%
		$	34				10	%			20	%
		$	36				20	%			40	%

 

Name		Performance Shares
John R. Frantz			150,000

To illustrate the calculation of the Performance Shares award, assume the average closing stock price during the thirty calendar day period ending April 30, 2016 is $24.12, is $30.43 during the thirty calendar day period ending April 30, 2017, and is $37.23 during the thirty calendar day period ending April 30, 2018, then he will earn 30% of 150,000 Performance Shares which is 45,000 Performance Shares for fiscal year 2016 (which will be pro-rated for calendar days employed in FY 2016, i.e. 75% of the above calculation if employed starting July 1 (the difference between (x) the number of shares that would have been received had no such pro-rated adjustment been applied minus (y) the number of shares actually received as a result of such pro-rated adjustment is referred to as the “Pro-Rata Excluded Share Amount”)); he will earn 30% of 150,000 Performance Shares which is 45,000 Performance Shares for fiscal year 2017; and he will earn 40% of 150,000 Performance Shares which is 60,000 Performance Shares for fiscal year 2018. Also, (i) in the event the maximum target is achieved for Fiscal Year 2017 as shown in the table above (i.e., $30 for the 30 calendar day period ending April 30, 2017), John R. Frantz shall be granted an additional Performance Share award in an amount equal to 50% of the Pro-Rata Excluded

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Share Amount and (ii) in the event the maximum target is achieved for Fiscal Year 2018 as shown in the table above (i.e., $36 for the 30 calendar day period ending April 30, 2018), John R. Frantz shall be granted an additional Performance Share award in an amount equal to 50% of the Pro-Rata Excluded Share Amount.

John R. Frantz Fiscal Year 2016 Compensation Program Terms and Requirements

 

1.

John R. Frantz must be in good standing as a full time employee of the Company (or a wholly owned subsidiary thereof) through (i) May 31, 2016 to receive the fiscal year 2016 cash and option bonuses and (ii) May 31st after the relevant fiscal year to receive the related Performance Shares bonus.

 

2.

No compensated outside work without the Board’s prior written approval.

 

3.

Execution of proprietary information and arbitration agreements.

 

4.

Determination of amounts and payment of all bonuses is discretionary and shall only be as approved by the Compensation Committee based on, among other things, audited financial statements and subject to the Company’s standing compensatory policies (e.g., the Company’s Clawback Policy), as such policies may be amended by the Company or applicable law.

 

5.

Consolidated Revenue and Non-GAAP EPS Growth targets will not include any revenues, expenses, and dilutive shares associated with acquisitions and divestitures closed during fiscal year 2016.

 

6.

The grant of the Performance Shares under the equity bonus component of the program will be made on May 31st of the relevant calendar year. The Performance Shares will fully vest 6 months following the date of grant; provided, however, that such vesting will accelerate in full if John R. Frantz is terminated without “Cause” (as defined in the Company’s 2015 Equity Incentive Plan) during the 6 month period following the date of grant.

 

7.

John R. Frantz must be in compliance with the Company executive stock ownership requirements to receive bonuses.

 

8.

The quantity of Option Grant Shares, Option Bonus Shares, Restricted Shares, and Performance Shares listed above will adjust pro-rata with any stock splits that may occur after the 2016 Executive Compensation Program is approved.

 

9.

The calculation for EPS will be adjusted for stock splits that may occur after the Fiscal Year 2016 Compensation Program is approved.

 

10.

Option Grant Shares, Option Bonus Shares, Restricted Shares, and Performance Shares will be subject to accelerated vesting in full in accordance with the “double trigger” change of control provisions of the Company’s 2015 Equity Incentive Plan; provided, however, if the successor to the Company or any affiliate of such successor does not agree to assume, substitute or otherwise continue any of such outstanding equity awards at the time of a change of control, then 100% of such outstanding equity awards shall fully vest immediately prior to, and contingent upon, the consummation of such change of control. For clarity, Option Bonus Shares and Performance Shares that are not yet earned pursuant to the criteria for the grant thereof shall not accelerate upon a “double trigger” (or, with respect to the proviso in the immediately preceding sentence, upon a change of control). For additional clarity, the cash bonus will not be paid if the criteria for the grant thereof has not been achieved upon the occurrence of a “double trigger” (or, with respect to the proviso in the first sentence of this item 10, upon a change of control).

