-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PyelO1uSbkIvCvCvzdBZOLI5+tgYzB0fKj9inYKkdf0Z8tjWcPOaUq5XYXmotCw1 UV/+d+d8Y+lPZIORrb7xkQ== 0001169232-04-006160.txt : 20041223 0001169232-04-006160.hdr.sgml : 20041223 20041223105645 ACCESSION NUMBER: 0001169232-04-006160 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041223 DATE AS OF CHANGE: 20041223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUALITY SYSTEMS INC CENTRAL INDEX KEY: 0000708818 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 952888568 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12537 FILM NUMBER: 041222768 BUSINESS ADDRESS: STREET 1: 18191 VON KARMAN AVENUE CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 7147317171 MAIL ADDRESS: STREET 1: 18191 VON KARMAN AVENUE STREET 2: SUITE 450 CITY: IRVINE STATE: CA ZIP: 92612 10-Q/A 1 d61691_10q-a.txt FORM 10-Q/A ================================================================================ 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. ================================================================================ 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. 3 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 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) - ---------- (#) 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 ---------------------------------------- Louis Silverman, Chief Executive Officer (principal executive officer) By: /S/ PAUL HOLT ---------------------------------------- Paul Holt, Chief Financial Officer (principal financial officer) 5 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) - ---------- (#) Management contract or compensatory plan, contract or arrangement. (1) Filed as an exhibit to the initial filing of this Form 10-Q. 6 EX-10.1 2 d61691_ex10-1.txt FORM OF INCENTIVE STOCK OPTION AGREEMENT EXHIBIT 10.1 FORM OF INCENTIVE STOCK OPTION AGREEMENT THIS INCENTIVE STOCK OPTION AGREEMENT, dated this ____ day of ______, ____, between QUALITY SYSTEMS, INC., a California Corporation (hereinafter referred to as the "Company"), and _______________, an employee of the Company, its parent or one or more of its subsidiaries (hereinafter referred to as the "Optionee"), is made with reference to the following facts: The Company desires, by affording the Optionee an opportunity to purchase shares of Common Stock, $0.01 par value, in the Company (hereinafter called "Common Stock"), as hereinafter provided, to carry out the purpose of the Company's 1998 Stock Option Plan (the "Plan"). Terms not otherwise defined herein shall have the meaning given them under the Plan. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties hereto have agreed, and do hereby agree, as follows: 1. Grant of Option. The Company hereby irrevocably grants to the Optionee the right and option (hereinafter called the "Option") to purchase all or any part of an aggregate of ______ shares (such number being subject to adjustment as provided in the Plan) on the terms and conditions herein set forth. The Option granted herein is intended to be an "incentive option" within the meaning of the Plan and Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Purchase Price. The purchase price of the Common Stock covered by the Option shall be $_____ per share, representing one hundred percent (100%) of the fair market value of the shares as determined pursuant to Section IV of the Plan as of the date hereof. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, (ii) at the discretion of the Board or the Committee, either at the time of the grant or exercise of the Option, by delivering to the Company other shares of Common Stock of the Company (provided that the shares have been held for the period required to avoid a charge to the Company's reported earnings), (iii) at the discretion of the Board or the Committee, either at the time of the grant or exercise of the Option, by delivering to the Company all or any part of an Option granted under this Plan for a cashless exercise (provided that such cashless exchange will not result in a charge to the Company's reported earnings), or (iv) by tendering any other form of legal consideration that may be acceptable to the Board. 3. Term of Option. The term of the Option shall commence on the date hereof and all rights to purchase Shares hereunder shall cease at 11:59 P.M. on the day before the fifth anniversary of the date hereof, subject to earlier termination as provided herein. Except as may otherwise be provided in this Agreement, options granted hereunder shall become exercisable in cumulative installments as follows: 1 Date Installments First Percent of Option Shares Become Exercisable Subject to Installment ----------------------- ------------------------ [date] 25% [date] 25% [date] 25% [date] 25% Once an installment of the Option granted hereunder becomes exercisable for the first time, the shares subject thereto will be purchasable thereafter by the Optionee at any time in whole, or from time-to-time in part, prior to the expiration or earlier termination of the Option granted hereunder. Except as provided in Section 5 hereof, the Option may not be exercised at any time unless the Optionee shall have been continuously, from the date hereof to the date of the exercise of the Option, an employee of the Company, its parent, if any, or of one or more of its subsidiaries or a corporation or a parent or subsidiary of a corporation issuing or assuming an option to which Section 425(a) of the Code applies. The holder of the Option shall not have any of the rights of a shareholder with respect to the shares covered by the Option as to any shares of Common Stock not actually issued and delivered to such holder. 