Securities and Exchange Commission
Washington, DC 20549
Schedule 13D
Under the Securities Exchange Act of 1934
Quality System, Inc.
(Name of Issuer)
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Common Stock, $.01 Par Value
(Title of class of securities)
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747582104
(cusip number)
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Steven Wolosky, Esq.
Olshan Grundman Frome Rosenweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
(212) 753-7200
(Name address and telephone number of person
authorized to receive notices and communications)
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Aug 4, 1999
(Date of event which requires filing of this statement)
If this filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13-1(b)(3) or (4), check the
following box [].
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 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).
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AHMED HUSSEIN ###-##-####
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
3. SEC USE ONLY
4. SOURCE OF FUNDS PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(D) OR 2 (E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES AND EGYPT
7. SOLE VOTING POWER
1,147,400
8. SHARED VOTING POWER
0
9. SOLE DISPOSITIVE POWER
1,147,400
10. SHARED DISPOSITIVE POWER
0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,147,400
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.46%
14. TYPE OF REPORTING CLASS
IN
Item 4 is amended as follows:
Item 4. Purpose of transaction. On August 5, 1999, the Reporting Person
reached an agreement with the Company. The agreement is more fully set forth
in a Memorandum of Understanding between the Company, the Reporting Person and
Lawndale Capital Management, LLC, a copy of which is attached hereto as
Exhibit 1 and incorporated herein by reference.
Item 7.
MEMORANDUM OF UNDERSTANDING
August 4, 1999
Ahmed Hussein and Lawndale Capital Management, LLC ("Lawndale") are substantial
shareholders of Quality Systems, Inc. (the "Company").
Sheldon Razin, Dr. John Bowers, Gordon Setran and William Bowers (the
"Directors") are four of the six Directors of the Company, the other two being
Patrick Cline, President of an operating division of the Company, and Janet
Razin, Sheldon Razin's wife. The Directors constitute all the members of the
Nominating Committee and the Transaction Committee of the Company's Board.
Mr. Hussein, Lawndale and the Directors believe that a proxy contest for
control of the Company will produce an inconclusive result and will lead to
continued infighting among shareholder groups and directors and will be
destructive of shareholder values. The parties agree that shareholder groups
should reconcile their differences by compromise and agreement and accordingly
have reached the following understandings:
1. The Board has adopted an amendment of the By-Laws containing corporate
governance provisions in the form attached as Exhibit A to this memorandum.
2. The Directors, acting as the Nominating Committee, will nominate and
recommend to the full Board the following candidates for election at the Annual
Meeting:
Sheldon Razin
Ahmed Hussein
Mohammed Tawfick El-Bardai
Emad A. Zikry
Dale M. Hanson
Frank Meyer
William Small
Mr. Hussein and Lawndale will support these candidates.
3. Following the annual meeting, Mr. Hussein and Mr. Razin will each
recommend to the Board that the Transaction Committee be composed of Ahmed
Hussein, Dale M. Hanson, Frank Myer, and William Small, that the Nominating
Committee be composed of Ahmed Hussein, Frank Myer, William Small, and Mohammed
Tawfick El-Bardai and that the Compensation Committee be composed of Ahmed
Hussein, Emad A. Zikry, Frank Myer, and William Small.
4. A lead Director will be chosen by the Board from among the independent
directors. Mr. Razin will recommend to the Board (a) that Mr. Hussein be
elected Co-Chairman of the Board, with power to preside at Board meetings in
the absence of the Chairman but without executive powers, and (b) that Mr.
Hussein be chosen to serve as Lead Director.
5. The Company will immediately commence a search for a new President and
Chief Operating Officer.
6. When a candidate acceptable to the Board has been identified and elected
to the position of President and Chief Operating Officer, Mr. Razin will
continue as Chairman and CEO with the understanding that after six months, if
the independent members of the Board deem the new candidate to be ready to
become Chief Executive Officer, Mr. Razin will step down as Chief Executive
Officer, although continuing as Chairman for a period of two years or such
longer period as the Board requests.
7. The parties believe that the corporate governance provisions referred to
in Item 1 above afford substantially complete protection to the shareholders
and accordingly Lawndale will withdraw all the proposals it has put forward,
including the proposal formerly to have been included in the proxy statement
and the proposals identified in the letter dated July 15, 1999.
8. Mr. Razin and the Directors will recommend to the Board that the
shareholder rights plan be terminated immediately by redemption of the Rights.
9. If any litigation should be initiated by any person based on the
understandings set forth in this memorandum or the implementation of such
understandings, the parties will use their best efforts to cause the Company to
indemnify the parties to this memorandum and the persons designated herein as
nominees for election to the Board of Directors, against any damages, costs,
expenses and reasonable attorneys' fees incurred in the defense of any such
claims or litigation.
10. Any press releases or publicly filed documents referring to the
understandings set forth herein will avoid negative characterization of any
party or the policies previously followed by any party.
11. The foregoing understandings will be implemented promptly as follows:
a. The Board has adopted the corporate governance provisions
b. Adoption of the corporate governance provisions has been publicly
announced
c. Nominating Committee nominates the "slate"
d. Board approves "slate" and authorizes inclusion in the Company's proxy
statement for the annual meeting
e. Board adopts resolutions for redemption of the Rights under the rights
plan
f. Public announcement by the Company of selection of Board's candidates,
stating that the slate includes candidates proposed by Ahmed Hussein and
Lawndale Capital, stating that search for President/COO has been
Commenced, stating that rights plan is being terminated, and stating that
an accord has been reached between the Company's board and the Hussein
and Lawndale groups.
g. Separate, concurrent public announcement by Ahmed Hussein that he
supports the slate
h. Mr. Hussein, Mr. Razin and Lawndale file appropriate 13D amendments
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