SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS
Exhibit 10.4
| CONFIDENTIAL | CONFIDENTIAL |
This SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS (“Agreement”) is made and entered
by and between Xxxxxx X. Xxxxxx (“Employee”) and Quality Systems, Inc., a California Corporation
(the “Company”), as of May 28, 2010.
RECITALS
WHEREAS, Employee has been employed by the Company since approximately September 17, 2009
pursuant to the terms described in an Employment Offer and Terms of Employment letter (the
“Employment Offer”) of that same date, as an at-will employee serving most recently in the position
of Chief Operating Officer; and
WHEREAS, Employee’s employment with the Company will terminate effective on May 28, 2010 as a
result of Employee’s resignation from employment with the Company and the decision of the Company’s
Board of Directors to eliminate the position of Chief Operating Officer; and the Company and
Employee mutually desire to settle fully and finally all obligations to Employee that the Company
may have of any nature whatsoever, as well as any asserted or unasserted claims that Employee may
have arising out of his employment with the Company or the separation of that employment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and
agreements and the terms and conditions set forth herein and other valuable consideration, the
parties agree as follows:
1. Separation. Employee’s employment with the Company will terminate effective on May 28,
2010 (the “Separation Date”).
2. Compensation Through Separation Date. On the Separation Date, Employee will be paid all
unpaid base salary, together with any accrued but unused vacation pay, less state and federal taxes
and other required withholding, for the period from the last regular pay day through the Separation
Date. Employee shall also be reimbursed for all business expenses incurred by Employee through the
Separation Date and ordinarily reimbursable pursuant to the Company’s business expense
reimbursement policy. Employee agrees to present to the Company a claim for any such reimbursable
expenses in accordance with the Company’s normal procedures within a reasonable time not to exceed
thirty (30) days following the Separation Date. Employee acknowledges and agrees that upon the
receipt of the foregoing payments, the Company has paid to him all salary, bonuses, benefits,
accrued vacation pay, or other consideration owed to him at any time and for any reason through the
Separation Date. Employee further represents and agrees that no further sums are or were due and
owing Employee either by the Company or by any individual or entity related to the Company in any
way, except as provided for in this Agreement.
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3. Severance Benefits. In consideration of this Agreement, and provided that this Agreement
has not been revoked by Employee pursuant to Paragraph 15, the Company shall provide the
following benefits:
A. Special Severance Compensation. The Company shall pay to Employee special
severance compensation in the gross amount of Two Hundred Thousand Dollars ($200,000.00),
representing six (6) months of Employee’s base salary at the annual rate in effect as of the
Separation Date. The foregoing severance compensation will be paid in substantially equal
installments on the Company’s regularly scheduled payroll dates over a six (6) month period
beginning with the next regularly scheduled payroll date following the Effective Date of
this Agreement and continuing until the last payment is made. The severance compensation
payments shall be subject to required state and federal withholdings, and other authorized
deductions. For purposes of this Agreement, the term “Effective Date” shall mean the date
determined pursuant to Paragraph 15 herein.
B. Reimbursement of COBRA Premiums. As additional consideration for the
promises and obligations contained herein, provided Employee elected coverage under the
Company’s group health insurance program prior to the Separation Date and makes a timely
election for continued coverage pursuant to COBRA, the Company further agrees to reimburse
Employee for the full amount of monthly premiums for such continued coverage under the
Company’s group health insurance program pursuant to COBRA for a period of six (6) months
from the Separation Date through November 30, 2010. Thereafter, if applicable, continuation
coverage pursuant to COBRA will be available to Employee at Employee’s sole expense, and
Employee will be responsible for the full COBRA premium for any remaining months of the
COBRA coverage period made available pursuant to applicable law.
C. Retention of Company Laptop. As additional consideration for the promises
and obligations contained herein, the Company shall transfer to Employee ownership of the
laptop computer issued to and used by Employee during the course of his employment; provided
however, that prior to the Company’s transfer of ownership to Employee and as an express
condition thereto, Employee must, not later than within five (5) business days following the
Separation Date, deliver the laptop computer to the Company’s designated representative for
the Company’s identification and removal of any Company records present on the computer.
