<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
QUALITY SYTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
[LOGO]
QUALITY SYSTEMS, INC.
17822 EAST 17TH STREET, SUITE 210
TUSTIN, CALIFORNIA 92780
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 6, 1996
To the Shareholders of Quality Systems, Inc.
The Annual Meeting of Shareholders of Quality Systems, Inc. (the "Company")
will be held at The Center Club, 650 Town Center Drive, Costa Mesa, California,
on Friday, September 6, 1996, at 2:30 P.M. Pacific Time, for the following
purposes:
1. To elect eight (8) persons to serve as directors of the Company
until the next annual meeting. The nominees for election to the Board of
Directors are named in the attached Proxy Statement, which is a part of
this Notice.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending March 31, 1997.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on July 10, 1996, are
entitled to notice of and to vote at the Annual Meeting and at any adjournments
of the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend the Annual Meeting, please sign the
enclosed proxy and return it in the enclosed addressed envelope. Your promptness
in returning the proxy will assist in the expeditious and orderly processing of
the proxy and will assure that you are represented at the Annual Meeting. If you
return your proxy card, you may nevertheless attend the Annual Meeting and vote
your shares in person, if you wish.
By Order of the Board of Directors,
QUALITY SYSTEMS, INC.
[SIG]
JANET M. RAZIN
Vice President and
Corporate Secretary
Tustin, California
July 26, 1996
<PAGE> 3
[LOGO]
QUALITY SYSTEMS, INC.
17822 EAST 17TH STREET, SUITE 210
TUSTIN, CALIFORNIA 92780
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 6, 1996
------------------------
PROXY STATEMENT
------------------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Quality
Systems, Inc. (the "Company") for use at the Company's Annual Meeting of
Shareholders to be held at The Center Club, 650 Town Center Drive, Costa Mesa,
California on Friday, September 6, 1996, and at any and all adjournments
thereof. All shares represented by each properly executed and unrevoked proxy
received in time for the meeting will be voted in the manner specified therein.
Any shareholder has the power to revoke his or her proxy at any time before
it is voted. A proxy may be revoked by delivering a written notice of revocation
to the Secretary of the Company, by submitting prior to or at the meeting a
later dated proxy executed by the person executing the prior proxy, or by
attendance at the meeting and voting in person by the person executing the
proxy.
This proxy statement, the accompanying proxy card and the Company's Annual
Report are being mailed to the Company's shareholders on or about July 26, 1996.
The cost of soliciting proxies will be borne by the Company. The solicitation
will be made by mail and expenses will include reimbursement paid to brokerage
firms and others for their expenses in forwarding solicitation material
regarding the Annual Meeting to beneficial owners of the Company's Common Stock.
Further solicitation of proxies may be made by telephone or oral communications
with some shareholders. All such further solicitations will be made by the
Company's regular employees who will not receive additional compensation for the
solicitation.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 5,963,337 shares of the Company's Common
Stock outstanding at the close of business on July 10, 1996, are entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof. A
majority of the shares, represented in person or by proxy, will constitute a
quorum for the transaction of business. All proxies delivered to the Company
will be counted in determining the presence of a quorum, including those
providing for abstention or withholding of authority and those delivered by
brokers voting without beneficial owner instruction and exercising a non-vote on
certain matters. Each shareholder will be entitled to one vote, in person or by
proxy, for each share of Common Stock held of record on the record date, except
that all shareholders have cumulative voting rights and in the event any
shareholder gives notice
<PAGE> 4
at the Annual Meeting, prior to the voting, of an intention to cumulate his or
her votes in the election of directors, then all shareholders entitled to vote
at the Annual Meeting may cumulate their votes in the election of directors.
