You first **have** to remove the quill stem. To remove you undo the bolt from the top (blue arrow), and then you will probably need to tap it lightly with a hammer to push the bung nut out the bottom so it's loose enough to remove.

Once you remove the stem, you need to remove the headset lock nut (red arrow). Once this is removed, you can remove the headset nut/race (yellow arrow). 

Watch out for the bearings inside the headset, they may be in a cage, they may be loose, or they may be in a worn out cage that doesn't hold them properly any more. 

[![enter image description here][1]][1]




Here is a general quill stem diagram for you to understand what locks it in place
[![enter image description here][2]][2]


And here is a general threaded headset diagram. 
[![enter image description here][3]][3]


  [1]: https://i.sstatic.net/qLTZl.jpg
  [2]: https://i.sstatic.net/ph70Q.png
  [3]: https://i.sstatic.net/KRkdT.png