According to the SEC Filing 10-K dated June 27, 2003, on January 14, 2003, the state court granted preliminary approval of the settlement, and approved a notice of the settlement that was mailed to shareholders who were potential class members. Two additional class members opted out of the settlement, and their requests were filed with the Court. On April 14, 2003, the class action settlement was approved by the Court and an Order and Final Judgment was entered dismissing the entire action with prejudice. The terms of the settlement call for a cash payment to plaintiffs, fully funded by the Company's directors and officers liability insurance.

By the Notice of Proposed Settlement dated January 14, 2003, the settlement was for $1.7 million in cash.

According to the firm's 10-K dated 6/28/2000, on April 22, 1997, a purported class action entitled JOHN P. CAVENY v.QUALITY SYSTEMS, INC., ET AL. was filed in the Superior Court of the State of California for the County of Orange, in which Mr. Caveny, on behalf of himself and all others who purchased the Company's Common Stock between June 26, 1995 and July 3, 1996, alleges that the Company, and certain officers, directors, as well as other defendants not affiliated with the Company, violated California Corporations Code Sections 25400 and 25500, California Civil Code Sections 1709 and 1710, and California Business and Professions Code Sections 17200 et. seq., by issuing positive statements about the Company that allegedly were knowingly false, in part, in order to assist the Company and the individual defendants in selling Common Stock at an inflated price in the Company's March 5, 1996 public offering and at other points during the class period. On January 25, 1999, the court denied plaintiffs' motion to certify thclass representative and class legal counsel. Plaintiffs have appealed that decision. On February 25, 2000, the Fourth District Court of Appeals affirmed the order disqualifying the class legal counsel. On May 9, 2000, the Court of Appeals issued its Remittur certifying its decision as final. Plaintiff will seek new class counsel, however, the named defendants will again have the opportunity to oppose class certification.

On May 14, 1997, a second purported class action entitled WENDY WOO v.
QUALITY SYSTEMS, INC., ET AL. was filed in the same court. This complaint, which has been consolidated with the Caveny lawsuit, essentially repeats the allegations in the Caveny lawsuit and seeks identical relief. The Company and the other named defendants successfully demurred to the plaintiffs' claim under California Civil Code Sections 1709 and 1710, and that claim, which served as the only basis for plaintiffs' request for punitive damages, has been dismissed from both actions.

On July 1, 1997, a third purported class action entitled WADE CHENEY v.
QUALITY SYSTEMS, INC., ET AL. was filed in the United States District Court of the Central District of California, Southern Division. The complaint makes essentially the same factual allegations as in the Caveny and Woo complaints, and purports to state claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and under Section 20(a) of said Act. By Court order dated August 13, 1997, this action was stayed temporarily and the Court reserved jurisdiction to lift the stay after all matters are final in the Caveny and Woo actions or if otherwise appropriate, and on August 15, 1997 the case was removed from the Court's active caseload. The Company denies all allegations of wrongdoing made in this suit, considers the allegations groundless and without merit, and if the stay is ever lifted, the Company intends to vigorously defend against this action.

The original complaint alleges that Quality Systems and certain of its officers and directors violated federal securities laws by making false representations that Quality Systems was effectively competing in a rapidly growing industry and was well positioned to achieve strong revenue and earnings per share ("EPS") growth, was enjoying very strong demand for its products, and that Quality Systems' merger with Clinitec International, Inc. was succeeding, all of which would result in the company achieving substantial sequential revenue and EPS gains in fiscal 1997 and 1998. The Complaint alleges that Quality Systems and its insiders sold over 2.2 million shares of stock at artificially inflated prices for over $43.4 million. In addition, in March 1996, the company completed a secondary offering of its stock, in which the company and its founder sold 1,000,000 and 676,000 shares of Quality Systems stock, respectively, at $22 1/4 per share for a total of $7.7 million. The Complaint alleges that, in early July 1996, after defendants had completed their sales of stock, Quality Systems announced that its net income and EPS revenues were declining due to weak sales of its own and Clinitec's products. The Complaint alleges that the company's stock declined to $11 3/4 per share from its Class Period high of $35 1/4 per share.