8-K

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 22, 2013

QUALITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA	001-12537	95-2888568
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

18111 Von Karman, Suite 700

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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Officer and Director Compensation

On May 22, 2013, the Compensation Committee of the Board of Directors (the “Board”) of Quality Systems, Inc. (the “Company”) approved the 2014 Executive Compensation Program for the Company’s executive officers, including its named executive officers, for the fiscal year ending March 31, 2014. The 2014 Executive Compensation Program includes new base salary levels and both cash and equity incentive compensation components as described in Exhibit 10.1 to this Form 8-K, which is incorporated herein by reference. The restricted shares of the Company’s common stock issued under the 2014 Executive Compensation Program will be granted pursuant to a Restricted Stock Agreement, the form of which is attached as Exhibit 10.2 to this Form 8-K and incorporated herein by reference.

On May 22, 2013, the Compensation Committee recommended to the Board, and the Board subsequently approved, the 2014 Director Compensation Program, which goes into effect on the date of the Company’s 2013 Annual Shareholders’ Meeting. The 2014 Director Compensation Program is described in Exhibit 10.3 to this Form 8-K, which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
10.1	Description of 2014 Executive Compensation Program
10.2	Form of Restricted Stock Agreement
10.3	Description of 2014 Director Compensation Program

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 28, 2013

QUALITY SYSTEMS, INC.
By:	/s/ JAMES J. SULLIVAN
	James J. Sullivan
	Executive Vice President, General Counsel and Secretary

EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

Exhibit No.	Description
10.1	Description of 2014 Executive Compensation Program
10.2	Form of Restricted Stock Agreement
10.3	Description of 2014 Director Compensation Program

EX-10.1

Exhibit 10.1

Quality Systems, Inc.

2014 Executive Compensation Program

Base Salary

Cash Component

The following table sets forth the cash salaries for the Company’s executive officers as approved by the Compensation Committee of the Company’s Board of Directors (the “Board”), effective on the dates of increase set forth below:

Name	Effective Date of Increase	Fiscal Year 2014 Salary
Steven Plochocki	August 16, 2013	$	600,000
Dan Morefield	September 25, 2013	$	440,000
Paul Holt	July 23, 2013	$	360,000
Steve Puckett	June 1, 2013	$	360,000
Monte Sandler	March 16, 2013	$	340,000

Equity Component

Each executive officer shall receive, as a component of his base salary, a grant of restricted shares of the Company’s common stock (“Restricted Stock”) as set forth below, to be granted on May 29, 2013, which is the first day of the opening of the trading window under the Company’s Insider Trading Policy immediately following the approval of this 2014 Executive Compensation Program.

Name	Shares of Restricted Stock
Steven Plochocki		5,000
Dan Morefield		4,000
Paul Holt		3,000
Steve Puckett		3,000
Monte Sandler		3,000

The Restricted Stock will be issued according to the standard form of the Company’s Restricted Stock Agreement and pursuant to the Company’s Second Amended and Restated 2005 Stock Option and Incentive Plan, and will bear a restriction requiring that the Restricted Stock vest in two equal installments over two consecutive years with the vesting dates being the anniversary dates of the initial grant.

Target Cash Bonuses

Cash bonuses include performance targets based on increases in: consolidated organic revenue, consolidated organic EPS, divisional organic revenue, and divisional organic income for fiscal year 2014. The following table sets forth the target cash bonuses payable to each of the Company’s executive officers based on his attainment during fiscal year 2014 of the targets described below:

Name	Target Cash Bonus Amount
Steven Plochocki	$	300,000
Dan Morefield	$	220,000
Paul Holt	$	180,000
Steve Puckett	$	180,000
Monte Sandler	$	170,000

