UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the transition period from _____________
to ___________
Commission File Number 0-15386
CERNER CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 43-1196944
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2800 Rockcreek Parkway, Suite 601
Kansas City, Missouri 64117
(816) 221-1024
(Address of principal executive offices, including zip code;
Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No _____
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
At March 1, 1995, there were 14,079,564 shares of
Common Stock outstanding, of which 4,079,662 shares were
owned by affiliates. The aggregate market value of the
outstanding Common Stock of the Registrant held by
non-affiliates, based on the average of bid and asked prices
of such stock on March 1, 1995, was $479,995,296.
Documents incorporated by reference: portions of the
Registrant's Proxy Statement for the 1995 Annual Meeting of
Stockholders are incorporated by reference in Part III
hereof.
<PAGE>
PART I
Item 1. Business
General
Cerner Corporation was incorporated in Missouri in
1980. Through a merger into a wholly-owned Delaware
subsidiary effected in June 1987, Cerner Corporation
("Cerner" or the "Company") became a Delaware corporation.
The Company's principal offices are located at 2800
Rockcreek Parkway, Kansas City, Missouri 64117, and its
telephone number is (816) 221-1024.
Cerner designs, develops, markets, installs, and
supports health information systems for use in healthcare
organizations, including hospitals, clinics, physicians
offices, reference laboratories, HMOs as well as large
integrated delivery systems and integrated health
organizations. Cerner's goal is to automate the process of
managing health using information systems. Cerner systems
are designed around its Health Network Architecture, or HNA.
HNA is not a product. It is the strategy of combining
Cerner applications under a common architecture so that
healthcare organizations can achieve the benefits of
intrarelationship among application systems and the data
managed by those systems.
Clinical Information Systems in Healthcare
The patient-physician relationship is still the
cornerstone of the healthcare delivery system. It is at
this level that procedures are ordered, diagnoses are made,
and treatments are prescribed. Information systems play an
integral role in this process as the physician relies upon
the various clinical departments to perform diagnostic
testing on a patient, monitor a patient's response to
treatment, and administer therapeutic products and
procedures to a patient. The most effective information
systems are those which are designed from the ground up to
work together as a single, comprehensive system addressing
all aspects of the clinical process, ie. are intrarelated,
as opposed to those systems that use disparate computer
applications that communicate through interfaces.
The demand for health information systems has
increased due to cost containment, forced shortened lengths
of stay, increased focus on reducing the variance in care
processes, a shift from acute to preventive care, and case
management philosophies in the healthcare industry. In the
past, payment methods discouraged the efficient utilization
of resources by providing reimbursement based on charges for
the procedures performed. Patient care and financial
management information systems were designed to help
healthcare providers maximize reimbursement under these
payment methods. However, changes in the way healthcare
providers are reimbursed have put pressure on healthcare
managers to control and reduce costs while maintaining the
quality of patient care. Today's payment methods, including
prospective fixed-price payments (DRGs), managed care
discounts, selective-price contracts, and capitated payment
arrangements, creates incentives to reduce the cost of care
and requires providers to have a better understanding of the
actual costs associated with providing healthcare products
and services. The Company believes that approximately 25-35
percent of a typical healthcare provider's costs are
generated in the clinical departments. Computer automation
of these departments is critical in measuring and
controlling costs. In addition, computer automation can
improve the accuracy of clinical information and expedite
its distribution, thereby maintaining or improving patient
care.
Recent Developments
A fundamental shift is occurring in the delivery
of healthcare in the United States as a result of financial
pressures on healthcare providers. During the last century,
healthcare evolved into a series of independent
organizations representing the various aspects of managing
disease (for example, tertiary care centers, community
hospitals, and independent doctors, along with pharmacies
and other ancillary support services). As a result of
financial pressures commencing in the early 1990's, these
thousands of service providers have begun combining into
larger organizations and are beginning to create a cohesive
system from the fragmented pieces that currently exist.
This is happening through the merger of community hospitals
and the acquisition by large community hospitals of other
healthcare providers within a large geographic area. By the
end of this century, it is clear that the number of
healthcare institutions will decrease dramatically as they
combine into much larger integrated provider networks, each
commonly referred to as an Integrated Delivery System (IDS).
Cerner believes these entities will transcend their roles as
IDSs to become integrated health organizations (IHOs), which
will assume the financial risk for the health status of a
defined population as well as responsibility for the
healthcare of the defined population.
Clearly, this environment creates a challenge for
the healthcare providers to "manage" the care process to
achieve the best clinical and economic outcomes. None of
these changes can be made without a major capital investment
in information technology that automates the process of
healthcare across a network of providers and facilities in a
community. Cerner believes these changes create an
opportunity to deliver systems that provide intrarelated
information to medical professionals responsible for patient
care over a broad range of facilities. As a result of these
consolidations in healthcare Cerner added 21 HNA clients
during 1993 and 1994. An HNA client is a client that has
two or more Cerner systems and Cerner's ProNet Orders
Management Information System. It is through the use of
ProNet that a Cerner client achieves the greatest
intrarelationship among Cerner systems. A majority of HNA
clients have committed to automating a number of clinical
processes by implementing a broad suite of Cerner's HNA
systems.
In 1994, through several "alliance agreements"
creating joint marketing arrangements, the Company extended
HNA further to deliver the breadth of applications required
to meet the emerging needs of the IHO. These alliance
agreements were entered into with ADVANTA (managed care
systems), SDK Healthcare Information Systems (patient
financial management systems) and MEDIC Computer Systems
(medical practice management systems).
Also during 1994, the CareNet Nursing Information
System and the Open Engine Application Gateway System became
commercially available and Cerner commenced a development
program to enable its products to operate on a client/server
computer and network environment.
Products
The cornerstone of Cerner's information systems is
HNA, the single architecture around which each of Cerner's
systems is developed. The value of HNA is the creation of
systems that intrarelate as opposed to being integrated.
Today, virtually all healthcare organizations are using some
form of information technology to manage their clinical,
financial, and administrative operations. Typically, a
multitude of systems on differing technology platforms from
various suppliers are used within a single organization.
These systems rely on a series of interfaces to transmit
information to one another. The greatest drawback to this
approach is that care providers do not have automatic access
to comprehensive patient information. In addition, the data
collected by the disparate systems is usually maintained in
a variety of formats, diluting its usefulness.
Cerner's systems are intrarelated, which means
they are designed around a single architecture so that they
intuitively and spontaneously share patient information.
That patient information is available concurrently to all
care providers in formats tailored to their individual,
professional preferences. In healthcare today, the average
patient receives care from a team composed of up to 150
caregivers. Linked only by interfaces, as opposed to
intrarelated systems, it is unlikely that even a small
percentage of the 150 caregivers will have timely access to
the most current patient information. With intrarelated
systems, however, all caregivers are kept apprised of each
patient's condition, allowing the activities of the care
team to be carefully and efficiently orchestrated so that
the highest quality of care is delivered.
Cerner's products can be divided into eight
categories: care management, clinical management,
repositories, health management, member management,
administrative management, knowledge, and provider network
systems.
The Company currently markets the following major
information systems: pathology and clinical laboratories
(PathNet); radiology (RadNet); pharmacy (PharmNet and
MSmeds); admissions/discharges, orders, scheduling and
tracking (ProNet); nursing (CareNet); various areas of
internal medicine (MedNet); Open Engine (interface engine);
common clinical data storage (Open Clinical Foundation); and
managerial data storage (Open Management Foundation); as
well as related systems for clinical decision support, such
as PowerChart, which automates the physician's practice of
medicine, and Discern Expert, a rule-based expert system.
These systems can be acquired individually or as a fully
intrarelated health information system. The individual
systems perform together even if installed at different
times. Cerner also markets over 200 product options that
compliment Cerner's major information systems.
The Company's major products are as follows:
The PathNet Laboratory Information System
addresses the information management needs of five clinical
areas: general laboratory, microbiology, blood bank
transfusion services, blood bank donor services, and
anatomic pathology. PathNet automates the ordering and
reporting of procedures, the production of accurate and
timely reports, and the maintenance of accessible clinical
records. PathNet can be interfaced with automated
instruments and databases, allowing for efficient and
accurate transfer of information. PathNet communicates this
information to patient care areas and other information
systems. Management attributes PathNet's acceptance to its
functional capability, ease of use, and event-level cost
accounting, which allows healthcare managers to better
control costs and assess profitability. As of December 31,
1994, PathNet has been licensed to 363 Cerner clients in the
United States and Canada, to 17 Cerner clients in the United
Kingdom, to one Cerner client in Singapore, to three Cerner
clients in Saudi Arabia, to eight Cerner clients in
Australia, to two Cerner clients in Germany, and to one
Cerner client in Scotland. Installations were in hospitals
ranging in size from approximately 70 to 2,300 beds.
The MedNet Internal Medicine Information System is
a family of software products that addresses the clinical
information needs of various internal medicine areas within
the health organization. Introduced as a pulmonary
information system in 1987, MedNet's functionality now
serves the disciplines of cardiology, neuro-diagnostics,
rehabilitation services, and nutritional services, as well
as many ancillary areas. Like PathNet, MedNet automates
procedure requests, patient and therapist scheduling, and
the processing, validation, and presentation of results.
The system provides reports on clinical activity, workload,
and billing charges by drawing from the departmental
databases. As of December 31, 1994, MedNet has been
licensed to 20 Cerner clients in the United States and
Canada and to one Cerner client in Scotland.
The RadNet Radiology Information System addresses
the operational and management requirements of diagnostic
radiation and radiation oncology departments. It allows a
department to replace its manual, paper-based system of
record-keeping with an efficient computer system. RadNet is
designed to adapt easily to current operations. Meanwhile,
such tasks as scheduling patients, modifying orders,
tracking patients, locating films, transcribing reports,
upgrading the quality and content of reports, and reporting
on productivity are accomplished with ease and accuracy.
RadNet has been licensed to 60 Cerner clients in the United
States and Canada, three Cerner clients in the United
Kingdom, three Cerner clients in Saudi Arabia, and two
Cerner clients in Australia as of December 31, 1994.
The PharmNet Pharmacy Information System provides
intrarelation in an HNA environment for rapid pharmacy order
entry and unique support of clinical pharmacy in either an
inpatient or outpatient setting. PharmNet streamlines order
entry, enabling the pharmacist or technician to place all
types of pharmaceutical orders on one easy-to-use screen.
Dispensing functions also are fully automated. Medication,
intravenous fill lists, and medication administration
records are produced automatically or on demand. Charges
are automatically captured at the time the fill list is
generated. Patient profiles and pharmaceutical inventories
are maintained without the intervention of the pharmacist,
saving significant time and resources. Features are
designed to address the special needs of the clinical
pharmacy, including on-line order entry screening for
drug-drug interactions, drug-food and drug-lab
interferences, drug-disease states, intravenous
incompatibilities, dose range, and therapeutic treatment
duplication. Clinical notes can be recorded on-line and
sent to other clinicians for comment or follow-up. PharmNet
has been licensed to 70 Cerner clients in the United States
and Canada, three Cerner clients in Saudi Arabia, and one
Cerner client in Scotland as of December 31, 1994.
The ProNet Orders Management Information System
addresses the needs of care providers and medical staff in
the areas of order entry, order review and/or validation,
interdepartmental/interfacility communication, and order
result inquiry and reporting. Management and use of the
system is driven by a comprehensive security matrix. Orders
can be placed for any ancillary department by healthcare
personnel, depending on their security level and appropriate
interfaces with non-Cerner departmental systems. Order and
result inquiries are secured in the same manner. ProNet
also gives care providers and medical staff access to
patient demographic, admission, transfer, and discharge
information. These data are retained on-line for a
specified period of time, making them easy to update.
Access to patient management functions is determined by
user-defined security levels, based on personnel
credentials. ProNet also provides functionality to help
clinicians and medical staff track patients through the
health organization, and to establish and maintain patient
appointment schedules for locations within an institution.
ProNet has been licensed to 30 Cerner clients in the United
States and Canada, one Cerner client in Scotland and one
Cerner client in Saudi Arabia as of December 31, 1994.
The MSmeds Pharmacy Information System focuses on
automating the pharmacy department. MSmeds was developed by
a company acquired by Cerner in 1993 and is not an HNA
product. Designed to meet the specialized and individual
needs of the pharmacy department, MSmeds incorporates
windows, on-line help, menu and table-driven entry, a built
in system customization tool, and an application generator.
The order entry application gives the pharmacist fast order
entry capabilities with a high level of quality control.
Safeguards that ensure the integrity of patient therapy
include: dose level checking by 36 parameters, drug
warnings, drug/drug interaction checking, and
pharmacokinetics. Reports to assure the appropriateness of
drug therapy include: drug interaction, a list of patients
on specific drugs, drug utilization by therapeutic category,
and dose checking reports. On-line storage on removable
disks provides full patient detail for a period of up to ten
years. MSmeds offers the availability of full detail
patient information for drug utilization evaluation, as well
as labor and cost efficiencies. ADT, billing, results
display, and order entry interfaces are contained within the
system. MSmeds is currently licensed to approximately 305
clients in the Unites States, France, Puerto Rico, Saudi
Arabia, England, and Canada.
The CareNet Nursing Information System automates
documentation related to nursing care delivery. All
information that nursing staff members enter into CareNet is
automatically transcribed to all appropriate locations in
the patient's computer-based health record. This includes
information obtained from the delivery of nursing care
(vital signs, assessments, medication administration, and
data automatically captured from bedside equipment and
monitoring devices). A direct benefit of using CareNet is
more time for patient care and greater job satisfaction for
an institution's nursing staff. CareNet also facilitates
nursing staff activities for patient care. It can be used
to plan and organize patient care activities from admission
to discharge. CareNet has been licensed to 19 Cerner clients
in the United States and Canada, and one Cerner client in
Scotland as of December 31, 1994.
Open Clinical Foundation Data Repository (OCF) is
a structured repository of clinical information. OCF forms
the foundation of Cerner's computer-based patient record
functionality. This information can originate from numerous
sources and is maintained in an easily accessible,
standardized format. OCF is dramatically more effective
when used as part of the comprehensive HNA solution. For
most enterprises, in which the various laboratories and
ancillaries cooperatively share data over the entire
enterprise, OCF provides an invaluable means of storing and
retrieving data. With OCF, the amount of on-line clinical
data that are retained in departmental systems can be
dramatically reduced. Furthermore, enterprises can scale
OCF for a particular clinical area's use and integrate it
into an architecture containing products from different
suppliers. The interfaces to OCF are available for use by
suppliers who comply with the interface requirements. OCF
was commercially introduced in 1993 and has been licensed to
20 Cerner clients in the United States and Canada, one
Cerner client in Scotland, and one Cerner client in
Australia as of December 31, 1994.
PowerChart enables care providers to
electronically view, sort, annotate, and amend a patient
record so that it is organized in a manner that allows them
to navigate through the chart using patient-provider and
encounter relations. PowerChart gives healthcare providers
structured access to the clinical information contained
electronically in OCF. The format of the on-line patient
chart consists of pages displayed from a patient's computer-
based patient record and information electronically
transmitted from connected systems. Clinicians are able to
browse through pages much the same as with printed
documents. Clinicians can access documents via tables of
contents or search for terms in the document text. The
scope of documents available is limited only by the system
interfaces to OCF. PowerChart was commercially introduced
in 1993 and has been licensed to 24 Cerner clients in the
United States and Canada as of December 31, 1994.
Cerner's Open Engine Application Gateway System
facilitates the exchange of data and assists in the
management of point-to-point interfaces between foreign
systems and serves as a toolkit to help clients write
interface code. Open Engine has been licensed to four
Cerner clients in the United States as of December 31, 1994.
All current Cerner HNA systems are designed to
operate on computers manufactured by Digital Equipment
Corporation ("Digital"). In addition, Open Engine, PathNet,
RadNet and MSmeds are available on IBM's RISC System/6000
AIX (UNIX) platform. Over time all HNA applications will be
available on both the Digital and IBM platforms.
Software Development
The Company expects to continue development
efforts both for its current health information systems, as
well as for future product offerings. As new clinical and
managerial information needs emerge, Cerner intends to
enhance its current HNA-based product lines with new
versions released to clients on a periodic basis. In
addition, Cerner plans to expand the current product lines
by developing additional information systems applicable to
the clinical departments in healthcare and facilitating
multifacility use of Cerner's HNA products.
