QUALITY SYSTEMS INC, SC 13D/A, 1999-06-24

QUALITY SYSTEMS INC
SC 13D/A, 1999-06-24
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D
(RULE 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)

(Amendment No. 11)*

Quality Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)

Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)

747582104
--------------------
(CUSIP Number)

David J. Berger, Esq.
Andrew E. Shapiro, Manager Page Mailliard, Esq.
Lawndale Capital Management, LLC Wilson Sonsini Goodrich & Rosati
One Sansome Street, Suite 3900 650 Page Mill Road
San Francisco, CA 94104 Palo Alto, CA 94304
(415) 288-2330 (650) 493-9300
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)

June 14, 1999
------------------------------
(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13(d)-1(g), check the following
box. [ ]

Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>

Item 1. Security and Issuer.

This statement relates to Common Stock of Quality Systems, Inc. ("QSII")
The principal executive office of QSII is located at 17822 East 17th Street,
Tustin, CA 92780.

Item 2. Identity and Background.

The persons filing this statement and the persons enumerated in Instruction
C of Schedule 13D and, where applicable, their respective places of
organization, general partners, directors, executive officers and controlling
persons, and the information regarding them, are as follows:

(a) Lawndale Capital Management, LLC, a California limited liability
company ("LCM"); Diamond A Partners, L.P., a California limited partnership
("DAP"); Diamond A Investors, L.P., a California limited partnership
("DAI"); and Andrew E. Shapiro ("Shapiro").

(b) The business address (and principal office) of LCM, DAP, DAI and
Shapiro is One Sansome Street, Suite 3900, San Francisco, California 94104.

(c) LCM is the investment adviser to and general partner of DAP and
DAI, which are investment limited partnerships. Shapiro is the sole manager
of LCM.

(d) During the last five years, none of such persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).

(e) During the last five years, none of such persons was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.

(f) Shapiro is a citizen of the United States of America.

Item 3. Source and Amount of Funds or Other Consideration.

The source and amount of funds used in purchasing the Common Stock were as
follows:

<TABLE>
<CAPTION>
Purchaser Source of Funds Amount
- ---------------------------- -------------------------- -------------------------
<S> <C> <C>
LCM Funds Under Management (1) $4,068,070
DAP Working Capital $3,438,846
DAI Working Capital $ 629,224
</TABLE>
- -----------------
(1) Includes funds of DAP and DAI invested in Common Stock.

Item 4. Purpose of Transaction.

On March 29, 1999, Lawndale Capital Management ("LCM"), on behalf of
Diamond A Partners, L.P., submitted a shareholder proposal for inclusion in the
proxy materials of Quality Systems, Inc. ("QSII") for the annual meeting
expected to be held in September 1999. As discussed in Amendment No. 9 to the
Schedule 13D filed by LCM on March 30, 1999, the proposal provides for an
increased role for

(2 of 18)
<PAGE>

independent directors on the board of directors of QSII (the "Board"). A copy of
the shareholder proposal is included as Exhibit B to this Amendment No. 11 to
the Schedule 13D (this "Amendment No. 11").

In a letter dated April 8, 1999, Mr. Sheldon Razin, President and Chief
Executive Officer of QSII, notified LCM of QSII's intent to exclude the
shareholder proposal from its proxy materials. Counsel for QSII filed a no-
action request and a related opinion letter dated May 5, 1999 with the
Securities and Exchange Commission with respect to QSII's proposed exclusion of
the shareholder proposal and filed an additional opinion letter dated May 17,
1999. Counsel for QSII indicated in its no-action request and opinion letters
that QSII intended to exclude the proposal on several grounds under Rule 14a-
8(c) and Rule 14a-8(i) of Regulation 14A (relating to the solicitation of
proxies) under the Securities Exchange Act of 1934, as amended. In particular,
counsel for QSII argued that (i) the proposal constituted more than one
proposal, (ii) the proposal had been substantially implemented, (iii) the
proposal was not a proper subject for action by shareholders under state law,
(iv) the proposal conflicted with a proposal to be submitted by the Company at
the annual meeting, (v) the proposal dealt with a matter relating to QSII's
ordinary business operations and (vi) the proposal related to an election for
membership on the Board. The May 5, 1999 no-action request and the May 5, 1999
and May 17, 1999 opinion letters are attached as Exhibit C to this Amendment
No. 11.

Counsel for LCM submitted letters dated April 22, 1999 and May 14, 1999 to
the Securities and Exchange Commission in response to QSII's decision to exclude
the shareholder proposal and the no-action request and supporting opinion
submitted by QSII's counsel. The April 22, 1999 and May 14, 1999 letters to the
Securities and Exchange Commission are attached as Exhibit D to this Amendment
No. 11.

The Division of Corporation Finance, in a letter dated June 9, 1999,
indicated that it was unable to concur with any of QSII's arguments for
exclusion of the shareholder proposal from QSII's proxy materials. The June 9,
1999 letter from the Division of Corporation Finance is attached as Exhibit E to
this Amendment No. 11.

As a result of the position adopted by the Division of Corporation Finance,
LCM believes that the shareholder proposal will be included in QSII's proxy
materials. LCM anticipates supporting passage of the shareholder proposal at
the time of the annual meeting and is considering the solicitation of proxies of
other QSII shareholders in support of the proposal. At this time, however, LCM
has not made a final decision in this regard, and there can be no assurance that
LCM will solicit any proxies in connection with the annual meeting.

LCM does not have any present plan or proposal which would relate to or
result in any of the matters set forth in subparagraphs (a) through (j) of Item
4 of Schedule 13D except as set forth herein or in prior amendments to this
Schedule 13D or such as would occur upon completion of any of the actions
discussed above. LCM intends to review its investment in QSII on a continuing
basis and, depending on various factors including, without limitation, QSII's
financial position and LCM's investment strategy, the price levels of QSII
Common Stock and conditions in the securities markets and general economic and
industry conditions, LCM may in the future take such actions with respect to its
investment in QSII as it deems appropriate including, without limitation,
purchasing additional shares of Common Stock or selling some or all of its
shares of Common Stock or change its intention with respect to any and all
matters referred to in Item 4. To the extent not inconsistent with the
foregoing, LCM incorporates by reference the material in Item 4 of its
previously filed Schedule 13D and the amendments thereto.

(3 of 18)
<PAGE>

Item 5. Interest in Securities of the Issuer.

The beneficial ownership of the Common Stock by the persons named in Item 2
of this Schedule is as follows at the date hereof:

<TABLE>
<CAPTION>
Aggregate Beneficially
Owned Voting Power Dispositive Power
----------------------- -------------- -----------------
Name Number Percent Sole Shared Sole Shared
- --------------------------------- ---------- ----------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
LCM 621,200 9.99 0 621,200 0 621,200
Shapiro 621,200 9.99 0 621,200 0 621,200
DAP 525,300 8.45 0 525,300 0 525,300
DAI 95,900 1.54 0 95,900 0 95,900
</TABLE>

The persons filing this statement effected no transactions in the Common
Stock since the filing of Amendment No. 10 to the Schedule 13D on April 14,
1999.

The percentages of outstanding shares of Common Stock used in this
Schedule are calculated based upon the 6,213,666 shares of Common Stock stated
by QSII to be issued and outstanding at May 28, 1999, as reflected in QSII's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.

LCM is the general partner of DAP and DAI pursuant to limited partnership
agreements providing to LCM the authority, among other things, to invest the
funds of DAP and DAI in Common Stock, to vote and dispose of Common Stock and to
file this statement on behalf of DAP and DAI. Pursuant to such limited
partnership agreements, the general partner of DAP and DAI is entitled to
allocations based on assets under management and realized and unrealized gains.
Andrew Shapiro is the sole manager of LCM.

Item 7. Material to be Filed as Exhibits.

A. Agreement Regarding Joint Filing of Statement on Schedule 13D or 13G.

B. Shareholder proposal for independent board submitted by Lawndale
Capital Management, LLC on behalf of Diamond A Partners, L.P. on
March 29, 1999 for inclusion in the proxy materials of Quality
Systems, Inc. for the annual meeting expected to be held in September
1999.

C. Opinion letter dated May 17, 1999 from Rutan & Tucker, LLP to the
Division of Corporation Finance of the Securities and Exchange
Commission (without attachments); no-action request and opinion
letter, each dated May 5, 1999 and each from Rutan & Tucker, LLP to
the Division of Corporation Finance of the Securities and Exchange
Commission (without attachments).

D. Letter dated May 14, 1999 from Wilson Sonsini Goodrich & Rosati to
the Division of Corporation Finance of the Securities and Exchange
Commission, attaching a letter dated April 22, 1999 from Wilson
Sonsini Goodrich & Rosati to the Division of Corporation Finance of
the Securities and Exchange Commission.

E. Letter dated June 9, 1999 from the Chief Counsel of the Division of
Corporation Finance to Rutan & Tucker, LLP (without attachments);
letter dated June 9, 1999 from the Office

(4 of 18)
<PAGE>

of Chief Counsel, Division of Corporation Finance, responding to the
no-action request by Rutan & Tucker, LLP on behalf of Quality
Systems, Inc.

(5 of 18)
<PAGE>

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Dated: June 24, 1999.

DIAMOND A PARTNERS, L.P. DIAMOND A INVESTORS, L.P.
By: Lawndale Capital By: Lawndale Capital
Management, LLC Management, LLC
General Partner General Partner

By: /s/ Andrew E. Shapiro By: /s/ Andrew E. Shapiro
--------------------- ---------------------
Andrew E. Shapiro Andrew E. Shapiro
Manager Manager

LAWNDALE CAPITAL MANAGEMENT, LLC

By: /s/ Andrew E. Shapiro /s/ Andrew E. Shapiro
---------------------- ---------------------
Andrew E. Shapiro Andrew E. Shapiro
Manager

(6 of 18)
<PAGE>

EXHIBIT A

AGREEMENT REGARDING JOINT FILING
OF STATEMENT ON SCHEDULE 13D OR 13G

The undersigned agree to file jointly with the Securities and Exchange
Commission (the "SEC") any and all statements on Schedule 13D or Schedule 13G
(and any amendments or supplements thereto) required under section 13(d) of the
Securities Exchange Act of 1934, as amended, in connection with purchases by the
undersigned of Common Stock of Quality Systems, Inc. For that purpose, the
undersigned hereby constitute and appoint Lawndale Capital Management, LLC, a
California limited liability company, as their true and lawful agent and
attorney-in-fact, with full power and authority for and on behalf of the
undersigned to prepare or cause to be prepared, sign, file with the SEC and
furnish to any other person all certificates, instruments, agreements and
documents necessary to comply with section 13(d) and section 16(a) of the
Securities Exchange Act of 1934, as amended, in connection with said purchases,
and to do and perform every act necessary and proper to be done incident to the
exercise of the foregoing power, as fully as the undersigned might or could do
if personally present.