Cumulative voting means that a shareholder has the right to give any one
candidate whose name has been properly placed in nomination prior to the voting
a number of votes equal to the number of directors to be elected, multiplied by
the number of shares such shareholder would otherwise be entitled to vote, or to
distribute such votes on the same principle among as many nominees (up to the
number of persons to be elected) as the shareholder may wish.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of July 10, 1996 by (i)
each person known by the Company to beneficially own more then 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers (as hereinafter defined), (iv) Robert
McGraw, who joined the Company in February 1996 as its Chief Financial Officer,
and (v) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED(2) OWNED(2)
---------------------------------------------------- ---------------- ------------
<S> <C> <C>
Janet Razin and Sheldon Razin(3).................... 1,510,220 25.33%
Ahmed Hussein(4).................................... 350,000 5.87%
Duncan -- Hurst Capital Management, Inc.(5)......... 299,400 5.02%
Patrick Cline....................................... 108,325 1.82%
Graeme Frehner...................................... 56,554 (7)
John Bowers, M.D.................................... 31,230 (7)
Robert Beck......................................... 21,350(6) (7)
Greg Flynn.......................................... 15,530(6) (7)
Donn Neufeld........................................ 15,500(6) (7)
George Bristol...................................... 13,500 (7)
William Bowers...................................... 9,600 (7)
Gordon Setran....................................... 1,500 (7)
Abe LaLande......................................... -- (7)
Robert McGraw....................................... -- (7)
All directors and officers as a group (14 persons,
including those named above)...................... 1,788,059(6) 29.71%
</TABLE>
- ---------------
(1) Unless otherwise indicated, the address of each of these persons is c/o
Quality Systems, Inc., 17822 East 17th Street, Suite 210, Tustin, California
92780. Unless otherwise indicated, to the Company's knowledge, the persons
named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where
applicable.
(2) Applicable percentage ownership is based on 5,963,337 shares of Common Stock
outstanding as of July 10, 1996. Any securities not outstanding but subject
to options exercisable as of July 10, 1996 or exercisable within 60 days
after such date are deemed to be outstanding for the purpose of computing
the
2
<PAGE> 5
percentage of outstanding Common Stock beneficially owned by the person
holding such options but are not deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by any other
person.
(3) Janet Razin and Sheldon Razin, each of whom is an officer and director of
the Company, are married to one another and own their shares as community
property.
(4) As reflected in the Schedule 13D dated December 8, 1995. The address for Mr.
Hussein is 401 East 4th Street, Apt. #N-25A, New York, New York 10016.
(5) As reflected in the Schedule 13G dated January 30, 1996. The address for
Duncan-Hurst Capital Management, Inc. ("Duncan-Hurst"), is 4365 Executive
Drive, Suite 1520, San Diego, California 92121. Duncan-Hurst has sole voting
power of 171,650 of the 299,400 shares it beneficially owns.
(6) Includes shares of Common Stock subject to stock options which were
exercisable as of July 10, 1996 or exercisable within 60 days after July 10,
1996, and are, respectively, as follows: Mr. Beck, 21,250 shares; Mr. Flynn,
13,500 shares; Mr. Neufeld, 15,500 shares; and all directors and officers as
a group, 55,000 shares.
(7) Less than one percent.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Directors are elected at each Annual Meeting of Shareholders and hold
office until their respective successors are duly elected and qualified. The
full Board consists of eight directors. Certain information with respect to the
eight nominees for election as directors is set forth below. All of the nominees
are now serving as directors. Seven of the directors were elected to their
present terms of office by the shareholders and the eighth director was
unanimously appointed by the existing directors in May 1996 to fill a newly
created board position upon the Company's completion of its acquisition of
Clinitec International, Inc. ("Clinitec"). Although it is anticipated that each
nominee will be available to serve as a director, should any nominee become
unavailable to serve, the proxies will be voted for such other person as may be
designated by the Company's Board of Directors.