4. Income Taxes. The following provisions shall govern all payments and benefits provided by
the Company to Employee pursuant to this Agreement:
A. Tax Consequences. The Company makes no representations or warranties with
respect to the tax consequences of the payment of any sums or the provision of any benefits
to Employee under the terms of this Agreement. Employee agrees and understands that he is
responsible for payment, if any, of local, state and/or federal taxes on the sums paid
hereunder by the Company and any penalties or assessments thereon.
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| CONFIDENTIAL | CONFIDENTIAL |
B. Code Section 409A. The intent of the parties is that payments and benefits
under this Agreement comply with, or be exempt from, Internal Revenue Code Section 409A and
the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and,
accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in
compliance therewith or exempt therefrom. If Employee notifies the Company (with
specificity as to the reason therefor) that Employee believes that any provision of this
Agreement (or of any award of compensation, including equity compensation or benefits) would
cause Employee to incur any additional tax or interest under Code Section 409A and the
Company concurs with such belief or the Company independently makes such determination, the
Company shall, after consulting with Employee, reform such provision to try to comply with
Code Section 409A through good faith modifications to the minimum extent reasonably
appropriate to conform with Code Section 409A. To the extent that any provision hereof is
modified in order to comply with Code Section 409A, such modification shall be made in good
faith and shall, to the maximum extent reasonably possible, maintain the original intent and
economic benefit to Employee and the Company of the applicable provision without violating
the provisions of Code Section 409A. A termination of employment shall not be deemed to
have occurred for purposes of any provision of this Agreement providing for the payment of
any amounts or benefits upon or following a termination of employment that are considered
“nonqualified deferred compensation” under Code Section 409A unless such termination is also
a “separation from service” within the meaning of Code Section 409A and, for purposes of any
such provision of this Agreement, references to a “termination,” “termination of employment”
or like terms shall mean “separation from service.” If Employee is deemed on the date of
termination to be a “specified employee” within the meaning of that term under Code Section
409A(a)(2)(B), then with regard to any payment that is considered non-qualified deferred
compensation under Code Section 409A payable on account of a “separation from service,” such
payment or benefit shall be made or provided at the date which is the earlier of (A) the
expiration of the six (6)-month period measured from the date of such “separation from
service” of Employee, and (B) the date of Employee’s death (the “Delay Period”). Upon the
expiration of the Delay Period, all payments and benefits delayed pursuant to this Section
(whether they would have otherwise been payable in a single sum or in installments in the
absence of such delay) shall be paid or reimbursed to Employee in a lump sum with interest
at the prime rate as published in The Wall Street Journal on the first business day
following the end of the Delay Period, and any remaining payments and benefits due under
this Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein. With regard to any provision herein that provides for
reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section
409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation
or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or
in-kind benefits, provided during any taxable year shall not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided
that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed
under any arrangement covered by Internal Revenue Code Section 105(b) solely because such
expenses are subject to a limit related to the period the arrangement is in effect and (iii)
such payments shall be made on or before the last day of
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Employee’s taxable year following the taxable year in which the expense occurred. For
purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant
to this Agreement shall be treated as a right to receive a series of separate and distinct
payments. Whenever a payment under this Agreement specifies a payment period with reference
to a number of days (e.g., “payment shall be made within thirty (30) days following the date
of termination”), the actual date of payment within the specified period shall be within the
sole discretion of the Company.
5. Nondisparagement. Employee agrees to refrain from any defamation, libel or slander of the
Company or its products, or any unlawful interference with the contracts and relationships of the
Company, its officers, directors and employees. The Company agrees that all inquiries by potential
future employers of Employee will be directed exclusively to the Company’s Chief Executive Officer,
Xxxxx Xxxxxxxxx. Company records and any press release or required public filing with respect to
Employee’s separation shall reflect that Employee’s employment with the Company was terminated by
the Employee’s resignation effective May 28, 2010.
6. Indemnification. The Company agrees to continue to indemnify Employee following the
Separation Date in accordance with the provisions of applicable law and pursuant to the Second
Amended and Restated Indemnification Agreement between the Company and Employee dated January 27,
2010 (the “Indemnification Agreement”), a copy of which is attached to this Agreement as Exhibit
“B”. All provisions of the Indemnification Agreement which, by their terms, extend beyond the
Separation Date will remain in full force and effect and shall not be affected by this Agreement.