Dated: December 22, 1997

DIAMOND A PARTNERS, L.P. DIAMOND A INVESTORS, L.P.
By: Lawndale Capital By: Lawndale Capital
Management, LLC Management, LLC
General Partner General Partner

By: /s/ Andrew E. Shapiro By: /s/ Andrew E. Shapiro
--------------------- ---------------------
Andrew E. Shapiro Andrew E. Shapiro
Manager Manager

LAWNDALE CAPITAL MANAGEMENT, LLC

By: /s/ Andrew E. Shapiro /s/ Andrew E. Shapiro
---------------------- ---------------------
Andrew E. Shapiro Andrew E. Shapiro
Manager

(7 of 18)
<PAGE>

EXHIBIT B
---------

Quality Systems, Inc -- SHAREHOLDER PROPOSAL

WHEREAS, the board of directors should be an independent body elected by
stockholders and owes fiduciary obligations to stockholders; and

WHEREAS, the Company's stockholders believe that an increased role for
independent directors would help our Company improve its long-term financial
condition, stock performance and competitiveness;

NOW THEREFORE, BE IT RESOLVED that pursuant to Section 8 of Article V of
the Bylaws of Quality System, Inc. ("QSII" or the "Company"), the Company's
stockholders hereby amend Article III of the Company's Bylaws to add the
following Section 16, such amendment to become effective 30 days following
approval by holders of a majority of the outstanding shares of stock entitled to
vote at the stockholders meeting at which this amendment is proposed:

SECTION 16 INDEPENDENT BOARD OF DIRECTORS. At least seventy-five
percent (75%) of the directors on the Board shall be Independent Directors.
At the end of each meeting of the Board, the Independent Directors shall
meet in executive session, separately from other directors, to discuss such
matters as they deem appropriate. The Independent Directors shall elect the
Chairman of the Board, who shall be an Independent Director. The
Independent Directors as a group shall constitute the Nominating Committee
of the Board, which shall have sole responsibility for recommending and
nominating candidates to the Board.

An "Independent Director" is one who, at any time during the past five
years, has had (i) no familial relationship with any of QSII's executive
officers or directors and (ii) no direct or indirect financial relationship
with QSII or any affiliate other than as a director or shareholder of the
Company, except those past relationships which are (a) fully disclosed in
the Company's proxy statements, and (b) deemed insignificant and non-
material by a majority of the other Independent Directors. Notwithstanding
any other provision of these Bylaws, this Section 16 shall govern in the
event of any inconsistency with other provisions of these Bylaws and may
not be altered, amended or repealed, except by approval of the outstanding
shares (as defined in Section 152 of the California General Corporation
Law).

Lawndale Capital Management, LLC is the third largest investor in QSII. As
discussed in Lawndale's Schedule 13D and amendments thereto, Lawndale believes
QSII's board lacks sufficient independence to take necessary actions to stop
poor managerial decision-making. Lawndale further believes that QSII's corporate
governance practices have been inadequate and a major factor in QSII's poor
shareholder performance. Lawndale believes that a greater role for independent
directors will improve QSII's corporate governance practices.
<PAGE>

EXHIBIT B (continued)
---------------------

Ultimately, Lawndale believes that shareholders can more confidently rely
on the board if decisions about, for example, management changes, corporate
control contests, executive compensation and major lawsuits are made by an
independent board.

Lawndale requests your support for the above resolution, which amends the
Company's Bylaws to increase the role of independent directors on the board.
Having a truly independent board is integral to shareholder confidence, and
ultimately enhancing QSII's long-term value.

This amendment would become effective 30 days following approval by
stockholders.
<PAGE>

EXHIBIT C

[Letterhead of Rutan & Tucker, LLP]

May 17, 1999
VIA FEDERAL EXPRESS
- -------------------
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20459

Re: Quality Systems, Inc.
---------------------

Dear Sir or Madam:

As counsel to Quality Systems, Inc. (the "Company"), we are rendering
the additional opinions set forth herein and are reiterating our request on
behalf of the Company that the Division of Corporation Finance (the "Division")
recommend no action to the Securities and Exchange Commission (the "Commission")
if management of the Company omits from its proxy materials for its 1999 Annual
Meeting of Shareholders the shareholder proposals submitted by Andrew E. Shapiro
and his affiliates, Lawndale Capital Management, LLC, Diamond A Partners, L.P.
and Diamond A Investors, L.P. (hereinafter referred to, collectively, as "Mr.
Shapiro and his Affiliates") attached hereto as Exhibit A, which the Company
received on March 29, 1999. Reference is made to the no-action request and
opinion letter originally filed by the undersigned with the Securities and
Exchange Commission (the "Commission") on May 6, 1999 on behalf of the Company
with respect to the Company's proposed omission of the proposals of Mr. Shapiro
and his Affiliates from the Company's proxy materials for its 1999 Annual
Meeting of Shareholders.

The Company plans to file definitive copies of the proxy materials on or
about July 26, 1999. Accordingly, pursuant to Rule 14a-8(j), the no-action
request and opinion letter originally filed by the undersigned was filed before
May 7, 1999.

1. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(c). Rule 14a-8(c) promulgated under the Securities Exchange Act of
- -------------
1934, as amended (the "Exchange Act") provides that a shareholder may submit no
more than one proposal for inclusion in a company's proxy materials. By letter
dated April 8, 1999, the Company advised Mr. Shapiro and his Affiliates that a
shareholder may submit no more than one proposal, and that the Company believed
more than one proposal was contained in the letter received on March 29, 1999
from Mr. Shapiro and his Affiliates, which letter attached the proposals. A copy
of the letter dated April 8, 1999 from the Company to Mr. Shapiro is attached
hereto as Exhibit B. As stated in the April 8, 1999 letter, the Company also
provided Mr. Shapiro and his Affiliates the opportunity to reduce the number of
proposals to one proposal within 14 days of receipt of that letter. On April 22,
1999, counsel to Mr. Shapiro and his Affiliates sent the Company a letter, a
copy of which is attached as Exhibit C. Pursuant to the April 22, 1999 letter,
Mr. Shapiro and his Affiliates have chosen to have the proposals considered in
an "all or nothing" manner and did not reduce the number of proposals to one, as
required within the 14-day limit.
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 2 of 7 Pages

The proposals of Mr. Shapiro and his Affiliates, although described by
Mr. Shapiro and his Affiliates as a "proposal seek[ing] shareholder approval to
amend [the Company's] Bylaws to add [a new] Section 16 to Article III thereof,"
consists in fact of the following five proposals:

First, that the Bylaws be amended to require that at least seventy-five
percent (75%) of the directors on the Board be "Independent Directors" (as
defined);

Second, that the Independent Directors of the Board are required to meet
in executive session, separately from the other directors, at the end of each
meeting of the Board to discuss such matters as they deem appropriate;

Third, that the Independent Directors shall elect the Chairman of the
Board;

Fourth, that the Chairman of the Board be required to be an Independent
Director; and

Fifth, that a Nominating Committee be established, which shall consist
of the Independent Directors and which shall have sole responsibility for
recommending and nominating candidates to the Board.

Accordingly, we are of the opinion that the proposals of Mr. Shapiro and
his Affiliates are improper and may be omitted from the Company's proxy
statement and form of proxy pursuant to Rule 14a-8(c) under the Exchange Act,
since Mr. Shapiro and his Affiliates have submitted more than one proposal for
inclusion in the Company's proxy materials and have not reduced the number of
proposals to one, as required within the 14-day limit. In support of this
opinion, please see Edison International, SEC N0-Action Letter, LEXIS 142
--------------------
(January 22, 1997); Doskocil Companies, Inc., SEC No-Action Letter (May 4,
------------------------
1994); and Delta Air Lines, Inc., SEC No-Action Letter (July 9, 1993).
---------------------

We are also of the opinion that the proposals of Mr. Shapiro and his
Affiliates are improper and may be omitted from the Company's proxy statement
and form of proxy because they constitute two or more separate and distinct
corporate actions as part of one proposal, which the Commission has also
identified as a basis for omission of a shareholder's submitted proposal from a
company's proxy statement and form of proxy. In support of this opinion, please
see Pauley Petroleum, Inc., SEC No-Action Letter, LEXIS 2820 (Dec. 5, 1985).
----------------------

2. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(i)(10). The purpose of the proposals of Mr. Shapiro and his
- -----------------
Affiliates--to ensure that a majority of the persons acting as directors of the
Company are "independent" (i.e., are not employees of the Company, are not
relatives of any employee, officer or director of the company and do not now
have or have not recently had a material financial interest in the Company)--has
already been substantially implemented by the Company since four out of seven
(approximately 57%) of the current directors of the Company are not
employees of the Company, are not relatives of any employee, officer or director
of the Company and do not have or have not recently had a material financial
interest in the Company. Only three of the current directors of the Company,
Sheldon Razin, Janet Razin and Patrick Cline, are employees of the Company or
relatives of any employee, officer or director of the Company or now have or
have recently had a material financial interest in the Company. The proposed
requirement that more than a majority (75% in this case) of the directors be
independent directors does not make any appreciable difference in the ability of
the independent directors

(10 of 18)
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 3 of 7 Pages

to control the actions of the Board than would just a majority of the directors
being independent directors, which has historically been, and is currently, the
case. Moreover, the definition of "Independent Director" proposed by Mr.
Shapiro and his Affiliates goes far beyond the usual and customary definition of
an "independent" or "outside" director, as prescribed by federal laws, the
National Association of Corporate Directors, the Council of Institutional
Investors (CII), the National Association of Securities Dealers (the "NASD") and
the New York Stock Exchange (the "NYSE"), as more particularly described below:

The regulations addressing Section 162(m) of the Internal Revenue Code
define a director as an "outside" director if the director (i) is not a
current or former employee of the corporation; and (ii) does not receive
significant direct or indirect compensation in any capacity other than as
director (i.e., remuneration for services or goods). Pursuant to Rule 16b-
3 promulgated under the Securities Exchange Act of 1934, a "non-employee
director" is a person who (i) is not currently an officer of the company
(or a parent or subsidiary of the company); (ii) does not receive
significant direct or indirect compensation from the company for any
services performed other than services as a director; and (iii) has no
interest in any significant transactions or business relationships with the
company.

The National Association of Corporate Directors considers a director to
be "independent" if he or she (i) has never been an employee of the
corporation or any of its subsidiaries; (ii) is not a relative of any
employee of the company; (iii) provides no services to the company, (iv) is
not employed by any firm providing major services to the company; and (v)
receives no compensation from the company, other than director fees. Report
of NACD Blue Ribbon Commission on Performance Evaluation of Chief Executive
Officers, Boards and Directors, Appendix G (1994).

According to a definition adopted April 5, 1991 by the Council of
Institutional Investors ("CII"), an independent director is someone who (i)
has not been employed by the corporation or an affiliate in an executive
capacity; (ii) is not an employee or owner of a firm that is one of the
corporation's or its affiliates paid advisors or consultants; (iii) is not
employed by a significant customer of, or supplier to, the corporation;
(iv) does not have a personal services contract with the corporation or one
of its affiliates; (v) is not a relative of an executive of the corporation
or one of its affiliates; and (vi) is not part of an interlocking
directorate in which the CEO or other executive officer of the corporation
serves on the board of another corporation that employs the director.

According to Section 6 of the NASD Bylaws, an independent director is: a
person other than an officer or employee of the company or its subsidiaries
or any other individual having a relationship which, in the opinion of the
board of directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Section 3 of
the NYSE Listed Company Manual also defines an independent director as
someone who is "free from any relationship that, in the opinion of the
Board of Directors, would interfere with the exercise of independent
judgment as a ... member." Section 303.00 specifies that directors who are
"affiliates" (a term that refers to a person having a significant stock
ownership) of the company, or officers or employees of the company or of
its subsidiaries, are not considered independent.

(11 of 18)
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 4 of 7 Pages

Under any of the foregoing definitions of an "independent" or "outside"
director by these leading authorities and regulatory bodies, the Company is
already in compliance with the standards for director independence established
thereby since four out of the current seven directors meet the criteria
specified. In addition, the Board of Directors has established an Audit
Committee which has for many years had all (100%) of its members consist only of
directors that meet the foregoing definitions of an "independent" or "outside"
director and has recently established both a Compensation Committee and a
Nominating Committee, each of which consists of four members of the Board, three
of which members (or 75%) are required to be independent directors. The Board of
Directors has delegated to the Nominating Committee the authority to identify,
recommend and nominate candidates to the Board of Directors and has thereby
already accomplished the purpose of the proposal submitted by Mr. Shapiro
seeking to establish just such a Nominating Committee of the Board, with the
only difference being that 75% (3 out of 4) of the members of the Nominating
Committee (as opposed to 100%, as proposed by Mr. Shapiro and his Affiliates)
are required to be independent directors. A copy of the resolutions adopted by
the Board of Directors authorizing the establishment of the Nominating Committee
is attached as Exhibit D.