Unless the authority to vote for directors has been withheld in the proxy,
the persons named in the enclosed proxy intend to vote at the Annual Meeting for
the election of the nominees presented below. However, discretionary authority
to cumulate votes represented by proxies and to cast such votes for any or all
of the nominees named below is solicited by the Board of Directors because, in
the event nominations are made in opposition to the nominees of the Board of
Directors, it is the intention of the persons named in the enclosed proxy to
cumulate votes represented by proxies in accordance with their best judgment for
individual nominees in order to assure the election of as many of the nominees
to the Board of Directors as possible.
In the election of directors, assuming a quorum is present, the eight
nominees receiving the highest number of votes cast at the meeting will be
elected directors. As a result, proxies voted to "Withhold Authority" and broker
non-votes will have no practical effect upon the election of directors, although
proxies specifying "Withhold Authority" will be counted for purposes of
determining whether a quorum is present, as will proxies delivered by brokers
voting without beneficial owner instruction and exercising a non-vote on certain
matters.
3
<PAGE> 6
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ELECTION OF EACH OF
THE NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
FIRST YEAR
BECAME
NOMINEE'S NAME AGE PRINCIPAL OCCUPATION DIRECTOR
----------------------------------- --- ------------------------------ ----------
<S> <C> <C> <C>
Sheldon Razin...................... 58 Chairman of the Board of 1974
Directors and President and
Chief Executive Officer of
the Company
John Bowers, M.D. ................. 58 Chief Executive Officer Heart 1987
Institute of Nevada
William Bowers..................... 67 Retired 1989
George Bristol..................... 47 Director of Corporate Finance 1982
Ernst & Young
Patrick Cline...................... 35 Executive Vice President of 1996
the Company and President and
Chief Operating Officer of
Clinitec International,
Inc., the Company's
wholly-owned subsidiary
Graeme Frehner..................... 57 Retired 1982
Janet Razin........................ 56 Vice President and Corporate 1974
Secretary of the Company
Gordon Setran...................... 74 Retired 1982
</TABLE>
Sheldon Razin is the founder of the Company and has served as Chairman of
the Board of Directors and Chief Executive Officer since the Company's
inception. He also has served as the Company's President since its inception
except for the period from August 1990 to August 1991. Additionally, Mr. Razin
served as Treasurer from the Company's inception until October 1982. Prior to
founding the Company, he held various technical and managerial positions with
Rockwell International Corporation and was a founder of the Company's
predecessor, Quality Systems, a sole proprietorship engaged in the development
of software for commercial and space applications and in management consulting
work. Mr. Razin holds a B.S. degree in Mathematics from the Massachusetts
Institute of Technology. Mr. Razin is the husband of Janet Razin.
John Bowers, M.D., has served as a Director since June 1987, and is the
founder and Chief Executive Officer of the Heart Institute of Nevada, a major
freestanding Cardiac Catheterization and Diagnostic Center. In 1970, Dr. Bowers
moved to Las Vegas, Nevada to associate with Dr. P.R. Akre, who organized the
first catheterization laboratory in Nevada. He subsequently became Director of
Cardiology at Sunrise Hospital and Valley Hospital. On June 1, 1975, he founded
Cardiology Associates of Nevada, John A. Bowers, M.D., FACC, a professional
corporation, and the forerunner of the Heart Institute of Nevada. Prior to 1970,
Dr. Bowers practiced cardiology in Santa Paula, California, after serving in the
U.S. Air Force. Dr. Bowers graduated from Indiana University School of Medicine.
William Bowers has served as a Director since June 1989. He was co-founder
and Chairman of MSI Data Corporation, a leading manufacturer of "on-the-move"
hand-held data collection systems, headquartered in Costa Mesa, California.
Founded in 1967, MSI was a public company until it was acquired by Symbol
Technologies, Inc. in 1988. Mr. Bowers is also a Director of D.H. Technology,
Inc., a publicly-owned
4
<PAGE> 7
company. Mr. Bowers has two Bachelors degrees, one in Advertising from USC and
another in Electrical Engineering from UCLA.
