CPSI 2018 Proxy Statement

23 Elements Used to Achieve Compensation Objectives The compensation of our NEOs consists of base salaries, annual performance-based cash bonuses, long-term incentive awards and employee benefits, as described below. One of our NEOs also receives sales commissions as described under “—Sales Commissions.” Our NEOs are also entitled to certain compensation and benefits upon qualifying terminations of employment pursuant to the various award agreements under the 2014 Incentive Plan, as described below under “Potential Payments Upon Termination or Change in Control.” Base Salaries. Each NEO’s base salary is determined principally by the responsibilities required by the executive’s position, as well as the executive’s length of service in a position and at our Company, and also takes into account the amount of other elements of compensation. The Compensation Committee did not approve any changes to the annual base salaries of our NEOs for 2017. The amount of any future increase or decrease in base salary will be considered based on the above mentioned factors, including the Company’s financial performance and, in the discretion of the Compensation Committee, the compensation paid by our competitors and/or other comparable-sized companies. Annual Performance-Based Cash Bonuses. In order to further align the interests of the executives with those of the stockholders, the Compensation Committee granted at its March 3, 2017 meeting performance-based cash bonus awards pursuant to the 2014 Incentive Plan to each executive officer of the Company, other than executive officers earning commission-based compensation. Each eligible NEO was granted a target incentive amount (in dollars and as a percentage of base salary), with the actual incentive earned to be calculated based on the percentage increase in the Company’s Adjusted EBITDA (as hereinafter defined) in 2017 over the Company’s Adjusted EBIDTA in 2016. “Adjusted EBITDA” is a non-GAAP financial measure and is expected to consist of GAAP net income as reported, adjusted for: (i) deferred revenue and other adjustments arising from purchase price allocation adjustments related to the CPSI’s acquisition of Healthland Holding Inc. and its affiliates (“HHI”); (ii) depreciation and amortization; (iii) stock-based compensation expense (including any adjustments for excess or deficient tax benefits); (iv) non- recurring expenses and transaction-related costs; (v) interest expense and other, net; and (vi) the provision for income taxes, net of the cash benefits derived from the utilization of net operating loss carryforwards acquired in CPSI’s acquisition of HHI. The Compensation Committee believes that Adjusted EBITDA is an appropriate metric for our annual performance-based cash bonuses, as it evaluates the overall financial and operational strength and performance of the Company and is a good measure of our historical operating trends. Under the terms of the performance-based cash bonus awards granted in 2017, the eligible NEOs were entitled to: ▪ 50% of their target cash bonus award if the Company’s Adjusted EBITDA in 2017 was 95% of Adjusted EBITDA in 2016 (the threshold award); ▪ 100% of their target cash bonus award if the Company’s Adjusted EBITDA in 2017 was 105% of Adjusted EBITDA in 2016 (the target award); and ▪ 150% of their target cash bonus award if the Company’s Adjusted EBITDA in 2017 was 125% or more of Adjusted EBITDA in 2016 (the maximum award). The Company interpolates between the threshold, target and maximum award amounts. Actual Results In 2017, the Company achieved 106.73% of Adjusted EBITDA in 2016, resulting in the eligible NEOs receiving 104.3% of their target award amounts under the terms of the 2017 performance-based cash bonus awards. The individual target cash bonus amounts, including as a percentage of salary, for the NEOs who received performance-based cash bonus awards for 2017, and the amounts earned and paid based on the level of achievement of Adjusted EBITDA growth, were as follows: Name Target Cash Bonus as a % of Salary Target Cash Bonus Amount Actual Cash Bonus Paid J. Boyd Douglas 48% $302,400 $315,479 Matt J. Chambless 48% $156,000 $162,747 David A. Dye 48% $204,000 $212,823 Christopher L. Fowler 48% $240,000 $250,380