The Commission has indicated that for a proposal to be omitted under
Rule 14a-8(i)(10), it need not have been implemented in full or precisely as
presented. The applicable standard under Rule 14a-8(i)(10) is one of substantial
implementation. See Release No. 34-20091, August 16, 1983. See also The Dial
--------
Corporation, SEC No-Action Letter (March 16, 1993); Valley National Corp., SEC
- ----------- ---------------------
No-Action Letter (Jan. 18, 1991).

3. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(i)(1). The proposals of Mr. Shapiro and his Affiliates may also be
- ----------------
omitted under rule 14a-8(i)(1) in that they contravene the statutory framework
established by California law and are therefore not a proper subject for action
by shareholders.

Section 212(b) of the California General Corporation Law ("CGCL")
provides that the Bylaws of a California corporation may contain any provision,
"not in conflict with law or the articles for the management of the business and
for the conduct of the affairs of the corporation." As in most states, it is a
long-established, fundamental tenet of California corporation law that a bylaw
that is inconsistent with the CGCL is invalid. See, e.g., Gaetano Mancini v.
Ettore Patrizi, 87 Cal. App. 435; 262 P. 375 (Cal. App. Ct., 1st Dist., Div. 1
1927). See also Joseph Polchinski Company v. Cemetery Floral Company, Inc., 433
--- ----
N.Y.S.2d 825 (N.Y. App. Div. 1980); Benintendi v. Kenton Hotel, Inc., 294 N.Y.
112 (1945). Thus, "a bylaw which requires or purports to authorize [acts
contrary to law] ... is inconsistent with the provisions of the statute and
void." Gaetano, supra, at p. 439.
-----

(12 of 18)
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 5 of 7 Pages

California corporation law, like that of most states, operates under the
premise that management of the corporation shall be the responsibility of the
board of directors. Section 300(a) of the CGCL provides that "the business and
affairs of the corporation shall be managed by or under the direction of the
board." The proposals of Mr. Shapiro and his Affiliates to require that at least
seventy-five percent (75%) of the directors on the Board be "Independent
Directors," the definition of which term is drafted to be extremely narrow and
exclusionary in its scope of eligible individuals, intrudes on the ability of
the Board to identify, attract and recommend to the shareholders for approval a
group of director candidates that are sufficiently familiar with the Company and
its business, and thereby interferes with the Board's authority to manage the
business and affairs of the corporation.

The proposals of Mr. Shapiro and his Affiliates also intrude upon the
authority of the Board of Directors to designate committees by resolution of the
Board pursuant to Section 311 of the CGCL. Section 311 of the CGCL permits
designation of a committee of the Board only by resolution of a majority of all
of the authorized directors at a duly convened meeting of the directors and
prescribes certain areas of authority of the Board which committees of the Board
are not permitted to have delegated to them. The proposal of Mr. Shapiro and his
Affiliates to require a special meeting of independent directors to "discuss
such matters as they deem appropriate" and the constitution of such independent
directors as the Nominating Committee of the Board (and the accompanying
conferral to such independent directors of the ability to elect the Chairman of
the Board) pursuant to a Bylaw amendment approved by the shareholders of the
Company interferes with the statutory requirement for the management of the
business and affairs of the corporation and the exercise of all corporate power
by the Board pursuant to Section 300 of the CGCL, intrudes upon the statutory
power of the Board to designate committees of the Board, and contravenes the
scope of authority of committees of the Board pursuant to Section 311 of the
CGCL. See, e.g., Edison International, SEC No-Action Letter, LEXIS 142 (January
--- ---- --------------------
22, 1997); Sonat, Inc., SEC No-Action Letter, LEXIS 298 (Feb. 17, 1989).
-----------

Under Section 307 of the CGCL, in order to constitute a duly convened
Board meeting, notice of a special meeting is required to be given to each
director and may only be called by the Chairman of the Board or the President or
any Vice President or the Secretary or any two directors. Section 307 further
provides that the requirement of notice of a special meeting may not be
dispensed with by the articles or bylaws. The proposals of Mr. Shapiro and his
Affiliates require that, pursuant to a Bylaw provision, the Independent
Directors meet in executive session, separate from the other directors, at the
end of each meeting to discuss "such matters as they deem appropriate." Such
proposal is improper because it contravenes the proper notice requirement of
Section 307 and also excludes certain directors from such meeting, and also
interferes with the exercise by a director of his or her fiduciary duty under
Section 309 of the CGCL to exercise sound business judgment by, among other
things, "conduct[ing] reasonable inquiry with respect to actions to be taken by
the Board." Moreover, pursuant to Section 309 of the CGCL, the conduct of such
reasonable inquiry may be satisfied only by (i) direct inquiry by the director
or (ii) by reliance on a presentation or information prepared or presented by
(1) one or more officers of the company, (2) professional advisors engaged by
the company or (3) a committee of the board on which the director does not serve
as to matters within the committee's designated authority. Any such meeting of
such independent directors would therefore be invalid and any action or
presentation of any information to the full Board resulting from such meeting
would not be valid for purposes of reliance by the Board under Section 309 of
the CGCL.

The proposals of Mr. Shapiro and his Affiliates would also impair the
rights of shareholders to cumulate their votes, as prescribed by Section 708(a)
of the CGCL, to elect directors. The proposals of Mr. Shapiro and his Affiliates
could result in a director-nominee being elected, even though he or she received

(13 of 18)
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 6 of 7 Pages

less votes than a director-nominee who did not meet the definition of
"Independent Director" proposed by Mr. Shapiro and his Affiliates. Section
708(c) of the CGCL provides unequivocally that "[i]n any election of directors,
the candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares are elected ..." (Emphasis added). Thus, in our opinion, the
proposals of Mr. Shapiro and his Affiliates, if implemented, could generate
election results which are in direct conflict with Section 708(c) of the CGCL.

Moreover, the approval by the shareholders of both the Company's
proposed slate of director nominees and the proposals of Mr. Shapiro and his
Affiliates would cause one or more of the Company's nominee-directors that are
properly elected at the 1999 Annual Meeting of Shareholders to be improperly
removed prior to the expiration of their term of office, since the effectiveness
of the Bylaws amendment implementing the proposals of Mr. Shapiro and his
Affiliates is stated to occur 30 days after approval of the proposal by the
stockholders. Such removal would violate the director term requirements
prescribed by Section 303 and 304 of the CGCL, which expressly provides for the
proper process for the removal of a director by the shareholders and prohibits
any removal of a director prior to the expiration of such director's term of
office except in accordance with such proper process.

Nowhere in the proposals of Mr. Shapiro and his Affiliates is there a
request or recommendation. Rather, the various proposals are stated as mandates
to be evidenced in an amendment to the Bylaws, which would be binding on the
Company if approved by the shareholders and which intrude upon the Board's power
to exercise sound business judgment. Under California law, the authority for
such action is vested exclusively in a company's board of directors.

We are not aware of any court decision under California law with respect
to the validity of a bylaw such as the bylaw provision proposed by Mr. Shapiro
and his Affiliates. We believe this is due to the fact that the mandates of the
relevant California statutes, particularly Sections 708(a) and 708(c) of the
CGCL, are so clear that any bylaw provision which is inconsistent with one or
more of such statutes is unequivocally invalid as a matter of law.

Accordingly, we are of the opinion that the proposals of Mr. Shapiro and
his Affiliates are invalid under Sections 212(b), 300(a), 303, 304, 307, 309,
311 and 708 of the CGCL and may therefore be omitted from the Company's proxy
statement and form of proxy pursuant to Rule 14a-8(i)(1) of the Exchange Act
because they contravene the statutory framework established by California law
and are not a proper subject for action by shareholders. In support of this
opinion, please see Edison International, SEC No-Action Letter, LEXIS 142
--------------------
(January 22, 1997).

4. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(i)(9). The Company's own proposal to be submitted to the shareholders
- ----------------
at the 1999 Annual Meeting of Shareholders designates a slate of director-
nominees that may not meet the proposed requirement that 75% of the members of
the Board come within the definition of "Independent Director" included as part
of the proposals of Mr. Shapiro and his Affiliates. The approval by the
shareholders of both the Company's proposed slate of director-nominees and the
proposals of Mr. Shapiro and his Affiliates would lead to inherently
contradictory results. Accordingly, we are of the opinion that the proposals of
Mr. Shapiro and his Affiliates may be omitted from the Company's proxy statement
and form of proxy pursuant to Rule 14a-8(i)(9) of the Exchange Act because such
proposals are directly contradictory to a proposal to be submitted by the
Company at the 1999 Annual Meeting of Shareholders.

(14 of 18)
<PAGE>

Securities and Exchange Commission May 17, 1999
Page 7 of 7 Pages

5. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(i)(7). By requiring that the Independent Directors meet in executive
- ----------------
session separate from the other directors at the end of each Board meeting
without proper committee designation by the full Board of Directors, and in the
absence of the delegation of a valid purpose for such executive session which is
not in violation of the scope of committee authority set forth in Section 311 of
the CGCL, the proposals deal with matters relating to, and are in contravention
of, the ordinary management functions of the full Board of Directors and
ordinary business of the Company. Accordingly, we are of the opinion that the
proposals of Mr. Shapiro and his Affiliates are invalid under Section 311 of the
CGCL and may therefore be omitted from the Company's proxy statement and form of
proxy pursuant to Rule 14a-8(i)(7) of the Exchange Act.

6. Exclusion of the Proposals of Mr. Shapiro and his Affiliates under
------------------------------------------------------------------
Rule 14a-8(i)(8). The proposal to require that at least seventy-five percent
- ----------------
(75%) of the directors on the Board be "Independent Directors," the definition
of which term is drafted to be extremely narrow and exclusionary in its scope of
eligible individuals, intrudes on the ability of the Board to identify, attract
and recommend to the shareholders for approval a group of director candidates
that are sufficiently familiar with the Company and its business to be able to
competently direct and manage the business affairs of the Company and, as such,
relate directly to the current (and future) elections for membership on the
Company's Board of Directors. Accordingly, we are of the opinion that the
proposals of Mr. Shapiro and his Affiliates are improper and may be omitted from
the Company's proxy statement and form of proxy pursuant to Rule 14a-8(i)(8) of
the Exchange Act. In support of this opinion, please see Edison International,
--------------------
SEC No-Action Letter, LEXIS 142 (January 22, 1997).

For the reasons set forth above, we request that you concur in our
opinion that the Company may omit the proposals of Mr. Shapiro and his
Affiliates from the proxy statement and form of proxy being prepared for the
Company's 1999 Annual Meeting of Shareholders and we request that you take a no-
action position if management of the Company does not omit such proposals.

Please contact the undersigned if you have any questions concerning this
matter at (714) 641-3464. Thank you.