7. Return of Company Property. Employee represents that, as of the Separation Date, with the
exception of the laptop computer referenced in Paragraph 3(C), Employee has returned to the
Company all property of the Company in his possession or under his control, including but not
limited to any equipment, supplies, credit cards, and office machines, and also including any
documents relating to the Company or copies thereof in any form, except for such personnel and
compensation records provided to Employee during the course of his employment.
8. Complete Release of Claims by Employee. In consideration for this Agreement, to the
fullest extent permitted by law, Employee hereby releases and forever discharges the Company and
each of its predecessors, successors, assigns, employees, officers, members, shareholders,
directors, agents, attorneys, subsidiaries, divisions or affiliated corporations or organizations,
whether previously or hereafter affiliated in any manner (collectively, “Released Parties”), from
any and all claims, demands, causes of action, charges of discrimination, obligations, damages,
attorneys’ fees, costs and liabilities of any nature whatsoever, including, but not limited to, all
claims of discrimination or harassment arising under any federal, state or local statute, ordinance
or common law, on the basis of race, sex, national origin, religion, disability, age medical
condition, marital status, veteran status, sexual orientation, or any other basis under applicable
law, whether or not now known, suspected or claimed, that Employee ever had, now has, or may claim
to have as of the date of this Agreement against the Released Parties (whether directly or
indirectly), or any of them, by reason of any act or omission concerning any matter, cause or
thing. This Release includes, without limiting the generality of the foregoing, the waiver of any
claims related to or arising out of Employee’s employment with
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| CONFIDENTIAL | CONFIDENTIAL |
the Company or his separation from that employment. This Release specifically includes the
waiver of any and all claims under the Age Discrimination in Employment Act, 29 U.S.C. § 621 and
sections following.
9. Older Workers Benefit Protection Act. This Agreement is subject to the terms of the Older
Workers Benefit Protection Act of 1990 (the “OWBPA”). The OWBPA provides that an individual cannot
waive a right or claim under the Age Discrimination in Employment Act (“ADEA”) unless the waiver is
knowing and voluntary. Pursuant to the terms of the OWBPA, Employee acknowledges and agrees that
he has executed this Agreement voluntarily, and with full knowledge of its consequences.
In addition, Employee hereby acknowledges and agrees that: (a) this Agreement has been written
in a manner that is calculated to be understood, and is understood, by Employee; (b) the release
provisions of this Agreement apply to rights and claims that Employee may have under the ADEA,
including the right to file a lawsuit against the Company or any other Released Party for age
discrimination; (c) the release provisions of this Agreement do not apply to any rights or claims
that Employee may have under the ADEA that arise after the date Employee executes this Agreement;
and (d) the Company does not have a preexisting duty to pay the special severance compensation
identified in this Agreement.
10. General Nature of Release; Claims Not Released. The Release set forth above in
Paragraph 8 of this Agreement is a general release of all claims, demands, causes of
action, obligations, damages, and liabilities of any nature whatsoever that are described in the
Release and is intended to encompass all known and unknown, foreseen and unforeseen claims that
Employee may have against the Released Parties, or any of them, except for any claims that may
arise from the terms of this Agreement, or any claims which may not be released as a matter of law.
It is further understood by the Parties that nothing in this Agreement shall affect any rights
Employee may have under any Pension Plan and/or Savings Plan (i.e., 401(k) plan) provided by the
Company as of the Separation Date, or upon any rights Employee may have with respect to any grant
of restricted stock or stock options made by the Company to Employee during Employee’s service as
an employee, or as a member of the Company’s Board of Directors, or the vesting thereof, such items
to be governed exclusively by the terms of the applicable plan documents. Employee covenants and
agrees never to commence, aid in any way, prosecute or cause to be commenced or prosecuted any
action or other proceeding based upon any claims, demands, causes of action, obligations, damages
or liabilities which are the subject of this Agreement; provided however, that Employee does not
relinquish any protected rights to file a charge, testify, assist or participate in any manner in
an investigation, hearing or proceeding conducted by the Equal Employment Opportunity Commission,
the Office of Federal Contract Compliance or any similar state human rights agency. However,
Employee may not recover additional compensation or damages as a result of any such action.
11. Release of Section 1542 Rights. Employee expressly waives and relinquishes all rights and
benefits he may have under Section 1542 of the California Civil Code or the law of any other state
or jurisdiction, or common law principle, to the same or similar effect. Section 1542 is intended
to protect against an inadvertent release of unknown or unsuspected claims that would be material
to this Agreement. This Paragraph 11 provides that Employee also is releasing any such
unknown or unsuspected claims. Section 1542 reads as follows:
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“Section 1542. [General Release; extent.] A general release
does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected
his or her settlement with the debtor.”