All Cerner systems are developed under HNA using a
proprietary development methodology. This methodology
defines and controls each task throughout the product
development cycle and ensures that current and future
products can be fully intrarelated. The Company believes
this approach greatly reduces the costs of maintaining and
supporting the products long-term. By implementing a
structured approach to development and continuing to invest
in existing as well as new products, the Company plans to
develop product lines that exceed the typical software life
cycle, minimizing the need for Cerner's clients to invest in
additional software technology.
Significant resources are dedicated to developing
new health information system products. As of December 31,
1994, 493 associates were engaged full-time in product
development activities. The total expenditures during the
three-year period ended December 31, 1994, for the
development and enhancement of the Company's products were
approximately $60,851,000, which includes the amounts
capitalized and excludes the amounts amortized for financial
reporting purposes, of which approximately $26,897,000 was
expended in 1994. Cerner expects to continue making
substantial investments in product development.
Major new products scheduled to be commercially
available in 1995 include the following:
Open Management Foundation Data Repository (OMF)
is a structured repository for process-and activity-related
information useful for management of the healthcare
institution. Information can originate from numerous
sources and can be maintained in an easily accessible,
standardized format. OMF can be scaled for a particular
department's use and can be integrated into an architecture
containing products from different suppliers.
PowerVision is a comprehensive, PC-based health
management information system used to view information in
OMF in much the same manner as PowerChart is used with OCF.
This management access tool presents summary information
through an attractive, sophisticated graphical user
interface, making key information available to all levels of
management. PowerVision is equipped with features that
allow the user to pursue "what if" and other investigatory
("drill down") information paths. This enables an executive
to determine the "health" of the institution in many
critical areas, as well as provides managers with a quick,
up-to-the-minute view of leading business indicators
regarding the performance of a department or care area.
The ProNet II Provider Network System applications
will extend Cerner's process automation and information to
community-based users. The ProNet II Communication
Management application will control connections and enforce
access privileges to functional services throughout the IDS
and the IHO. It performs translation and routing functions
for data feeds from external systems and provides electronic
mail and multifacility-wide calendar capabilities.
Cerner's on-line Discern Reference Library will
provide healthcare professionals with on-line assistance
from third-party reference databases at the point of
decision making.
Scheduled for commercial release in the first half
of 1996 is Cerner's SurgiNet Surgery Information System,
which will address the needs of the surgical department,
including automating the functions of resource and equipment
scheduling, inventory management, and operating room
management and MRNet Medical Records Department Information
System, which will help meet the operations management needs
of the medical records department. MRNet will include
functionality for the various chart tracking and completion
tasks commonly associated with maintaining medical records.
Product Strategy
Cerner's product strategy is to expand its
information system offerings to the broad range of clinical
departments, provider networks, IDSs, and IHOs, and to
provide a database of intrarelated patient information
useful to both the practitioner and the healthcare manager.
In addition, the Company's strategy is to design its
products so that they may be easily modified or enhanced to
take advantage of changes in medical and information system
technologies.
To effect this strategy, Cerner developed its
proprietary Health Network Architecture, which provides
the structure and common software functions necessary for
the development of its clinical information systems. Cerner
believes that HNA allows the Company to address a wide
spectrum of clinical information needs in healthcare
provider organizations.
Sales and Marketing
The market for Cerner clinical information system
products includes hospitals, HMOs, clinics, free-standing
reference laboratories and commercial blood bank labs, IDSs,
and IHOs. The majority of system sales to date have been in
hospital-based provider settings. Providers currently using
PathNet represent the primary target market for MedNet,
RadNet, PharmNet, ProNet, and CareNet. Cerner currently
services hospitals ranging from under 50 beds to over 2,000
beds. The modular design of Cerner's HNA products and the
range of Digital and IBM hardware products allows Cerner
systems to be price-competitive across the full range of
size and organizational structures of healthcare providers.
The sale of a health information system usually takes
approximately nine to fifteen months from the time of
initial contact to the execution of a contract.
The Company's executive marketing management is
located in its Kansas City, Missouri, office, while its
account representatives are strategically located and
deployed through regional offices across the United States.
The Company, through subsidiaries, has offices and sales
staff in the United Kingdom, Australia, Germany, and has a
joint venture in Saudi Arabia. The Company supports its
sales force with technical personnel who perform
demonstrations of Cerner's products and assist clients in
determining the proper hardware and software configurations.
The Company has developed a unique and effective
demonstration and presentation facility at its headquarters
in Kansas City, Missouri, called the Cerner Vision Center.
This facility enables the Company to actually demonstrate
the processes automated through HNA and adapt the
presentations to the client's environment. The Company's
primary direct marketing strategy is to generate sales
contacts through presentations at industry seminars and
trade shows. Cerner attends a number of major trade shows
each year and has begun to sponsor executive conferences,
which feature industry experts who address the information
system needs of IHOs.
Client Service
The Company provides immediate and long-term
client service and support. Initial service consists of
education and installation services, documentation, and
training for the clinical staff. The Company has regional
offices in Atlanta, Boston, Dallas, Detroit, Kansas City,
Los Angeles, Seattle, and Washington, D.C. Each regional
office is focused on long-term project management and client
satisfaction for a group of clients within a specific
geographical region.
All of Cerner's clients enter into software
maintenance agreements with Cerner for support of their
Cerner systems. In addition to immediate software support
in the event of problems, these agreements allow these
clients the use of new releases of the Cerner products
covered by these agreements. Each client has 24 hour access
to the client support staff located at Cerner's corporate
headquarters. Most of Cerner's clients also enter into
hardware maintenance agreements with Cerner. These
arrangements normally provide for a fixed monthly fee for
specified services. In the majority of cases, Cerner
subcontracts hardware maintenance to the hardware
manufacturer. At December 31, 1994, Cerner had a software
support and hardware maintenance backlog of approximately
$77,222,000 on an annual basis. The annualized value of
support and maintenance currently being billed is approximately
$46,000,000. The value of amounts to be billed in the current
year for projects not complete at the beginning of the year
is estimated to be $9,000,000.
Clients and Backlog
As of December 31, 1994, Cerner has issued
end-user licenses for the installation of its products to
approximately 715 clients representing 1,028 sites.
Cerner's clients are located throughout the United States
and in Canada, Germany, Puerto Rico, Saudi Arabia, the
United Kingdom, France, Australia, and Singapore. Clients
include hospitals, clinics, reference laboratories, hybrid
reference laboratories and free-standing blood centers. In
1994, sales to a single client did not comprise more than
10% of the Company's revenues. Continuing hardware and
software support revenues from any one client do not
constitute a material part of the Company's annual revenues,
and the loss of any one client would not have a material
adverse impact on the Company.
As of December 31, 1994, the Company had
approximately $134,770,000 in its backlog, compared to
approximately $99,524,000 in its backlog as of December 31,
1993. Approximately 76% of the December 31, 1994 backlog is
expected to be included in revenues in fiscal 1995. Backlog
consists only of signed contracts (including all computer
equipment and software, as well as equipment maintenance and
software support for twelve months, that are part of those
contracts) that are not yet recorded as revenue.
Approximately $57,547,000 of the Company's December 31,
1994, backlog consists of computer equipment and software
that are part of such contracts. The remaining backlog
represents twelve months' equipment maintenance and software
support on all existing Cerner contracts.
Competition
The market for clinical information systems is
highly competitive. The Company believes that the principal
competitive factors in this market are the company's
stability, features and capabilities of the information
systems, the user's evaluation of the ongoing support for
the system, and the potential for enhancements and future
compatible products. The Company's departmental clinical
systems competition at this time is from companies that
primarily offer information systems applicable to a specific
clinical discipline. There also are multiproduct healthcare
information systems companies that offer clinical
information system products that are becoming more
competitive. The Company faces additional competitors in
the nursing, order communications systems and electronic
medical records markets from the multiproduct healthcare
information systems companies. Cerner's principal
competitors include HBO Corporation, Shared Medical Systems,
Meditech, First Data Corporation, Sunquest, Continental
Healthcare, Compucare, and Phamis. The rapidly changing
structure of the healthcare industry in the United States
and its need for clinical information systems is likely to
attract new competitors into the market, some of which may
have significantly greater resources than the Company
Relationships with Key Suppliers
Cerner's current products are designed to operate
on computers manufactured by Digital and IBM, and the
Company has value-added reseller agreements that expire
annually with both Digital and IBM. These agreements are
typically renewed in the ordinary course of business, and
the Company has no reason to believe that they will not be
renewed. In addition, Cerner purchases a variety of
peripheral equipment and sublicensed software from several
sources, none of which is a significant supplier to the
Company. The Company also has a multiyear contract with
Oracle Systems for use of its relational database software.
The Company's work-station based products operate on the
Microsoft Windows environment.
In addition to its software products, the Company
sells the computer equipment, including central processing
units, personal computers, operating system software, disk
drives, video display terminals, workstations, and printers,
that operate in connection with such products. Although
clients could deal directly with a manufacturer or with
another distributor of such equipment, clients have
generally found it advantageous to deal with the Company as
a single source for both hardware and software.
All of the Company's sales during 1994 used
Digital's Alpha and VAX lines of hardware using the OpenVMS
operating system or IBM's RISC System/6000 processor with
AIX/6000 (UNIX).
Product Protection
The Company relies on a combination of trade
secret, copyright, and trademark laws, contractual
provisions, and technical measures to protect its rights in
its software technology. The Company has not filed any
patent applications or copyrights covering its software
technology. Due to the nature of the software, the Company
believes that patent, trade secret, and copyright protection
are less significant than the Company's ability to further
develop, enhance, and modify its products.
Government Regulation and Healthcare Reform
The United States Food and Drug Administration
(FDA) has promulgated a policy for the regulation of certain
computer products as medical devices under the 1976 Medical
Device Amendments to the Federal Food, Drug and Cosmetic Act
and the Safe Medical Devices Act of 1990. To the extent
that computer software is a medical device under the policy,
the manufacturers of such products could be required,
depending on the product, to (a) register and list their
products with the FDA, (b) notify FDA and demonstrate
substantial equivalence to other products on the market
before marketing such products, (c) obtain FDA approval by
demonstrating safety and effectiveness before marketing a
product, or (d) communicate Medical Device Reports in
instances where a device is thought to have contributed to
personal injury or death. In addition, those products would
be subject to such act's general controls, including those
relating to good manufacturing practices and adverse
experience reporting. Considering the policies that FDA has
promulgated to-date concerning these matters, it is evident
that FDA intends to be increasingly active in the regulation
of computer software intended for use in clinical settings,
especially bloodbank transfusion and donor centers. The
FDA, if it chooses to regulate such software, can impose
extensive requirements governing pre- and post-market
conditions, such as device investigation, approval, labeling
and manufacturing.
The healthcare industry is subject to extensive
federal and state regulation governing, among other things,
addition of new services, certain capital expenditures and
reimbursement. The effect of future legislation and
regulation upon prospective clients may, in certain
circumstances, have an adverse effect upon the Company's
business. On the other hand, changes in the regulatory
environment have increased and may continue to increase the
needs of healthcare organizations for cost-effective data
management and thereby enhance the marketability of the
Company's products. The Company believes there can be no
meaningful predictions as to the impact, if any, of future
legislation and regulation on its business.
Most industry observers believe that the United
States Congress will not pass any form of significant
healthcare reform during 1995. Although the effects of
state and federal initiatives for healthcare reform are
unknown at this time, the Company believes that
notwithstanding such reform competitive factors in the
healthcare industry will force healthcare providers to
continue to invest heavily in clinical information systems.
Personnel
At December 31, 1994, the Company employed 1,091
persons of which 493 were in product development, 498 in
client service and support and sales and marketing and 100
in general management and administration. The Company's
future success will depend in part upon its continued
ability to attract and retain qualified employees. The
Company's employees are not represented by a labor union and
Cerner believes its relations with its employees are
excellent.
Quarterly Results
The Company's quarterly revenues and net earnings
have historically been variable and cyclical. The
variability is attributable primarily to the number and size
of system contracts for which revenue is recognized in any
fiscal quarter. The Company expects the fluctuation in
quarterly financial results to continue until the
combination of the Company's recurring software and hardware
maintenance revenues and total sales are much larger as
compared to the size of the average system sale.
Item 2. Properties
During April, 1995 the Company purchased the
Rockcreek Office Park in North Kansas City, Missouri for
$20,000,000. Prior to that date, the Company leased
approximately 165,000 of the office park's 409,000 square
feet of usable feet. The Company's principle offices have
been located in the office park for approximately 15 years
and the Company had been leasing additional space as it
became available. After investigating other possibilities,
the Company determined that purchasing the office park was
the most cost effective option considering the Company's
anticipated future needs for additional space. As of
December 31, 1994, the Company was using approximately
222,000 square feet and substantially all of the remainder
was leased to tenants. The Company has commenced
construction of a combination child care and exercise
facility at the office park for the use of the Company's
employees. The Company believes that its employees are its
most important asset and that this facility will enable the
Company to attract and retain it's relatively young work
force which contains a large number of married women. The
Company also leases offices space for its branch offices in
Atlanta, Boston, Dallas, Detroit, Los Angeles, Seattle and
Washington D.C.
Item 3. Legal Proceedings
The Company is not involved in any material pending litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the
stockholders of the Company during the fourth quarter of the
fiscal year ended December 31, 1994.
Item 4A. Executive Officers of the Company
The following table sets forth the names, ages,
positions and certain other information regarding the
Company's executive officers as of March 1, 1995. Officers
are elected annually and serve at the discretion of the
board of directors.
Name Age Positions
---- --- ---------
Neal L. Patterson 45 Chairman of the Board of Directors and
Chief Executive Officer
Clifford W. Illig 44 President,
Chief Operating Officer and Director
Charles S. Runnion, III 47 Executive Vice President,
Area General Manager and Director
David M. Margulies, M.D. 43 Executive Vice President
of Product Engineering and Director
Jeffrey C. Reene 40 Executive Vice President and
Area General Manager
P. Michael Breedlove 50 Group Vice President and
Area General Manager
Alan D. Dietrich 32 Group Vice President and
Area General Manager
Charles O. Whitcraft 43 Group Vice President of
of Product Engineering
Gary W. Willett 50 Group Vice President and
Chief Operating Officer of
Cerner International
Neal L. Patterson was President, Chairman of the
Board of Directors and Chief Executive Officer of the
Company from its incorporation to May 1987. Since May 1987
he has been Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Patterson has served
as a director of Home Office Reference Laboratory since
August 1988.
Clifford W. Illig was Executive Vice President,
Secretary, Treasurer and Chief Financial Officer and a
Director of the Company from its incorporation to May 1987.
From May 1987 to May 1993, he was a Director, President,
Chief Operating Officer and Chief Financial Officer of the
Company. Since May 1993, he has been a Director, President
and Chief Operating Officer.
Charles S. Runnion, III joined the Company in July
1989 and since that date has been an Executive Vice
President and Director of the Company. Prior to working at
the Company, he spent fourteen years with the IBM
Corporation in a variety of marketing and management
positions.
David M. Margulies, M.D. joined the Company in
February 1991 and since that date has been an Executive Vice
President of the Company. Prior to joining the Company, for
four years, he was Vice President in charge of information
systems at Children's Hospital, a healthcare institution
located in Boston, Massachusetts. During this time Dr.
Margulies also was the Director of the Program in Medical
Information Sciences at Harvard Medical School. Dr.
Margulies has served as a Director of the Company since May
1991.
Jeffrey C. Reene joined the Company in September
1991 as Group Vice President of Client Services. He was
promoted to Executive Vice President in June of 1994. Prior
to joining the Company, he was with Andersen Consulting from
July 1978 to August 1991, being a Partner with Andersen
Consulting since September, 1988.
P. Michael Breedlove joined the Company as
National Sales Manager in May 1984 and has held various
executive positions with the Company since then.
Alan D. Dietrich joined the Company in 1990 as
Director of Business, Planning and Development. Prior to
joining the Company, he spent seven years with IBM
Corporation.
Charles O. Whitcraft joined the Company as Vice
President of Technology in January 1984. Since that time he
has served in several executive positions dealing with
technology and engineering.