Respectfully submitted,

/s/ Thomas J. Crane
--------------------------
Thomas J. Crane, for
Rutan & Tucker, LLP

cc: Mr. Sheldon Razin
Mr. Andrew E. Shapiro

(15 of 18)
<PAGE>

[LETTERHEAD OF RUTAN&TUCKER APPEARS HERE]

May 5,1999

VIA FEDERAL EXPRESS
- -------------------

[STAMP APPEARS HERE]

Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20459

Re: Quality Systems. Inc.
---------------------

Dear Sir or Madam:

As counsel to Quality Systems, Inc. (the "Company"), we hereby request on
behalf of the Company that the Division of Corporation Finance (the "Division")
recommend no action to the Securities and Exchange Commission (the "Commission")
if management of the Company omits from its proxy materials for its 1999 Annual
Meeting of Shareholders the shareholder proposals submitted by Andrew E. Shapiro
and his affiliates, Lawndale Capital Management, LLC, Diamond A Partners, L.P.
and Diamond A Investors, L.P. (hereinafter referred to, collectively, as "Mr.
Shapiro and his Affiliates") attached hereto as Exhibit A, which the Company
received on March 29, 1999. The reasons for which the Company believes it may
omit the proposals of Mr. Shapiro and his Affiliates from its proxy statement
and form of proxy are as follows:

1. Rule 14a-8(c) provides that a shareholder may submit no more than one
proposal for inclusion in a company's proxy materials. By letter dated April 8,
1999, the Company advised Mr. Shapiro and his Affiliates that a shareholder may
submit no more than one proposal, and that the Company believed more than one
proposal was contained in the letter received on March 29, 1999 from Mr. Shapiro
and his Affiliates, which letter attached the proposals. A copy of the letter
dated April 8, 1999 from the Company to Mr. Shapiro is attached hereto as
Exhibit B. As stated in the April 8, 1999 letter, the Company also provided Mr.
Shapiro and his Affiliates the opportunity to reduce the number of proposals to
one proposal within 14 days of receipt of that letter. On April 22, 1999,
counsel to Mr. Shapiro and his Affiliates sent the Company a letter, a copy of
which is attached hereto as Exhibit C. Pursuant to the April 22, 1999 letter,
Mr. Shapiro and his Affiliates have chosen to have the proposals considered in
an "all or nothing" manner and did not reduce the number of proposals to one, as
required within the 14-day limit.
<PAGE>

The proposals of Mr. Shapiro and his Affiliates, although described by Mr.
Shapiro and his Affiliates as "a proposal seek[ing] shareholder approval to
amend [the Company's] Bylaws to add [a new] Section 16 to Article III thereof,"
consists in fact of the following five proposals:

First, that the Bylaws be amended to require that at least seventy-five
percent (75%) of the directors on the Board be "Independent Directors" (as
defined);

Second, that the Independent Directors of the Board are required to meet in
executive session, separately from the other directors, at the end of each
meeting of the Board to discuss such matters as they deem appropriate;

Third, that the Independent Directors shall elect the Chairman of the
Board;

Fourth, that the Chairman of the Board be required to be an Independent
Director; and

Fifth, that a Nominating Committee be established, which shall consist of
the Independent Directors and which shall have sole responsibility for
recommending and nominating candidates to the Board.

Accordingly, the Company respectfully submits that the proposals of Mr.
Shapiro and his Affiliates may be omitted from its proxy statement and form of
proxy pursuant to Rule 14a-8(c), since Mr. Shapiro and his Affiliates have
submitted more than one proposal for inclusion in the Company's proxy materials
and have not reduced the number of proposals to one, as required within the 14-
day limit. See Edison International, SEC No-Action Letter, LEXIS 142 (January
------------------------
22, 1997). See, e.g., Doskocil Companies, Inc., SEC No-Action Letter (May 4,
--- ----- ------------------------
1994); Delta Air Lines, Inc., SEC No-Action Letter (July 9, 1993).
---------------------

Alternatively, the proposals of Mr. Shapiro and his Affiliates constitute
two or more separate and distinct corporate actions as part of one proposal,
which the Commission has also identified as a basis for omission of a
shareholder's submitted proposal from a company's proxy statement and form of
proxy. See, e.g., Pauley Petroleum, Inc., SEC No-Action Letter, LEXIS 2820 (Dec.
--- ---- ---------------------
5, 1985).

2. The proposals of Mr. Shapiro and his Affiliates may also be omitted
under Rule 14a-8(i)(10). The purpose of the proposals - to ensure that a
majority of the persons acting as directors of the Company are "independent"
(i.e., are not employees of the Company, are not relatives of any employee,
officer or director of the company and do not now have or have not recently had
a material financial interest in the Company) - has already been substantially
implemented by the Company since four out of seven (approximately 57%) of the
current directors of the Company are not employees of the Company, are not
relatives of any employee, officer or director of the Company and do not have or
have not recently had a material financial interest in the Company. Only three
of the current directors of the Company, Sheldon Razin, Janet Razin and Patrick
Cline, are employees of
<PAGE>

the Company or relatives of any employee, officer or director of the Company or
now have or have recently had a material financial interest in the Company. The
proposed requirement that more than a majority (75% in this case) of the
directors be independent directors does not make any appreciable difference in
the ability of the independent directors to control the actions of the Board
than would just a majority of the directors being independent directors, which
has historically been, and is currently, the case. Moreover, the definition of
"Independent Director" proposed by Mr. Shapiro and his Affiliates goes far
beyond the usual and customary definition of an "independent" or "outside"
director, as prescribed by federal laws, the National Association of Corporate
Directors, the Council of Institutional Investors (CII), the National
Association of Securities Dealers (the "NASD") and the New York Stock Exchange
(the "NYSE"), as more particularly described below:

The regulations addressing Section 162(m) of the Internal Revenue Code
define a director as an "outside" director if the director (i) is not a
current or former employee of the corporation; and (ii) does not receive
significant direct or indirect compensation in any capacity other than as
director (i.e., remuneration for services or goods). Pursuant to Rule 16b-3
promulgated under the Securities Exchange Act of 1934, a "non-employee
director" is a person who (i) is not currently an officer of the company
(or a parent or subsidiary of the company); (ii) does not receive
significant direct or indirect compensation from the company for any
services performed other than services as a director; and (iii) has no
interest in any significant transactions or business relationships with the
company.

The National Association of Corporate Directors considers a director
to be "independent" if he or she (i) has never been an employee of the
corporation or any of its subsidiaries; (ii) is not a relative of any
employee of the company; (iii) provides no services to the company; (iv) is
not employed by any firm providing major services to the company; and (v)
receives no compensation from the company, other than director fees. Report
of NACD Blue Ribbon Commission on Performance Evaluation of Chief Executive
Officers, Boards and Directors, Appendix G (1994).

of the NYSE Listed Company Manual also defines an independent director as
someone who is "free from any relationship that, in the opinion of the
Board of Directors, would interfere with the exercise of independent
judgment as a ... member." Section 303.00 specifies that directors who are
"affiliates" (a term that refers to a person having a significant stock
ownership) of the company, or officers or employees of the company or of
its subsidiaries, are not considered independent.

The Commission has indicated that for a proposal to be omitted under Rule
14a-8(i)(10), it need not have been implemented in full or precisely as
presented. The applicable standard under Rule 14a-8(i)(10) is one of substantial
implementation. (See Release No. 34-20091, August 16, 1983). See, also, The Dial
--------
Corporation, SEC No-Action Letter (March 16, 1993); Valley National Corp., SEC
- ----------- --------------------
No-Action Letter (Jan. 18, 1991). Accordingly, the proposals of Mr. Shapiro and
his Affiliates are also improper under Rule 14a-8(i)(10), since they have
already been substantially implemented by the Company as discussed.

3. The proposals of Mr. Shapiro and his Affiliates may also be omitted
under Rule 14a-8(i)(1) in that they contravene the statutory framework
established by California law and are therefore not a proper subject for action
by shareholders. The proposals of Mr. Shapiro and his Affiliates intrude upon
the Board's authority to manage the business and affairs of the corporation and
to exercise all corporate power, as prescribed by Section 300 of the California
General Corporation Law ("CGCL"). In particular, the proposal of Mr. Shapiro and
his Affiliates to require that at least seventy-five percent (75%) of the
directors on the Board be "Independent Directors," the definition of which term
is drafted to be extremely narrow and exclusionary in its scope of eligible
individuals, intrudes on the ability of the Board to identify, attract and
recommend to the shareholders for approval a group of director candidates that
are sufficiently familiar with the Company and its business, and thereby
interferes with the Board's authority to manage the business and affairs of the
corporation. The proposals of Mr. Shapiro and his Affiliates also intrude upon
the authority of the
<PAGE>

Board of Directors to designate committees by resolution of the Board pursuant
to Section 311 of the CGCL. Section 311 of the CGLC permits designation of a
committee of the Board only by resolution of a majority of all of the authorized
directors at a duly convened meeting of the directors and prescribes certain
areas of authority of the Board which committees of the Board are not permitted
to have delegated to them. Accordingly, the proposal of Mr. Shapiro and his
Affiliates to require a special meeting of independent directors to "discuss
such matters as they deem appropriate" and the constitution of such independent
directors as the Nominating Committee of the Board (and the accompanying
conferral to such independent directors of the ability to elect the Chairman of
the Board) pursuant to a Bylaw amendment approved by the shareholders of the
Company interferes with the statutory requirement for the management of the
business and affairs of the corporation and the exercise of all corporate power
by the Board pursuant to Section 300 of the CGCL, intrudes upon the statutory
power of the Board to designate committees of the Board, and contravenes the
scope of authority of committees of the Board pursuant to Section 311 of the
CGCL, and is therefore improper. See, e.g., Edison International, SEC No-Action
--- ---- --------------------
Letter, LEXIS 142 (January 22, 1997); Sonat, Inc., SEC No-Action Letter, LEXIS
-----------
298 (Feb 17, 1989).

Under Section 307 of the CGCL, in order to constitute a duly convened Board
meeting, notice of a special meeting is required to be given to each director
and may only be called by the Chairman of the Board or the President or any Vice
President or the Secretary or any two directors. Section 307 further provides
that the requirement of notice of a special meeting may not be dispensed with by
the articles or bylaws. The proposals of Mr. Shapiro and his Affiliates require
that, pursuant to a Bylaw provision, the Independent Directors meet in executive
session, separate from the other directors, at the end of each meeting to
discuss "such matters as they deem appropriate." Such proposal is improper
because it contravenes the proper notice requirement of Section 307 and also
excludes certain directors from such meeting, and also interferes with the
exercise by a director of his or her fiduciary duty under Section 309 of the
CGCL to exercise sound business judgment by, among other things, "conduct[ing]
reasonable inquiry with respect to actions to be taken by the Board." Moreover,
pursuant to Section 309 of the CGCL, the conduct of such reasonable inquiry may
be satisfied only by (i) direct inquiry by the director or (ii) by reliance on a
presentation or information prepared or presented by (1) one or more officers of
the company, (2) professional advisors engaged by the company or (3) a committee
of the board on which the director does not serve as to matters within the
committee's designated authority. Any such meeting of such independent directors
would therefore be invalid and any action or presentation of any information to
the full Board resulting from such meeting would not be valid for purposes of
reliance by the Board under Section 309 of the CGCL.