12. Non-Admission of Liability. Employee and the Company acknowledge and agree that this
Agreement is a settlement agreement and shall not in any way be construed as an admission by any of
the Released Parties of any wrongful act against, or any liability to, Employee or any other
person.
13. Trade Secrets and Confidential Information. Employee agrees to keep in strict confidence,
and will not, either directly or indirectly, make known, reveal, make available or use, any
Confidential and Trade Secret Information of the Company obtained by Employee during Employee’s
employment with the Company. Employee acknowledges and agrees that he has complied and will
continue to comply with the terms and provisions of the Quality Systems, Inc. Employee Confidential
Information and Employee Works Agreement (the “Confidentiality Agreement”) entered into by and
between Employee and the Company, a copy of which is attached to this Agreement as Exhibit “A”, and
that Employee’s obligations under the Confidentiality Agreement shall survive the termination of
Employee’s employment with the Company.
14. Twenty-One Day Consideration Period. This Agreement is being given to Employee on May 27,
2010. Employee acknowledges that he is entitled to take up to twenty-one (21) calendar days to
consider whether to accept this Agreement; provided however, that if Employee chooses to
sign this Agreement before the end of this 21-day period, Employee acknowledges that he does so
knowingly and voluntarily and waives any claim that to the effect that he was not given the full 21
days to consider whether to sign this Agreement or did not use the entire period of time available
to consider this Agreement or to consult with an attorney. Employee agrees that any modifications,
material or otherwise, made to this Agreement do not restart or affect in any manner the original
twenty-one (21) calendar day consideration period.
15. Seven Day Revocation Period. After signing this Agreement, Employee shall have a period
of seven (7) calendar days to revoke the Agreement by providing the Company with written notice of
his revocation. To be effective, such revocation must be in writing, must specifically revoke this
Agreement, and must be actually received by the Company’s Chief Executive Officer, Xxxxx Xxxxxxxxx,
at the Company’s Irvine, California headquarters offices, 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx 00000, prior to the eighth calendar day following Employee’s execution of this
Agreement. Unless timely revoked by Employee, this Agreement shall become effective, enforceable,
and irrevocable on the eighth calendar day following Employee’s execution of this Agreement (the
“Effective Date”). In the event that Employee revokes this Agreement, it shall be null and void
and Employee will not receive any payment or other benefit pursuant to this Agreement, including,
but not limited to, the compensation and benefits provided in Paragraph 3 herein. Any
revocation of this Agreement, however, shall not affect the finality of the separation of
Employee’s employment with the Company on the Separation Date.
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16. Acknowledgment of Being Advised to Consult Legal Counsel. This Agreement is an important
legal document. Employee acknowledges that the Company hereby advises him to consult with an
attorney of his choice prior to signing this Agreement, and Employee represents that he has had the
opportunity to consult with an attorney to the extent he so desires.
17. Confidentiality of Agreement. As a material inducement to the Company to enter into this
Agreement, Employee promises and agrees that this Agreement, including the special severance
compensation and other benefits referred to in Paragraph 3 hereof, shall be and remain
confidential. Employee promises and covenants not to disclose, publicize, or cause to be
publicized any of the terms and conditions of this Agreement except to his immediate family, and to
his attorney or accountant to the extent reasonably necessary to obtain professional advice with
respect to the parties’ rights and obligations as stated herein. Employee further promises and
covenants to use his best efforts to prevent any further disclosure of this Agreement by any such
persons to whom he does make disclosure. Notwithstanding the foregoing, Employee may disclose the
terms of this Agreement to persons to whom disclosure is ordered by a court of competent
jurisdiction or otherwise required by law.
18. Cooperation. Upon reasonable request, Employee shall make himself available to the
Company to furnish full and truthful information concerning any event that took place during
Employee’s employment with the Company. Upon reasonable request, as deemed necessary by the
Company, Employee shall make himself available to furnish full and truthful consultation concerning
any potential or actual litigation. Employee shall furnish the information as soon as is practical
after a request from the Company is received. The Company shall reimburse Employee for the
reasonable cost of any travel, lodging, meals, and any direct loss of compensation suffered by
Employee from Employee’s current employer as a result of time spent furnishing information under
this clause, upon presentation of evidence of such loss or expense satisfactory to the Company.
