Filed With the Securities and Exchange Commission on May 28, 2008
Click
here for a more detailed response to Mr. Hussein's 13D
- The views of a majority of the Board of Directors are set forth below:
I. General Response
Mr. Hussein’s filing is materially inaccurate and misleading.
He has repeatedly displayed a disregard for the truth and
an unwillingness to behave in a constructive manner as
a responsible director of a public company as further described
below. His actions have been and continue to be detrimental
to the shareholders of our Company. Despite his unfounded
protests, the majority of our Board, representing a majority
of our shareholders, is committed to creating value for
all of our shareholders.
II. General Rebuttal to Main Themes of Ahmed’s
13D
Mr. Hussein’s 13D theme is that he is a champion of good corporate governance.
Nothing could be further from the truth. In fact, he has in the past and
continues to exhibit behavior that is inconsistent with good corporate governance.
He has failed to attend Board and committee meetings in protest, failed to
prepare for meetings, been unable to work with other Board members in a collegial
and collaborative manner and waged frequent, unsubstantiated attacks against
other directors, advisors and company counsel. He has submitted public
filings to the SEC that contain inaccuracies and misstatements, and violated
Company policy and compromised the Company with respect to sensitive and
confidential Company information. As a result of his behavior, the majority
of the Board of Directors has resolved that Mr. Hussein will not be
nominated as a candidate for the Board of Directors at the 2008 annual shareholders
meeting. |
1.0 The Chairman of QSI (Sheldon Razin) controls
corporate governance at QSI
This statement is false.
The Board acting as a whole controls corporate governance,
not Sheldon Razin.
2.0 The reasons the parties entered into the Settlement
Agreement
A little background is necessary here. Mr. Hussein launched
a proxy fight and
sought to elect three directors to the
Board at the Company’s annual meeting on September 21, 2005.
When only two of his nominees were elected to the Board,
he claimed voting procedure irregularities and appealed to
the independent inspector of elections, IVS. IVS rejected
his claim. He then filed suit in Superior Court in Orange
County, California. He lost again. He then launched an appeal
of his case. This process led to Mr. Hussein and the Company
entering into a settlement agreement on August 8, 2006. QSI
hoped to save QSI shareholders the expense associated with
further litigation. It offered to give Mr. Hussein
a third seat on QSI’s Board and representation on key committees
in exchange for a promise of, among other things, no litigation
for two years (until the 2007 annual shareholders’ meeting).
Furthermore, Mr. Hussein acknowledged the independence of
Mr. Razin and promised to refrain from attacking him or the
Company on such basis during the term of the Settlement Agreement. In
the course of the negotiations with Mr. Hussein’s counsel,
Mr. Hussein said he would not make a direct statement confirming
Mr. Razin’s independence. Rather, he said that since
the Settlement Agreement specified that Mr. Razin would serve
on Committees that required all of the members to be independent,
the Agreement would suffice to confirm Mr. Razin’s independence. In
essence, Mr. Hussein obtained a third seat on the Board and
significant representation on the Company’s committees. QSI
obtained two years of freedom from continued harassment,
legal expense and negative publicity (which the Company
believed
was hurting its sales).
3.0 The Settlement Agreement between the
Company and Ahmed Hussein dated 08/08/06 –
a copy of the Settlement Agreement may be viewed by
clicking
here.
Mr. Hussein told the Company that he had
certain expectations
This is inconsistent with the terms of the Agreement
and irrelevant. The Settlement Agreement spelled out
the expectations of the parties to the Agreement. Furthermore,
Mr. Hussein and his lawyers worked and reworked the
Settlement Agreement consistently during a period of
approximately thirty days after the Agreement was first
drafted. He was not in any way misled or enticed into
signing the Agreement. He and his counsel understood
every term in its entirety.
The Company violated the Settlement Agreement
This is not true. In fact, Mr. Hussein has continually
violated the Settlement Agreement. Specifically, almost
immediately after he entered into the Settlement Agreement
whereby he implicitly acknowledged Mr. Razin’s independence
and promised not to attack him or the Company on such
grounds, he placed a phone call to Nasdaq in an attempt
to get that body to investigate the Company and Mr.
Razin’s independence. (It should be noted that after
examining the facts, Nasdaq promptly closed the matter.)
The Settlement Agreement prohibited the
Company from retaining the services of its existing
general counsel
The Settlement Agreement did say that the Company would
hire new Board Counsel in a
prescribed manner. The Board Counsel would also
take the minutes of Board meetings. The Company did
exactly that. It hired Mark Shurtleff, a partner
in the firm of Gibson, Dunn & Crutcher – a well
known, large international law firm. Mr. Shurtleff
then proceeded to take the minutes of the Board meetings.
Mr. Hussein, continuing the practice he has adopted
with the Company’s general counsel, verbally harassed
Mr. Shurtleff, accusing him of taking “concocted and
inaccurate” Board meeting notes.
It is important to note that Section 3.3 of the Settlement
Agreement states: “Nothing in this section
shall limit the Company’s ability to seek legal advise
or representation from any attorney or law firm. including
attorneys or law firms that it has retained in the past.” This
provision clearly states that the Company could continue
to use the services of its existing general counsel, which
it has engaged in such capacity over the past 11 years. |
Quality Systems 2008 Proxy Contest vs. Ahmed Hussein