The proposals of Mr. Shapiro and his Affiliates may also be omitted under
Rule 14a-8(i)(9), as well as Rule 14a-8(i)(1), as they directly conflict with
the Company's own proposal to be submitted to the shareholders at the 1999
Annual Meeting of Shareholders which designates a slate of director nominees
that may not meet the proposed requirement that 75% of the members of the Board
come within the overly narrow and exclusionary definition of "Independent
Director" included as part of the proposals of Mr. Shapiro and his Affiliates.
The approval by the shareholders of both the Company's proposed slate of
director nominees and the proposals of Mr. Shapiro and his
<PAGE>

Affiliates would also cause the Company to be in violation of the new Section 16
of Article III of the Company's Bylaws proposed by Mr. Shapiro and his
Affiliates and in violation of Section 708 of the CGCL. Section 708 of the CGCL
provides that in any election of directors, "the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted ... are
elected." The proposals of Mr. Shapiro and his Affiliates would mandate an
election procedure whereby even if the Company's slate of director nominees are
duly approved by the shareholders, a director-nominee proposed by Mr. Shapiro
and his Affiliates would be elected first, even though he or she received less
votes than a director-nominee of the Company who did not meet the definition of
"independent director" proposed by Mr. Shapiro and his Affiliates, simply by
virtue of such director-nominee proposed by Mr. Shapiro and his Affiliates
having met such "independent director" definition. This is in clear violation of
subsection (c) of Section 708 of the CGCL in that California law requires the
candidate receiving the highest number of votes to be elected, regardless of
whether the candidate meets some additional criteria. Moreover, the approval by
the shareholders of both the Company's proposed slate of director nominees and
the proposals of Mr. Shapiro and his Affiliates would cause one or more of the
Company's nominee-directors that are properly elected at the 1999 Annual Meeting
of Shareholders to be improperly removed prior to the expiration of their term
of office, since the effectiveness of the Bylaws amendment implementing the
proposals of Mr. Shapiro and his Affiliates is stated to occur 30 days after
approval of the proposal by the stockholders. Such removal would violate the
director term requirements prescribed by Section 303 and 304 of the CGCL, which
expressly provides for the proper process for the removal of a director by the
shareholders and prohibits any removal of a director prior to the expiration of
such director's term of office except in accordance with such proper process.
See Edison International, SEC No-Action Letter, LEXIS 142 (January 22, 1997).
- ------------------------

Similarly, the proposals of Mr. Shapiro and his Affiliates would intrude
upon the rights of the shareholders to cumulate their votes, as prescribed by
subsection (a) of Section 708 of the CGCL. Mr. Shapiro has already indicated to
the Company that he and his affiliates intend to cumulate their votes at the
1999 Annual Meeting of Shareholders, which will entitle all other shareholders
to cumulate their votes, as permitted by subsection (b) of Section 708 of the
CGCL. As discussed above, the proposals of Mr. Shapiro and his Affiliates would
result in a director-nominee proposed by Mr. Shapiro and his Affiliates being
elected first, even though he or she received less votes than a director-nominee
of the Company who did not meet the definition of "independent director"
proposed by Mr. Shapiro and his Affiliates simply by virtue of having met such
"independent director" definition, which would also controvert the ability of
the other shareholders to cumulate their votes and elect one or more directors
from the slate of director-nominees proposed by the Company who may not meet the
definition of "Independent Director" proposed by Mr. Shapiro and his Affiliates.

of the Board, under California law the proposals are not a proper subject for
shareholder action and may be excluded pursuant to Rule 14a-8(i)(1). See Edison
--- -----
International, SEC No-Action Letter, LEXIS 142 (January 22, 1997).
- -------------

4. The proposals of Mr. Shapiro and his Affiliates may also be omitted
under Rule 14a-8(i)(7). By requiring that the Independent Directors meet in
executive session separate from the other directors at the end of each Board
meeting without proper committee designation by the full Board of Directors, and
in the absence of the delegation of a valid purpose for such executive session
which is not in violation of the scope of committee authority set forth in
Section 311 of the CGCL, the proposals deal with matters relating to, and are in
contravention of, the ordinary management functions of the full Board of
Directors and ordinary business of the Company.

5. The proposals of Mr. Shapiro and his Affiliates may also be omitted
under Rule 14(i)(8). The proposal to require that at least seventy-five
percent (75%) of the directors on the Board be "Independent Directors," the
definition of which term is drafted to be extremely narrow and exclusionary in
its scope of eligible individuals, intrudes on the ability of the Board to
identify, attract and recommend to the shareholders for approval a group of
director candidates that are sufficiently familiar with the Company and its
business to be able to competently direct and manage the business affairs of the
Company and, as such, relate directly to the current (and future) elections for
membership on the Company's Board of directors. The proposals are therefore
improper under Rule 14a-8(i)(8). See, Edison International, SEC No-Action
--- ---------------------
Letter, LEXIS 142 (January 22, 1997).

For the reasons set forth above, we request that you concur in our opinion
that management may omit the proposals of Mr. Shapiro and his Affiliates from
the proxy statement and form of proxy being prepared for the Company's 1999
Annual Meeting of Shareholders and we request that you take a no-action position
if management of the Company does omit such proposals.

Please contact the undersigned if you have any questions concerning this
matter at (714) 641-3464. Thank you.

Respectfully submitted,

/s/ Thomas J. Crane
Thomas J. Crane, for
Rutan & Tucker, LLP

cc: Mr. Sheldon Razin
Mr. Andrew E. Shapiro
<PAGE>

EXHIBIT D
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI APPEARS HERE]

May 14, 1999

Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Shareholder Proposal For Quality Systems, Inc.

Ladies and Gentlemen:

My firm is counsel to Lawndale Capital Management LLC, which is the general
partner of Diamond A Partners, L.P. ("Diamond A"). Diamond A is a shareholder of
Quality Systems, Inc. ("QSII" or "the Company"). On March 29, 1999, Diamond A,
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the "Exchange
Act"), submitted a shareholder proposal to QSII (the "Diamond A Proposal") for
inclusion in its proxy materials for the upcoming annual shareholders meeting
for the Company.

In a letter to Diamond A, dated April 8, 1999, the Company stated that it
intended to exclude the Diamond A Proposal from its proxy materials, purportedly
because the Company considered the Diamond A Proposal to be separate proposals
excludable under Rule 14a-8(c). In a letter to QSII dated April 22, 1999, we
responded that the Diamond A Proposal was a single proposal for purposes of Rule
14a-8(c), and that the items identified by the Company comprised only the
definitional elements of the Diamond A Proposal. As described in our April 22,
1999 letter, a copy of which is attached hereto and incorporated by reference,
the Diamond A Proposal is a single proposal in favor of the establishment of an
Independent Board of Directors for QSII. As such, and consistent with several
recent no-action letters issued by the Division of Corporation Finance, we
believe the Diamond A Proposal is not excludable under Rule 14a-8(c).

We have received a copy of a letter dated May 5, 1999, from the firm of
Rutan & Tucker, counsel to the Company, to the Division of Corporation Finance
(the "Division"), requesting that the Division recommend no action to the
Securities and Exchange Commission (the "Commission") if the Company omits the
Diamond A Proposal from its proxy materials for its 1999 annual meeting of
shareholders. The May 5 letter does not address (or even cite) any of the recent
no-action letters discussed in our April 22 letter. Rather than respond to the
authorities identified in our April 22 letter, Rutan & Tucker's May 5 letter
offers several new arguments- which were not identified in the Company's April 8
letter to Diamond A - why the Company believes it may omit the Diamond A
Proposal from its proxy materials.

The following is Diamond A's response to the May 5 letter, pursuant to Rule
14a-8(k) promulgated under the Exchange Act. For clarity's sake, our numbered
paragraphs correspond to
<PAGE>

those in QSII's May 5 letter. On May 10, 1999, we provided notice that we
intended to provide this response by May 13, 1999. For the reasons set forth
below, as well as those set forth in our April 22 letter, we request that the
Division deny QSII's request for no action.

Argument No. 1: The Company argues that a shareholder may submit only one
proposal under Rule 14a-8, whereas Diamond A has submitted what are really five
separate proposals.

Rule 14a-8(c) provides that a shareholder may submit no more than one
proposal to a company for inclusion in the proxy materials for a particular
shareholders' meeting. The Division has repeatedly taken the position that, as
here, a proposal for purposes of Rule 14a-8(c) may include the definitional
elements of the proposal provided that these elements all relate to the specific
concept set forth in the proposal. Thus here, for example, the Diamond A
Proposal seeks only the creation of an independent Board of Directors to govern
QSII, and we believe should be so considered by the Staff.

As discussed in detail in our April 22 letter, an analysis of the Staff's
position on "single proposal cases" clearly supports this position. For example,
in 1992 a shareholder submitted a proposal to McDonald's Corp. relating to (i)
potential conflicts of interest involving McDonald's officers and directors,
(ii) limitations on McDonald's executive Compensation, and (iii) limits on
McDonald's ability to award stock options. McDonald's, in its submission to the
Staff, asked that the Staff take "no action" if McDonald's excluded the revised
proposal on the grounds that it still constituted multiple proposals. The Staff
rejected MacDonald's position, concluding instead that the shareholder's
proposal was a single proposal. The Staff's reasoning was that the separate
elements of the proposal related to the single concept of executive
compensation. McDonald's Corp., SEC No-Action Letter, 1992 SEC No-Act. LEXIS
----------------
1101 at *1, December 2, 1992.

The Staff has also concluded that a proposal which contains multi-elements
should be considered a single proposal under Rule 14a-8(c) where all elements of
the proposal related to the single issue. See, e.g., Ferrofluidics Corp., SEC
--- ---- -------------------
No-Action Letter, 1992 SEC No-Act. LEXIS 932, September 18, 1992 (elements
relating to base pay and warrants granted to executives); Westinghouse Electric
---------------------
Corporation, SEC No-Action Letter, 1995 SEC No-Act. LEXIS 169, January 27, 1995
- -----------
(elements including base compensation, bonuses, retirement compensation,
performance based pay found to relate to the single concept of executive
compensation). The Staff also concluded that a multi-element proposal was a
single proposal because it related to a "request to sell or merge the company,
and suggested procedures for implementing this proposal." Todd Shipyards Corp.,
--------------------
SEC No-Action Letter, 1992 SEC No-Act. LEXIS 876, August 13, 1992 (elements
included retaining an independent investment bank and establishing an committee
of independent directors to consider and recommend to board best available
offers for merger or sale). Similarly the Staff held that a proposal relating to
anti-takeover defenses was a single proposal, which included definitional
elements relating to (i) a termination of the company's shareholder rights plan,
(ii) amending change of control agreements with officers and directors, and
(iii) eliminating other steps which might impede a takeover Computer Horizons
-----------------
Corp., SEC No-Action Letter, 1993 SEC No-Act. Lexis 572 at *1, April 1, 1993.
- -----
<PAGE>

Most recently, the Staff addressed a shareholder proposal which, like the
Diamond A Proposal, involved the issue of corporate governance. Specifically, in
1998 a shareholder of Boeing Co. requested that Boeing include in its proxy
materials a single proposal that contained a number of specific proposed actions
relating to the election process for the Board of Directors. See The Boeing
--------------
Company, SEC No-Action Letter, 1999 SEC No-Act. LEXIS 232, February 18, 1998.
- -------

The Staff rejected Boeing's argument. In rejecting Boeing's position that
the proposal could be omitted under Rule 14a-8(c), the Staff stated that "[Tire
revised proposal requests that the Board take the necessary steps to ensure that
all Directors are elected annually and requests restriction on the ability to
change that requirement."

As with Boeing, the Diamond A Proposal is a single proposal for purposes of
Rule 14a-8(c). The Diamond A Proposal, if adopted by QSII's shareholders, would
establish an independent board of Directors for QSII. The elements of this
proposal - i.e. the definition of an Independent Board at QSII- are not separate
---
proposals. Rather, the elements of the Diamond A Proposal explain how the board
shall operate to ensure that QSII is controlled by an Independent Board.

These (and other) authorities were all reviewed in detail in our April 22
letter to the Company. Yet the Company's May 5 letter does not discuss, respond
.to, or even cite, the Division's position as reflected in these letters.
Instead, the May 5 letter cites, without explanation, four no-action letters for
the undisputed proposition that Rule 14a-8(c) limits shareholders to one
proposal. None of these letters are relevant to the Diamond A Proposal, because
none discuss or relate to a single proposal which includes the definitional
elements necessary to implement the proposal./1/

As with Boeing, the Diamond A Proposal is a single proposal for purposes of
------
Rule 14a-8(c). While the Proposal includes the necessary, definitional elements
for the creation of an Independent Board, given the Staff's history of
concluding that such explanations or definitions are not separate proposals
which can be excluded from the company's proxy materials on Rule 14a-8(c)
grounds, we believe that the Company lacks a sufficient basis to oppose the
inclusion of the Diamond A Proposal on the grounds that it is more than one
proposal.