Gary W. Willett joined the Company in April 1990
as Group Vice President of Client Services and has served in
various executive capacities. Prior to joining the Company,
he spent twenty-one years with IBM Corporation in a variety
of marketing and management positions.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters
The Company's common stock is traded in the over-
the-counter market and is quoted through the NASDAQ National
Market System under the symbol CERN. The following table
sets forth the high and low, and last sales prices for the
fiscal quarters of 1994 and 1993 as reported by the NASDAQ
National Market System. These quotations represent prices
between dealers and do not include retail mark-up, mark-
down, or commissions, and do not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
High Low Last High Low Last
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 49 1/2 38 3/4 41 1/2 31 1/4 20 1/2 22 1/2
Second Quarter 45 23 1/2 27 3/4 27 15 3/4 26
Third Quarter 43 1/2 24 7/8 40 7/8 37 3/4 21 3/4 36 3/4
Fourth Quarter 45 1/4 37 1/4 44 1/8 45 3/4 31 3/4 43 1/2
</TABLE>
At February 10, 1995, there were approximately
1,036 owners of record. To date, the Company has paid no
dividends and it does not intend to pay dividends in the
foreseeable future. Management believes it is in the
stockholders' best interest to reinvest funds in the
operation of the business.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Selected Consolidated Financial Information
(In thousands, except per share data)
Year Ended December 31
--------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Revenues $ 155,917 120,572 101,145 77,240 57,110
Operating earnings 33,779 24,330 16,587 8,068 4,296
Earnings before income taxes 32,451 24,120 16,293 7,552 4,185
Net earnings 19,501 14,558 9,932 4,688 2,636
Primary earnings per share 1.31 1.00 .69 .35 .19
Primary weighted average
shares outstanding 14,881 14,579 14,340 13,437 13,816
Balance Sheet Data:
Working capital $ 52,370 42,603 30,522 22,588 19,461
Total assets 156,410 104,910 66,667 56,155 44,175
Long-term debt, net 30,235 10,354 8,310 7,982 7,729
Stockholders' equity 85,777 64,230 38,643 27,517 22,728
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For a more thorough understanding of management's
analysis of results of operations and financial condition,
the following discussion should be read in conjunction with
the discussion of the Company's business operations.
Results of Operations - The Company's revenues increased
from $101,145,000 in 1992, to $120,572,000 (19%) in 1993, to
$155,917,000 (29%) in 1994. Net earnings increased from
$9,932,000 in 1992, to $14,558,000 (47%) in 1993, to
$19,501,000 (34%) in 1994.
Revenues - In 1994, revenues increased due to an increase in
system sales and support of installed systems. System sales
increased from $71,586,000 in 1992, to $84,024,000 (17%) in
1993, to $108,322,000 (29%) in 1994. The lower percentage
increase in 1993 is due primarily to the 1993 sales having a
larger software component. A significant amount of the
1994, 1993, and 1992 system sales revenue was in the backlog
at the beginning of each year, including portions of HNA
contracts that had been signed in prior years. An HNA
contract is an initial contract that includes the Company's
ProNet Order Management product and at least two other
clinical systems, or a contract that brings an existing
client to this level. ProNet Order Management gives clients
access to the full intrarelationship of the Company's
products. The sale of additional hardware and software
products to the installed client base increased 40% in 1994,
9% in 1993, and 52% in 1992.
The Company has seen a significant increase in the
number of clients who have purchased two or more clinical
system units on their initial contract, or clients from the
installed base who purchase one or more system units
subsequent to their initial contract. Total sales to the
installed base in 1994, including new systems, incremental
hardware and software, and recurring and discrete services,
were 73% of total revenues in 1994, compared to 63% in 1993
and 51% in 1992.
The HNA contracts signed in 1994 and prior years
will contribute significantly to future revenues and margin
due to the increasing size of the individual contracts and
the commensurate increase in project timeframes. At the end
of 1994, the Company had $57.5 million in contract backlog
and $77.2 million in support backlog, compared to $42.2
million in contract backlog and $57.3 in support backlog at
the end of 1993.
The Company entered the overseas market in 1991.
During 1993, the Company completed installations begun in
1992 and expanded its presence in this market with
additional signed contracts. During 1994, the Company
generated revenues from systems sold and supported in
England, Australia, Scotland, Germany, and Saudi Arabia.
The increase in these revenues and margins from 1992 to 1993
was 37% and 61%, respectively, and from 1993 to 1994 was 41%
and 48%, respectively.
Support and maintenance revenues increased 24% in
1994, 25% in 1993, and 28% in 1992. These revenues
represented 27% of 1994 total revenues, 28% of 1993 total
revenues, and 26% of 1992 total revenues. The number of
clients converted and paying monthly software support fees
was 581 at the end of 1994, compared to 527 at the end of
1993 and 264 at the end of 1992. The numbers for 1994 and
1993 include clients of Megasource, Inc., which the Company
acquired on November 1, 1993. The average support fee for
the Megasource clients is significantly lower than the
average support fee for the Company's other clients. The
number of clients installed and paying monthly hardware
maintenance fees was 290 at the end of 1994, compared to 275
at the end of 1993 and 234 at the end of 1992.
Other revenues have increased from $2,895,000 in
1992, to $3,348,000 (16%) in 1993, to $6,273,000 (87%) in
1994. This increase is due primarily to real estate lease
revenues from unrelated parties and international
activities.
Cost of Revenues - The cost of revenues includes the cost of
computer hardware and sublicensed software purchased from
computer and software manufacturers for client contracts.
It also includes the cost of hardware maintenance and
sublicensed software support subcontracted to the
manufacturers. The cost of revenues was 30% of total
revenues in 1994, 36% of total revenues in 1993, and 44% in
1992. The percentage of costs relative to revenues
typically has varied as the mix of revenue (software,
hardware, and support) components carrying different margin
rates changes from period to period. The percentages for
1994 and 1993 were affected positively because of three
factors. First, system sales reflect an increase of multi-
Net projects, which carry a lower cost percentage. Second,
the cost of support and maintenance decreased as more
systems were converted and the client began paying support.
Third, the incremental hardware and software sold to
existing clients had a larger software component.
Sales and Client Service - Sales and client service costs
include salaries of client service personnel, communications
expenses, and unreimbursed travel expenses. Also included
are sales and marketing salaries, travel expenses, tradeshow
costs, and advertising costs. These expenses as a percent
of total revenues were 26%, 23%, and 20% in 1994, 1993, and
1992, respectively. Increases in total sales and client
service expenses are attributable to the cost of a larger
field sales and services organization, marketing of new
products, and international marketing initiatives.
Software Development - Software development expenses include
salaries, documentation, and other direct expenses incurred
in product development and amortization of software
development costs. Total expenditures for software
development, including both capitalized and noncapitalized
portions, for 1994, 1993, and 1992 were $26,897,000,
$19,432,000, and $14,522,000, respectively. These amounts
exclude amortization. Capitalized software costs were
$8,131,000, $6,181,000, and $4,098,000 for 1994, 1993, and
1992, respectively. The increase in aggregate expenditures
for software development in 1994 is due to development of
more clinical information system products to complement the
existing product line. The percentage of costs capitalized
should remain fairly constant as the Company continues to
develop new products.
General and Administrative - General and administrative
expenses include salaries for corporate, financial, and
administrative staffs, utilities, communications expenses,
and professional fees. These expenses as a percent of total
revenues were 8%, 7%, and 7% for 1994, 1993, and 1992,
respectively.
Interest Expense - Net interest expense was considerably
higher in 1994 than 1993 and 1992. This increase in
interest expense is due to financing the $20,000,000
purchase of the Company's headquarters complex. The
financing initially consisted of a term loan for
$17,425,000, with the remainder provided by additional
borrowing under the Company's revolving line of credit. On
July 19, 1994, the Company issued $30,000,000 in Senior
Notes bearing an interest rate of 8.3%. The proceeds of the
Senior Notes were used to repay the term loan and reduce the
outstanding borrowings under the revolving line of credit.
The remaining proceeds will be used for capital improvements
to the headquarters complex. The higher interest expense is
offset by a reduction in the Company's rent expense and an
increase in lease revenues from unrelated parties.
Income Taxes - The Company's effective tax rates were 40%,
40%, and 39% for 1994, 1993, and 1992, respectively, which
are not significantly different from the combined federal
and state statutory rates.
Quarterly Results - The Company's quarterly revenues and net
earnings historically have been variable and cyclical. The
variability is attributable primarily to the number and size
of project milestone events in any fiscal quarter. The
Company expects the fluctuation in quarterly financial
results to continue.
Capital Resources and Liquidity - The Company's liquidity
position remains strong, with total cash and cash
equivalents of $15,305,000 at December 31, 1994, and working
capital of $52,370,000, compared to cash and cash
equivalents of $16,784,000 at December 31, 1993, and working
capital of $42,603,000. The Company finances its
operations, capital expenditures (other than the purchase of
its Kansas City headquarters complex and its anticipated
capital improvements), and working capital needs from
internally generated funds and bank borrowings. The Company
has an $18,000,000 long-term, revolving line of credit. At
December 31, 1994, there were no borrowings on the revolving
line of credit.
On April 19, 1994, the Company purchased its
Kansas City headquarters complex for $20,000,000. The
purchase was initially funded by bank borrowings. The
purchase has no material effect on operating cash flow,
since the reduction in lease payments and increase in net
rental income approximates the debt service payments. The
Company anticipates investing an additional $6,000,000 to
$8,000,000 for the construction of a building and other
improvements.
On July 29, 1994, the Company issued $30,000,000
of Senior Notes, due in 2004. The proceeds were used to
repay the bank borrowings related to the purchase of the
Company's headquarters complex and retire existing debt.
The interest is paid semiannually; principal is due in five
equal installments beginning in 2000.
The Company generated cash of $18,949,000,
$15,856,000, and $13,875,000, from operations in 1994, 1993,
and 1992, respectively. Cash flow from operations has
increased primarily because of the increase in net earnings.
Revenues provided under support and maintenance
agreements of the Company represent recurring cash flows.
Support and maintenance revenues increased 24%, 25%, and 28%
in 1994, 1993, and 1992, respectively, and the Company
expects these revenues to continue to grow as the base of
installed systems grows.
The Company believes its present cash and cash
equivalent position, together with cash generated from
operations and the current bank borrowing facility, will be
sufficient to meet anticipated cash requirements.
Inflation - The effects of inflation were minimal on the
Company's business.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Notes required by
this Item are submitted as a separate part of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant's Proxy Statement to be used in
connection with the Annual Meeting of Stockholders to be
held on May 16, 1995, contains under the caption "Election
of Directors" certain information required by Item 10 of
Form 10-K and such information is incorporated herein by
this reference. The information required by Item 10 of Form
10-K as to executive officers is set forth in Item 4A of
Part I hereof.
The Registrant's Proxy Statement to be used in
connection with the Annual Meeting of Stockholders to be
held on May 16, 1995, contains under the caption "Compliance
with Section 16(a) of the Securities Exchange Act of 1934"
certain information required by Item 10 of Form 10-K and
such information is incorporated herein by this reference.
Item 11. Executive Compensation
The Registrant's Proxy Statement to be used in
connection with the Annual Meeting of Stockholders to be
held on May 16, 1995, contains under the caption "Executive
Compensation" the information required by Item 11 of Form 10-
K and such information is incorporated herein by this
reference (except that the information set forth under the
following sub captions is expressly excluded from such
incorporation: "Executive Compensation and Stock Option
Committee Report" and "Company Performance").
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The Registrant's Proxy Statement to be used in
connection with the Annual Meeting of Stockholders to be
held on May 16, 1995, contains under the caption "Voting
Securities and Principal Holders Thereof" the information
required by Item 12 of Form 10-K and such information is
incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions
The Registrant's Proxy Statement to be used in
connection with the Annual Meeting of Stockholders to be
held on May 16, 1995, contains under the caption "Certain
Transactions" the information required by Item 13 of Form 10-
K and such information is incorporated herein by this
reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Financial Statements.
(1) Consolidated Financial Statements:
Independent Auditors' Report on Consolidated
Financial Statements
Consolidated Balance Sheets -
December 31, 1994 and December 31, 1993
Consolidated Statements of Earnings -
Years Ended December 31, 1994, 1993, and 1992
Consolidated Statements of Stockholders'
Equity - Years Ended December 31, 1994, 1993,
and 1992
Consolidated Statements of Cash
Flows - Years Ended December 31, 1994,
1993, and 1992
Notes to Consolidated Financial Statements
(2) The following financial statement,
schedule and independent auditors' report
on financial statement schedule of the
Registrant for the three-year period ended
December 31, 1994 are included herein:
Schedule II - Valuation and Qualifying Accounts,
Independent Auditors' Report on Consolidated
Financial Statement Schedule.
All other schedules are omitted, as the required
information is inapplicable or the information is presented
in the consolidated financial statements or related notes.
(3) The exhibits required to be filed
by this item are set forth below:
Number Description
------ -----------
3(a) Restated Certificate of Incorporation, as
amended through December 31, 1993, (filed as
Exhibit 3(a) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 and
hereby incorporated by reference).
3(b) Bylaws, as amended (filed as Exhibit 4(a) to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, and hereby
incorporated by reference).
4(a) Reference is made to the Restated Certificate
of Incorporation and Bylaws of Registrant
described above under 3(a) and 3(b), respectively.
4(b) Specimen stock certificate (filed as Exhibit
4(a) to Registrant's Registration Statement on
Form S-8 (File No. 33-15156) and hereby
incorporated herein by reference).
4(c) Note Agreement between Cerner Corporation,
Principal Mutual Life Insurance Company, and
Principal National Life Insurance Company dated
July 1, 1994, (filed as Exhibit 10(a) to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, and hereby
incorporated by reference.
4(d) Credit Agreement between Cerner Corporation,
Cerner Properties, Inc. Mark Twain Kansas Bank,
and Harris Trust & Savings Bank dated April 18,
1994, (filed as Exhibit 10(b) to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and hereby incorporated by
reference.
10(a) Employment Agreement, dated January 1, 1990,
between Clifford W. Illig and Registrant (filed as
an Exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990, and
hereby incorporated herein by reference).*
10(b) Employment Agreement, dated January 1, 1990,
between Neal L. Patterson and Registrant (filed as
an Exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990, and
hereby incorporated herein by reference).*
10(c) Standard Volume Agreement, dated July 6,
1989, between Digital Equipment Corporation and
Registrant (filed as Exhibit 10(g) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1989, and hereby incorporated herein
by reference).
10(d) Incentive Stock Option Plan C of Registrant
(filed as Exhibit 10(f) to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1993, and hereby incorporated herein by reference).*
10(e) Indemnification Agreement, dated as of June
1, 1987, between Clifford W. Illig and Registrant
(filed as Exhibit 10(j) to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1987, and hereby incorporated herein by reference).
10(f) Amended Nonqualified Stock Option Plan of
Registrant (filed as Exhibit 4(d) to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and hereby incorporated
herein by reference).
10(g) Employment Agreement dated February 22, 1991,
between Cerner Corporation and David M. Margulies,
M.D. (filed as Exhibit 10(1) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1991, and hereby incorporated herein
by reference).*
10(h) Incentive Stock Option Agreement
(Non-Standard Vesting) dated February 22, 1991,
between Cerner Corporation and David M. Margulies,
M.D. (filed as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1991, and hereby incorporated herein
by reference).*
10(i) Stock Option Agreement
(Non-Qualified-Milestone) dated February 22, 1991,
between Cerner Corporation and David M. Margulies,
M.D. (filed as Exhibit 10(n) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1991, and hereby incorporated herein
by reference).*
10(j) Cerner East Deferred Payout Plan dated March 7,
1991, for the benefit David M. Margulies, M.D.
and Edwin D. Trautman (filed as Exhibit 10(o) to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991, and hereby
incorporated herein by reference).*
10(k) Non-Qualified Stock Option Agreement dated
February 19, 1991, between Cerner Corporation and
David J. Hart (filed as Exhibit 10(q) to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991, and hereby
incorporated herein by reference).*
10(l) Stock Option Agreement dated May 15, 1990,
between Cerner Corporation and Gerald E. Bisbee,
Jr. (filed as Exhibit 10(r) to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1991, and hereby incorporated herein by reference).*
10(m) Stock Option Agreement dated May 15, 1990,
between Cerner Corporation and Thomas C. Tinstman
(filed as Exhibit 10(s) to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1991, and hereby incorporated herein by reference).*
10(n) Cerner Performance Plan for 1993 (filed as
Exhibit 10(v) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993,
and hereby incorporated herein by reference).*
10(o) Non-Qualified Stock Option Agreement dated July 20,
1994, between the Registrant and Alan E. Dietrich.*
10(p) Incentive Stock Option Agreement dated September 12,
1990, between the Registrant and Alan E. Dietrich.*
10(q) Incentive Stock Option Agreement dated August 22,
1991, between the Registrant and Jeffrey C. Reene.*
10(r) Incentive Stock Option Agreement dated May 15,
1990, between the Registrant and Gary W. Willett.*
10(s) Incentive Stock Option Agreement dated February 27,
1985, between the Registrant and Charles O. Whitcraft.*
10(t) Incentive Stock Option Agreement dated May 15,
1990, between the Registrant and Charles O. Whitcraft.*
10(u) Cerner Performance Plan for 1994.*
10(v) Real Estate Sales Contract dated April 18, 1994,
between Northtown Devco and Cerner Corporation (filed
as Exhibit 10(c) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, and
hereby incorporated herein by reference).