4. Non-Transferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Optionee, only by the Optionee. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided in Section 5 hereof), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect. 5. Termination of Employment. (a) Termination of Employment Other than by Disability or Death. In the event that an Optionee's Continuous Status as an Employee is terminated either by the voluntary resignation by the Optionee or for cause by the Company, all Options granted to the Optionee shall terminate immediately. In the event an Optionee's Continuous Status as an Employee is terminated without cause by the Company, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination) but only within such period of time ending on the earlier of (i) the date thirty (30) days after the termination of the Optionee's Continuous Status as an Employee, or (ii) the expiration of the term of the Option as set forth herein. If, after termination, the Optionee does not exercise his or her Option as set forth in this Section 5(a), the Option shall terminate. (b) Disability of Optionee. In the event an Optionee's Continuous Status as an Employee terminates as a result of the Optionee's disability, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date three hundred sixty-five (365) days following such termination, or (ii) the expiration of the term of the Option as set forth herein. If, after termination, the Optionee does not exercise his or her Option as set forth in this Section 5(b), the Option shall terminate. 2 (c) Death of Optionee. In the event of the death of an Optionee during, or within a period specified in the Option after the termination of, the Optionee's Continuous Status as an Employee, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option at the date of death) by the Optionee's estate, by a person who acquired the right to exercise the Option by bequest or inheritance, or by a person designated to exercise the option upon the Optionee's death pursuant to the Plan, but only within the period ending on the earlier of (i) the date three hundred sixty-five (365) days following the date of death, or (ii) the expiration of the term of such Option as set forth herein. If, after death, the Option is not exercised as set forth in this Section5(c), the Option shall terminate. 6. Other Expirations. In addition to any other event causing an expiration or termination of this Option, this Option shall expire and all rights to purchase the Common Stock shall cease (to the extent not theretofore terminated or expired as herein provided) upon the effective date of (i) the dissolution or liquidation of the Company, or (ii) a merger, consolidation, acquisition of property or shares, separation or reorganization of the Company with one or more entities, corporate or otherwise, as a result of which the Company is not the surviving entity, or (iii) a "reverse merger" in which the Company is a surviving entity but more than 50% of its voting shares are converted into cash, property or the securities of another entity, or (iv) a sale of substantially all of the property or shares of the Company to another entity, corporate or otherwise; provided, however, that the Company may, in its discretion, and immediately prior to any such transaction, cause a new option to be substituted for this Option or cause this Option to be assumed by an employer entity or a parent or subsidiary of such entity; and such new option shall apply to all shares issued in addition to or substitution, replacement or modification of the shares theretofore covered by such option; provided that: (a) The excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares; and (b) The new option or the assumption of the existing option shall not give the Optionee additional benefits which he or she did not have under the old option prior to such assumption; and (c) An appropriate adjustment of the original option price shall be made among original shares subject to the option and any additional shares or shares issued in substitution, replacement or modification thereof. If no provision is made for the continuance of the Plan and the assumption of this Option, or the substitution of new options for this Option as hereinabove provided, then the Company shall cause written notice to be given to the Optionee of the proposed transaction not less than thirty (30) days prior to the anticipated effective date thereof, and at the sole option and discretion of the Company's Board of Directors, this Option, if not already fully exercisable, may thereupon become fully exercisable, in which event the Optionee shall have the right to exercise this Option at any time prior to the effective date of the proposed transaction. The failure of the Company to give the written notice specified hereinabove shall not affect the validity, nor shall it be a basis for delaying or restraining the consummation, of any such transaction. 