Quality Systems Reports Changes

Quality Systems Inc. appears to be closer to heading off a proxy battle at its September annual meeting after it released details of corporate changes its board of directors adopted last week.

The Tustin medical software company provided more details Thursday of an agreement by its board of directors to make at least three-quarters of the board independent, mollifying some of the concerns of one of its most vocal critics, Lawndale Capital Management.

Lawndale is a San Francisco money management firm that owns 9.99% of Quality Systems’ stock.

The company, in a document filed Thursday with the Securities and Exchange Commission, also outlined a variety of board committees and their composition, some of which were sought by Lawndale.

The plan also includes a provision for a separate lead director if the head of Quality Systems, Sheldon Razin, continues to be both chairman and chief executive.

Razin has been battling over the board’s independence with Lawndale and shareholder Ahmed Hussein, who holds an 18% stake in Quality Systems. Lawndale and Hussein have proposed three candidates apiece for a new board.

On Thursday, Lawndale’s manager, Andrew Shapiro, appeared to be pleased with the details outlined, and indicated that they could lead to a withdrawal of some items that Lawndale is asking shareholders to vote for at the September meeting to make the board more independent. Hussein and Razin were not available for comment.