George Bristol, who has served as a Director since December 1982, has been
a member of the corporate finance group of Ernst & Young LLP, an international
professional services firm, since February 1992. Prior to this, Mr. Bristol was
a Managing Director with the investment banking firms of Dean Witter Reynolds
Inc. from September 1989 and Prudential Securities, Inc., for more than eight
years, until September 1989. Prior to joining Prudential Securities, Inc., Mr.
Bristol served as First Vice President of Blyth Eastman Paine Webber
Incorporated, an investment banking firm. He holds a B.A. degree from the
University of Michigan and an M.B.A. degree from the Harvard Business School.
Patrick Cline has served as a Director and Executive Vice President since
May 1996. Mr. Cline is a co-founder of Clinitec and has served as its President
since its inception in January 1994 and as its Chief Operating Officer since May
1996 when it was acquired by the Company. Mr. Cline served as Clinitec's
Chairman of the Board of Directors and Chief Executive Officer from January 1994
until May 1996. Prior to co-founding Clinitec, Mr. Cline served, from July 1987
to January 1994, as Vice President of Sales and Marketing with Script Systems, a
subsidiary of InfoMed, a healthcare information systems company. From January
1994 to May 1994, after the founding of Clinitec, Mr. Cline continued to serve,
on a part time basis, as Script Systems' Vice President of Sales and Marketing.
Mr. Cline has held senior positions in the health care information systems
industry since 1981.
Graeme Frehner, a co-founder of the Company, has served as a Director since
November 1982. He served as the Company's Vice President-Software from October
1982 to January 1996, when he retired from active management in the Company.
Despite this retirement, he intends to consult with the Company from time to
time. Mr. Frehner joined Quality Systems, the Company's predecessor, shortly
after it was founded. Prior to that time, he held a number of technical,
managerial and consulting positions with Planning Research Corporation and with
Autonetics, formerly a division of North American Aviation and currently a
division of Rockwell International Corporation. Mr. Frehner holds a B.S. degree
in Mathematics, Education and Physics from Brigham Young University.
Janet Razin has served as a Director, Vice President and Corporate
Secretary of the Company since its inception and served as the Company's
Controller until November 1981. She served as Vice President Chief Financial
Officer from October 1982 until October 1984. Prior to joining the Company, she
was a computer programmer for Rockwell International Corporation. Mrs. Razin
holds a B.A. degree in Mathematics from Northeastern University. Mrs. Razin is
the wife of Sheldon Razin.
Gordon Setran has served as a Director since November 1982, and was a Vice
President of California Federal Savings & Loan Association from 1975 until his
retirement in December 1985. Mr. Setran was a co-founder, President and Director
of First Federal Savings & Loan Association of Corona which was acquired by
California Federal Savings & Loan Association in 1975.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
directors and officers of the Company and any person who owns more than ten
percent of the Company's Common Stock are required to report their initial
ownership of the Company's Common Stock and any subsequent changes in that
ownership to the Securities and Exchange Commission (the "SEC") and the Nasdaq
National Market. Officers, directors and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all forms they
file in accordance with Section 16(a).
5
<PAGE> 8
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, during the fiscal year
ended March 31, 1996, its officers, directors and greater than 10% shareholders
complied with all filing requirements applicable to such persons, with the
exception that one report, covering one transaction by William Bowers, a
director of the Company, was inadvertently filed approximately three months
late.
BOARD OF DIRECTORS MEETINGS AND RELATED MATTERS
During the fiscal year ended March 31, 1996, the Board of Directors held
seven meetings and acted once by unanimous written consent. No director, except
George Bristol, attended less than 75% of the aggregate of all meetings of the
Board of Directors and all meetings of committees of the Board of Directors on
which the Directors served that were held during the fiscal year.
