CPSI 2018 Proxy Statement

27 Based upon the formulas described above, the Compensation Committee approved 2018 grants of time-based restricted stock and performance share awards to the NEOs as follows: Name Dollar Value of Time-Based Award Number of Restricted Shares Dollar Value of Performance- Based Awards Target Number of One-Year PSAs Target Number of Three-Year PSAs J. Boyd Douglas $320,000 10,596 $480,000 7,947 7,947 Matt J. Chambless $280,000 9,272 $420,000 6,953 6,954 David A. Dye $320,000 10,596 $480,000 7,947 7,947 Christopher L. Fowler $320,000 10,596 $480,000 7,947 7,947 Troy D. Rosser $200,000 6,623 $300,000 4,967 4,967 With respect to the Three-Year PSAs, the Compensation Committee decided to apply a “TSR Modifier” (as hereinafter defined) to the number of performance shares earned to arrive at the final number of shares to be issued. 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 executives with returns generated for our stockholders. Equity Grant Practices As discussed above, the Compensation Committee intends to continue to make regular grants of equity that incentivize performance and have retentive effect. All such equity awards will be made under the 2014 Incentive Plan. The Compensation Committee is in the process of transitioning to a mix for the long-term equity awards more heavily weighted in favor of performance share awards than time-based restricted stock. Starting in 2018, the Compensation Committee structured the long-term equity awards to the Company’s executive officers, including the NEOs, so that approximately 40% of the equity is time-based restricted stock and approximately 60% is performance share awards (at the target level of performance). The Compensation Committee is also in the process of transitioning the performance share awards from a one-year performance period to a three-year performance period. To date, our practice in granting equity has been to determine the dollar amount of targeted equity compensation that we want to provide the executives and then to grant a number of shares of time-based restricted stock or the target number of performance- based shares, as applicable, that has a fair market value equal to that amount on the date of grant. We determine the fair market value based on the closing price of our stock on Nasdaq on the date of grant. In 2017, this process was slightly different than in past years due to the amendment to the 2014 Incentive Plan to increase the number of shares available for grant being approved at the 2017 Annual Meeting of Stockholders. The Compensation Committee determined the dollar amount of restricted stock that it wanted to provide the NEOs and the corresponding number of shares based on the fair market value equal to that amount in early spring, but then did not grant the time-based restricted stock until after the amendment to the 2014 Incentive Plan was approved by the stockholders at the 2017 Annual Meeting. When the Compensation Committee granted time-based restricted stock to each of the NEOs and performance-based shares to Mr. Rosser on May 11, 2017, the Committee used the number of shares that it had calculated in early spring. This resulted in the NEOs receiving equity grants with a higher grant date fair value than the original targeted value due to the Company’s share price increasing from early spring to May 2017, and the Compensation Committee determined that it was appropriate to grant these higher amounts in order to compensate the NEO for receiving the grants later than in prior years and missing out on the stock price appreciation during such period. We do not select grant dates based upon the public release of material information about the Company, and the proximity of the grant date of any award to the date on which we announce such information is coincidental. Employment, Severance and Change-in-Control Arrangements Our NEOs do not have employment, severance or change-in-control agreements. Our NEOs serve at the will of the Board, which enables the Company to terminate their employment with discretion as to the terms of any severance arrangement. This is consistent with the Company’s employment and compensation philosophy. However, the NEOs are eligible to receive certain benefits upon the termination of their employment with the Company or a change in control of the Company with respect to awards made under the 2014 Incentive Plan. Under the 2014 Incentive Plan, if a NEO’s employment is terminated due to death or “Disability” (as defined in the 2014 Incentive Plan), the executive will be entitled to receive the pro rata portion of any performance-based cash bonus and any performance share award that would have been earned had the termination not occurred, and the vesting of any unvested restricted stock will automatically accelerate. If a NEO’s employment is terminated without “Cause” (as defined in the 2014 Incentive Plan), the Compensation Committee may determine, in its sole discretion, to accelerate the vesting of any unvested restricted stock. Finally, in the event of a “Change in Control” of the Company (as defined in the 2014 Incentive Plan) prior to the last day of a