10(w)(i) Standard Form of Agreement between Owner and
Contractor dated September 1, 1994, between Cerner
Properties, Inc. and J. E. Dunn Construction Company.
10(w)(ii) Supplement to General Conditions of the Contractor
for Construction dated September 1, 1994, between Cerner
Properties, Inc. and J. E. Dunn Construction Company.
10(w)(iii) Amendment No. 1 to the Agreement dated October 24, 1994,
between Cerner Properties, Inc. and J. E. Dunn Construction
Company.
10(x) Standard Form of Agreement Between Owner and Architect
dated April 29, 1994, between Cerner Properties, Inc.
and The Hollis & Miller Group,Inc.
11 Computation of Registrant's Earnings Per Share.
22 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Management contracts or compensatory plans or arrangements
required to be identified by Item 14(a)(3).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by Registrant
during the fourth quarter of the fiscal year ended December
31, 1994.
(c) Exhibits.
The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is
submitted as a separate section of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CERNER CORPORATION
Dated: March 29, 1995 By:/s/ Neal L. Patterson
Neal L. Patterson
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
Signature and Title Date
------------------- ----
/s/Neal L. Patterson March 29, 1995
Neal L. Patterson, Chairman of the Board
and Chief Executive Officer (Principal Executive Officer)
/s/Clifford W. Illig March 29, 1995
Clifford W. Illig, President, Chief
Operating Officer and Director
/s/Maureen M. Evans March 29, 1995
Maureen M. Evans, Principal Financial
and Accounting Officer
/s/David M. Margulies, M.D. March 29, 1995
David M. Margulies, M.D., Director
/s/Gerald E. Bisbee, Jr. March 29, 1995
Gerald E. Bisbee, Jr., Director
/s/Charles S. Runnion, III March 29, 1995
Charles S. Runnion, III, Director
/s/Thomas C. Tinstsman, M.D. March 29, 1995
Thomas C. Tinstman, M.D., Director
/s/David J. Hart March 29, 1995
David J. Hart, Director
<PAGE>
The Board of Directors and Stockholders Cerner Corporation:
We have audited the accompanying consolidated balance sheets
of Cerner Corporation and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Cerner Corporation and
subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1994,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
February 10, 1995
Managements Report
-----------------------------------------------------------------
The management of Cerner Corporation is responsible for the
consolidated financial statements and all other information
presented in this report. The financial statements have
been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances, and, therefore,
included in the financial statements are certain amounts based on
management's informed estimates and judgments. Other financial
information in this report is consistent with that in the
consolidated financial statements. The consolidated financial
statements have been audited by Cerner Corporation's independent
certified public accountants and have been reviewed by the audit
committee of the Board of Directors.
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
<CAPTION>
1994 1993
----------------
(Dollars in thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 15,305 16,784
Receivables 65,148 46,435
Inventory 2,218 1,024
Prepaid expenses and other 979 2,926
------- ------
Total current assets 83,650 67,169
Property and equipment, net 41,129 13,818
Software development costs, net 18,784 14,571
Intangible assets, net 6,390 8,564
Noncurrent receivables 4,508 --
Other assets 1,949 788
------- -------
$156,410 104,910
-------- -------
-------- -------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 13,485 11,516
Notes payable -- 975
Current installments of long-term debt 160 511
Advanced billings 3,737 4,178
Deferred income taxes 6,652 1,993
Accrued payroll and tax withholdings 4,689 3,812
Other accrued expenses 2,557 1,581
------- ------
Total current liabilities 31,280 24,566
Long-term debt, net 30,235 10,354
Deferred income taxes 9,118 5,760
Stockholders' Equity:
Common stock, $.01 par value,
50,000,000 shares authorized,
14,510,816 shares issued in 1994 and
14,121,329 shares in 1993 145 141
Additional paid-in capital 30,947 28,939
Retained earnings 60,353 40,852
Treasury stock, at cost (513,018
shares in 1994 and 1993) (5,693) (5,693)
Foreign currency translation adjustment 25 (9)
-------- -------
Total stockholders' equity 85,777 64,230
-------- --------
Commitments (Note 11)
$ 156,410 104,910
-------- --------
-------- --------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Earnings
For the years ended December 31, 1994, 1993, and 1992
<CAPTION>
1994 1993 1992
----------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues:
System sales $ 108,322 84,024 71,586
Support and maintenance 41,322 33,200 26,664
Other 6,273 3,348 2,895
-------- -------- -------
Total revenues 155,917 120,572 101,145
-------- -------- -------
Costs and expenses:
Cost of revenues 46,426 43,921 44,818
Sales and client service 39,857 28,248 20,067
Software development 22,688 16,000 12,962
General and administrative 13,167 8,073 6,711
-------- -------- -------
Total costs and expenses 122,138 96,242 84,558
-------- -------- -------
Operating earnings 33,779 24,330 16,587
Interest expense, net 1,328 210 294
-------- --------- -------
Earnings before income taxes 32,451 24,120 16,293
Income taxes 12,950 9,562 6,361
-------- --------- -------
Net earnings $ 19,501 14,558 9,932
------- --------- -------
------- --------- -------
Primary earnings per share $ 1.31 1.00 .69
------- --------- -------
------- --------- -------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Stockholders' Equity
December 31, 1994, 1993, and 1992
<CAPTION>
Foreign
Additional currency
Common Stock paid-in Retained Treasury Stock translation
------------- --------------
Shares Amount capital earnings Amount adjustment Total
------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 13,148 $ 131 16,749 16,362 (5,693) (32) 27,517
Exercise of options 194 2 326 - - - 328
Issuance of stock grants - - 5 - - - 5
Tax benefit from disqualifying
dispositions of stock options - - 896 - - - 896
Foreign currency translation
adjustment - - - - - (35) (35)
Net earnings - - - 9,932 - - 9,932
---------------------------------------------------------------------------
Balance at December 31, 1992 13,342 133 17,976 26,294 (5,693) (67) 38,643
---------------------------------------------------------------------------
Exercise of options 519 5 985 - - - 990
Issuance of stock grants - - 8 - - - 8
Issuance of stock for acquisition 260 3 6,770 - - - 6,773
Tax benefit from disqualifying
dispositions of stock options - - 3,200 - - - 3,200
Foreign currency translation
adjustment - - - - - 58 58
Net earnings - - - 14,558 - - 14,558
---------------------------------------------------------------------------
Balance at December 31, 1993 14,121 141 28,939 40,852 (5,693) (9) 64,230
---------------------------------------------------------------------------
Exercise of options 389 3 984 - - - 987
Issuance of stock grants 1 1 24 - - - 25
Tax benefit from disqualifying
dispositions of stock options - - 1,000 - - - 1,000
Foreign currency translation
adjustment - - - - - 34 34
Net earnings - - - 19,501 - - 19,501
---------------------------------------------------------------------------
Balance at December 31, 1994 14,511 $ 145 30,947 60,353 (5,693) 25 85,777
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flow
For the years ended December 31, 1994, 1993, and 1992
<CAPTION>
1994 1993 1992
------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 19,501 14,558 9,932
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 10,062 6,434 5,293
Issuance of stock as compensation 25 8 5
Provision for deferred income taxes 8,017 7,500 536
Tax benefit from disqualifying
dispositions of stock options 1,000 3,200 896
Loss on disposal of capital equipment 165 -- --
Changes in assets and liabilities:
Receivables (23,221) (13,426) (60)
Inventory (1,194) 821 (359)
Prepaid expenses and other 1,213 391 (519)
Accounts payable 1,969 2,901 (2,995)
Accrued income taxes -- (5,791) (1,218)
Other accrued liabilities 1,412 (740) 2,364
--------- -------- -------
Total adjustments (552) 1,298 3,943
--------- -------- -------
Net cash provided by operating activities 18,949 15,856 13,875
--------- -------- -------
Cash flows from investing activities:
Purchase of capital equipment (11,291) (7,078) (4,615)
Purchase of land, building, and improvements (20,939) -- --
Proceeds on disposal of capital equipment 21 -- --
Capitalized software development costs (8,131) (6,181) (4,098)
Acquisition of business -- (585) --
--------- -------- -------
Net cash used in investing activities (40,340) (13,844) (8,713)
--------- -------- -------
Cash flows from financing activities:
Net borrowings (payments) under short-term
notes payable (639) 388 --
Proceeds from issuance of long-term debt 50,273 109 6,281
Repayment of long-term debt (30,743) (511) (6,692)
Proceeds from exercise of options 987 990 328
--------- -------- -------
Net cash provided by (used in) financing
acitivities 19,878 976 (83)
--------- -------- -------
Foreign currency translation adjustment 34 58 (35)
--------- -------- -------
Net increase (decrease) in cash and cash equivalents (1,479) 3,046 5,044
Cash and cash equivalents at beginning of year 16,784 13,738 8,694
--------- -------- -------
Cash and cash equivalents at end of year $ 15,305 16,784 13,738
--------- -------- -------
--------- -------- -------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,110 686 636
Income taxes, net of refund 3,574 4,499 6,171
Noncash investing and financing activities:
Acquisition of business $ -- 6,773 --
Acquisition of equipment through capital leases 386 139 840
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1 Summary of Significant Accounting Policies
(a) Principles of Consolidation - The consolidated
financial statements include the accounts of Cerner
Corporation and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been
eliminated in consolidation.
(b) Revenue Recognition - Revenues are derived primarily
from the sale of clinical information systems. In addition,
revenue is generated from servicing installed clinical
information systems, which generally include support of
software and maintenance of hardware. The Company also
derives revenue from the sale of computer hardware.
Clinical information system sales contracts are negotiated
separately and generally include the licensing of the
Company's clinical information system software and the sale
of computer hardware. Clinical information system sales
contracts are noncancelable and provide for a right of
return only in the event the system fails to meet the
performance criteria set forth in the contracts. The
Company recognizes revenue from sales of clinical
information systems using a percentage-of-completion method
based on meeting key milestone events over the term of the
contracts in accordance with Statement of Position 91-1,
"Software Revenue Recognition."
Revenue from the licensing of additional software is
recognized upon installation at the client's site. Revenue
from the sale of computer hardware is recognized upon
shipment. Revenue from ongoing software support and
equipment maintenance is recognized as the services are
rendered.
(c) Software Development Costs - Costs incurred internally
in creating computer software products are expensed until
technological feasibility has been established upon
completion of a detail program design. Thereafter, all
software development costs are capitalized and subsequently
reported at the lower of amortized cost or net realizable
value. Capitalized costs are amortized based on current and
future revenue for each product with minimum annual
amortization equal to the straight-line amortization over
the estimated economic life of the product. The Company is
amortizing capitalized costs on a straight-line basis over
five years. During the years ended December 31, 1994, 1993,
and 1992, the Company capitalized $8,131,000, $6,181,000,
and $4,098,000, respectively, of total software development
costs of $26,897,000, $19,432,000, and $14,522,000,
respectively. Amortization expense of capitalized software
development costs for the years ended December 31, 1994,
1993, and 1992, was $3,918,000, $2,652,000, and $2,538,000,
respectively, and accumulated amortization was $13,854,000,
$9,936,000, and $7,284,000, respectively.
(d) Inventory - Inventory consists primarily of computer
hardware held for resale and is recorded at the lower of
cost (first-in, first-out) or market.
(e) Property and Equipment - Property, equipment, and
leasehold improvements are stated at cost. Depreciation of
property and equipment is computed using the straight-line
method over periods of 5 to 39 years. Amortization of
leasehold improvements is computed using a straight-line
method over the lease terms, which range from periods of two
to five years.
(f) Earnings Per Share - Earnings per share is based on the
weighted average number of common shares and common share
equivalents outstanding. Common share equivalents consist
of shares issuable upon exercise of stock options using the
treasury stock method. The computation of fully diluted
earnings per share reflects additional dilution under the
treasury stock method when the Company's stock price at the
end of a reporting period exceeds the average price. Fully
diluted earnings per share is not materially different from
primary earnings per share. Weighted average shares
outstanding utilized in the computation of primary earnings
per share were 14,881,104, 14,579,178, and 14,340,408, and
fully diluted earnings per share were 14,903,752,
14,642,899, and 14,506,958, for the years ended December 31,
1994, 1993, and 1992, respectively.
(g) Foreign Currency - Assets and liabilities in foreign
currencies are translated into dollars at rates prevailing
at the balance sheet date. Revenues and expenses are
translated at average rates for the year. The net exchange
differences resulting from these translations are reported
in stockholders' equity. Gains and losses resulting from
foreign currency transactions are included in the
consolidated statements of earnings. The net gain (loss)
resulting from foreign currency transactions was $107,000,
($83,000), and ($180,000), in 1994, 1993, and 1992,
respectively.
(h) Income Taxes - The Company accounts for income taxes
using the asset and liability method pursuant to Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under the asset and liability method,
deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled.
(i) Goodwill - Excess of cost over net assets acquired
(goodwill) is being amortized on a straight-line basis over
eight years. Accumulated amortization was $916,000 at
December 31, 1994 and $151,000 at December 31, 1993.
(j) Reclassifications - Certain prior year amounts have
been reclassified to conform with current year presentation.
2 Acquisition
On November 1, 1993, the Company completed the acquisition
of Megasource, Inc. through the merger of Megasource, Inc.
into a new wholly owned subsidiary of the Company. The
Company issued 259,770 shares of common stock, valued at
approximately $6,773,000, in the merger. Megasource, Inc.
was engaged in the design, sale, and support of several
clinical information systems, the most significant of which
was its pharmacy system. The acquisition has been accounted
for as a purchase with the operating results of Megasource,
Inc. included in the Company's consolidated statement of
earnings from November 1, 1993. The Company has determined
that the consolidated results of operations as if the
acquisition had occurred at the beginning of 1992 and 1993
would have had no material effect on the overall results of
the Company.
3 Cash and Cash Equivalents
<TABLE>
Cash and cash equivalents consist of the following:
<CAPTION>
1994 1993
---------------
(In thousands)
<S> <C> <C>
Cash and overnight repurchase agreements $ 6,643 4,721
Commercial paper 3,982 7,967
Variable rate securities 500 500
Fixed rate securities 3,330 2,746
Certificates of deposit 850 850
------ ------
Total cash and cash equivalents $ 15,305 16,784
</TABLE>
The Company considers all highly liquid debt instruments
with original maturities of three months or less to be cash
equivalents. Cash equivalents are carried at cost, which
approximates market.
The carrying value of cash and cash equivalents approximates
fair value due to the short maturity of those instruments.
4 Receivables
Receivables consist of accounts receivable and contracts
receivable. Accounts receivable represent recorded revenues
that have been billed. Contracts receivable represent
recorded revenues that are billable by the Company at future
dates under the terms of a contract with a client. Contract
receivables that are not expected to be collected within one
year are classified as noncurrent. Billings on contracts in
excess of related revenues recognized under the percentage
of completion method are recorded as advanced billings. A
summary of current receivables is as follows:
<TABLE>
1994 1993
----------------
(In thousands)
<S> <C> <C>
Current receivables:
Accounts receivable $ 37,019 28,251
Contracts receivable 28,129 18,184
-------- -------
Total current receivables $ 65,148 46,435
-------- -------
-------- -------
</TABLE>
Substantially all receivables are derived from sales and
related support and maintenance of the Company's clinical
information systems to healthcare providers located
throughout the United States and in certain foreign
countries. Included in receivables at December 31, 1994 and
1993, are amounts due from healthcare providers located in
foreign countries of $3,777,000 and $4,108,000,
respectively. Consolidated revenues include foreign sales
of $13,274,000, $8,417,000, and $10,018,000, for the years
ended December 31, 1994, 1993, and 1992, respectively.