3 7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, this Option may be exercised by written notice to the Company, at its administrative office in the State of California, which presently is located at 18191 Von Karman Avenue, Ste. 450, Irvine, California 92612. Such notice shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person so exercising the Option. Such notice shall be accompanied by payment in cash, certified check or bank draft in the amount of, or with the prior consent of the Board of Directors or the Committee, certificates for shares of Common Stock of the Company having an aggregate fair market value (determined in the manner provided in Section 2(k) of the Plan) equal to, the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing the shares subject to such exercise as soon as practicable after the notice shall be received. The certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option and shall be delivered to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised by any person or persons other than the Optionee in accordance with the terms hereof, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable. The holder of this Option shall not be entitled to the privileges of share ownership as to any shares of Common Stock not actually issued and delivered to him. 8. General. (a) The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations, which, in the opinion of counsel for the company, shall be applicable thereto. (b) The granting of the Option hereunder shall not impose any obligation on the Company to continue the employment of the Optionee; nor shall it impose any obligation on the Optionee to exercise this Option. (c) This Agreement and the Plan contain the entire agreement of the parties, and supersede any and all other prior or contemporaneous agreements, whether written or oral, between the parties hereto, with respect to the subject matter hereof. The Plan shall govern any Option granted hereunder. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall govern. (d) This Agreement shall be governed by and construed in accordance with the internal laws of the State of California. (e) The Company may require, as a condition precedent to the Company's obligation to sell and issue, and the Optionee's right to purchase, shares of common stock of the Company on exercise of this Option, that the Optionee shall certify, in writing, that he or she is acquiring such shares for investment and not with a view or the intent to sell or redistribute such shares. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and the Optionee has hereunto set his or her hand, all as of the day and year first above written. QUALITY SYSTEMS, INC. By: ----------------------------- Title: Chief Financial Officer -------------------------- "Company" ----------------------- ----------------------- "Optionee" 5 EX-10.2 3 d61691_ex10-2.txt FORM OF NONQUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.2 FORM OF NONQUALIFIED STOCK OPTION AGREEMENT THIS NONQUALIFIED STOCK OPTION AGREEMENT, dated this day of , 2004 between QUALITY SYSTEMS, INC., a California corporation (hereinafter referred to as the "Company"), and , an employee, director or consultant of the Company, its parent or one or more of its subsidiaries (hereinafter referred to as the "Optionee"), is made with reference to the following facts: The Company desires, by affording the Optionee an opportunity to purchase shares of Common Stock, $0.01 par value, in the Company (hereinafter called "Common Stock"), as hereinafter provided, to carry out the purpose of the Company's 1998 Stock Option Plan (the "Plan"). Terms not otherwise defined herein shall have the meaning given them under the Plan. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties hereto have agreed, and do hereby agree, as follows: 1. Grant of Option. The Company hereby irrevocably grants to the Optionee the right and option (hereinafter called the "Option") to purchase all or any part of an aggregate of shares (such number being subject to adjustment as provided in the Plan) on the terms and conditions herein set forth. 2. Purchase Price. The purchase price of the Common Stock covered by the Option shall be $__________ per share, representing _______________ percent (_______%) of the fair market value of the shares as determined pursuant to Section 2(k) of the Plan as of the date hereof. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, (ii) at the discretion of the Board or the Committee (as defined in Section 2 of the Plan), either at the time of the grant or exercise of the Option, by delivering to the Company other shares of Common Stock of the Company (provided that the shares have been held for the period required to avoid a charge to the Company's reported earnings), (iii) at the discretion of the Board or the Committee, either at the time of the grant or exercise of the Option, by delivering to the Company all or any part of an Option granted under this Plan for a cashless exercise (provided that such cashless exchange will not result in a charge to the Company's reported earnings), or (iv) by tendering any other form of legal consideration that may be acceptable to the Board. 3. Term of Option. The term of the Option shall commence on the date hereof and all rights to purchase Shares hereunder shall cease at 11:59 P.M. on the day before the fifth anniversary of the date hereof, subject to earlier termination as provided herein. Except as may otherwise be provided in this Agreement, options granted hereunder shall become exercisable in cumulative installments as follows: 1 Date Installments First Percent of Option Shares Become Exerciseable Subject to Installment ----------------------- ------------------------ [date] 25% [date] 25% [date] 25% [date] 25% Once the Option granted hereunder becomes exercisable, the shares subject thereto will be purchasable thereafter by the Optionee at any time in whole or from time-to-time in part prior to the expiration or earlier termination of the Option granted hereunder. Except as provided in Section 5 hereof, the Option may not be exercised at any time unless the Optionee shall have been continuously, from the date hereof to the date of the exercise of the Option, an employee, director or consultant of the Company, its parent, if any, or of one or more of its subsidiaries or a corporation or a parent or subsidiary of a corporation issuing or assuming an option to which Section 425(a) of the Internal Revenue Code of 1986, as amended (the "Code"), applies. The holder of the Option shall not have any of the rights of a shareholder with respect to the shares covered by the Option as to any shares of Common Stock not actually issued and delivered to such holder. 