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE     JUNE 4, 2015				For further information, contact: Susan J. Lewis, 954-389-3700 slewis@qsii.com

QUALITY SYSTEMS, INC. ANNOUNCES RETIREMENT OF PRESIDENT AND CHIEF EXECUTIVE OFFICER STEVEN T. PLOCHOCKI; NAMES RUSTY FRANTZ SUCCESSOR

IRVINE, Calif. ... June 4, 2015 ... Quality Systems, Inc. (NASDAQ: QSII) announced today that President and Chief Executive Officer Steven T. Plochocki, 63, will retire from the Company, effective June 30, 2015. Plochocki has served in this leadership role since 2008, and has been affiliated with Quality Systems since 2004 when he was elected a member of its board of directors.

Plochocki will serve out the remainder of his current term as director, but will not stand for reelection at the Company’s Annual Meeting of Shareholders, scheduled to be held August 11, 2015. Following his retirement, Plochocki will continue with the Company as a consultant for a four-month period to ensure a smooth transition.

Plochocki will be succeeded by Rusty Frantz, 48, who will join the company July 1, 2015. Both Plochocki and Frantz will be in attendance at the Company’s previously announced Investment Community Analyst Day to be held on Monday, June 8, 2015 in New York City.

Most recently, Frantz spent eight years serving in varying roles with increasing responsibility at CareFusion Corp., a San Diego-based global medical technology corporation serving the healthcare industry, providing products and services that assist hospitals in improving the safety and quality of care.

From 2011 until March 2015, when CareFusion was acquired by Becton, Dickinson and Company (BD), Frantz held the role of senior vice president and general manager, global dispensing division. During this time, he spearheaded a transformational medication management strategy across three global brands – Pyxis, Rowa and CareFusion Smartworks – which comprised $1 billion in global revenue. This was a key strategic driver in the acquisition of CareFusion by BD. Prior to heading the division, Frantz served as vice president of research and development of the Pyxis business unit, where he led the process to bring the highly successful Pyxis ES medication dispensing solution to market. He also served as general manager of Pyxis Perioperative Solutions, a leader in hospital and health system supply management solutions.

 

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Retirement of Steven T. Plochocki/Appointment of Rusty Frantz

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Frantz also was chief technology officer and co-founder of OutPurchase, a provider of cloud-based procurement solutions and services. He began his career as one of the first employees at Omnicell, a leading supplier of comprehensive automation and business analytics software for patient-centric medication and supply management across the healthcare continuum.

Frantz holds a Bachelor of Science degree in engineering from the Maine Maritime Academy and a Master’s of Engineering from Stanford University.

Plochocki reflected on his tenure with the Company, stating: “For more than a decade, I have had the privilege of guiding Quality Systems during what is believed to be the most exciting time in the history of our nation’s healthcare system. I am fortunate to have worked alongside a talented team of professionals whose collaborative efforts enabled the Company to transition to a full-service healthcare information technology (HCIT) provider. The hard work of all our employees allowed Quality Systems to realize double-digit growth for fiscal 2015, which is a testament to their knowledge, hard work and dedication. And, over the past five years, we have grown this Company four-fold to reach the half-billion dollar revenue mark. While the industry keeps evolving through reform and new payment models, Quality Systems remains in a strong position as it continues to provide a broad range of products and services the healthcare community needs to be successful in competing in this new era of healthcare.”

Sheldon Razin, founder and chairman of the board, added: “The entire Quality Systems team, along with the Board, thanks Steve for his years of distinguished leadership and service. He has helped define and shape Quality Systems into the global HCIT leader it has become. Now, as we embark on our new fiscal year, we look forward to the direction Rusty will provide and the contributions he will make in his new role. Rusty’s extensive experience working with global healthcare entities will bode well for Quality Systems and the 85,000 providers we serve.”

About Quality Systems, Inc.

Irvine, Calif.-based Quality Systems, Inc. and its NextGen Healthcare subsidiary develop and market computer-based practice management, electronic health records and revenue cycle management applications as well as connectivity products and services for medical and dental group practices and small hospitals. Visit www.qsii.com and www.nextgen.com for additional information.

 

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Retirement of Steven T. Plochocki/Appointment of Rusty Frantz

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SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events, developments in the healthcare sector and regulatory framework, the Company’s future performance, as well as management’s expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements and additional risks and uncertainties are set forth in Part I, Item A of our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2015, including but not limited to: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; product liability; impact of internal and external privacy and security breaches; changing economic, political or regulatory influences in the health-care industry and changes to the regulatory framework applicable to our business; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company’s ability or inability to attract and retain qualified personnel; changes of accounting estimates and assumptions used to prepare the prior periods’ financial statements; and general economic conditions. A significant portion of the Company’s quarterly sales of software product licenses and computer hardware is concluded in the last month of a fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company’s revenues and operating results are very difficult to forecast. A major portion of the Company’s costs and expenses, such as personnel and facilities, are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company’s period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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