The Company provides an allowance for estimated
uncollectible accounts based upon historical experience and
management's judgment.
The fair value of the Company's noncurrent receivables is
estimated to be $4,155,000, based on current interest rates
offered to the Company for debt of the same maturities.
5 Property and Equipment
<TABLE>
A summary of property, equipment, and leasehold improvements
stated at cost, less accumulated depreciation and
amortization, is as follows:
<CAPTION>
1994 1993
------------------
(In thousands)
<S> <C> <C>
Furniture and fixtures $ 9,942 7,041
Computer equipment 18,163 12,796
Marketing equipment 913 280
Communications equipment 1,612 1,178
Leasehold improvements 4,319 2,782
Capital lease equipment 1,055 1,770
Land, building, and improvements 20,939 -
------- ------
56,943 25,847
Less accumulated depreciation and amortization 15,814 12,029
------- ------
Total property and equipment, net $ 41,129 13,818
------- ------
------- ------
</TABLE>
6 Indebtedness
At December 31, 1993, the Company had a loan agreement with
a bank that provided for a term loan, a line of credit for
financing contract receivables, and a long-term, revolving
line of credit for working capital purposes. The lines of
credit were secured by eligible receivables, inventory,
property, and equipment, and bore interest at the bank's
prime rate. At December 31, 1993, the Company had
borrowings of $481,000 under the contract receivables line
of credit and $10,251,000 under the long-term, revolving
line of credit.
On April 19, 1994, the Company entered into a loan agreement
with two banks that provided for a long-term revolving line
of credit for working capital purposes. The long-term
revolving line of credit is unsecured and requires monthly
payments of interest only. Interest is payable at the
Company's option at a rate based on prime (8.5% at December
31, 1994) or LIBOR plus 1.75% (7.75% at December 31, 1994).
The interest rate may be reduced by up to .5% if certain net
worth ratios are maintained. At December 31, 1994, the
Company had no outstanding borrowings under this agreement
and had $18,000,000 available for working capital purposes.
The agreement contains certain net worth, current ratio, and
fixed charge coverage covenants and provides certain
restrictions on the Company's ability to borrow, incur
liens, sell assets, and pay dividends. A commitment fee of
3/16% is payable quarterly on the unused portion of the
revolving line of credit.
On April 19, 1994, the Company entered into a loan agreement
with two banks that provided for a term loan of $17,425,000
to fund the $20,000,00 purchase of its Kansas City
headquarters complex. On July 29, 1994, the Company issued
$30,000,000 of Senior Notes. The note proceeds were used to
repay the term loan, which then terminated, and reduce the
outstanding borrowings under the revolving line of credit.
The Senior Notes are payable in five equal annual
installments beginning in August 2000. Interest is payable
on February 1 and August 1 at a rate of 8.3%. The note
agreement contains certain net worth, current ratio, and
fixed charge coverage covenants and provides certain
restrictions on the Company's ability to borrow, incur
liens, sell assets, and pay dividends.
The fair value of the Company's Senior Notes is estimated to
be $28,716,000, based on the quoted market prices for
similar issues offered to the Company for debt of the same
remaining maturities. Although the fair value of the long-
term debt is less than the carrying amount, settlement at
the reported fair value does not include potential taxes and
other expenses that would be incurred in an actual
settlement. The Company estimates that the fair value of
the long-term portion of capital leases approximates the
carrying value.
<TABLE>
Long-term debt is as follows:
<CAPTION>
1994 1993
---------------------
(In thousands)
<S>
Revolving line of credit, interest payable monthly at prime <C> <C>
(8.5% at December 31, 1994), secured by receivables,
inventory, and all property and equipment $ -- 10,251
Senior Notes, 8.3% due 2004 30,000 --
Obligation under capital lease agreements, interest at 6 - 10%
payable in monthly installments through August 1997,
secured by equipment 395 614
-------- --------
30,395 10,865
Less current installments 160 511
-------- --------
Long-term debt, excluding current installments $ 30,235 10,354
-------- --------
-------- --------
</TABLE>
<TABLE>
Scheduled maturities of long-term debt (in thousands) at December 31, 1994, are as follows:
<CAPTION>
Years
ending
December
31
---------
<S> <C>
1995 $ 160
1996 130
1997 105
2000 and thereafter 30,000
-------
$ 30,395
-------
-------
</TABLE>
7 Interest Income and Expense
<TABLE>
A summary of interest income and expense is as follows:
<CAPTION>
1994 1993 1992
----------------------
(In thousands)
<S> <C> <C> <C>
Interest income $ 542 438 403
Interest expense (1,870) (648) (697)
-------- ----- ------
Interest expense, net $ (1,328) (210) (294)
-------- ----- ------
-------- ----- ------
</TABLE>
8 Stock Options
The Company has three incentive stock option plans and a
nonqualified stock option plan. Stock Option Plan A (Plan
A) was approved by the Board of Directors on September 20,
1983, and expired on September 20, 1993. Stock Option Plan
B (Plan B) was approved by the Board of Directors on
November 30, 1983, and expired on November 30, 1993. Stock
Option Plan C (Plan C) was approved by the Board of
Directors on May 18, 1993. The NonQualified Stock Option
Plan was approved by the Board of Directors on February 19,
1991.
All associate stock options authorized under Plan A were
granted prior to December 31, 1983. Options granted under
Plan A were exercisable through September 20, 1993, at $.38
per share (fair market value on the date of grant) and
contained restrictions as to transferability and
exercisability after termination of employment.
Transactions for associate stock options under Plan A are
summarized as follows:
<TABLE>
Number of
shares Exercise Shares
under option price exercisable
----------------------------------------
<S> <C> <C> <C>
Outstanding, December 31, 1991 179,200 $ .38 179,200
Exercised (60,000) .38
-----------
Outstanding, December 31, 1992 119,200 .38 119,200
Exercised (119,200) .38
-----------
Outstanding, December 31, 1993 and 1994 - $ -
-----------
-----------
</TABLE>
Under Plan B, the Company could grant to associates options
to purchase shares of common stock through November 30,
1993. The options are exercisable at the fair market value
on the date of grant for a period determined by the Board of
Directors (not more than ten years from the date granted).
The options contain restrictions as to transferability and
exercisability after termination of employment.
Transactions for associate stock options under Plan B are
summarized as follows:
<TABLE>
Number of
shares Exercise Shares
under option price exercisable
<S> <C> <C> <C>
Outstanding, December 31, 1991 1,569,052 $ 1.00-5.00 704,600
Granted 44,000 3.69-24.13
Canceled (31,312) 2.38-3.03
Exercised (133,852) 1.00-5.00
----------
Outstanding, December 31, 1992 1,447,888 1.00-24.13 817,204
Granted 71,000 17.25-35.13
Canceled (24,600) 2.69-21.38
Exercised (359,581) 1.00-4.50
----------
Outstanding, December 31, 1993 1,134,707 1.00-35.13 734,667
Canceled (18,400) 2.69
Exercised (348,780) 1.00- 8.94
----------
Outstanding, December 31, 1994 767,527 $ 1.00-35.13 564,727
----------
----------
</TABLE>
Under Plan C, the Company may grant to associates options to
purchase shares of common stock through May 18, 2003. The
options are exercisable at the fair market value on the date
of grant for a period determined by the Board of Directors
(not more than ten years from the date granted). The
options contain restrictions as to transferability and
exercisability after termination of employment.
Transactions for associate stock options under Plan C are
summarized as follows:
<TABLE>
Number of shares Exercise Shares
under option price exercisable
-------------------------------------------
<S> <C> <C> <C>
Outstanding, December 31, 1993 - $ - -
Granted 47,500 25.13-37.75
Canceled (300) 28.25
-------
Outstanding, December 31, 1994 47,200 $ 25.13-37.75 -
-------
-------
</TABLE>
Under the NonQualified Stock Option Plan, the Company may
grant to associates, consultants, or advisors options to
purchase shares of common stock through January 1, 2000.
The options are exercisable at a price and during a period
determined by the Stock Option Committee.
Transactions under the NonQualified Stock Option Plan and
other nonqualified stock option agreements are summarized as
follows:
<TABLE>
Number of shares Exercise Shares
under option price exercisable
--------------------------------------------
<S> <C> <C> <C>
Outstanding, December 31, 1991 292,000 $ 2.50-3.06 72,000
Granted - -
--------
Outstanding, December 31, 1992 292,000 2.50-3.06 114,000
Exercised (40,000) 2.69-3.06
--------
Outstanding, December 31, 1993 252,000 2.50-3.06 106,000
Granted 157,916 25.13-37.75
Exercised (40,000) 2.69
--------
Outstanding, December 31, 1994 369,916 $ 2.50-37.75 122,000
--------
--------
</TABLE>
9 Income Taxes
<TABLE>
Income taxes for the years ended December 31, 1994, 1993,
and 1992, consist of the following:
<CAPTION>
1994 1993 1992
-----------------------
(In thousands)
<S>
Current: <C> <C> <C>
Federal $ 3,740 1,767 5,001
State 692 333 768
Foreign 501 (38) 56
------- ------ -----
Total current 4,933 2,062 5,825
------- ------ -----
Deferred:
Federal 7,043 6,531 295
State 919 969 241
Foreign 55 -- --
------- ------ ------
Total deferred 8,017 7,500 536
------- ------ ------
Total income tax $ 12,950 9,562 6,361
------- ------ ------
------- ------ ------
</TABLE>
Included in 1993 deferred income tax expense is
approximately $88,000 resulting from the increase in the
statutory tax rate.
Temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities
that give rise to significant portions of deferred income
taxes at December 31, 1994 and 1993, relate to the
following:
<TABLE>
1994 1993
----------------
(In thousands)
<S> <C> <C>
Software development costs $ 6,776 5,401
Contract and service revenues and costs 1,704 --
Depreciation and amortization 789 594
Operating leases (151) (235)
-------- ------
Noncurrent deferred income tax liability 9,118 5,760
-------- ------
-------- ------
Contract and service revenues an costs 8,136 2,669
Other (1,484) (676)
-------- -------
Current deferred income 6,652 1,993
-------- -------
Net deferred income taxes $ 15,770 7,753
-------- -------
-------- -------
</TABLE>
Net deferred income taxes at December 31, 1994, are composed
of deferred tax liabilities of $17,758,000 and deferred tax
assets of $1,988,000. At December 31, 1993, deferred tax
liabilities were $11,113,000 and deferred tax assets were
$3,360,000. There was no valuation allowance provided for
deferred tax assets at December 31, 1994 or 1993.
The effective income tax rates for 1994, 1993, and 1992 were
40%, 40%, and 39%, respectively. These effective rates
differ from the federal statutory rate of 35% in 1994 and
1993 and 34% in 1992 as follows:
<TABLE>
1994 1993 1992
------------------------
(In thousands)
<S> <C> <C> <C>
Tax expense at statutory rates $ 11,358 8,442 5,540
State income tax, net of federal benefit 1,047 846 666
Other, net 545 274 155
-------- ------ ------
Total income tax $ 12,950 9,562 6,361
-------- ------ ------
-------- ------ ------
</TABLE>
Income taxes payable at December 31, 1994, 1993, and 1992,
are reduced by the tax benefit resulting from disqualifying
dispositions of stock acquired under the Company's stock
option plans. The 1994, 1993, and 1992 benefits of
$1,000,000, $3,200,000, and $896,000, respectively, are
treated as increases to additional paid-in capital.
10 Associate Stock Purchase Retirement Plan
The Company established the Cerner Corporation Associate
Stock Purchase Retirement Plan (the Plan) under Section
401(k) of the Internal Revenue Code. All full-time
associates are eligible to participate. Participants may
elect to make pre-tax contributions from 1% to 15% of
compensation to the Plan, subject to annual limitations
determined by the Internal Revenue Service. Participants
may direct contributions into mutual funds, a money market
fund, or a Company stock fund. The Company makes matching
contributions to the Plan, on behalf of participants, in an
amount equal to 20% of the participant's contribution,
limited to a maximum of $600 per participant. The Company's
expense for the plan amounted to $316,000, $275,000, and
$154,000 for 1994, 1993, and 1992, respectively.
11 Commitments
The Company is committed under operating leases for office
space through December 1999 and for computer equipment
through March 1995. Rent expense for office and warehouse
space for the Company's regional and international offices
for 1994, 1993, and 1992 was $1,721,000, $2,195,000, and
$1,604,000, respectively. Lease expense for computer
equipment was $328,000, $323,000, and $315,000, in 1994,
1993, and 1992, respectively. Aggregate minimum future
payments (in thousands) under these noncancelable leases are
as follows:
<TABLE>
Years ending
December 31
------------
<S> <C>
1995 $ 1,253
1996 1,243
1997 1,253
1998 1,047
1999 319
</TABLE>
At December 31, 1994, the Company was committed to spending
$3,332,000 under a construction contract for a new building
at its Kansas City headquarters complex. The completed cost
of the new building is estimated to be $6,000,000 to
$8,000,000.
12 Real Estate Lease Revenue
The Company leases space to unrelated parties in its Kansas
City headquarters complex under noncancelable operating
leases. Rental income from April 19, 1994 (the date of the
Company's purchase of its headquarters complex), to
December 31, 1994, was $1,843,000. Future minimum lease
revenues (in thousands) under these noncancelable operating
leases expiring in 1999 are as follows:
<TABLE>
Years ending
December 31
-------------
<S> <C>
1995 $ 2,099
1996 2,023
1997 1,752
1998 1,333
1999 1,016
</TABLE>
13 Stockholders' Equity
At December 31, 1994 and 1993, the Company had 1,000,000
shares of authorized but unissued preferred stock, $.01 par
value.
14 Quarterly Results (unaudited)
<TABLE>
Selected quarterly financial data for 1994 and 1993 is set
forth below:
<CAPTION>
Earnings
before Primary
income Net earnings
Revenues taxes earnings per share
----------------------------------------------
(In thousands, except
per share data)
1994 Quarterly Results:
<S> <C> <C> <C> <C>
March 31 $ 30,515 4,724 3,002 .20
June 30 39,795 8,253 4,903 .33
September 30 40,933 8,387 5,069 .34
December 31 44,674 11,087 6,527 .44
------- ------- ------
Total $ 155,917 32,451 19,501 1.31
------- ------- ------
------- ------- ------
1993 Quarterly Results:
March 31 $ 24,137 4,320 2,560 .18
June 30 29,834 5,568 3,314 .23
September 30 32,334 6,809 4,072 .28
December 31 34,267 7,423 4,612 .31
------- ------ ------
Total $ 120,572 24,120 14,558 1.00
------- ------ ------
------- ------ ------
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Cerner Corporation
Valuation and Qualifying Accounts
---------------------------------
Balance at Allowance
Beginning Acquired in Balance at
Description of Period Acquisitions Deductions End of Period
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For Year Ended
December 31, 1993
Doubtful Accounts $ 300,000 $ 234,268 $ 0 $ 534,268
Sales Allowances $ 300,000 $ 0 $ 0 $ 300,000
</TABLE>
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Deductions End of Period
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For Year Ended
December 31, 1994
Doubtful Accounts $ 534,268 $ 0 $ 100,000 $ 434,268
Sales Allowances $ 300,000 $ 0 $ 0 $ 300,000
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
-------------------------------
The Board of Directors
Cerner Corporation:
Under date of February 10, 1995, we reported on the consolidated balance
sheets of Cerner Corporation and subsidiaries as of December 31, 1994 and 1993
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1994. These consolidated financial statements in our report thereon are
included in the Company's annual report on Form 10-K for the year 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule as
listed in Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statement schedule based on our audits.
In our opinion, this financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Kansas City, Missouri
February 10, 1995
EXHIBIT 10(o)
Non-Qualified Stock Option Agreement
THIS AGREEMENT, made and entered into this twentieth day of July, 1994 (the
"granting" date), by and between CERNER CORPORATION, a Delaware corporation
(the "Company"), and Alan D. Dietrich ("Optionee"),
WITNESSETH:
WHEREAS, The Stock Option Committee of the Board of Directors of the Company
(the "Committee") has determined that the Optionee is eligible to receive an
option to purchase shares of common stock of the Company under the Company's
Non-Qualified Stock Option Plan (the "Plan");
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto
agree as follows:
1. Incorporation of the Plan. A copy of the Plan is incorporated herein by
reference and all of the terms, conditions and provisions contained therein
shall be deemed to be contained in this Agreement.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions contained in this
Agreement, the Company hereby grants to the Optionee an option (the "option")
to purchase from the Company all or any part of an aggregate of twenty
thousand (20,000) shares of Cerner Common Stock at the purchase price of
twenty-five and one-eighth ($25 1/8) per share.