4. Non-Transferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Optionee, only by the Optionee. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided in Section 5 hereof), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process. Nothwithstanding the foregoing, an Option granted to an Optionee who is not subject to Section 16 of the Exchange Act on the date of the grant may not be transferable except by will or by the laws of descent and distribution, unless otherwise permitted by the Board, and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person or, subsequent to any permitted transfer, only by a permitted transferee. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect. 5. Termination of Employment. (a) Termination of Employment or Relationship as a Director or Consultant Other than by Disability or Death. In the event that an Optionee's Continuous Status as an Employee, Director or Consultant is terminated either by the voluntary resignation by the Optionee or for cause by the Company, all Options granted to the Optionee shall terminate immediately. In the event an Optionee's Continuous Status as an Employee, Director or Consultant is terminated without cause by the Company, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination) but only within such period of time ending on the earlier of (i) the date thirty (30) days after the termination of the Optionee's Continuous Status as an Employee, Director or Consultant, or (ii) the expiration of the term of the Option. If, after termination, the Optionee does not exercise his or her Option as set forth in this Section 5(a), the Option shall terminate. (b) Disability of Optionee. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee's disability, the Optionee may exercise his or 2 her Option (to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date three hundred sixty-five (365) days following such termination, or (ii) the expiration of the term of the Option as set forth herein. If, after termination, the Optionee does not exercise his or her Option as set forth in this Section 5(b), the Option shall terminate. (c) Death of Optionee. In the event of the death of an Optionee during, or within a period specified in the Option after the termination of, the Optionee's Continuous Status as an Employee, Director or Consultant, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option at the date of death) by the Optionee's estate, by a person who acquired the right to exercise the Option by bequest or inheritance, or by a person designated to exercise the option upon the Optionee's death pursuant to the Plan, but only within the period ending on the earlier of (i) the date three hundred sixty-five (365) days following the date of death, or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised as set forth in this Section 5(c), the Option shall terminate. 6. Other Expirations. In addition to any other event causing an expiration or termination of this Option, this Option shall expire and all rights to purchase the Common Stock shall cease (to the extent not theretofore terminated or expired as herein provided) upon the effective date of (i) the dissolution or liquidation of the Company, or (ii) a merger, consolidation, acquisition of property or shares, separation or reorganization of the Company with one or more entities, corporate or otherwise, as a result of which the Company is not the surviving entity, or (iii) a "reverse merger" in which the Company is a surviving entity but more than 50% of its voting shares are converted into cash, property or the securities of another entity, or (iv) a sale of substantially all of the property or shares of the Company to another entity, corporate or otherwise; provided, however, that the Company may, in its discretion, and immediately prior to any such transaction, cause a new option to be substituted for this Option or cause this Option to be assumed by the acquiring entity or a parent or subsidiary of such entity; and such new option shall apply to all shares issued in addition to or substitution, replacement or modification of the shares theretofore covered by such option; provided that: (a) The excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares; and (b) The new option or the assumption of the existing option shall not give the Optionee additional benefits which he or she did not have under the old option prior to such assumption; and (c) An appropriate adjustment of the original option price shall be made among original shares subject to the option and any additional shares or shares issued in substitution, replacement or modification thereof. If no provision is made for the continuance of the Plan and the assumption of this Option, or the substitution of new options for this Option as hereinabove provided, then the Company shall cause written notice to be given to the Optionee of the proposed transaction not less than thirty (30) days prior to the anticipated effective date thereof, and at the sole option and discretion of the Company's Board of Directors, this Option, if not already fully exercisable, may thereupon become immediately and fully exercisable, in which event the Optionee shall have the right to exercise this Option at any time prior to 3 the effective date of the proposed transaction. The failure of the Company to give the written notice specified hereinabove shall not affect the validity, nor shall it be a basis for delaying or restraining the consummation, of any such transaction. 