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)
January 27, 2005
QUALITY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 0-13801 95-2888568
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification Number)
18191 Von Karman, Suite 450
Irvine, California 92612
(Address of Principal Executive Offices)
(949) 255-2600
(Registrant's Telephone Number, Including Area Code)
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 (see General Instruction A.2. below):
|_| 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))
Item 1.01 Entry into a Material Definitive Agreement.
Revision to Director Compensation Program
On January 27, 2005, the Board of Directors of Quality Systems, Inc.
(referred herein to as the "Company," "Registrant" or "QSI"), approved a
revision to the compensation program for members of the Board of Directors (the
"Revised Director Compensation Program"). Under the terms of the Revised
Director Compensation Program, all directors of the Company shall receive a
retainer of $24,000 per year, plus a fee of $2,000 per meeting of the Board
attended. Directors who serve on a committee of the Board of Directors shall
receive a fee of $1,000 per committee meeting attended. Board members traveling
from the East Coast of the United States to attend a West Coast Board meeting or
committee meeting shall receive $1,000 to cover travel and other related
expenses.
In addition to the cash remuneration above, each newly elected director
shall receive 6,000 options to purchase Common Stock of the Company upon
election to the Board of Directors. Thereafter, each director reelected to the
Board of Directors shall receive 5,000 options to purchase Common Stock of the
Company upon reelection. The options are priced at the fair market value of the
Company's Common Stock on the date of grant, fully vest in three months from the
date of grant, and expire seven years from the date of grant.
Indemnification Agreement
On January 27, 2005, the Board of Directors approved an agreement
providing certain indemnification rights to the Company's executive officers and
members of the Board of Directors (the "Indemnity Agreement"). Under the terms
of the Indemnity Agreement, the Company shall indemnify an executive officer or
member of the Board of Directors, as the case may be ("Indemnitee"), from third
party actions or similar proceedings against Indemnitee by reason of
Indemnitee's position with the Company if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the best interests of the
Company and its shareholders, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful. The
Company shall indemnify Indemnitee from actions or similar proceeding by or in
the right of the Company against Indemnitee by reason of Indemnitee's position
with the Company if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the Company and its
shareholders, except that no indemnification shall be made where Indemnitee is
adjudged to be liable to the Company unless and to the extent that the court in
which such action was brought determines that Indemnitee is entitled to
indemnity.
The Company shall advance all expenses incurred by an Indemnitee in
connection with the actions and proceedings above. Indemnitee undertakes to
repay such amounts advanced if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company.
Notwithstanding any terms of the Indemnity Agreement, the Company agrees to
indemnify Indemnitee to the fullest extent permitted by the California General
Corporation Law.
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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On January 27, 2005, the Board of Directors approved the following
amendments to the Company's Bylaws, effective immediately:
Article I, Section 1, was amended to reflect the Company's current
principal executive office as 18191 Von Karman Avenue, Suite 450, Irvine,
California 92612. Prior to the amendment, Article I, Section 1, referenced the
Company's previous address of 17822 East 17th Street, Tustin, California 92680.
Article II, Section 3(c), was amended to specify that the requirements set
forth in Section 3(c) apply to any request for a special meeting of the Board
submitted "by a shareholder." Prior to the amendment, Article II, Section 3(c),
referenced any request for a special meeting of the Board without specifying
that such request be submitted by a shareholder.
Article III, Section 7, was amended to allow forty-eight hours notice of
special meetings of the Board to be given, in addition to personal notification,
by telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, telegraph, facsimile, electronic
mail, or other electronic means. Prior to the amendment, Article III, Section 7,
stated that forty-eight hour notice of special meetings of the Board could be
given personally or by telephone, telegraph, telex or other similar means of
communication.
Article III, Section 7, was further amended to state that oral notice
shall be deemed to have been given, in addition to the events already set forth
prior to the amendment, when communicated to a voice messaging system or other
system or technology designed to record and communicate messages where the
person giving the notice has reason to believe the recipient will promptly
receive the message.
Article III, Section 9, was amended to expand the specified means by which
the members of the Board may participate in a meeting through the use of
conference technologies to include electronic video screen communication, or
other communication equipment. Article III, Section 9, was further amended to
define what constitutes "presence" when utilizing such conference methods.
Participation in a conference telephone meeting constitutes presence in person
at such meeting so long as all members participating are able to hear one
another. Participation in a meeting through use of electronic video screen
communication or other communication equipment, other than conference telephone,
constitutes presence in person at the meeting if: (A) each member participating
can communicate with all of the other members concurrently, (B) each member is
provided the means of participating in all matters before the board, and (C) the
Company adopts and implements some means of verifying both that (i) a person
participating is a director or other person entitled to participate, and (ii)
all actions of, or votes by, the Board are taken or cast only by the directors
and not by persons who are not directors.
Article V, Section 1(a), was amended to provide that certain shareholders
who have filed a Schedule 14A with the SEC shall have an absolute right to do
either or both of the following, subject to the requirements set forth in
Section 1(a)(i) and (ii): (i) inspect and copy the record of shareholders' names
and addresses and shareholdings, and (ii) obtain a list of the shareholders'
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names and addresses who are entitled to vote for the election of directors and
their shareholdings. Prior to the amendment, Article V, Section 1(a), instead
provided the same absolute right to certain shareholders who had filed a
Schedule 14B relating to the election of directors of the Company.