For each of Steve Plochocki, Dan Morefield, Paul Holt and Steve Puckett, (i) 50% of the bonus will be based on the percentage increase, if any, of the Company’s consolidated revenues reported for the 2014 fiscal year over the Company’s consolidated revenues reported for the previous fiscal year (“Consolidated Revenue Growth”) and (ii) 50% of the bonus will be based on the percentage increase, if any, of the Company’s fully diluted earnings per share reported for the 2014 fiscal year over the Company’s fully diluted earnings per share reported for the previous fiscal year (“Consolidated EPS Growth”). For Monte Sandler, (i) 37.5% of the bonus will be based on Consolidated Revenue Growth; (ii) 37.5% of the bonus will be based on Consolidated EPS Growth; (iii) 12.5% of the bonus will be based on the percentage increase, if any, of the RCM Services Division’s revenues for the 2014 fiscal year over the RCM Services Division’s revenues for the previous fiscal year (“Divisional Revenue Growth”); and (iv) 12.5% of the bonus will be based on the percentage increase, if any, of the RCM Services Division’s operating income for the 2014 fiscal year over the RCM Services Division’s operating income for the previous fiscal year (“Divisional Operating Income Growth”). The percentage of the potential cash bonus for each level of Consolidated Revenue Growth, Consolidated EPS Growth, Divisional Revenue Growth and Divisional Operating Income Growth are set forth below:

Consolidated Revenue Growth Consolidated EPS Growth Divisional Revenue Growth Divisional Operating Income Growth	% of Target Cash Bonus Earned
<7%	0%
7%	70%
8%	80%
9%	90%
10%	100%
11%	110%
12%	120%
13%	130%
14%	140%
>15%	150%

In order to receive the percentage award shown in the right hand column, the full amount of the minimum target amount in the left hand column must be achieved. Accordingly, there will be no partial credit, proration or extrapolation between levels. Notwithstanding anything contained herein to the contrary, all revenues and expenses associated with acquisitions closed during fiscal year 2014 will be eliminated from revenues and expenses used to calculate bonus amounts.

Target Equity Awards

In addition to the cash bonus described above, each of the Company’s executive officers will be eligible to receive a potential equity award for fiscal year 2014. Each of the Company’s executive officers will be entitled to receive a non-qualified stock option (“Option”) grant to purchase a number of shares of the Company’s common stock equal to the product of (i) the total target shares listed for such executive in the table below, multiplied by (ii) the same percentage used for calculating such executive’s cash bonus award.

The Option awards will be determined by multiplying the same percentages used for calculating the cash bonuses by the target Options below:

Name	Target Options
Steven Plochocki		50,000
Dan Morefield		40,000
Paul Holt		30,000
Monte Sandler		30,000
Steve Puckett		30,000

The maximum total number of options granted to the Executive Officers pursuant to this plan is 315,000 options (150% x 210,000 options).

2014 Executive Compensation Program Terms and Requirements

1. Must be in good standing as a full time employee of the Company (or a wholly owned subsidiary thereof) at least 2 weeks beyond the public release of the Company’s fiscal year 2014 financial results.

2. No compensated outside work without the Board’s prior written approval.

3. Execution of a confidential information and non-compete agreement.

4. Determination of amounts and payment of all bonuses is discretionary and shall only be as approved by the Compensation Committee based on, among other things, audited financial statements and subject to the Company’s standing compensatory policies (i.e., the Company’s Clawback Policy), as such policies may be amended by the Company or applicable law.

5. Consolidated Revenue Growth, Consolidated EPS Growth, Divisional Revenue Growth and Divisional Operating Income Growth targets will not include any revenues or expenses associated with acquisitions closed during fiscal year 2014.

6. The exercise price of any Options granted under the equity awards component of the program will be the closing price of the Company’s common stock on the date of grant. The Options will vest in five equal annual installments commencing one year after the date of grant and will have an eight year term.

It is understood that the quantity of Options and Restricted Stock listed above will adjust pro-rata with any stock splits that may occur after the 2014 Executive Compensation Program is approved.

EX-10.2

Exhibit 10.2

QUALITY SYSTEMS, INC.

EXECUTIVE OFFICER

RESTRICTED STOCK AGREEMENT

GRANTED UNDER THE QUALITY SYSTEMS, INC.

SECOND AMENDED AND RESTATED 2005 STOCK OPTION AND INCENTIVE PLAN

THIS EXECUTIVE OFFICER RESTRICTED STOCK AGREEMENT (this “Agreement”), dated and effective as of _______, 20__ (the “Grant Date”), is by and between Quality Systems, Inc., a California corporation (the “Company”), and ____________ (“Grantee”). Terms used in this Agreement and not defined herein shall have the meaning given under the Plan.