The numbers of shares of common stock subject to the Option and the purchase
price per share shall be appropriately adjusted to reflect any stock dividends,
stock splits, split ups or combinations of outstanding shares of common stock
of the Company. The date first written above shall be deemed to be the granting
date of this Option.
This Option grant is made in conjunction with the role of Group Vice President
and General Manager ("Role"), currently performed by the Optionee as of the
granting date. The definition and responsibilities of this Role will be based
annually on the description incorporated in the then-current Incentive Plan
documentation or comparable document. Future vesting of shares granted in
this Option will be evaluated as explained in paragraph 4. Vesting will be
contingent on continued performance of this Role and other factors as
determined by the Chief Executive Officer and President of the Company.
3. Term of Option: Exercise in Installments. This option shall expire with
respect to all shares of Cerner Common Stock subject hereto twenty-five
years from the date first above written (the "Expiration Date"), unless it
shall be terminated at an earlier date in accordance with this Agreement.
This Option shall become exercisable in installments as follows, subject to
the vesting provisions of paragraph 4:
Number of Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be purchased
-------------------- ----------------
1,500 March 31, 1995
2,000 March 31, 1996
2,000 March 31, 1997
2,000 March 31, 1998
2,000 March 31, 1999
2,000 March 31, 2000
2,000 March 31, 2001
2,000 March 31, 2002
2,000 March 31, 2003
2,000 March 31, 2004
500 March 31, 2005
4. Option Vesting. The Optionee may purchase all or any portion of the shares
subject to each installment listed above at any time on or after the exercise
dates listed above and before the Expiration Date (or any earlier termination
date) that have become "vested". "Vested" means that a) the Optionee has
continued to perform the Role noted in Paragraph 2, or an alternate Role as
assigned by the Chief Executive Officer and President of the Company, b) that
the Optionee's performance in the assigned Role has been reviewed by the
Chief Executive and President of the Company and such performance has been
evaluated, in their sole discretion, as acceptable for the Role, and c) that
they have issued a written statement to Optionee stating the amount of shares
which are vested at each of the dates set forth above.
Any shares which do not become so "vested" shall no longer be subject to
this Option. This Option shall expire as to any such shares not so vested.
This Option shall expire as to all unexercised shares immediately upon
termination of the Associate's employment with the reason of the Optionee's
death or disability the Optionee, or Optionee's estate, shall have thirty
(30) calendar days following such date to exercise this Option as to the
number of shares exercisable on such date.
This Option may be exercised by Optionee delivering to the Company a written
notice of exercise along with a cash payment in the amount of the purchase
price for such shares.
5. Investment Purpose. By accepting this Option, the Optionee agrees that
any and all share of stock purchased upon the exercise of this Option will
be purchased for investment purposes, and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by Optionee (or
by the person or persons entitled to exercise the Option in the event of the
death of the Optionee) that the share of stock are being purchased in good
faith for personal investment purposes, and not with a view to any distribution
thereof.
6. Stock Restrictions. The Optionee further agrees that:
a) Each stock certificate issued pursuant to the exercise of the Option granted
hereby shall bear a legend to the effect that the shares represented thereby
have not been registered under the Securities Act of 1993, and may not be
transferred except in accordance with the provisions of this Agreement.
b) The shares of the stock acquired upon the exercise of this Option may be
transferred, in whole or in part, only if in the opinion of counsel for
the Company such proposed transfer may be effected without registration
under the Securities Act of 1993 and appropriate state securities laws or such
registration has been effected. Prior to the transfer of any such shares the
holder thereof shall furnish the Company written notice of the intention to
effect such transfer, which notice shall include the manner and circumstances
of the proposed transfer and such matters as the Company may request.
c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares
acquired to this Option which the Company may need in connection with an
income tax return or report which it may be required to file with any
governmental agency.
7. Notices. Any notices or other communications required or allowed to be made
or given to the Company under terms of this Agreement shall be addressed to
the Company in care of its secretary at its offices at 2800 Rockcreek Parkway,
North Kansas City, Missouri 64117, and any notice to be given to the Optionee
at the address given beneath the signature hereto. Either party hereto may
from time to time change the address to which notices are to be sent to such
party giving written notice of such change to the other party. Any notice
hereunder shall be deemed to have been duly given if and when addressed as
aforesaid, registered and deposited, postage and registry fee prepaid, in a
post office regularly maintained by the United States Government.
8. Binding Effect and Assignment. This Agreement shall bind the parties hereto
but shall not be assignable by either party without the express written
consent of the other.
9. Governing Law. This Agreement shall be constructed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and Optionee has hereunto set hand as of day and year first above
written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
/s/Alan D. Dietrich
3604 NW 75th Court
Kansas City, MO 64151
---------------------
Address
EXHIBIT 10(p)
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into this 12th day of September, 1990
(the "Granting Date"), by and between CERNER CORPORATION, a Delaware
corporation (the "Company"), and Alan D. Dietrich (the "Optionee"),
WITNESSETH:
WHEREAS, on January 13, 1984, the Board of Directors of the Company adopted,
and on May 8, 1984, the holders of a majority of the issued and outstanding
shares of the Company's common stock approved, the Cerner Corporation Incentive
Stock Option Plan B (the "Plan") pursuant to which the Company may grant
from time to time, on or prior to November 30, 1993, options to purchase
shares of Cerner Common Stock (as defined in said Plan) to any employee of
the Company or of any of its subsidiary corporations, in such amounts and
under such form of agreements as shall be determined by the Incentive Stock
Option Committee, appointed by the Board of Directors of the Company
pursuant to the Plan; and
WHEREAS, the Incentive Stock Option Committee (the "Committee") has
determined that the Optionee is an employee of the Company or of one of its
subsidiary corporations within the meaning of the Plan, and that the
Optionee shall be granted an option to purchase shares of Cerner Common
Stock on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached hereto and
hereby incorporated herein by reference, and all of the terms, conditions and
provisions contained therein shall be deemed to be terms, conditions and
provisions of this Agreement. All terms used herein which are defined in
the Plan shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions contained in the Plan and this
Agreement, the Company hereby grants to the Optionee, as a matter of separate
inducement and agreement in connection with employment, but not in lieu of
any salary or other compensation for services, an option (the "Option") to
purchase from the Company all or any part of an aggregate of Five thousand
(5,000) shares of Cerner Common Stock at the purchase price of Six Dollars
and seventy-five cents ($6.75) per share. The date first written above shall
be deemed to be the granting date of this Option.
3. Term of Option: Exercise In Installments. This Option shall expire with
respect to all shares of Cerner Common Stock subject hereto on September 12,
2000 (the "Expiration Date"), unless it shall be terminated at an earlier
date in accordance with the provisions of the Plan. This Option shall become
exercisable in installments as follows:
Number or Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be Purchased
--------------------- ----------------
1,000 September 10, 1991
1,000 September 10, 1992
1,000 September 10, 1993
1,000 September 10, 1994
1,000 September 10, 1995
The Optionee may purchase all or any portion of the shares subject to each
installment listed above at any time (i) on or after the respective exercise
date listed above, and (ii) before the Expiration Date (or before any earlier
termination date), in accordance with the provisions of the Plan.
PLEASE REMEMBER THAT YOU MAY LOSE VALUABLE TAX BENEFITS IF YOU SELL OR
DISPOSE OF THE STOCK ACQUIRED UPON THE EXERCISE OF THIS OPTION BEFORE (1) TWO
YEARS HAVE PASSED SINCE THE DATE ON WHICH THIS OPTION WAS GRANTED, OR (2) ONE
YEAR HAS PASSED SINCE THE DATE ON WHICH YOU EXERCISED THIS OPTION. PLEASE
CONTACT YOUR PERSONAL TAX ADVISOR FOR MORE INFORMATION.
4. Investment Purpose. By accepting this Option, the Optionee agrees that any
and all shares of stock purchased upon the exercise of this Option will be
purchased for investment purposes and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by the Optionee
(or by the person or persons entitled to exercise the Option in the event of
the death of the Optionee) that the shares of stock are being purchased in
good faith for personal investment purposes, and not with a view to any
distribution thereof.
5. Stock Restrictions. The optionee further agrees that:
(a) Each stock certificate issued pursuant to the exercise of the Option
granted hereby shall bear a legend to the effect that the shares represented
thereby have not been registered under the Securities Act of 1933, and may not
be transferred except in accordance with the provisions of this Incentive
Stock Option Agreement and the Plan.
(b) Subject to the Company's right to repurchase described in paragraph 6
hereof, the shares of stock acquired upon the exercise of this Option may be
transferred, in whole or in part, only upon the following conditions:
(i) Prior to any transfer of any such shares, the holder thereof shall furnish
the Company written notice of the intention to effect such transfer. Such
notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall contain an undertaking to furnish such further
information as may be required, to enable counsel to render the opinion
referred to below. Promptly after receiving such notice, the Company shall
obtain from its counsel a written opinion (a copy of which shall be furnished
to the person giving such notice) as to whether the proposed transfer may be
effected without registration under the Securities Act of 1933.
(ii) If it is the opinion of said counsel that no such registration is
necessary under the circumstances, then the holder of the shares for which
transfer has been requested shall be entitled to transfer such shares in
accordance with the terms specified in the written notice given the Company.
Each certificate issued to the transferee to evidence the shares so transferred,
and each certificate evidencing any untransferred balance of shares of stock
acquired by the Optionee upon exercise of this Option, shall bear the
restrictive transfer legend described in paragraph 5(a) hereof unless in the
opinion of said counsel such legend is not then required.
(iii) If it is the opinion of said counsel that the proposed transfer may not
be effected without registration under the Securities Act of 1933, then the
Company shall so notify said holder and said transfer shall not be effected.
(c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares acquired
pursuant to this Option which the Company may need in connection with an
income tax return or any other return or report which it may be required to
file with any governmental agency.
6. Company's Right to Repurchase Shares. In the event that the Optionee (i)
dies, (ii) ceases to be employed by the Company or any of its subsidiary
corporations at any time before the expiration of three (3) years after the
date on which this Option was last exercised or any other option
granted under this Plan, or (iii) desires to sell, pledge, hypothecate,
transfer or otherwise dispose of or encumber all or any portion of the shares
of stock that were purchased upon the exercise of this Option, the Company
shall have the right to repurchase all or any portion of the shares of stock
which were acquired by the Optionee (or by the person or persons entitled to
exercise this Option in the event of the death of the Optionee) pursuant to
the exercise of this Option, upon the following terms and conditions:
(a) Period--Unless exercisable as a result of the death of the Optionee, the
Company's right shall commence upon the date of which the Optionee delivers
to the Company written notice of desire to sell, pledge, hypothecate, transfer
or otherwise dispose of or encumber all or any portion of the stock purchased
upon the exercise of this Option, and shall expire thirty (30) days after such
date. Failure of the Company to exercise its right during such thirty (30)
day period shall be deemed to constitute a waiver of such right. However,
if the Optionee fails to sell, pledge, hypothecate, transfer or otherwise
dispose of or encumber all or any portion of the stock that was acquired
upon the exercise of this Option within sixty (60) days after the date on
which the Company shall be deemed to have waived its right, its right shall
be reinstated and again operative upon the Optionee's death, termination
of employment or any subsequent proposed disposition of such stock.
In the event that its right to repurchase becomes exercisable by reason of
the death of the Optionee, the Company's right shall commence on the date of
the Optionee's death and shall expire twelve (12) months after the date on
which it receives written notice of the Optionee's death from the legal
representative appointed by and qualified in a probate court of competent
jurisdiction. If no legal representative of the Optionee is appointed within
sixty (60) days after the death of the Optionee, then the Company shall be
considered a creditor of the estate and shall have all of the rights conferred
upon creditors of the estate of the Optionee by the state in which the
Optionee was domiciled at the date of death.
(b) Exercise--The Company shall exercise its right by delivering to the
Optionee, the legal representative or the person or persons who exercised this
Option after the death of the Optionee (the "Holder") a written notice
stating the number of shares with respect to which it is exercising its right
to repurchase. Such written notice shall be deemed to be effective as of the
earlier of (i) the date on which it is received by the Holder, or (ii) the
date on which it is placed in the United States mail, postage prepaid and
addressed to the Holder.
(c) Price--The price at which shares of stock may be repurchased by the
Company upon the exercise of its right described in this paragraph 6 shall be
the fair market value of such shares on the date that such right is exercised.
In the event that the Company's right becomes exercisable by reason of the
Optionee's desire to sell, pledge, hypothecate, transfer or otherwise dispose
of or encumber such stock, however, the purchase price shall not be less then
any bona fide cash offer which the Optionee has received therefor.
(d) Payment--The Company may pay for the stock repurchased from the Holder
pursuant to its exercise of the right described in this paragraph 6--
(i) if the Holder has held such option stock for three years or less, either
by a lump sum cash payment at the time it exercises its right to repurchase
pursuant to this paragraph 6, or, at the Company's discretion, partly by a
lump sum cash payment (in the amount equal to the lesser of (A) the
original option price paid by the Holder for such stock, or (B) the then
fair market value of such stock) at the time of repurchase and partly by a
promissory note requiring the Company to make equal annual cash installment
payments over a period of not more than ten (10) years, or
(ii) if the Holder has held such option stock for more than three years, by
a lump sum cash payment at the time it exercises its right to repurchase
pursuant to this paragraph 6, unless the Holder will, upon completion of the
Company's repurchase of all or a portion of the option stock and taking into
account all prior sales by the Holder of Cerner Common Stock to the Company,
have sold back to the Company an aggregate number of shares exceeding one-
half of one percent (1/2%) of its issued and outstanding shares of Cerner
Common Stock (determined at the time of such repurchase), in which event the
Company may, in its sole discretion, elect to pay partly by a lump sum cash
payment (in the amount equal to the lessor of (A) the original option price
paid by the Holder for such stock, or (B) the then fair market value of
such stock) at the time of repurchase and partly by a promissory note requiring
the Company to make equal annual cash installment payments over a period of
not more than ten (10) years.
Simple interest shall accrue on the unpaid balance of any promissory note
issued by the Company pursuant to this paragraph 6 at the rate of ten
percent (10%) per year.
7. Notices. Any notices or other communications required or allowed to be made
or given to the Company under the terms of this Agreement shall be addressed
to the Company in care of its secretary at its offices at 2800 Rockcreek
Parkway, North Kansas City, Missouri 64117, and any notice to be given to
the Optionee shall be addressed to the Optionee at the address given beneath
the signature hereto. Either party hereto may from time to time change the
address to which notices are to be sent to such party be giving written notice
of such change to the other party. Any notice hereunder shall be deemed to
have been duly given if and when addressed as aforesaid, registered and
deposited, postage and registry fee prepaid, in a post office regularly
maintained by the United States Government.
8. Binding Effect. This Agreement shall bind, and except as specifically
provided in the Plan and this Agreement, shall inure to the benefit of, the
respective heirs, legal representatives, successors and assigns of the parties
hereto.
9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and the Optionee has hereunto set hand as of the day and year first
above written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
/s/Alan Dietrich
Optionee
11902 Bluejacket
Overland Park, KS 66213
-----------------------
Address
EXHIBIT 10(q)
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into this twenty-second day of August, 1991
(the "Granting Date"), by and between CERNER CORPORATION, a Delaware
corporation (the "Company"), and Jeffrey C. Reene (the "Optionee"),
WITNESSETH:
WHEREAS, on January 13, 1984, the Board of Directors of the Company adopted, and
on May 8, 1984, the holders of a majority of the issued and outstanding shares
of the Company's common stock approved, the Cerner Corporation Incentive Stock
Option Plan B (the "Plan") pursuant to which the Company may grant from time
to time, on or prior to November 30, 1993, options to purchase the shares of
Cerner Common Stock (as defined in said Plan) to any employee of the
Company or any of its subsidiary corporations, in such amounts and under such
form of agreements as shall be determined by the Incentive Stock Option
Committee, appointed by the Board of Directors of the Company pursuant to the
Plan; and
WHEREAS, the Incentive Stock Option Committee (the "Committee") has determined
that the Optionee is an employee of the Company or one of its subsidiary
corporations within the meaning of the Plan, and that the Optionee shall be
granted and option to purchase shares of Cerner Corporation Stock on the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached hereto and hereby
incorporated herein by reference, and all of the terms, conditions and
provisions contained therein shall be deemed to be terms, conditions and
provisions of the Agreement. All terms used herein which are defined in the
Plan shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions of this Agreement, the
Company hereby grants to the Optionee, as a matter of separate inducement and
agreement in connection with employment, but not in lieu of any salary or other
compensation for services, an option (the "Option") to purchase from the Company
all or any part of an aggregate of twenty thousand (20,000) shares of Cerner
Corporation Stock at the purchase price of fifteen dollars and fifty cents
($15.50) per share. The date first written above shall be deemed to be the
granting date of this Option.