Article V, Section 1(a)(ii), was amended to state that the list of
shareholders' names and addresses referenced in Section 1(a)(ii) shall be made
available on or before the later of five business days after the demand for such
list is received or the date specified therein as the date as of which the list
is to be compiled. Prior to the amendment, Article V, Section 1(a)(ii), required
five business days prior written demand for such list and made no reference to
compliance dates within such demands.
Article V, Section 3, was amended to state that, subject to applicable
law, a written contract entered into by the Company and any other person, when
signed by the officers set forth in Section 3, is not invalidated as to the
Company by any lack of authority of the signing officers in the absence of such
actual knowledge on the part of the other person that the signing officer had no
authority to execute the same. Prior to the amendment, Article V, Section 3,
stated that a written contract signed by such officers was valid and binding on
the Company in the absence of actual knowledge on the part of the other person
that the signing officers had no authority to execute the same.
Article V, Section 6, was amended to provide that an option or obligation
on the part of the Company under a stock purchase plan or agreement or stock
option plan or agreement to repurchase shares upon termination of employment is
subject to the provisions of Chapter 5 of the California General Corporation
Law.
Article VI, Section 1, was amended to replace the reference to Section
5(c) of Article VI with a reference to Section 5(d) of Article VI.
Article VI, Section 3, was amended to state that the Company shall have
the power to indemnify any person, subject to the other terms of Section 3, if
such person acted in good faith, in a manner such person believed to be in the
best interests of the Company and its shareholders. Prior to the amendment,
Article VI, Section 3, provided that the Company had the power to indemnify any
person, subject to the other terms of Section 3, if such person acted in good
faith, in a manner such person believed to be in the best interests of the
Company and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
Article VI, Section 3(a), was amended to extend the prohibition on
indemnification in Section 3(a) to include a prohibition on indemnification of
any person adjudged liable to the Company in the performance of such person's
duty to the Company's shareholders. Prior to the amendment, the prohibition on
indemnification in Article VI, Section 3(a), was limited to any person adjudged
liable to the Company in the performance of such person's duty to the Company,
without reference to a duty to the Company's shareholders.
Article VI, Section 3(b), was amended to prohibit indemnification of
amounts paid in settling or otherwise disposing of a pending action, without
court approval. Prior to the
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amendment, Article VI, Section 3(b), prohibited indemnification of amounts paid
in settling or otherwise disposing of either a threatened or pending action,
with or without court approval.
Article VI, Section 3(c), was amended to prohibit indemnification of
expenses incurred in defending a pending action which is settled or otherwise
disposed of without court approval. Prior to the amendment, Article VI, Section
3(c), prohibited indemnification of expenses incurred in defending a threatened
or pending action which is settled or otherwise disposed of without court
approval.
Article VI, Section 5, regarding authorization of indemnification, was
amended by the insertion of a new Section 5(b) stating that a determination that
indemnification is proper may be made "If such a quorum of directors [as set
forth in Section 5(a)] is not obtainable, by independent legal counsel in a
written opinion;" Article VI, Section 5, was further amended to move the
provision referenced as Section 5(b) prior to the amendment to Section 5(c), and
to move the provision referenced as Section 5(c) prior to the amendment to
Section 5(d).
Article VI, Section 6, was amended to allow expenses incurred in defending
any proceeding to be advanced by the Company prior to the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of the agent to
repay such amount if it shall be determined ultimately that the agent is not
entitled to be indemnified as authorized under Article VI. Prior to the
amendment, Article VI, Section 6, allowed such an advance upon receipt of an
undertaking by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is entitled to be indemnified. The
post-amendment language of Article VI, Section 6, is consistent with California
General Corporation Law Section 317(f).
Article VI, Section 8, was amended to replace the reference to Section
5(c) of Article VI with a reference to Section 5(d) of Article VI.
Throughout the entirety of the Bylaws, all references to the Board of
Directors, or similar references to the Company's Board, were amended to read
the "Board," and all references to the Articles, or similar references to the
Company's Articles of Incorporation, were amended to read the "Articles of
Incorporation."
In addition, various immaterial grammatical corrections were made
throughout the Bylaws.
A copy of the Bylaws, as amended, is attached hereto as Exhibit 3.0 and is
incorporated herein by reference.
Item 8.01 Other Events.
On January 31, 2005, the Company issued a press release announcing the
declaration of a one-time cash dividend of Three Dollars ($3.00) per share on
the Company's outstanding shares of Common Stock, payable to shareholders of
record as of February 24, 2005. A copy of the press release is attached hereto
as Exhibit 99.0 and is incorporated herein by reference.
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Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits.
Exhibit No. Description
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3.0 A copy of the Company's Bylaws, as amended
99.0 Press Release dated January 31, 2005
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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.
Date: February 1, 2005 QUALITY SYSTEMS, INC.
By: /s/ Paul Holt
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Paul Holt
Chief Financial Officer
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