Argument No. 2: The Company argues that the proposal has been substantially
implemented, and is therefore moot.

A shareholder proposal may be omitted under Rule 14a-8(i)(10), if the
action requested by the proposal has been "substantially implemented" by the
registrant. Release No. 34-020091 (August 1, 1983). On this basis, the Company
argues that the Diamond A Proposal may be omitted,

______________________

/1/ The principle authority relied upon by the Company is Edison International,
--------------------
SEC No. Action Letter, 1997 SEC No. Act. LEXIS 142 (January 22, 1997). Yet the
situation at issue in Edison is clearly distinguishable from the Diamond A
-------
Proposal. In .Edison, the proposals related to at least three separate and
-------
distinct concepts: (i) the number, composition and qualifications of the Board;
(ii) the procedures for electing directors, including nomination of quorum
procedures; and (iii) procedures for the Annual Meeting, including how long
board candidates should be allowed to speak. In contrast, the Diamond A.
Proposal involves a single issue: the establishment of an Independent Board of
Directors for QSII.
<PAGE>

purportedly because the Company has an independent board, and has recently
established nominating and compensation committees allegedly consisting of 75%
"independent" directors.

The Company's argument is wrong factually, and is contrary to recent
opinions of the Division. Factually, the QSII board is not in "substantial
compliance" with the Diamond A Proposal. The Diamond A Proposal, if adopted by
QSII's shareholders, would result in the establishment of an Independent Board
of Directors at QSII, which is in sharp contrast to the current board's
procedures. Listed below are four specific differences between the way in which
an Independent Board at QSII would operate and the practices of the current
board:

1. An Independent Board would be led by an Independent Chairman,
rather than Mr. Razin, QSII's current chairman, president and CEO;

2. The nominating and compensation committees would consist entirely
of Independent Directors./2/

3. An Independent Board would have a significantly greater
percentage of independent directors than the current QSII board; and

4. Consistent with the views expressed by The Blue Ribbon Committee
on Improving the Effectiveness of Corporate Audit Committees (Report and
-----------
Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of
- ------------------------------------------------------------------------------
Corporate Audit Committees (1999), hereinafter, the "Blue Ribbon Report")), an
- --------------------------
Independent Board would provide more effective oversight of management by
meeting on a regular basis outside the presence of management.

Given these changes -- which are structural changes and do not include the
qualitative potential benefits to QSII and its shareholders which Diamond A
believes will occur once QSII is led by an Independent Board -- it is difficult
to understand QSII's argument that the Diamond A Proposal has been
"substantially implemented" by QSII./3/

__________________
/2/ QSII's effort, in response to the Diamond A Proposal, to at last establish
nominating and compensation committees of the Board, only demonstrate further
that the Board is not independent. Each of these committees consists of the
---
identical four directors: Mr. Razin, and the three longest serving directors at
QSII. Omitted from both committees is the only QSII director who has served less
than five years on QSII's board, while Mr. Razin's position as committee member,
in addition to his other roles at QSII as chairman, president, and CEO, only
further solidifies his control over QSII's board.

/3/ Equally difficult to understand is the Company's argument that the Diamond
A Proposal's "definition of "Independent Director... goes far beyond the usual
and customary definition of an "independent" or "outside" directors. In fact,
the definition of Independent Director contained in the Diamond A Proposal is
largely indistinguishable from the definitions the Company ascribes in its
letter to, for example, the Council of Institutional Investors and the National
Association of Corporate Directors. What is clear, however, is that adoption of
the Diamond A Proposal would result in meaningful and significant changes to
QSII's board.
<PAGE>

The Company's legal argument that "the proposed requirement that more than
a majority of the directors be independent does not make any appreciable
difference" also is contrary to the Division's recent opinions on this issue.

For example, the Division has consistently recognized the real differences
which may occur if the percentage of independent directors of a Company's board
increases, and if this level is mandated in the Company's by-laws. Thus, in
General Motors Corp., SEC No-Action Letter, SEC No-Act. LEXIS 387, March 3,
- --------------------
1997, a shareholder requested that the Board take action to require that 90% of
the directors be independent. General Motors Corp. ("GM") argued that its
bylaws, which already required a majority of independent directors,
substantially implemented the standards for director independence sought by the
shareholder proposal. It further argued that the difference between the
shareholder request of 90% independence, and the existing GM by-law requirement
of majority independence "did not appear to constitute a significant difference
between the two proposals." General Motors at 387. GM argued that for practical
--------------
purposes, the historical fact that the percentage of independent directors
exceeded 80% also showed that there was not a significant difference between the
shareholder proposal and existing practice. GM argued therefore that the
proposal could be excluded because it had substantially implemented the
shareholder proposal.

The Division rejected GM's view that the proposal was moot, and stated that
it did not believe that the proposal could be omitted in reliance on 14a-
8c(i)(10). Yet the differences between the existing situation and QSII's
situation if the Diamond A Proposal is adopted are even greater than the
distinctions in General Motors. These differences include the following:
--------------

1. QSII does not have any by-laws that mandate an independent number
of
directors;

2. Prior QSII history has led to a board that has been run by an
inside director (Mr. Razin) and had at best, a slight majority of outside
directors. In contrast, the GM board was historically 80% independent and had a
long history of structural and practical independence; and

3. Diamond A proposes changes from QSII's historical practice of
allowing the board to be controlled by inside directors, while at GM the board
had a long tradition of independence and good corporate governance.

The Division's response to GM's arguments is instructive, and has
application in the present discussion. Specifically, in GM, the discrepancy
between the shareholder proposal under consideration and the existing state of
business at the time was considerably smaller than the discrepancy that exists
-------
between the Diamond A Proposal and QSII's current board procedures, and
practices. Yet in GM's case, the Division refused to agree that GM's actions
constituted "substantial implementation."

Furthermore, even if the QSII Board presently happens to have a slight
majority of outside directors, it has yet to commit itself formally to this form
of governance. The Proposal urges that the independent majority principle be
grounded in the Company's By-Laws, and that the percentage of Independent
Directors be increased. These facts alone are sufficient to defeat the Company's
<PAGE>

argument that the Diamond A Proposal is moot because the Company has already
been substantially implemented.

The Division has, in addition to the no-action request cited above,
consistently rejected the types of arguments raised on behalf of the Company.
For example, in Ametek, Inc., SEC No-Action Letter, 1995 No-Act. LEXIS 248, (Feb
-----------
14, 1994), the Division indicated that even where an issuer claimed to have a
truly independent board, a like shareholder proposal could not be considered
substantially implemented where differences remained in their definitions of
"independent."

Additionally, as with the current situation, the Ametek board did not
appear to have formally sanctioned the principle of an independent director
majority. See also Phillip Morris Companies Inc., SEC No-Action Letter, 1995 No-
-------------------------------------
Act. LEXIS 248, (Feb. 15, 1995) (proposal to create independent director's
committee that would evaluate management proposals to the board and generate
independent alternatives not substantially implemented by existence of current
non-employee director majority). Not only has the company failed to implement a
by-law amendment -- but also the committee's view equating a simple numerical
majority of arguably the Diamond A Proposal's request to establish an
Independent Board of Directors. Accordingly, the Diamond A Proposal was not
substantially implemented, and the Company's request for exemption based on Rule
14a-8(i)(10) should be denied.

Argument No. 3: The Proposal fails under Rule 14a-8(i)(1) in that it contravenes
the statutory framework established by California law and is therefore not a
proper subject for action by shareholders.

The Company sets forth a number of sub-arguments in Section 3 of its
letter, under the general argument that the Diamond A Proposal violates the
California Corporations Code ("CGCL"). Although not always clear, it appears
that the Company argues that the proposal intrudes upon the board's authority to
mange the business and affairs of the corporation in the following respects:

(a) the requirement of 75% independent directors intrudes on the ability
of the Board to identify, attract, and recommend to the shareholders
for approval a group of director candidates who are sufficiently
familiar with the company and its business to be able to competently
direct and manage the business affairs of the company;

(b) the Proposal interferes with the statutory requirement for the
management of the business and affairs of the corporation and the
exercise of all corporate power by the Board pursuant to Section 300
of the CGCL;

(d) the Proposal would cause the company to be in violation of
Section 708(c) of the CGCL;
<PAGE>

(e) the Proposal would cause one or more of the Company's 1999 nominee
directors to be improperly removed prior to the expiration of their
term of office; and

(f) The proposals intrude upon the Board's power to exercise sound
business judgment.

The primary no-action letter relied upon by the Company in support of all
of its arguments in this Section is Edison, supra. Yet Edison has no relevance
------ ----- ------ --
to any of the Company's arguments on these issues, as it explicitly did not
reach any of these issues. Indeed, Edison states that it provided no-action
------
support because the six proposals at issue violated the single proposal
requirement; the Staff explicitly did not "address the alternative bases for
---
omission upon which the Company relies." Thus, the Company's legal support for
its position has no merit.

The Company is wrong on each of these claims for other reasons as well. Our
specific responses to each argument are set forth below:

Argument No. 3(a:) The Company claims that the proposal may be eliminated under
Rule 14a-8(i)(8) because the requirement of 75% independent directors intrudes
on the ability of the Board to identify, attract, and recommend to the
shareholders for approval a ground of directors candidates that are sufficiently
familiar with the company and its business to be able to competently direct and
manage the business affairs of the company.

The Company's argument here has been repeatedly made to, and rejected by,
the Division. For example, in General Dynamics Corp., SEC No-Action Letter, 1996
----------------------
SEC No-Act. LEXIS 156. (February 5, 1996), the Division rejected General
Dynamic's ("GD") argument that a proposal requiting the GD Board to be composed
of a majority of independent directors be omitted on the grounds that although
it may appear to fall into the category of proposals which would enhance
"corporate responsibility," the proposal would allegedly limit the persons with
defense industry experience able to serve on GD's Board.

In the present case, QSII is repeating the very same argument which was
rejected by the Division in General Dynamics- namely, that a proposal that the
Board be composed of a majority of Independent Directors interferes with the
ordinary business operations of the Company because it prevents the Company from
finding qualified director candidates, and therefore should be omitted from the
proxy materials. The Division rejected this argument in General Dynamics, and it
should do so again.

Argument No. 3 (b) The Proposal does not interfere with the statutory
requirement that the Board manage the business and affairs of the corporation
pursuant to Section 300 of the CGCL.

The Company's claim that the proposal interferes with the statutory
authority of the Board, pursuant to CGCL(S)300, to manage the business and
affairs of the corporation is based upon a gross distortion of the Diamond A
Proposal, as well as a misunderstanding of California law.

First, the proposal does nothing more than create an Independent Board, in
part by having the Independent Directors meet separately at the end of each
board meeting. The proposal does not in
<PAGE>

any way change the nature of the Board responsibilities, nor does it attempt to
interfere with the statutory authority of the Board. See, e.g., Philip Morris
--- ---- -------------
Companies Inc., SEC No Action Letter. 1995 No-Act LEXIS 248, (Feb 15, 1995).
- --------------

Second nothing in California Law prohibits independent directors from
meeting on a regular basis. To the contrary, California Law has long recognized
the value from having special committees composed of independent directors
review various matters as a group, without the presence of management and/or
"inside" directors. See, e.g., Gaillliard v. Natomas Co., 286 Cal. Rptr. 702
--- ---- -------------------------
(1989).

