| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
The Board of Directors (the “Board”) of Computer Programs and Systems, Inc. (the “Company”) adopted the Computer Programs and Systems, Inc. 2019 Incentive Plan (the “Plan”) on March 7, 2019 and submitted the Plan for stockholder approval at the 2019 Annual Meeting of Stockholders of the Company on April 29, 2019 (the “2019 Annual Meeting”). The Company’s stockholders approved the Plan at the 2019 Annual Meeting. As disclosed in the Company’s Proxy Statement on Schedule 14A (the “2019 Proxy Statement”) filed with the Securities and Exchange Commission (the “Commission”) on March 18, 2019, the Compensation Committee of the Board (the “Compensation Committee”), at a meeting of the Compensation Committee held on March 7, 2019, approved grants pursuant to the Plan of performance share awards to all of the Company’s named executive officers (the “NEOs”) and performance-based cash bonus awards to certain of the NEOs, in each case subject to stockholder approval of the Plan.
As disclosed in the Company’s 2019 Proxy Statement, each NEO was granted a performance share award,one-half of which is subject to aone-year performance period (the“One-Year PSAs”) andone-half of which is subject to a three-year performance period (the “Three-Year PSAs”). TheOne-Year PSAs and Three-Year PSAs represent a right to receive shares of restricted common stock or shares of unrestricted common stock, respectively, subject to the satisfaction of performance conditions set forth in a performance share award agreement entered into under the Plan. The Compensation Committee approved total grants of performance share awards, including theOne-Year PSAs and Three-Year PSAs, to each of the NEOs in the following approximate dollar amounts, which amounts represent the target level of performance: $418,800 for J. Boyd Douglas, $366,600 for Matt J. Chambless, $418,800 for David A. Dye, $418,800 for Christopher L. Fowler, and $261,900 for Troy D. Rosser.
The actual number of performance shares earned pursuant to theOne-Year PSAs will be calculated based on the Company’s adjusted earnings per share, or “Adjusted EPS” (as hereinafter defined), in 2019 compared to the budgeted amount for 2019. “Adjusted EPS” is anon-GAAP financial measure and is calculated as GAAP net income as reported, adjusted for theafter-tax effects of (i) acquisition-related amortization; (ii) stock-based compensation expense (including any adjustments for excess or deficient tax benefits); (iii)non-recurring expenses and transaction-related costs; and(iv) non-cash charges to interest expense and other, divided by weighted shares outstanding (diluted) in the applicable period. The Compensation Committee has the authority to adjust the calculation of the performance goal based on certain events set forth in the award agreement. The actual performance shares earned by the NEOs pursuant to theOne-Year PSAs, if any, will be issued as shares of restricted stock following the certification by the Compensation Committee of the Company’s achievement of the performance goal set forth above. Such shares of restricted stock are subject to time-based vesting, withone-third of the shares vesting on each of the first three anniversaries of the date of certification.
The actual number of performance shares earned pursuant to the Three-Year PSAs will be calculated based on the Company’s Adjusted EPS in each of 2019, 2020 and 2021 compared to thepre-established budgeted amount in such year. The threshold, target and maximum annual growth rates for each of the three years were established at the beginning of the three-year performance period and will be applied to each prior year actual outcome. The payout percentages achieved in each of the three years will be averaged when determining the number of performance shares earned. If a payout percentage for a specific year does not reach the threshold level for such year, it will count as 0% toward the average for the three-year performance period. The Compensation Committee decided to apply a “TSR Modifier” to the number of performance shares earned to arrive at the final number of shares to be issued under the Three-Year PSAs. The “TSR Modifier” is an adjustment to the number of performance shares earned based on how the Company’s total shareholder return (“TSR”) compares to the S&P 600 Health Care Equipment and Services index for the performance period. If the Company’s TSR is in the top quartile of this index, the number of performance shares earned for the period will be adjusted upward by 15% in order to reward relative outperformance against the index. Conversely, if the Company’s TSR is in the bottom quartile of this index, the number of performance shares earned for the period will be adjusted downward by 15% in order to further align compensation paid to our NEOs with returns generated for our stockholders. The actual performance shares earned by the NEOs pursuant to the Three-Year PSAs, if any, will be issued as shares of common stock following the certification by the Compensation Committee of the Company’s achievement of the performance goal set forth above.
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