7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, this Option may be exercised by written notice to the Company - attention Corporate Secretary, at its administrative office in the State of California, which presently is located at 18191 Von Karman Ave., Suite 450, Irvine, California 92612. Such notice shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person so exercising the Option. Such notice shall be accompanied by payment in cash, certified check or bank draft in the amount of, or with the prior consent of the Board of Directors or the Committee, certificates for shares of Common Stock of the Company having an aggregate fair market value (determined in accordance with Section 2(k) of the Plan) equal to, the full purchase price of such shares (or such other consideration permitted under Section 2 or under the Plan), and the Company shall deliver a certificate or certificates representing the shares subject to such exercise as soon as practicable after the notice shall be received. The certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option and shall be delivered to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised by any person or persons other than the Optionee in accordance with the terms hereof, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable. The holder of this Option shall not be entitled to the privileges of share ownership as to any shares of Common Stock not actually issued and delivered to him or her. 8. General. (a) The granting of the Option hereunder shall not impose any obligation on the Company to continue utilizing the services of the Optionee as an employee, director or consultant; nor shall it impose any obligation on the Optionee to exercise this Option. (b) This Agreement and the Plan embodies the entire agreement of the parties, and supersedes any and all other prior or contemporaneous agreements, whether written or oral, between the parties hereto, with respect to the subject matter hereof. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall govern. (c) This Agreement shall be governed by and construed in accordance with the internal laws of the State of California. (d) The Company may require, as a condition precedent to the Company's obligation to sell and issue, and the Optionee's right to purchase, shares of common stock of the Company on exercise of this Option, that the Optionee shall certify, in writing, that he or she is acquiring such shares for investment and not with a view or the intent to sell or redistribute such shares. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and the Optionee has hereunto set his or her hand, all as of the day and year first above written. QUALITY SYSTEMS, INC. By: ------------------------------- Title: ---------------------------- "Company" ------------------------------ ------------------------------ `Optionee" 5 EX-10.3 4 d61691_ex10-3.txt BONUS CRITERIA FOR NAMED EXECUTIVE OFFICERS EXHIBIT 10.3 Bonus Criteria ("Named Executive Officers") ---------- Chief Executive Officer and President Fiscal Year 2005 Bonus Plan The bonus plan is a curve resulting in a bonus of up to 50% of base salary tied to meeting certain target increases in EPS performance during the 2005 fiscal year. ---------- President NextGen Healthcare Information Systems Division Fiscal Year 2005 Bonus Plan Bonus Based on a Formula Incorporating the Following Factors: o Year over Year % divisional revenue growth o Year over Year % divisional operating income growth o Cap = 100% of Earned Base Salary ---------- Executive Vice President, General Manager QSI Division Fiscal Year 2005 Bonus Plan The bonus opportunity related to QSI divisional financial performance is 15% of earned base compensation. This bonus would be earned on the basis on growth in Operating Income and Revenue in accordance with an established formula. Secondarily, a discretionary bonus opportunity of up to 10% earned base salary is tied to meaningful participation on corporate projects assigned to him by the CEO. Any recommendation for payments to be made under this discretionary portion of this bonus plan would be presented by the CEO to the Comp Committee/Board for approval prior to any payments being rendered. 1 ---------- Chief Financial Officer and Secretary Fiscal Year 2005 Bonus Plan The bonus opportunity for up to $60,000 in bonus payment for the fiscal year ended March 31, 2005 is related to the achievement of certain qualitative goals as may be approved by the Compensation Committee of the Board of Directors considering, among other factors, the timely filing of SEC periodic reports and Board report package distribution, achieving collection goals, audit completion and responsiveness. 2 EX-10.4 5 d61691_ex10-4.txt DIRECTOR COMPENSATION PROGRAM EXHIBIT 10.4 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. 3 EX-31.1 6 d61691_ex31-1.txt CERTIFICATIONS EXHIBIT 31.1 CERTIFICATIONS I, Louis Silverman, certify that: 1. I have reviewed this Amendment No. 1 to Form 10-Q of Quality Systems, Inc.; and 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. Date: December 22, 2004 /S/ LOUIS SILVERMAN - ----------------------------------------------------- Louis Silverman Chief Executive Officer (principal executive officer) I, Paul Holt, certify that: 1. I have reviewed this Amendment No. 1 to Form 10-Q of Quality Systems, Inc.; and 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. Date: December 22, 2004 /S/ PAUL HOLT - ----------------------------------------------------- Paul Holt Chief Financial Officer (principal financial officer) 1 -----END PRIVACY-ENHANCED MESSAGE-----