WHEREAS, Grantee is an executive officer of the Company;

WHEREAS, the Company has established the Quality Systems, Inc. Second Amended and Restated 2005 Stock Option and Incentive Plan (the “Plan”), a copy of which has previously been provided to Grantee;

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of the Company has established a compensation program (the “Program”) for the executive officers of the Company that includes the grant of restricted shares in the Company’s common stock (“Restricted Stock”); and

WHEREAS, under the terms of the Program, Grantee shall be granted shares of Restricted Stock subject to the restrictions stated below.

NOW, THEREFORE, the parties hereby agree as follows:

1. Grant of Restricted Stock. Subject to the terms and conditions of this Agreement and the Plan, the Company hereby grants to Grantee _________ shares Restricted Stock. As soon as practicable, the Company shall cause the Company’s transfer agent to register the Restricted Stock in Grantee’s name and to place such Restricted Stock in book entry position on the records of the Company. The Restricted Stock shall be subject to, and shall bear appropriate legends with respect to, the restrictions described herein.

2. Vesting Schedule. The Restricted Stock shall vest in two equal annual installments, each on the next two anniversaries of the Grant Date (and each referred to herein as a “Vesting Date”).

3. Restrictions. No portion of the Restricted Stock or rights granted hereunder may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of by Grantee during the period beginning on the Vesting Date of that portion of the Restricted Stock and ending the day prior to the one year anniversary of the Vesting Date of that portion of the Restricted Stock provided that the restrictions set forth in this Section 3 shall not apply to any transfer of fully-vested shares of Restricted Stock to the Company solely for the purpose of covering Grantee’s tax liability incurred in connection with the vesting of such shares.

4. Termination of Employment. In the event that Grantee’s Termination of Employment occurs voluntarily at Grantee’s election or at the Company’s election for Cause, all unvested shares of Restricted Stock held by Grantee shall immediately terminate.

5. Change in Control. In the event of a Change in Control, Section 3.7 of the Plan shall control vesting and termination of the Restricted Stock.

6. Taxes.

(a) Grantee hereby acknowledges that he or she has reviewed with his or her own tax advisors the tax consequences of receiving the Restricted Stock. Grantee represents to the Company that he or she is relying solely on such advisors and not on any statements or representations of (i) the Company, (ii) its officers, directors or employees, or (iii) its or their respective agents or representatives.

(b) Grantee shall be liable for any and all taxes, including withholding taxes, arising out of this grant of Restricted Stock. The Company shall not be required to deliver any Restricted Stock or to recognize any purported transfer of shares of the Restricted Stock until all applicable withholding obligations are satisfied. Grantee is ultimately liable and responsible for all taxes owed by Grantee in connection with the Restricted Stock, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Stock. The Company makes no representation or undertaking regarding the treatment of any tax withholding in connection with the grant, issuance or settlement of the Restricted Stock or the subsequent sale or transfer of any of the shares of Restricted Stock. The Company does not commit and is under no obligation to structure the Restricted Stock award or program to reduce or eliminate Grantee’s tax liability.

7. Securities Law Compliance. The Company will use its reasonable commercial efforts to assure that the Restricted Stock is registered under federal securities laws. However, no Restricted Stock will be issued pursuant to Grantee’s award if such issuance would otherwise constitute a violation of any applicable federal or state securities laws or regulations or the requirements of The NASDAQ Global Select Market or any stock exchange or other market on which the Common Stock is then quoted or listed for trading. The inability of the Company to obtain approval from any regulatory body deemed necessary by the Company for the lawful issuance of any Restricted Stock hereunder shall defer the Company’s obligation with respect to the issuance of such Restricted Stock until such approval has been obtained. Grantee understands Grantee’s responsibilities to report the grant and future disposition of the Restricted Stock under the applicable provisions of the Securities Exchange Act of 1934, as amended.

8. Miscellaneous.

(a) The grant of Restricted Stock or another award to Grantee under the Plan in any one year, or at any time, does not obligate the Company to make a grant in any future year or in any given amount and should not create an expectation that the Company might make a grant in any future year or in any given amount.

(b) The Company shall not be required to transfer on its books any shares of Restricted Stock that have been sold or transferred in violation of any of the provisions set forth in this Agreement or in the Plan.

(c) The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(d) Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to Grantee at Grantee’s address then on file with the Company.