The Board of Directors has an Audit Committee consisting of Messrs. Setran,
Bristol, William Bowers and Dr. John Bowers, all of whom are non-employee
directors of the Company. The duties of the Audit Committee include meeting with
the independent auditors of the Company to review the scope of the annual audit
and to review the quarterly and annual financial statements of the Company
before the statements are released to the Company's shareholders. The audit
Committee also evaluates the independent auditors' performance and makes
recommendations to the Board of Directors as to whether the auditing firm should
be retained by the Company for the ensuing fiscal year. In addition, the Audit
Committee reviews the Company's internal accounting and financial controls and
reporting systems practices. During the fiscal year ended March 31, 1996, the
Audit Committee held four meetings.
There are currently no other standing committees of the Board of Directors.
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 $2,500 per year for
serving on the Board of Directors. Directors who serve on a committee of the
Board of Directors receive an additional annual fee of $1,000 and a fee of $250
for each committee meeting attended, together with reasonable expenses of
attendance at committee meetings.
CERTAIN TRANSACTIONS
The Company sold a computer system for $334,600 to the Heart Institute of
Nevada during the quarter ended December 31, 1995. John Bowers, M.D., the
founder and Chief Executive Officer of the Heart Institute of Nevada, is a
member of the Company's Board of Directors. The Company's gross profit on the
sale is comparable to the gross profit on sales of similar computer systems. In
connection with this sale, the Company also entered into an agreement to pay a
license fee based upon future revenues, if any, from certain software templates
that may be developed by the Heart Institute of Nevada in the future.
In April 1995, the Company entered into a strategic relationship with
Clinitec International, Inc. ("Clinitec"), a developer of electronic medical
records software systems. In May 1995 as part of this relationship, the Company
acquired a 25% equity interest in Clinitec by purchasing all of Clinitec's newly
issued convertible preferred stock for $1.0 million in cash. In May 1996, the
Company acquired the remaining 75% of Clinitec by purchasing 100% of the
outstanding shares of Clinitec common stock directly from Clinitec's common
stock shareholders for approximately $4.9 million in cash plus 309,846 shares of
the Company's Common Stock. In connection with the May 1996 stock purchase
transaction, Mr. Patrick Cline, a co-founder, President and Chairman of the
Board of Clinitec, became a Director and Executive Vice
6
<PAGE> 9
President of the Company. In accordance with the terms of the May 1996 stock
purchase transaction, each Clinitec common stock shareholder received a pro rata
share of the cash and Common Stock paid by the Company determined by the number
of shares of Clinitec common stock owned by each Clinitec common stock
shareholder divided by the total number of outstanding shares of Clinitec common
stock. As a result of the May 1996 stock purchase transaction, Mr. Cline
received $1,703,600 in cash plus 107,825 shares of the Company's Common Stock
for his shares of Clinitec common stock.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the three fiscal
years ended March 31, 1994, March 31, 1995 and March 31, 1996, respectively, by
the Chief Executive Officer and the four other highest paid executive officers
of the Company serving as such at the end of the 1996 fiscal year whose
aggregate total annual salary and bonus for such year exceeded $100,000 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ------------ ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($)(1) (#) ($)(2)
--------------------- ----- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sheldon Razin........ 1996 225,000 -- 6,381 -- 3,014
Chief Executive 1995 213,750 -- 6,882 -- 2,873
Officer and 1994 180,000 -- 23,372 -- 2,235
President
Robert Beck.......... 1996 144,996 -- -- -- 2,787
Executive 1995 144,996 -- -- -- 2,740
Vice President 1994 144,996 -- -- -- 2,478
Greg Flynn........... 1996 111,667 20,000 -- -- 1,457
Vice President 1995 108,929 -- -- -- 1,224
Sales & Marketing 1994 97,152 -- -- 22,000 945
Abe Lalande.......... 1996 105,000 -- -- -- 1,190
Vice President 1995 105,000 -- -- -- 1,185
Hardware R&D 1994 105,000 -- -- -- 1,010
Donn Neufeld......... 1996 105,000 -- -- -- 1,190
Vice President 1995 104,250 -- -- -- 1,178
Software and 1994 96,000 -- -- 30,000 935
Operations
</TABLE>
- ---------------
(1) This column reflects perquisite compensation which exceeds the lesser of
$50,000 or 10% of the Named Executive Officer's total salary and bonus with
the exception of Mr. Razin's, which is included regardless. For the fiscal
year ended March 31, 1996, no Named Executive Officer received perquisites
exceeding that limit. For fiscal years ended March 31, 1996, 1995, and 1994,
respectively, Mr. Razin's perquisites included $5,481, $5,982 and $22,472
for the value of the use of a Company car, which includes insurance
premiums, depreciation, and miscellaneous expenses.