3. Term of Option: Exercise in Installments. This Option shall expire with
respect to all shares of Cerner Common Stock subject hereto on August 22,2001
(the "Expiration Date"), unless it shall be terminated at an earlier date in
accordance with the provisions of the Plan. This Option shall become
exercisable in installments as follows:
Number or Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be Purchased
--------------------- --------------------
4,000 July 1, 1992
4,000 July 1, 1993
4,000 July 1, 1994
4,000 July 1, 1995
4,000 July 1, 1996
The Optionee may purchase all or any portion of the shares subject to each
installment listed above at any time (i) on or after the respective exercise
date listed above, and (ii) before the Expiration Date (or before an earlier
termination date), in accordance with the provisions of the Plan.
PLEASE REMEMBER THAT YOU MAY LOSE VALUABLE TAX BENEFITS IF YOU SELL OR DISPOSE
OF THE STOCK ACQUIRED UPON THE EXERCISE OF THIS OPTION BEFORE (1) TWO YEARS
HAVE PASSED SINCE THE DATE ON WHICH THIS OPTION WAS GRANTED, OR (2) ONE YEAR
HAS PASSED SINCE THE DATE ON WHICH YOU EXERCISED THIS OPTION. PLEASE CONTACT
YOUR PERSONAL TAX ADVISOR FOR MORE INFORMATION.
4. Investment Purpose. By accepting this Option, the Optionee agrees that
any and all shares of stock purchased upon the exercise of this Option will be
purchased for investment purposes, and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by the Optionee
(or by the person or persons entitled to exercise the Option in the event of
the death of the Optionee) that the shares of stock are being purchased in good
faith for personal investment purposes, and not with a view to any distribution
thereof.
5. Stock Restrictions. The Optionee further agrees that:
(a) Each stock certificate issued pursuant to the exercise of the Option granted
hereby shall bear a legend to the effect that the shares represented thereby
have not been registered under the Securities Act of 1993, and may not be
transferred except in accordance of this Incentive Stock Option Agreement and
the Plan.
(b) Subject to the Company's right to repurchase described in paragraph 6
hereof, the shares of stock acquired upon the exercise of the Option may be
transferred, in whole or in part, only upon the following conditions:
(i) Prior to any transfer of any such shares, the holder thereof shall
furnish the Company written notice of the intention to effect such transfer.
Such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall contain an undertaking to furnish such further
information as may be required, to enable counsel to render the opinion referred
below. Promptly after receiving such notice, the Company shall obtain from its
counsel a written opinion (a copy of which shall be furnished to the person
giving such notice) as to whether the proposed transfer may be effected without
registration under the Securities Act of 1993.
(ii) If it is the Opinion of said counsel that no such registration is
necessary under the circumstances, then the holder of the shares for which
transfer has been requested shall be entitled to transfer such shares in
accordance with the terms specified in the written notice given the Company.
Each certificate issued to the transferee to evidence the shares so transferred,
and each certificate evidencing any untransferred balance of shares of stock
acquired by the Optionee upon exercise of this Option, shall bear the
restrictive transfer legend described in paragraph 5(a) hereof unless in the
opinion of said counsel such legend is not then required.
(iii) If it is the opinion of said counsel that the proposed transfer may not
be effected without registration under the Securities Act of 1993, then the
Company shall so notify said holder and said transfer shall not be effected.
(c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares acquired
pursuant to this Option which the Company may need in connection with an income
tax return or report which it may be required to file with any governmental
agency.
6. Company's Right to Repurchase Shares. In the event that the Optionee (i)
dies, (ii) ceases to be employed by the company or any of its subsidiary
corporations at any time before the expiration of three(3) years after the date
on which this Option was last exercised or any of the option granted under this
Plan, or (iii) desires to sell, pledge, hypothecate, transfer or otherwise
dispose of or encumber all or any portion of the shares of stock that were
purchased upon the exercise of this Option, the Company shall have the right
to repurchase all or any portion of the shares of stock which wee acquired by
the Optionee (or by the person or persons entitled to exercise this Option in
the event of the death of the Optionee) pursuant to the exercise of this Option,
upon the following terms and conditions:
(a) Period -- Unless exercisable as a result of the death of the Optionee, the
Company's right shall commence upon the date of which the Optionee ceases to be
employed by the Company or one of its subsidiary corporations or the date on
which the Optionee delivers to the Company written notice of desire to sell,
pledge, hypothecate, transfer or otherwise dispose of or encumber all or any
portion of the stock purchased upon the exercise of this Option, and shall
expire thirty (30) days after such date. Failure of the Company to exercise
its right during such thirty (30) day period shall be deemed to constitute a
waiver of such right. However, if the Optionee fails to sell, pledge,
hypothecate, transfer or otherwise dispose of or encumber all or any portion
of the stock that was acquired upon the exercise of this Option within sixty
(60) days after the date on which the Company shall be deemed to have waived its
right, its right shall be reinstated and again operative upon the Optionee's
death, termination of employment or any subsequent proposed disposition of such
stock.
In the event that its right to repurchase becomes exercisable by reason of the
death of the Optionee, the Company's right shall commence on the date of the
Optionee's death and shall expire twelve (12) months after the date on which
it receives written notice of the Optionee's death from the legal representative
appointed by and qualified in a probate court of competent jurisdiction. If
no legal representative of the Optionee is appointed within sixty (60) days
after the death of the Optionee, then the Company shall be considered a
creditor of the estate and shall have all rights conferred upon creditors of the
estate of the Optionee by the state in which the Optionee was domiciled at the
date of death.
(b) Exercise -- The Company shall exercise its right by delivering to the
Optionee, the legal representative or the person or persons who exercised this
Option after the death of the Optionee (the "Holder") a written notice stating
the number of shares with respect to which it is exercising its right to
repurchase. Such written notice shall be deemed to be effective as of the
earlier of (i) the date on which it is received by the Holder, or (ii) the date
on which it is placed in the United States Mail, postage prepaid and addressed
to the Holder.
(c) Price -- The price at which shares of stock may be repurchased by the
Company upon the exercise of its right described in this paragraph 6 shall be
fair market value of such shares on the date that such right is exercised. In
the event that the Company's right becomes exercisable by reason of the
Optionee's desire to sell, pledge, hypothecate, transfer or otherwise dispose
of or encumber such stock, however, the purchase price shall not be less than
any bona fide cash offer which the Optionee has receive therefor.
(d) Payment -- The Company may pay for the stock repurchased from the Holder
pursuant to its exercise of the right described in this paragraph 6 --
(i) if the Holder has held such option stock for three years or less,
either by a lump sum cash payment at the time it exercises its right to
repurchase pursuant to this paragraph 6, or, at the Company's discretion, partly
by a lump sum cash payment (in the amount equal to the lesser of (A) the
original option price paid by the Holder for such stock, or (B) the then fair
market value of such stock) at the time of repurchase and partly by a promissory
note requiring the Company to make equal annual cash installment payments over a
period of not more than ten (10) years, or
(ii) if the Holder has held such option stock for more than three years, by a
lump sum cash payment at the time it exercises its right to repurchase pursuant
to this paragraph 6, unless the Holder will, upon completion of the Company's
repurchase of all or a portion of the option stock and taking into account all
prior sales by the Holder of Cerner Common Stock to the Company, have sold back
to the Company an aggregate number of shares exceeding one-half of one percent
(1/2%) of its issued and outstanding shares of Cerner Common Stock (determined
at the time of such repurchased), in which event the Company may, in its sole
discretion, elect to pay partly by a lump sum cash payment (in the amount equal
to the lessor of (A) the original option price paid by the Holder for such
stock, or (B) the then fair market value of such stock) at the time of
repurchase and partly by a promissory note requiring the Company to make equal
annual cash installment payments over a period of not more than ten (10) years.
Simple interest shall accrue on the unpaid balance of any promissory note issued
by the Company pursuant to this paragraph 6 at the rate of ten percent (10%)
per year.
7. Notices. Any notices or other communications required or allowed to be
made or given to the Company under the terms of this Agreement shall be
addressed to the Company in care of its secretary at its offices at 2800
Rockcreek Parkway, North Kansas City. Missouri 64117, and any notice to be
given to the Optionee shall be addressed to the Optionee at the address given
beneath the signature hereto. Either party hereto may from time to time change
the address to which notices are sent to such party be giving written notice of
such change to the other party. Any notice hereunder shall be deemed to have
been duly given if and when addressed as aforesaid, registered and deposited,
postage and registry fee prepaid, in a post office regularly maintained by the
United States Government.
8. Binding Effect. This Agreement shall bind, and except as specifically
provided in the Plan and this Agreement, shall inure to the benefit of, the
respective heirs, legal representatives, successors and assigns of the parties
hereto.
9. Governing Law. This Agreement shall be constructed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and the Optionee has hereunto set hand as a the day and year first
above written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
By:/s/Jeffrey C. Reene
Optionee
2420 West 103rd Street
Leawood, KS 66206
----------------------
Address
EXHIBIT 10(r)
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into this fifteenth day of May, 1990
(the "Granting Date"), by and between CERNER CORPORATION, a Delaware
corporation (the "Company"), and Gary W. Willett (the "Optionee"),
WITNESSETH:
WHEREAS, on January 13, 1984, the Board of Directors of the Company adopted,
and on May 8, 1984, the holders of a majority of the issued and outstanding
shares of the Company's common stock approved, the Cerner Corporation Incentive
Stock Option Plan B (the "Plan") pursuant to which the Company may grant
from time to time, on or prior to November 30, 1993, options to purchase
shares of Cerner Common Stock (as defined in said Plan) to any employee of
the Company or of any of its subsidiary corporations, in such amounts and
under such form of agreements as shall be determined by the Incentive Stock
Option Committee, appointed by the Board of Directors of the Company
pursuant to the Plan; and
WHEREAS, the Incentive Stock Option Committee (the "Committee") has
determined that the Optionee is an employee of the Company or of one of its
subsidiary corporations within the meaning of the Plan, and that the
Optionee shall be granted an option to purchase shares of Cerner Common
Stock on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached hereto and
hereby incorporated herein by reference, and all of the terms, conditions and
provisions contained therein shall be deemed to be terms, conditions and
provisions of this Agreement. All terms used herein which are defined in
the Plan shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions contained in the Plan and this
Agreement, the Company hereby grants to the Optionee, as a matter of separate
inducement and agreement in connection with employment, but not in lieu of
any salary or other compensation for services, an option (the "Option") to
purchase from the Company all or any part of an aggregate of Ten thousand
(10,000) shares of Cerner Common Stock at the purchase price of Ten dollars
($10.00) per share. The date first written above shall be deemed to be the
granting date of this Option.
3. Term of Option: Exercise In Installments. This Option shall expire with
respect to all shares of Cerner Common Stock subject hereto on May 15, 2000
(the "Expiration Date"), unless it shall be terminated at an earlier date in
accordance with the provisions of the Plan. This Option shall become
exercisable in installments as follows:
Number or Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be Purchased
--------------------- ----------------
2,000 April 16, 1991
2,000 April 16, 1992
2,000 April 16, 1993
2,000 April 16, 1994
2,000 April 16, 1995
The Optionee may purchase all or any portion of the shares subject to each
installment listed above at any time (i) on or after the respective exercise
date listed above, and (ii) before the Expiration Date (or before any earlier
termination date), in accordance with the provisions of the Plan.
PLEASE REMEMBER THAT YOU MAY LOSE VALUABLE TAX BENEFITS IF YOU SELL OR
DISPOSE OF THE STOCK ACQUIRED UPON THE EXERCISE OF THIS OPTION BEFORE (1) TWO
YEARS HAVE PASSED SINCE THE DATE ON WHICH THIS OPTION WAS GRANTED, OR (2) ONE
YEAR HAS PASSED SINCE THE DATE ON WHICH YOU EXERCISED THIS OPTION. PLEASE
CONTACT YOUR PERSONAL TAX ADVISOR FOR MORE INFORMATION.
4. Investment Purpose. By accepting this Option, the Optionee agrees that any
and all shares of stock purchased upon the exercise of this Option will be
purchased for investment purposes and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by the Optionee
(or by the person or persons entitled to exercise the Option in the event of
the death of the Optionee) that the shares of stock are being purchased in
good faith for personal investment purposes, and not with a view to any
distribution thereof.
5. Stock Restrictions. The optionee further agrees that:
(a) Each stock certificate issued pursuant to the exercise of the Option
granted hereby shall bear a legend to the effect that the shares represented
thereby have not been registered under the Securities Act of 1933, and may not
be transferred except in accordance with the provisions of this Incentive
Stock Option Agreement and the Plan.
(b) Subject to the Company's right to repurchase described in paragraph 6
hereof, the shares of stock acquired upon the exercise of this Option may be
transferred, in whole or in part, only upon the following conditions:
(i) Prior to any transfer of any such shares, the holder thereof shall furnish
the Company written notice of the intention to effect such transfer. Such
notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall contain an undertaking to furnish such further
information as may be required, to enable counsel to render the opinion
referred to below. Promptly after receiving such notice, the Company shall
obtain from its counsel a written opinion (a copy of which shall be furnished
to the person giving such notice) as to whether the proposed transfer may be
effected without registration under the Securities Act of 1933.
(ii) If it is the opinion of said counsel that no such registration is
necessary under the circumstances, then the holder of the shares for which
transfer has been requested shall be entitled to transfer such shares in
accordance with the terms specified in the written notice given the Company.
Each certificate issued to the transferee to evidence the shares so transferred,
and each certificate evidencing any untransferred balance of shares of stock
acquired by the Optionee upon exercise of this Option, shall bear the
restrictive transfer legend described in paragraph 5(a) hereof unless in the
opinion of said counsel such legend is not then required.
(iii) If it is the opinion of said counsel that the proposed transfer may not
be effected without registration under the Securities Act of 1933, then the
Company shall so notify said holder and said transfer shall not be effected.
(c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares acquired
pursuant to this Option which the Company may need in connection with an
income tax return or any other return or report which it may be required to
file with any governmental agency.
6. Company's Right to Repurchase Shares. In the event that the Optionee (i)
dies, (ii) ceases to be employed by the Company or any of its subsidiary
corporations at any time before the expiration of three (3) years after the
date on which this Option was last exercised or any other option
granted under this Plan, or (iii) desires to sell, pledge, hypothecate,
transfer or otherwise dispose of or encumber all or any portion of the shares
of stock that were purchased upon the exercise of this Option, the Company
shall have the right to repurchase all or any portion of the shares of stock
which were acquired by the Optionee (or by the person or persons entitled to
exercise this Option in the event of the death of the Optionee) pursuant to
the exercise of this Option, upon the following terms and conditions:
(a) Period--Unless exercisable as a result of the death of the Optionee, the
Company's right shall commence upon the date of which the Optionee delivers
to the Company written notice of desire to sell, pledge, hypothecate, transfer
or otherwise dispose of or encumber all or any portion of the stock purchased
upon the exercise of this Option, and shall expire thirty (30) days after such
date. Failure of the Company to exercise its right during such thirty (30)
day period shall be deemed to constitute a waiver of such right. However,
if the Optionee fails to sell, pledge, hypothecate, transfer or otherwise
dispose of or encumber all or any portion of the stock that was acquired
upon the exercise of this Option within sixty (60) days after the date on
which the Company shall be deemed to have waived its right, its right shall
be reinstated and again operative upon the Optionee's death, termination
of employment or any subsequent proposed disposition of such stock.
In the event that its right to repurchase becomes exercisable by reason of
the death of the Optionee, the Company's right shall commence on the date of
the Optionee's death and shall expire twelve (12) months after the date on
which it receives written notice of the Optionee's death from the legal
representative appointed by and qualified in a probate court of competent
jurisdiction. If no legal representative of the Optionee is appointed within
sixty (60) days after the death of the Optionee, then the Company shall be
considered a creditor of the estate and shall have all of the rights conferred
upon creditors of the estate of the Optionee by the state in which the
Optionee was domiciled at the date of death.
