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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004 or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number -0-13801
QUALITY SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
California 95-2888568
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
18191 Von Karman Avenue
Irvine, California 92612
(Address of Principal Executive Offices) Zip Code)
(949) 255-2600
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address And Former Fiscal Year,
if Changed Since Last Report)
Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of December 21, 2004, there were 6,505,280 shares of the issuer's
common stock, $0.01 par value, outstanding.
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PURPOSE OF AMENDMENT
This Amendment No. 1 to Form 10-Q is being filed solely to amend Items 5
and 6 of Part II to include information that otherwise was required to be filed
on Form 8-K.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Quality Systems, Inc. (referred herein to as the "Company," "Registrant"
or "QSI") has previously adopted (i) a form of Incentive Stock Option Agreement
(the "Incentive Option Agreement") for use in conjunction with its 1998 Stock
Option Plan for its employees, (ii) a form of Nonqualified Stock Option
Agreement (the "Nonqualified Option Agreement") for use in conjunction with its
1998 Stock Option Plan for its employees and members of the Board of Directors,
(iii) bonus criteria for its "Named Executive Officers"; and (iv) a compensation
program for the members of its Board of Directors (the "Director Compensation
Program").
The Incentive Option Agreement provides for the grant of options to
purchase a specified number of shares of Common Stock with an exercise price
equal to 100% of the fair market value of the shares as of the date of the grant
("Incentive Options"). Incentive Options shall have the following vesting
schedule: 25% on the first anniversary of the grant of options, 25% on the
second anniversary of the grant of options; 25% on the third anniversary of the
grant of options, and 25% on the fourth anniversary of the grant of options.
Incentive Options have a term of five years from their date of grant. Subject to
certain exclusions, Incentive Options are generally non-transferable. Incentive
Options immediately terminate upon an option holder's voluntary resignation or
termination for cause. Upon termination without cause, an option holder has a
limited period to exercise vested Incentive Options. An option holder's
disability or death or the Company's dissolution, liquidation, merger,
consolidation, acquisition, sale of substantially all assets or shares, or a
similar event may also affect the option holder's rights with respect to
Incentive Options. The foregoing summary description of the Incentive Option
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Incentive Option Agreement, which is attached hereto as Exhibit
10.1 and incorporated by reference into this report. Under the Incentive Option
Agreement, Paul Holt, Chief Financial Officer and Secretary of the Company was
granted 4,000 options, and Greg Flynn, Executive Vice President, General Manager
QSI Division, was granted 4,500 options, on September 3, 2004.
The Nonqualified Option Agreement provides for the grant of options to
purchase a specified number of shares of Common Stock with an exercise price
that is required to equal the fair market value of the shares as of the date of
the grant ("Nonqualified Options"). Nonqualified Options shall have the
following vesting schedule: 25% on the first anniversary of the grant of
options, 25% on the second anniversary of the grant of options; 25% on the third
anniversary of the grant of options, and 25% on the fourth anniversary of the
grant of options. Nonqualified Options have a term of five years from their date
of grant. Subject to certain exclusions, Nonqualified Options are generally
non-transferable. Nonqualified Options immediately terminate upon an option
holder's voluntary resignation or termination for cause. Upon termination
without cause, an option holder has a limited period to exercise vested
Nonqualified Options. An option holder's disability or death or the Company's
dissolution, liquidation, merger, consolidation, acquisition, sale of
substantially all assets or shares, or a similar event will also affect the
option holder's rights with respect to Nonqualified Options. The foregoing
summary description of the Nonqualified Option Agreement does not purport to be
complete and is qualified in its entirety by reference to the Nonqualified
Option Agreement, which is attached hereto as Exhibit 10.2 and incorporated by
reference into this report.
2
The bonus criteria (the "Bonus Criteria") approved by the Company's
Compensation Committee and its Board of Directors for each of the Company's
Named Executive Officers provides as follows: (i) for the Company's President
and Chief Executive Officer, Mr. Louis Silverman, the Bonus Criteria permit a
bonus of up to 50% of his base salary to be earned based upon the achievement of
certain growth milestones in the Company's earnings per share; (ii) for the
President of the Company's NextGen Healthcare Information Systems Division, Mr.
Patrick Cline, a bonus of up to 100% of his base salary may be earned based on a
formula which takes into account growth, on a year-to-year basis, of revenue and
operating income of the NextGen Healthcare Information Systems Division; (iii)
for the Executive Vice President, General Manager of the Company's QSI Division,
Mr. Gregory Flynn, a bonus of up to 25% of his base salary may be earned based
40% on qualitative goals and 60% based upon the achievement of certain revenue
and operating performance goals related to the QSI Division; and (iv) for the
Company's Chief Financial Officer and Secretary, Mr. Paul Holt, a bonus of up to
$60,000 may be earned based upon the achievement of certain qualitative goals as
approved by the Compensation Committee of the Board of Directors. The foregoing
summary description of the Bonus Criteria does not purport to be complete and is
qualified in its entirety by reference to the Bonus Criteria which is attached
hereto as Exhibit 10.3 and incorporated by reference into this report. Such
Exhibit 10.3 is also a summary of the actual Bonus Criteria used by the Company
and does not contain the specific qualitative and quantitative performance
related factors and such factors considered confidential by the Company, the
disclosure of which may have an adverse effect upon the Company.
Under the terms of the Company's Director Compensation Program, directors
of the Company who are also employees of the Company are not compensated for
their services as directors or committee members. Directors of the Company who
are not also employees receive a fee of $2,000 per month and $2,000 per meeting
of the Board, along with reasonable expenses for serving on the Board of
Directors. Directors who serve on a committee of the Board of Directors receive
an additional fee of $1,000 per committee meeting attended, together with
reasonable expenses for attendance at committee meetings. On September 21, 2004,
the Company's Directors were each granted 2,500 options to purchase common stock
of the Company. The options fully vest in six months from the date of grant.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
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10.1 Form of Incentive Stock Option Agreement (Employees) (#)
10.2 Form of Nonqualified Stock Option Agreement (Directors) (#)
10.3 Bonus Criteria for Named Executive Officers (#)
10.4 Director Compensation Program (#)
31.1 Certifications Required by Rule 13a-14(a) of the Securities Exchange
Act of 1934, as amended, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (1)
- ----------
(#) Management contract or compensatory plan, contract or arrangement.
(1) Filed as an exhibit to the initial filing of this Form 10-Q.
4
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 thereunto duly authorized.
QUALITY SYSTEMS, INC.
Dated: December 22, 2004 By: /S/ LOUIS SILVERMAN
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Louis Silverman, Chief Executive Officer
(principal executive officer)
By: /S/ PAUL HOLT
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Paul Holt, Chief Financial Officer
(principal financial officer)
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INDEX TO EXHIBITS
Exhibit
Number Description
- -------- --------------------------------------------------------------
10.1 Form of Incentive Stock Option Agreement (Employees) (#)
10.2 Form of Nonqualified Stock Option Agreement (Directors) (#)
10.3 Bonus Criteria for Named Executive Officers (#)
10.4 Director Compensation Program (#)
31.1 Certifications Required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
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(#) Management contract or compensatory plan, contract or arrangement.
(1) Filed as an exhibit to the initial filing of this Form 10-Q.
6