(e) This Agreement shall not be construed so as to grant Grantee any right to remain as an executive officer or employee of the Company.

(f) The parties agree that neither the Company nor any of its affiliates shall have any further obligation to Grantee relating to the grant of Restricted Stock or other equity-based incentive compensation except as stated herein and under the terms of the Program.

(g) This Agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof. This Agreement may not be amended except (i) with the consent of the Committee and the Board; and (ii) by a written instrument duly executed by the Company and Grantee.

(h) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted heirs, personal representatives, successors and assigns. The terms of this Agreement shall in all respects be subject to the terms of the Plan and the Program. In the event of a conflict between the terms of this Agreement and the Plan and/or Program, the terms of the Plan and/or Program (as the case may be) shall control. In the event of a conflict between the terms of the Plan and the Program, the terms of the Plan shall control. In accordance with the Plan, Grantee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee or the Board of Directors upon any questions arising under the Plan or this Agreement.

(i) The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort or reference to the conflicts-of-laws rules of that or any other state.

(j) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

9. Remaining Terms. The remaining terms and conditions of Grantee’s award are governed by the Plan, and Grantee’s award is also subject to all interpretations, amendments, rules, regulations and decisions that may from time to time be adopted under the Plan.

[signature page follows]

IN WITNESS WHEREOF, the undersigned have executed this Executive Officer Restricted Stock Agreement effective as of the date first set above.

COMPANY:	QUALITY SYSTEMS, INC.,
	a California corporation
	By:
	Address:
	18111 Von Karman Avenue, Suite 700
	Irvine, CA 92612
	Facsimile:
	Email:

I, the undersigned Grantee, hereby acknowledge and accept the foregoing terms and conditions of the Restricted Stock award evidenced hereby. I also acknowledge and agree that the foregoing sets forth the entire understanding between the Company and me regarding my entitlement to receive the shares of Restricted Stock subject to such award and supersedes all prior oral and written agreements on that subject.

	(signature of Grantee)
GRANTEE:	Name:
	Address:
	Email:

EX-10.3

Exhibit 10.3

Quality Systems, Inc.

2014 Director Compensation Program

	Tier 0 Employee Director		Tier 1 Non- Employee Director		Tier 2 Nominating & Governance and Compensation Committee Chairpersons		Tier 3 Audit Committee and Board Chairpersons
Base Compensation	$	0	$	80,000	$	92,500	$	100,000
Value of Restricted Stock	$	0	$	80,000	$	92,500	$	100,000

2014 Director Compensation Plan Terms:

1. Meeting attendance is expected to be at or near a 100% level.

2. Pay Tiers: Tier 0 is for directors who are full-time employees of the Company. Tier 1 is for non-employee directors who do not chair a committee. Tier 2 is for Nominating and Governance Committee and Compensation Committee Chairpersons. Tier 3 is for Audit Committee and Board Chairpersons. A Chairperson of any other committee will be paid at the highest tier otherwise eligible, according to the specifically named functions above. All directors are paid only at one tier (and not multiple tiers), which is their highest eligible tier.

3. Each director is to be awarded restricted shares of the Company’s common stock (“Restricted Stock”) upon election or re-election to the Board equivalent to the value amounts set forth in the table above. The shares of Restricted Stock will be valued at the price of the Company’s common stock at the close of trading on the date of grant. The Restricted Stock will be issued according to the standard form of the Company’s approved Amended and Restricted Stock Agreement and pursuant to the Company’s Second Amended and Restated 2005 Stock Option and Incentive Plan and will carry a restriction requiring that the Restricted Stock vest in two equal installments over two consecutive years with the vesting dates being the meeting dates of the Company’s annual shareholders’ meeting following the director’s election or re-election to the Board. In the event of an annual shareholders’ meeting immediately following which a director that previously received Restricted Stock under the 2014 Director Compensation Plan is no longer a member of the Board, then any unvested shares of Restricted Stock held by such director shall immediately vest and become transferable. The Restricted Stock shall be granted on a pro-rata basis for directors appointed to serve less than a full year.

4. All directors must own a minimum of 2,000 shares of the Company’s common stock purchased on the open market, which must be retained as long as they are a director. New directors have nine months in which to fulfill their minimum common stock holding requirements after their election or appointment to the Board.

5. Base compensation shall be paid quarterly.