| Item 1.01. | Entry into a Material Definitive Agreement. |
On February 27, 2019, Computer Programs and Systems, Inc. (the “Company”) entered into a Support Agreement (the “Support Agreement”) with Gilead Capital Master Fund Ltd., Gilead Capital LP, Gilead Capital GP LLC and Jeffrey A. Strong (collectively, the “Gilead Group”) and certain of the Gilead Group’s affiliates. The Gilead Group is the beneficial owner of approximately 7.6% of the Company’s outstanding shares of common stock.
Simultaneously with the execution of the Support Agreement, the Company appointed Jeffrey A. Strong to fill the vacancy in Class I of the Board of Directors (the “Board”) resulting from John C. Johnson’s resignation from the Board on November 15, 2018, with a term expiring at the Company’s 2021 Annual Meeting of Stockholders (the “2021 Annual Meeting”). The Company has also agreed to, among other things, (i) appoint Mr. Strong to the Nominating and Corporate Governance Committee or the Compensation Committee of the Board no later than the Company’s 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”), (ii) appoint Glenn P. Tobin as the independent Chairperson of the Board no later than the 2019 Annual Meeting, (iii) nominate, recommend and solicit proxies for the election of an additional independent director, to be mutually agreed upon by the Company and the Gilead Group in accordance with the terms of the Support Agreement (the “New Director Nominee”), at the Company’s 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”); and (iv) fix the size of the Board to 9 directors immediately following the 2020 Annual Meeting through the remainder of the Standstill Period (as defined below). The Support Agreement also provides that, during the Standstill Period, if Mr. Strong is unable to serve as a director due to his death or incapacity or a family emergency or other emergent circumstance, the Gilead Group will be entitled to recommend to the Nominating and Corporate Governance Committee and the Board a substitute person (who meets certain independence and experience criteria) to fill the resulting vacancy.
Under the Support Agreement, the Gilead Group is subject to certain customary standstill restrictions that, among other things, prohibit the Gilead Group from acquiring an economic interest in more than 10.0% of the Company’s outstanding common stock and from taking certain actions with respect to extraordinary transactions and other matters, as described in the Support Agreement. The standstill restrictions apply until the date that is thirty (30) days prior to the deadline for the submission of stockholder nominations for directors at the 2021 Annual Meeting (the “Standstill Period”). However, the Standstill Period will terminate immediately in the event that the New Director Nominee is not selected thirty (30) days prior to the deadline for the submission of stockholder nominations for directors at the 2020 Annual Meeting. Mr. Strong has agreed to resign from the Board if a court of competent jurisdiction concludes that the Gilead Group has violated any provision of the Support Agreement or a related confidentiality agreement and has agreed to offer to resign from the Board ifthe Gilead Group ceases to collectively beneficially own at leastone-third of the number of shares of the Company’s common stock that it owned on the date of the Support Agreement.
During the Standstill Period, each member of the Gilead Group will vote (i) in favor of each director nominated and recommended by the Board for election at any meeting of stockholders or at any adjournments or postponements thereof, (ii) against any stockholder nominations for director that are not approved and recommended by the Board for election at any such meeting and against any proposals or resolutions to remove any member of the Board, and (iii) subject to certain exceptions related to the recommendations of proxy advisory firms, in accordance with the recommendations of the Board on all other proposals of the Board set forth in the Company’s proxy statements.
In conjunction with the Support Agreement, the Company and the Gilead Group have also entered into a customary confidentiality agreement governing the confidentiality obligations of the Gilead Group.
The foregoing description of the terms of the Support Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such document. A copy of the Support Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.