Employee further agrees that Employee shall provide advance written notice to the Company in the
event Employee is subpoenaed to testify, or provide documents at deposition or at trial, relating
to: (1) any actual, possible, or perceived violation by the Company or any other Released Party of
any federal, state, local, or administrative law, rule, or regulation; (2) the negotiations
relating to and the terms of, this Agreement; and (3) any acts or omissions by the Company or any
of the other Released Parties occurring prior to the Effective Date of this Agreement. Nothing in
this Paragraph is intended to interfere with any protected right of Employee to file charges,
testify, assist or participate in any manner in an EEOC or similar state agency investigation,
hearing or proceeding, and nothing in this paragraph is intended to influence the substance of such
involvement by Employee which is properly compelled by legal process
19. Ambiguities. The parties and/or their attorneys have had a full opportunity to review the
terms and conditions of this Agreement. Accordingly, the parties expressly waive any common-law or
statutory rule of construction that ambiguities should be construed against the drafter of this
Agreement, and agree, covenant, and represent that the language in all parts of this Agreement
shall be in all cases construed as a whole, according to its fair meaning.
20. Interpretation. Whenever possible, each provision of this Agreement shall be interpreted
in such a manner as to be valid and effective under applicable law. Therefore, each
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and every provision of this Agreement shall be considered severable from, and shall in no way
affect the validity or enforceability of, the remaining provisions of this Agreement except for the
release provisions contained in Paragraphs 8 through 11 of this Agreement. If a court of
competent jurisdiction finds any release provisions contained in Paragraphs 8 through 11 of
this Agreement to be unlawful, void, or for any reason unenforceable or invalid, this Agreement
shall become null and void, and Employee shall repay the special severance compensation paid by the
Company pursuant to this Agreement within a reasonable period of time not to exceed fifteen (15)
days. If a court of competent jurisdiction finds any provision other than the release provisions
contained in Paragraphs 8 through 11 to be unlawful, void, or for any reason unenforceable
or invalid, that provision, or part thereof, shall remain in force and effect to the extent allowed
by law, and all of the remaining provisions of this Agreement shall remain in full force and effect
and enforceable, and the rights and obligations of the parties shall be enforced to the fullest
extent possible. All captions are for convenience of reference only and shall be disregarded in
interpreting this Agreement.
21. Entire Agreement. Employee acknowledges that he is not relying, and has not relied, on
any representation or statement by the Company with regard to the subject matter or terms of this
Agreement, except to the extent set forth fully in this Agreement. This Agreement constitutes the
entire agreement between Employee and the Company with respect to the subject matter of this
Agreement, and supersedes any and all other agreements, understandings or discussions between
Employee and the Company with respect to the subject matter of this Agreement; provided,
however, that this Agreement does not supersede, and has no effect upon, the Confidentiality
Agreement attached hereto as Exhibit “A”, or upon the Indemnification Agreement attached hereto as
Exhibit “B”.
22. Risk of New or Different Facts. Employee acknowledges that he may discover new
information different from or inconsistent with facts he presently believes to be true, and
expressly agrees to assume the risk of such new or different information.
23. Modification. This Agreement cannot be modified or terminated, except by a writing signed
by the party against whom enforcement of the modification or termination is sought.
24. Voluntary Agreement. This Agreement in all respects has been voluntarily and knowingly
executed by the parties hereto. Employee specifically represents that he has carefully read and
fully understands all of the provisions of this Agreement, and that he is voluntarily entering
into this Agreement.
25. Execution in Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one and the same
instrument.
26. Governing Law. This Agreement is made and entered into in the State of California and
shall in all respects be interpreted and enforced pursuant to the laws of the State of California,
without regard to or application of any of California’s conflict of laws rules.
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IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement and General
Release of All Claims, and have initialed each page hereof, on the dates set forth below.
| Employee |
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| Dated: June 1, 2010 | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx | ||||
| Quality Systems, Inc. |
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| Dated: June 1, 2010 | By: | /s/ Xxxxxx Xxxxxxxxx | ||
| Xxxxxx Xxxxxxxxx | ||||
| Its: Chief Executive Officer | ||||
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