(2) This column reflects amounts attributable to Company contributions to the
Company's Deferred Compensation Plan and income attributable to the
provision of additional life insurance for the named individuals. For fiscal
year ended March 31, 1996 such amounts were, respectively, as follows: Mr.
Razin
7
<PAGE> 10
$2,250 and $764, Mr. Beck $1,570 and $1,217; Mr. Flynn $1,317 and $140; Mr.
LaLande, $1,050 and $140; Mr. Neufeld, $1,050 and $140.
On February 19, 1996, Robert McGraw joined the Company as its Chief
Financial Officer at an annual salary of $125,000.
OPTION /SAR GRANTS IN LAST FISCAL YEAR
No options or stock appreciation rights were granted to the Named Executive
Officers in fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in fiscal 1996
by the Named Executive Officers and unexercised options held by them at the
close of such fiscal year. No named Executive Officer exercised any stock
appreciation rights during fiscal 1996 or held any stock appreciation rights at
the end of such fiscal year.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (NUMBER OF SHARES) IN-THE-MONEY OPTIONS
AT MARCH 31, 1996 AT MARCH 31, 1996(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sheldon Razin...................... -- -- -- -- -- --
Robert Beck........................ 27,000 451,125 21,250 -- 435,625 --
Greg Flynn......................... 18,000 359,000 13,500 10,500 277,375 215,875
Abe LaLande........................ 20,000 343,750 -- -- -- --
Donn Neufeld....................... 15,000 297,125 15,500 7,500 317,750 153,750
</TABLE>
- ---------------
(1) Calculated on the basis of $22.00, the closing sale price of the Company's
Common Stock on March 29, 1996, the last trading day in the 1996 fiscal
year, minus the exercise price of the option, multiplied by the number of
shares subject to the option.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has an arrangement with Robert Beck under which Mr. Beck will
receive, if the Company attains an after-tax profit of at least $2.5 million in
any fiscal year in which the Company's sales are at least $25.0 million, a
one-time grant of options for shares representing the difference between 225,000
shares of Common Stock and the number of shares of Common Stock Mr. Beck has
been granted by the Company up to such date pursuant to stock options. As of
July 10, 1996, Mr. Beck had been granted options to purchase 75,000 shares and
had exercised 53,750 of such options. Other than this arrangement, the Company
does not presently have any employment contracts in effect with the Chief
Executive Officer or any of the other Named Executive Officers.
The Board of Directors, as the administrator of the Company's 1989 Stock
Option Plan, has the discretion to accelerate any outstanding options held by
the Named Executive Officers in the event of an acquisition of the Company by a
merger or asset sale in which the outstanding options under such plan are not to
be assumed by the successor corporation or substituted with options to purchase
shares of such corporation.
8
<PAGE> 11
RATIFICATION OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
The Board of Directors of the Company appointed the firm of Deloitte &
Touche LLP as its independent auditors for the fiscal year ended March 31, 1996.
The Board of Directors of the Company has also appointed Deloitte & Touche LLP
to serve again as the Company's independent auditors for the fiscal year ending
March 31, 1997, subject to ratification by the holders of a majority of the
shares represented either in person or proxy at the Annual Meeting. In the event
that the shareholders do not ratify the selection of Deloitte & Touche LLP as
the Company's independent auditors, the selection of another independent
auditing firm will be considered by the Board of Directors.