The Company's argument that the proposal violates Section 307's notice
requirement for a special meeting of the Board is equally misguided. Again,
Diamond A's Proposal only provides that, as part of each board meeting, the
Independent Directors meet separately as a group "to discuss such maters as they
deem appropriate". No additional notice is required or appropriate for this
portion of the meeting. Rather, this portion of the meeting would presumably be
part of the regular meeting, the only difference being that some directors
(i.e., the inside directors) would be excluded from this portion of the meeting.
---
Having the independent directors meet separately as a group is common practice
for well governed corporations today, See, e.g., Blue Ribbon Report and the
--- ---- ------------------
Company's argument that this practice violates California Law only demonstrates
why QSII needs an Independent Board of Directors.

Argument 3(c).The Proposal does not allocate authority to a subset of
directors that should otherwise be exercised by the full Board.

Adoption and implementation of the Proposal would not result in any
improper delegation of responsibilities of rights or responsibilities
established under California State law. The board recently established (in
response to the proposal) a nominating committee, and thus there can be no
question that this committee is appropriate. Yet this is the only committee
----
required pursuant to the Diamond A Proposal.

The Company's apparent argument that the Independent Directors meeting
separately as a group somehow constitutes an illegal and unauthorized committee
is unprecedented in law and contrary to the current practices of most well
governed corporations. Again, however, it must be emphasized that the
independent directors meeting separately as a group does not constitute a
"special committee" (other than the Nominating Committee) and their having
discussions outside the presence of management-directors cannot be considered a
violation of California law.

Argument No. 3(d): The Company's argument that the proposal would cause the
company to be in violation of Section 708(c) of the CGCL is wrong.

Again, this argument has been previously rejected by the Division and is
contrary to well-established principles of corporate governance. QSII's argument
is that the candidate with the highest number of votes at the next 1999 meeting
may not be elected because of the requirement that 75% of the Board be
independent. According to the Company's argument, because the proposed by-law
amendment imposes qualifications for the board as a whole, it may violate
Section 708(c) and
<PAGE>

would intrude upon the rights of shareholders to cumulate their votes, as
permitted by Section 708(b) of the CGCL.

QSII's argument is incorrect in several respects. First, this line of
argument was rejected by the Division in Waste Management. Inc., SEC No-Action
----------------------
Letter, 1991 SEC No-Act LEXIS 450. (March 8, 1991). The proposal in Waste
-----
Management similarly requested that "the bylaws of Waste Management be amended
- ----------
to provide that the Board of Directors shall consist of a majority of
independent directors." In its argument that the Division take no action if the
Waste Management omitted the proposal, Waste Management argued that the proposal
would result in independent director candidates with fewer votes being elected
over non-independent director candidates with more votes, in derogation of state
statute. (Maryland corporate law similarly states that the candidates with the
most votes get elected in elections for corporate directors.) The Division
rejected the company's argument and did not grant Waste Management's request
that it recommend no action to the Commission.

Second, the argument assumes that QSII and/or others will nominate
directors such that the Board will not have independent directors comprising 75%
of the Board. In fact, however, QSII has not yet identified its director
nominees, and there is no reason to assume that a board, which has 75% of its
members as independent, will not obtain the most votes.

Finally, QSII's argument must be rejected because it would mean the end of
all eligibility requirements for boards. In fact, numerous companies, in
California and elsewhere, contain similar eligibility requirements for
directors. Such eligibility requirements have long been recognized as
appropriate, and the Diamond A Proposal is similarly legal under California Law.
Section 212(b)(4), CGCL.

Argument No. 3(e): The proposal would cause one or more of the Company's 1999
nominee directors to be improperly removed prior to the expiration of their term
of office.

QSII's characterization of the Diamond A Proposal is distorted and
tortured. There is nothing in the Diamond A Proposal that calls for the removal
of the Company's present directors, or of its 1999 nominee directors. The
Proposal simply recommends that the board be composed of Independent Directors,
and defines the terms "Independent" as it is used in the proposal. The Company
has failed to indicate how, under the Diamond A Proposal, it is or would be
required to remove any of its present or future directors. The proposal that the
Board be composed of a majority of Independent Directors can be implemented in
many ways that would not call for the removal of a single director. Among such
measures, for example, would be an increase in the number of seats on the board.

Based on the information provided, the Division should be unable to concur
with the Company's opinion that, to implement the proposal, the Company would be
required to remove directors and that the removal under these circumstances
would violate applicable state corporate law. Under the circumstances, the
Division should be unable to conclude that the company has met its burden of
demonstrating that omission of the proposal is proper, as is required under Rule
14a-8. See, e.g., General Dynamics Corp., SEC No-Action Letter, 1996 SEC No-Act.
--- ----
LEXIS 156, Feb. 5,
<PAGE>

1996 (Division declined to grant GD no action request regarding shareholder
request that the board of directors consist of majority of independent
directors.)

Argument 3(f) The proposals intrude upon the Board's power to exercise sound
judgment

In the matter under consideration, the Diamond A Proposal sets forth the
language of a proposed amendment to the bylaws of QSII, which recommends the
implementation of an Independent Board of Directors. QSII argues that the
proposal would intrude upon the Board's power to exercise sound business
judgment. The Company further argues that "the authority for such action is
vested exclusively in a company's board of directors...the proposals mandate
action that is beyond the shareholder's authority and would invade the province
of the Board."

In fact, it is well established under California law that bylaws may be
adopted, amended or repealed by approval of the outstanding shares. CGCL Section
211 states:

"Bylaws may be adopted, amended or repealed...by approval of the outstanding
shares."

Furthermore, under CGCL, the bylaws may contain any provision for the
conduct of the affairs of the corporation including the qualifications of
directors. Section 212(b) (4) of the CGCL states:

"(b) The bylaws may contain any provision, not in conflict with law or the
articles for the management of the business and for the conduct of the
affairs of the corporation, including but not limited to...

(4) The qualifications...of directors."

Thus California law, contrary to the arguments of the Company, expressly
grants shareholders the power to define qualifications of the directors through
amendments to the bylaws. Therefore the Diamond A Proposal, which recommends
amendment of the bylaws to define the qualifications for an independent board of
directors set forth in the Proposal does not violate of California law.

Furthermore, the Division has recognized the rights of shareholders to
amend corporate bylaws through shareholder proposals. In Mapco, Inc., SEC No-
-----------
Action Letter, SEC No Act LEXIS 2012, March 16, 1983, the shareholder proposal
related to a demand that the Company's bylaws be amended to require the Board of
Directors to establish a special committee of the board consisting of three
independent directors. Mapco argued that the proposal could be excluded on the
grounds that the proposal was not a proper subject for shareholder action. The
Division refused to concur in Mapco's argument that a shareholder proposal was
excludable. In rejecting the argument, the Division cited specific sections of
Delaware Law almost identical in language to corresponding section in the CGCL.
Specifically, the Division stated:

"We note that under Section 109 of the DGCL, shareholders "have the power
to make, alter and repeal by laws." The Commission has stated that the
burden is on the issuer to
<PAGE>

demonstrate that the rule (14a-8) is available to exclude a proposal from
the issuer's proxy material. We are unable to conclude that you have met
your burden of demonstrating that the bylaw provision contained in the
proposal is not a proper subject for shareholder action." Mapco at 2.
-----

Thus, as it has in other instances, the Division should not grant QSII's no
action request, as QSII has failed to meet its burden of demonstrating that the
proposed bylaw provision contained in the Diamond A Proposal is not a proper
subject for shareholder action on the grounds that the proposal would require a
violation of California law.

Argument No. 4: The proposals may be omitted under rule 14a-8(i)(7) on the
grounds that the proposal deals with matters relating to and in contravention of
the ordinary functions of the Board of Directors and the ordinary business of
the Company.

QSII next seeks to omit Diamond A's Proposal from its proxy materials on
the grounds that the proposal, to the extent that it seeks the formation of a
Nominating Committee (which QSII's current board has recently established), as
well as a group of Independent Directors who will meet separate and apart from
the other non-independent directors at the end of each board meeting relates
solely to and in contravention of the ordinary functions of the Board of
Directors and the ordinary business of the Company. Again, no legal support is
offered for this view, and no such authority is available. To the contrary, the
Division's recent rulings are directly to the contrary.

For example, in its recent consideration of a no action request by RJR
Nabisco ("RJR"), (RJR Nabisco Holding Corp., 1998 SEC No-Act. LEXIS 337,
---------------------
February 23,1998), the Division refused to agree with the proponent of a similar
argument. In RJR, the Company requested that the Division grant no action if it
omitted a shareholder proposal which sought the formation of a Board of
independent directors. The company argued:

"To the extent that the proponent is seeking to direct how board committees
will function and what matters they should considering evaluating the
operation of the company and its subsidiaries, the Proposal relates to the
conduct of ordinary business operations." (RJR at 17.)
----

In further support of its argument, RJR argued that the Board was in a
better position to assure how the company was organized, and how management and
staff resources should be allocated. The Division rejected that argument, and
found that the proposal at issue could not be excluded under this provision.

Furthermore, the SEC has been very specific in addressing the meaning of
the term "ordinary business." In its release accompanying the recent amendments
to the rule, Release No. 34-40018, "Amendments To Rules on Shareholder
Proposals," 63 FR 29106, Fed Register, Vol. 63, No. 102, May 28, 1998), the SEC
reiterated the standard for determining when a proposal relates to "ordinary
business." The standard originally articulated in the Commission's 1976 release,
provided an exception for certain proposals that raise significant social policy
issues. See Exchange Act Release No. 12999 (Nov. 22, 1976) (41 FR 52994.)
(Proposals "which have significant policy, economic or
<PAGE>

other implications inherent in them" will not be excluded by Rule 14a-8(c)(7)
and that the Rule would only restrict those "proposals that deal with truly
'ordinary' business matters...that are mundane in nature and do not involve any
substantial policy or other consideration.")

A shareholder proposal may not be excluded under Rule 14a-8(i)(7) if it
raises important policy issues. The Proposal to establish an Independent Board
of Directors clearly raises such important policy matters. The issue of the
independence and/or governance practices of a Board of Directors of a public
company cannot be considered "mundane in nature," especially in a situation,
such as that at QSII, where significant corporate governance problems exist and
how to address these problems raises profound policy issues that are the
continuing subject of public debate.

Argument No. 5: The Company also states that the proposal may be eliminated
under Rule 14a-8(i)(8) on the grounds that the requirement of 75% independent
directors is exclusionary and narrow in scope, and intrudes on the ability of
the Board to identify, attract, and recommend to the shareholders for approval a
ground of directors candidates that are sufficiently familiar with the company
and its business to be able to competently direct and manage the business
affairs of the company.

This argument is the same that was set forth under several previous
arguments, and fails for the same reasons set forth above.

Respectfully submitted,

/s/ David J. Berger
David J. Berger

cc: Mr. Andrew E. Shapiro
Mr. Thomas J. Crane
<PAGE>

[Letterhead of Wilson Sonsini Goodrich & Rosati, Professional Corporation]

April 22, 1999

VIA FACSIMILE AND OVERNIGHT DELIVERY

Sheldon Razin
President and CEO
Quality Systems, Inc.
17822 East 17th Street, #210
Tustin, CA 92780

Re: Shareholder Proposal for Inclusion in
Proxy Materials by Diamond A Partners

Dear Mr. Razin:

My firm is counsel to Lawndale Capital Management, LLC, which is the
general partner of Diamond A Partners, L.P. ("Diamond A"). On March 29, 1999,
Diamond A, an eligible shareholder of Quality Systems, Inc. ("Quality Systems"
or the "Company") under Rule 14a-8 of Regulation 14A under the Securities
Exchange Act of 1934 as amended, submitted a shareholder proposal to Quality
Systems for inclusion in its proxy materials for the upcoming annual meeting of
the Company. We have been asked by Diamond A to respond to your letter dated
April 8, 1999, in which you contend that Diamond A's shareholder proposal
("Diamond A's Proposal") may be excluded from the Company's 1999 proxy statement
under Rule 14a-8(c), promulgated under the Securities Exchange Act of 1934
("Rule 14a-8(c)"). Based upon our review of the relevant materials, we do not
believe that Diamond A's Proposal is excludable under the cited sections.

