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)
May 25, 2005
QUALITY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 0-13801 95-2888568
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) 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.
On May 25, 2005, the Company's Compensation Committee and
Board of Directors approved the Company's bonus criteria (the "2006 Bonus
Criteria") for each of the Company's Named Executive Officers for the
Company's 2006 fiscal year. The 2006 Bonus Criteria 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 75% of his base
salary tied to meeting certain target increases in EPS performance and
revenue growth during the 2006 fiscal year; (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 incorporating NextGen divisional revenue and operating income
growth; (iii) for the Executive Vice President, General Manager of the
Company's QSI Division, Mr. Gregory Flynn, a bonus of up to 35% of his
base salary may be earned based upon the achievement of certain
qualitative and quantitative goals related to both QSI division
performance and other corporate objectives as approved by the Compensation
Committee of the Board of Directors and the Board of Directors; and (iv)
for the Company's Chief Financial Officer and Secretary, Mr. Paul Holt, a
bonus of up to $66,000 may be earned based upon the achievement of certain
qualitative goals as approved by the Compensation Committee of the Board
of Directors and 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 10.1 and
incorporated by reference into this report. Such Exhibit 10.1 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 other factors considered confidential by the Company, the
disclosure of which may have an adverse effect upon the Company.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
On May 25, 2005, the Company's Board of Directors elected Louis Silverman
and Patrick Cline to the Board of Directors. Each will serve in such
capacity in accordance with the Company's Bylaws and the requirements of
the General Corporation Law of the State of California. Mr. Silverman is
the Company's President and Chief Executive Officer. Mr. Cline is the
President of the Company's NextGen Healthcare Information Systems
Division. Neither Mr. Silverman nor Mr. Cline is a member of any of the
Board's committees.
Mr. Silverman has an Employment Agreement ("Agreement") with the Company
which details the terms of his employment as the Company's Chief Executive
Officer. The Agreement granted Mr. Silverman a total of 124,260 options
which vest equally over a four year period commencing with the effective
date of the Agreement (July 20, 2000). Additionally, on July 20, 2001 he
received an additional 59,940 options per his agreement. Mr. Silverman is
eligible for a
cash bonus of up to 50% of his annual base compensation based on
performance goals established jointly between himself and the Board of
Directors. Mr. Silverman's employment may be terminated for any reason by
himself or the Company upon 60 days written notice. Should Mr. Silverman
terminate his employment due to the Company's breach of the Agreement he
will be entitled to (i) a lump sum payment equal to six months base
compensation; and (ii) 12 months worth of accelerated vesting of granted
stock options. Should Mr. Silverman's employment be terminated without
cause or by himself for good reason, he will be entitled to (i) unpaid
base compensation and vacation earned and accrued through his date of
termination plus a lump sum equal to six months base compensation, (ii)
any other performance bonus earned and not paid, and (iii) vesting of an
additional 25% of all unvested stock options. Should Mr. Silverman's
employment be terminated due to a "change of control" he will be entitled
to (i) unpaid base compensation and vacation earned plus a lump sum
payment equal to six months base compensation; (ii) any performance bonus
earned but not paid; and (iii) immediate vesting of all unvested options.
A "change of control" is defined as the earliest occurrence of any of the
following events: the direct or indirect sale, lease, exchange or other
transfer of 35% of more of the total assets of the Company, the merger or
consolidation of the Company with another company with the effect that the
shareholders of the Company immediately prior to the merger hold less than
51% of the combined voting power of the then outstanding securities of the
surviving company; the replacement of a majority of the Company's
Directors without the approval of the Board of Directors; the purchase of
25% or more of the combined voting power of the outstanding securities of
the Company with the exception of the purchase of securities by Ahmed
Hussein or Sheldon Razin of shares owned by either Sheldon Razin or Ahmed
Hussein. The Agreement also grants immediate vesting of all unvested
options should a change of control occur whether or not Mr. Silverman's
employment is terminated.
Kim Cline, the Company's manager of implementations, is the sister of Pat
Cline. Kim Cline earned $138,287 in salary and bonuses during the fiscal
year ended March 31, 2004 and was awarded 4,000 stock options during the
same period.
Pursuant to the terms of a Board Service Agreement, each of Mr. Silverman
and Mr. Cline have agreed that upon a termination of their respective
employment service with the Company for any reason, their respective
service upon the Company's Board of Directors shall terminate.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On May 25, 2005, the Board of Directors approved an amendment to
Article III, Section 2 of the Company's Bylaws to increase the number of
authorized directors from seven to nine, effective immediately.
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.
10.1 2006 Bonus Criteria for Named Executive Officers.
10.2.1 Board Service Agreement - Lou Silverman
10.2.2 Board Service Agreement - Patrick Cline
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: May 31, 2005 QUALITY SYSTEMS, INC.
By: /s/ Paul Holt
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Paul Holt
Chief Financial Officer