Representatives of Deloitte & Touche LLP are expected to attend the Annual
Meeting and will be available to respond to appropriate questions. The
representatives of Deloitte & Touche LLP also will have the opportunity to make
a formal statement, if they so desire.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal years ended March 31, 1996 and 1995 accompanies this Proxy Statement but
such report is not incorporated herein and is not deemed to be a part of this
proxy solicitation material.
PROPOSALS OF SHAREHOLDERS
Pursuant to the rules of the SEC, proposals by shareholders which are
intended to be presented at the Company's next Annual Meeting must be received
by the Company by March 28, 1997, in order to be considered for inclusion in the
Company's proxy materials.
9
<PAGE> 12
OTHER MATTERS
The Board of Directors knows of no other matters which will be acted upon
at the Annual Meeting. If any other matters are presented properly for action at
the Annual Meeting or at any adjournment thereof, it is intended that the proxy
will be voted with respect thereto in accordance with the best judgment and in
the discretion of the proxy holder.
By Order of the Board of Directors,
QUALITY SYSTEMS, INC.
[SIG]
JANET M. RAZIN
Vice President and
Corporate Secretary
Tustin, California
July 26, 1996
SHAREHOLDERS MAY OBTAIN FREE OF CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH 31, 1996, (WITHOUT
EXHIBITS) AS FILED WITH THE SEC BY WRITING TO: INVESTOR RELATIONS-QUALITY
SYSTEMS, INC., 17822 EAST 17TH STREET, SUITE 102, TUSTIN, CALIFORNIA 92780.
10
<PAGE> 13
PROXY QUALITY SYSTEMS, INC.
1996 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 6, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sheldon Razin and Janet Razin, and
each of them, individually, as attorneys and proxies, with full power
of substitution, to represent the undersigned and to vote, as
designated below, all the shares of Common Stock of Quality Systems,
Inc. which the undersigned is entitled to vote at its Annual Meeting
of Shareholders to be held at The Center Club, 650 Town Center Drive,
Costa Mesa, California, on Friday, September 6, 1996, at 2:30 P.M.
Pacific Time, or at any adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY
BELOW)
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW
Sheldon Razin, John Bowers, M.D., William Bowers, George Bristol,
Patrick Cline, Graeme Frehner, Janet Razin and Gordon Setran.
(INSTRUCTION: To withhold authority to vote for any nominee, write the
nominee's name in the space provided below.)
----------------------------------------------------------------------
2. Ratification of selection of Deloitte & Touche LLP as the Company's
Independent Auditors:
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, upon other business which properly comes
before the Meeting or any adjournment thereof.
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY.
(CONTINUED ON THE REVERSE SIDE)
<PAGE> 14
(continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY
THE SHAREHOLDER ON THE REVERSE SIDE OF THIS PROXY. WHERE NO DIRECTION
IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE ELECTION OF THE
DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY AND "FOR" PROPOSAL
2. THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO CUMULATE VOTES FOR
ANY OR ALL OF THE NOMINEES FOR ELECTION OF DIRECTORS FOR WHICH
AUTHORITY TO VOTE HAS NOT BEEN WITHHELD.
DATED: , 1996
------------------
-------------------------------
(SIGNATURE OF SHAREHOLDER)
-------------------------------
PLEASE SIGN YOUR NAME EXACTLY
AS IT APPEARS HEREON.
EXECUTORS, ADMINISTRATORS,
GUARDIANS, OFFICERS OF
CORPORATIONS, AND OTHERS
SIGNING IN A FIDUCIARY
CAPACITY, SHOULD STATE THEIR
FULL TITLES AS SUCH. WHETHER OR
NOT YOU PLAN TO ATTEND THE
MEETING, YOU ARE URGED TO SIGN
AND RETURN THIS PROXY, WHICH
MAY BE REVOKED AT ANY TIME
PRIOR TO ITS USE.