Rule 14a-8(c) provides that a shareholder may submit no more than one
proposal to a company for inclusion in the proxy materials for a particular
shareholders' meeting. The Staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the "Staff") has repeatedly taken the
position that, as here, a proposal for purposes of Rule 14a-8(c) may include the
definitional elements of the proposal provided that these elements all relate to
the specific concept set forth in the proposal. Thus here, for example, Diamond
A's Proposal defines the role of an independent Board of Directors to govern
QSII, and we believe would be so considered by the Staff.

An analysis of the Staff's position on "single proposal cases" clearly
supports this position. For example, in 1992 a shareholder submitted a proposal
to McDonald's Corp. relating to (i) potential conflicts of interest involving
McDonald's officers and directors, (ii) limitations on McDonald's executive
compensation, and (iii) limits on McDonald's ability to award stock options.
After objection by McDonald's, the shareholder resubmitted his proposal,
eliminating the conflicts of interest issue. McDonald's, in its submission to
the Staff, asked that the Staff take "no action" if McDonald's excluded the
revised proposal regarding executive compensation and stock options on the
grounds that it still constituted multiple proposals.

The Staff rejected MacDonald's' position, concluding instead that the
shareholder's proposal was a single proposal. The Staff's reasoning was that
the separate elements of the proposal related to the single concept of executive
compensation. McDonald's Corp., SEC No-Action Letter, 1992 SEC No-Act. LEXIS
----------------
1101 at *1, December 2, 1992.

(16 of 18)
<PAGE>

A similar situation arose out of the request by Computer Horizons Corp. for
a no-action letter after a shareholder had proposed that: (1) the company's
shareholder rights plan be modified or terminated; (2) existing contracts with
directors or officers providing additional compensation after a change in
control be modified or terminated; (3) existing contracts with directors or
officers providing for additional assurances of continued employment after a
change in control be modified or terminated; and (4) each plan, contract or
arrangement which would significantly discourage potential offers to acquire the
company be modified or terminated. Computer Horizons argued that such proposals
were actually four different proposals, and that the shareholder was merely
"attempting to circumvent the single proposal requirement of the Rule by
characterizing disparate proposals as action implementing a single policy." The
Staff rejected this argument, stating that the proposal was a single proposal,
and that all the elements of the proposal related to one concept -- the
elimination of anti-takeover defenses. Computer Horizons Corp., SEC No-Action
-----------------------
Letter, 1993 SEC No-Act. Lexis 572 at *1, April 1, 1993.

The Staff has also concluded that multi-element proposals should be
considered single proposals under Rule 14a-8(c) where all "elements" of a
proposal related to the single issue of executive compensation. See
---
Ferrofluidics Corp., SEC No-Action Letter, 1992 SEC No-Act. LEXIS 932, September
- -------------------
18, 1992 (elements relating to base pay and warrants granted to executives);

Westinghouse Electric Corporation, SEC No-Action Letter, 1995 SEC No-Act. LEXIS
- ---------------------------------
169, January 27, 1995 (elements including base compensation, bonuses, retirement
compensation, performance based pay found to relate to the single concept of
executive compensation). The Staff also concluded that a proposal which defined
numerous issues relating to a change of control transaction was a single
proposal because it related to a "request to sell or merge the company, and
suggested procedures for implementing this proposal." Todd Shipyards Corp., SEC
--------------------
No-Action Letter, 1992 SEC No-Act. LEXIS 876, August 13, 1992 (elements included
retaining an independent investment bank and establishing a committee of
independent directors to consider and recommend to the board the best available
offers for merger or sale).

These situations are all directly analogous to Diamond A's Proposal.
Diamond A's Proposal, like those above, relates to a single issue, albeit the
issue of an independent board of directors. Nothing in Diamond A's Proposal
relates to other issues such as, for example, executive compensation,
Shareholder Rights Plans, or change of control transactions. Rather, Diamond
A's Proposal is one proposal, specifically defining the role of an independent
board at QSII, and we believe this is how it would be viewed by the Staff.

The Staff recently addressed a shareholder proposal which, like Diamond A's
proposal, involved issues of corporate governance. Specifically, in 1998 a
shareholder of Boeing Co. requested that Boeing include in its proxy materials a
single proposal that contained a number of specific proposed actions relating to
the election process for the Board of Directors. See The Boeing Company, SEC
--- ---------- -------
No-Action Letter, 1999 SEC No-Act. LEXIS 232, February 18, 1998. The
shareholder proposal requested that the Board of Directors take certain steps to
amend the company's governing instruments, including the company's by-laws, to
provide for the annual election of the full Board of Directors. The proposal
also required that a majority vote of outstanding shares be required to change
this resolution.

Boeing, like QSII here, requested that the Staff agree that the proposal be
excluded on Rule 14a-8(c) grounds, arguing that the proposal consisted of the
following three proposals:

-that the Board of Directors "take the necessary steps to amend the
company's governing instruments" to provide for the annual election of
the full Board of Directors;

-that the Board of Directors take the necessary steps to limit director
service to 15 years; and

-that any change in the by-law provisions created by the first two
proposals must be approved by the holders of a majority of Boeing's
outstanding shares.

(17 of 18)
<PAGE>

The Staff rejected this argument, finding that the proposal was in fact one
proposal. In its letter rejecting Boeing's argument that the proposal could be
omitted under Rule 14a-8(c), the Staff stated that "[T]he revised proposal
requests that the Board take the necessary steps to ensure that all Directors
are elected annually and requests restriction on the ability to change that
requirement."

Also during the 1998 proxy season, a shareholder proposal submitted by
TIAA-CREF was included in Walt Disney Co.'s proxy materials for its 1998 annual
stockholder meeting. The proposal, which is very similar to Diamond A's
proposal, requested that the company restructure the Board of Directors so that
it be largely composed of "Independent Directors." It also requested that the
Audit, Compensation, and Nominating Committees of the Board of Directors consist
entirely of independent directors. It also defined the term, "Independent
Directors." Walt Disney Co. does not appear to have objected to this proposal on
Rule 14a-8(c) grounds -- presumably because the issue has been settled in light
of the "no action" letters cited above.

As with Boeing and Disney, Diamond A's Proposal is a single proposal for
purposes of Rule 14a-8(c). Diamond A's single proposal defines the role of an
independent board of directors to govern QSII. The definitional elements of
this proposal are not separate proposals, but rather merely explain how the
board shall operate to ensure that QSII is governed by an Independent Board.
Given the Staff's history of concluding that such explanations or definitions
are not separate proposals which can be excluded from the company's proxy
materials on Rule 14a-8(c) grounds, we believe that the Company lacks a
sufficient basis to oppose the inclusion of Diamond A's proposal on the grounds
that it is more than one proposal. Accordingly, we hereby request that QSII
include the Diamond A Proposal in its 1999 proxy so that QSII shareholders may
resolve this critical issue.

Please call me if you have any further questions on this matter.

Very truly yours,

WILSON SONSINI
GOODRICH & ROSATI
Professional Corporation

/s/ David J. Berger

David J. Berger

cc: Andrew Shapiro
Page Mailliard, Esq.

(18 of 18)
<PAGE>

EXHIBIT E
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549

[LOGO]

June 9, 1999

Thomas J. Crane
Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626-1998

Re: Quality Systems, Inc.
Incoming letter dated May 5, 1999

Dear Mr. Crane:

This is in response to your letters dated May 5, 1999 and May 17, 1999
concerning the shareholder proposal submitted by Diamond A Partners, L.P. to
Quality Systems. We also have received letters from the proponent's counsel
dated May 7, 1999 and May 14, 1999. Our response is attached to the enclosed
photocopy of your correspondence. By doing this, we avoid having to recite or
summarize the facts set forth in the correspondence. Copies of all of the
correspondence also will be provided to the proponent.

In connection with this matter, your attention is directed to the
enclosure, which sets forth a brief discussion of the Division's informal
procedures regarding shareholder proposals.

Sincerely,

/s/ Catherine T. Dixon
Catherine T. Dixon
Chief Counsel

Enclosures

cc: David J. Berger
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
<PAGE>

June 9, 1999

Response of the Office of Chief Counsel
Division of Corporation Finance
- -------------------------------

Re: Quality Systems, Inc.
Incoming letter dated May 5, 1999

The proposal amends Quality Systems' bylaws to require an independent
board of directors.

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(f). In our view, Quality Systems has not met its
burden of establishing that the proposal exceeds the one proposal limitation in
rule 14a-8(c). Accordingly, we do not believe that Quality Systems may omit the
proposal from its proxy materials in reliance on rules 14a-8(c) and 14a-8(f).

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(i)(1). In our view, Quality Systems has not met its
burden of establishing that the proposal is an improper subject for shareholder
action under applicable state law. Accordingly, we do not believe that Quality
Systems may omit the proposal from its proxy materials in reliance on rule 14a-
8(i)(1).

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(i)(7). Accordingly, we do not believe that Quality
Systems may omit the proposal from its proxy materials in reliance on rule 14a-
8(i)(7).

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(i)(8). Accordingly, we do not believe that Quality
Systems may omit the proposal from its proxy materials in reliance on rule 14a-
8(i)(8).

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(i)(9). Accordingly, we do not believe that Quality
Systems may omit the proposal from its proxy materials in reliance on rule 14a-
8(i)(9).

We are unable to concur in your view that Quality Systems may exclude the
proposal under rule 14a-8(i)(10). Accordingly, we do not believe that Quality
Systems may omit the proposal from its proxy materials in reliance on rule 14a-
8(i)(10).

Sincerely,

/s/ Carolyn Sherman
Carolyn Sherman
Special Counsel
<PAGE>

DIVISION OF CORPORATION FINANCE
INFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALS

The Division of Corporation Finance believes that its responsibility with
respect to matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other
matters under the proxy rules, is to aid those who must comply with the rule by
offering informal advice and suggestions and to determine, initially, whether or
not it may be appropriate in a particular matter to recommend enforcement action
to the Commission. In connection with a shareholder proposal under Rule 14a-8,
the Division's staff considers the information furnished to it by the Company in
support of its intention to exclude the proposals from the Company's proxy
materials, as well as any information furnished by the proponent or the
proponent's representative.

Although Rule 14a-8(k) does not require any communications from
shareholders to the Commission's staff, the staff will always consider
information concerning alleged violations of the statutes administered by the
Commission, including argument as to whether or not activities proposed to be
taken would be violative of the statute or ru le involved. The receipt by the
staff of such information, however, should not be construed as changing the
staff's informal procedures and proxy review into a formal or adversary
procedure.

It is important to note that the staff's and Commission's no-action
responses to Rule 14a-8(j) submissions reflect only informal views. The
determinations reached in these no-action letters do not and cannot adjudicate
the merits of a company's position with respect to the proposal. Only a court
such as a U.S. District Court can decide whether a company is obligated to
include shareholder proposals in its proxy materials. Accordingly a
discretionary determination not to recommend or take Commission enforcement
action, does not preclude a proponent, or any shareholder of a company, from
pursuing any rights he or she may have against the company in court, should the
management omit the proposal from the company's proxy material.