(b) Exercise--The Company shall exercise its right by delivering to the
Optionee, the legal representative or the person or persons who exercised this
Option after the death of the Optionee (the "Holder") a written notice
stating the number of shares with respect to which it is exercising its right
to repurchase. Such written notice shall be deemed to be effective as of the
earlier of (i) the date on which it is received by the Holder, or (ii) the
date on which it is placed in the United States mail, postage prepaid and
addressed to the Holder.
(c) Price--The price at which shares of stock may be repurchased by the
Company upon the exercise of its right described in this paragraph 6 shall be
the fair market value of such shares on the date that such right is exercised.
In the event that the Company's right becomes exercisable by reason of the
Optionee's desire to sell, pledge, hypothecate, transfer or otherwise dispose
of or encumber such stock, however, the purchase price shall not be less then
any bona fide cash offer which the Optionee has received therefor.
(d) Payment--The Company may pay for the stock repurchased from the Holder
pursuant to its exercise of the right described in this paragraph 6--
(i) if the Holder has held such option stock for three years or less, either
by a lump sum cash payment at the time it exercises its right to repurchase
pursuant to this paragraph 6, or, at the Company's discretion, partly by a
lump sum cash payment (in the amount equal to the lesser of (A) the
original option price paid by the Holder for such stock, or (B) the then
fair market value of such stock) at the time of repurchase and partly by a
promissory note requiring the Company to make equal annual cash installment
payments over a period of not more than ten (10) years, or
(ii) if the Holder has held such option stock for more than three years, by
a lump sum cash payment at the time it exercises its right to repurchase
pursuant to this paragraph 6, unless the Holder will, upon completion of the
Company's repurchase of all or a portion of the option stock and taking into
account all prior sales by the Holder of Cerner Common Stock to the Company,
have sold back to the Company an aggregate number of shares exceeding one-
half of one percent (1/2%) of its issued and outstanding shares of Cerner
Common Stock (determined at the time of such repurchase), in which event the
Company may, in its sole discretion, elect to pay partly by a lump sum cash
payment (in the amount equal to the lessor of (A) the original option price
paid by the Holder for such stock, or (B) the then fair market value of
such stock) at the time of repurchase and partly by a promissory note requiring
the Company to make equal annual cash installment payments over a period of
not more than ten (10) years.
Simple interest shall accrue on the unpaid balance of any promissory note
issued by the Company pursuant to this paragraph 6 at the rate of ten
percent (10%) per year.
7. Notices. Any notices or other communications required or allowed to be made
or given to the Company under the terms of this Agreement shall be addressed
to the Company in care of its secretary at its offices at 2800 Rockcreek
Parkway, North Kansas City, Missouri 64117, and any notice to be given to
the Optionee shall be addressed to the Optionee at the address given beneath
the signature hereto. Either party hereto may from time to time change the
address to which notices are to be sent to such party be giving written notice
of such change to the other party. Any notice hereunder shall be deemed to
have been duly given if and when addressed as aforesaid, registered and
deposited, postage and registry fee prepaid, in a post office regularly
maintained by the United States Government.
8. Binding Effect. This Agreement shall bind, and except as specifically
provided in the Plan and this Agreement, shall inure to the benefit of, the
respective heirs, legal representatives, successors and assigns of the parties
hereto.
9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and the Optionee has hereunto set hand as of the day and year first
above written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
/s/Gary W. Willett
Optionee
12135 Nieman Rd.
Overland Park, KS 66213
-----------------------
Address
EXHIBIT 10(s)
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into this twenty-seventh day of February, 1985
(the "Granting Date"), by and between CERNER CORPORATION, a Delaware
corporation (the "Company"), and Charles O. Whitcraft (the "Optionee"),
WITNESSETH:
WHEREAS, on January 13, 1984, the Board of Directors of the Company adopted, and
on May 8, 1984, the holders of a majority of the issued and outstanding shares
of the Company's common stock approved, the Cerner Corporation Incentive Stock
Option Plan B (the "Plan") pursuant to which the Company may grant from time
to time, on or prior to November 30, 1993, options to purchase the shares of
Cerner Common Stock (as defined in said Plan) to any employee of the
Company or any of its subsidiary corporations, in such amounts and under such
form of agreements as shall be determined by the Incentive Stock Option
Committee, appointed by the Board of Directors of the Company pursuant to the
Plan; and
WHEREAS, the Incentive Stock Option Committee (the "Committee") has determined
that the Optionee is an employee of the Company or one of its subsidiary
corporations within the meaning of the Plan, and that the Optionee shall be
granted and option to purchase shares of Cerner Corporation Stock on the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached hereto and hereby
incorporated herein by reference, and all of the terms, conditions and
provisions contained therein shall be deemed to be terms, conditions and
provisions of the Agreement. All terms used herein which are defined in the
Plan shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions of this Agreement, the
Company hereby grants to the Optionee, as a matter of separate inducement and
agreement in connection with employment, but not in lieu of any salary or other
compensation for services, an option (the "Option") to purchase from the Company
all or any part of an aggregate of five hundred (500) shares of Cerner
Corporation Stock at the purchase price of ten dollars ($10.00) per share.
The date first written above shall be deemed to be the granting date of this
Option.
3. Term of Option: Exercise in Installments. This Option shall expire with
respect to all shares of Cerner Common Stock subject hereto on November 30, 1995
(the "Expiration Date"), unless it shall be terminated at an earlier date in
accordance with the provisions of the Plan. This Option shall become
exercisable in installments as follows:
Number or Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be Purchased
--------------------- --------------------
500 January 1, 1992
The Optionee may purchase all or any portion of the shares subject to each
installment listed above at any time (i) on or after the respective exercise
date listed above, and (ii) before the Expiration Date (or before an earlier
termination date), in accordance with the provisions of the Plan.
PLEASE REMEMBER THAT YOU MAY LOSE VALUABLE TAX BENEFITS IF YOU SELL OR DISPOSE
OF THE STOCK ACQUIRED UPON THE EXERCISE OF THIS OPTION BEFORE (1) TWO YEARS
HAVE PASSED SINCE THE DATE ON WHICH THIS OPTION WAS GRANTED, OR (2) ONE YEAR
HAS PASSED SINCE THE DATE ON WHICH YOU EXERCISED THIS OPTION. PLEASE CONTACT
YOUR PERSONAL TAX ADVISOR FOR MORE INFORMATION.
4. Investment Purpose. By accepting this Option, the Optionee agrees that
any and all shares of stock purchased upon the exercise of this Option will be
purchased for investment purposes, and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by the Optionee
(or by the person or persons entitled to exercise the Option in the event of
the death of the Optionee) that the shares of stock are being purchased in good
faith for personal investment purposes, and not with a view to any distribution
thereof.
5. Stock Restrictions. The Optionee further agrees that:
(a) Each stock certificate issued pursuant to the exercise of the Option granted
hereby shall bear a legend to the effect that the shares represented thereby
have not been registered under the Securities Act of 1993, and may not be
transferred except in accordance of this Incentive Stock Option Agreement and
the Plan.
(b) Subject to the Company's right to repurchase described in paragraph 6
hereof, the shares of stock acquired upon the exercise of the Option may be
transferred, in whole or in part, only upon the following conditions:
(i) Prior to any transfer of any such shares, the holder thereof shall
furnish the Company written notice of the intention to effect such transfer.
Such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall contain an undertaking to furnish such further
information as may be required, to enable counsel to render the opinion referred
below. Promptly after receiving such notice, the Company shall obtain from its
counsel a written opinion (a copy of which shall be furnished to the person
giving such notice) as to whether the proposed transfer may be effected without
registration under the Securities Act of 1993.
(ii) If it is the Opinion of said counsel that no such registration is
necessary under the circumstances, then the holder of the shares for which
transfer has been requested shall be entitled to transfer such shares in
accordance with the terms specified in the written notice given the Company.
Each certificate issued to the transferee to evidence the shares so transferred,
and each certificate evidencing any untransferred balance of shares of stock
acquired by the Optionee upon exercise of this Option, shall bear the
restrictive transfer legend described in paragraph 5(a) hereof unless in the
opinion of said counsel such legend is not then required.
(iii) If it is the opinion of said counsel that the proposed transfer may not
be effected without registration under the Securities Act of 1993, then the
Company shall so notify said holder and said transfer shall not be effected.
(c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares acquired
pursuant to this Option which the Company may need in connection with an income
tax return or report which it may be required to file with any governmental
agency.
6. Company's Right to Repurchase Shares. In the event that the Optionee (i)
dies, (ii) ceases to be employed by the company or any of its subsidiary
corporations at any time before the expiration of three(3) years after the date
on which this Option was last exercised or any of the option granted under this
Plan, or (iii) desires to sell, pledge, hypothecate, transfer or otherwise
dispose of or encumber all or any portion of the shares of stock that were
purchased upon the exercise of this Option, the Company shall have the right
to repurchase all or any portion of the shares of stock which were acquired by
the Optionee (or by the person or persons entitled to exercise this Option in
the event of the death of the Optionee) pursuant to the exercise of this Option,
upon the following terms and conditions:
(a) Period -- Unless exercisable as a result of the death of the Optionee, the
Company's right shall commence upon the date of which the Optionee ceases to be
employed by the Company or one of its subsidiary corporations or the date on
which the Optionee delivers to the Company written notice of desire to sell,
pledge, hypothecate, transfer or otherwise dispose of or encumber all or any
portion of the stock purchased upon the exercise of this Option, and shall
expire thirty (30) days after such date. Failure of the Company to exercise
its right during such thirty (30) day period shall be deemed to constitute a
waiver of such right. However, if the Optionee fails to sell, pledge,
hypothecate, transfer or otherwise dispose of or encumber all or any portion
of the stock that was acquired upon the exercise of this Option within sixty
(60) days after the date on which the Company shall be deemed to have waived its
right, its right shall be reinstated and again operative upon the Optionee's
death, termination of employment or any subsequent proposed disposition of such
stock.
In the event that its right to repurchase becomes exercisable by reason of the
death of the Optionee, the Company's right shall commence on the date of the
Optionee's death and shall expire twelve (12) months after the date on which
it receives written notice of the Optionee's death from the legal representative
appointed by and qualified in a probate court of competent jurisdiction. If
no legal representative of the Optionee is appointed within sixty (60) days
after the death of the Optionee, then the Company shall be considered a
creditor of the estate and shall have all rights conferred upon creditors of the
estate of the Optionee by the state in which the Optionee was domiciled at the
date of death.
(b) Exercise -- The Company shall exercise its right by delivering to the
Optionee, the legal representative or the person or persons who exercised this
Option after the death of the Optionee (the "Holder") a written notice stating
the number of shares with respect to which it is exercising its right to
repurchase. Such written notice shall be deemed to be effective as of the
earlier of (i) the date on which it is received by the Holder, or (ii) the date
on which it is placed in the United States Mail, postage prepaid and addressed
to the Holder.
(c) Price -- The price at which shares of stock may be repurchased by the
Company upon the exercise of its right described in this paragraph 6 shall be
fair market value of such shares on the date that such right is exercised. In
the event that the Company's right becomes exercisable by reason of the
Optionee's desire to sell, pledge, hypothecate, transfer or otherwise dispose
of or encumber such stock, however, the purchase price shall not be less than
any bona fide cash offer which the Optionee has receive therefor.
(d) Payment -- The Company may pay for the stock repurchased from the Holder
pursuant to its exercise of the right described in this paragraph 6 --
(i) if the Holder has held such option stock for three years or less,
either by a lump sum cash payment at the time it exercises its right to
repurchase pursuant to this paragraph 6, or, at the Company's discretion, partly
by a lump sum cash payment (in the amount equal to the lesser of (A) the
original option price paid by the Holder for such stock, or (B) the then fair
market value of such stock at the time of repurchase and partly by a promissory
note requiring the Company to make equal annual cash installment payments over
a period of not more than ten (10) years, or
(ii) if the Holder has held such option stock for more than three years, by a
lump sum cash payment at the time it exercises its right to repurchase pursuant
to this paragraph 6, unless the Holder will, upon completion of the Company's
repurchase of all or a portion of the option stock and taking into account all
prior sales by the Holder of Cerner Common Stock to the Company, have sold back
to the Company an aggregate number of shares exceeding one-half of one percent
(1/2%) of its issued and outstanding shares of Cerner Common Stock (determined
at the time of such repurchased), in which event the Company may, in its sole
discretion, elect to pay partly by a lump sum cash payment (in the amount equal
to the lessor of (A) the original option price paid by the Holder for such
stock, or (B) the then fair market value of such stock) at the time of
repurchase and partly by a promissory note requiring the Company to make equal
annual cash installment payments over a period of not more than ten (10) years.
Simple interest shall accrue on the unpaid balance of any promissory note issued
by the Company pursuant to this paragraph 6 at the rate of ten percent (10%)
per year.
7. Notices. Any notices or other communications required or allowed to be
made or given to the Company under the terms of this Agreement shall be
addressed to the Company in care of its secretary at its offices at 2800
Rockcreek Parkway, North Kansas City. Missouri 64117, and any notice to be
given to the Optionee shall be addressed to the Optionee at the address given
beneath the signature hereto. Either party hereto may from time to time change
the address to which notices are sent to such party be giving written notice of
such change to the other party. Any notice hereunder shall be deemed to have
been duly given if and when addressed as aforesaid, registered and deposited,
postage and registry fee prepaid, in a post office regularly maintained by the
United States Government.
8. Binding Effect. This Agreement shall bind, and except as specifically
provided in the Plan and this Agreement, shall inure to the benefit of, the
respective heirs, legal representatives, successors and assigns of the parties
hereto.
9. Governing Law. This Agreement shall be constructed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and the Optionee has hereunto set hand as a the day and year first
above written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
/s/Charles Whitcraft
Optionee
9715 North Brooklyn
Kansas City, MO 64155
---------------------
Address
EXHIBIT 10(t)
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into this fifteenth day of May, 1990
(the "Granting Date"), by and between CERNER CORPORATION, a Delaware
corporation (the "Company"), and Charles O. Whitcraft (the "Optionee"),
WITNESSETH:
WHEREAS, on January 13, 1984, the Board of Directors of the Company adopted, and
on May 8, 1984, the holders of a majority of the issued and outstanding shares
of the Company's common stock approved, the Cerner Corporation Incentive Stock
Option Plan B (the "Plan") pursuant to which the Company may grant from time
to time, on or prior to November 30, 1993, options to purchase the shares of
Cerner Common Stock (as defined in said Plan) to any employee of the
Company or any of its subsidiary corporations, in such amounts and under such
form of agreements as shall be determined by the Incentive Stock Option
Committee, appointed by the Board of Directors of the Company pursuant to the
Plan; and
WHEREAS, the Incentive Stock Option Committee (the "Committee") has determined
that the Optionee is an employee of the Company or one of its subsidiary
corporations within the meaning of the Plan, and that the Optionee shall be
granted and option to purchase shares of Cerner Corporation Stock on the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached hereto and hereby
incorporated herein by reference, and all of the terms, conditions and
provisions contained therein shall be deemed to be terms, conditions and
provisions of the Agreement. All terms used herein which are defined in the
Plan shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Committee, and
subject to the terms, conditions and provisions of this Agreement, the
Company hereby grants to the Optionee, as a matter of separate inducement and
agreement in connection with employment, but not in lieu of any salary or other
compensation for services, an option (the "Option") to purchase from the Company
all or any part of an aggregate of eight hundred (800) shares of Cerner
Corporation Stock at the purchase price of ten dollars ($10.00) per share.
The date first written above shall be deemed to be the granting date of this
Option.
3. Term of Option: Exercise in Installments. This Option shall expire with
respect to all shares of Cerner Common Stock subject hereto on May 15, 2000
(the "Expiration Date"), unless it shall be terminated at an earlier date in
accordance with the provisions of the Plan. This Option shall become
exercisable in installments as follows:
Number or Percentage Earliest Date on
of Shares Subject to Which Shares May
This Option Be Purchased
--------------------- --------------------
800 April 1, 1993
The Optionee may purchase all or any portion of the shares subject to each
installment listed above at any time (i) on or after the respective exercise
date listed above, and (ii) before the Expiration Date (or before an earlier
termination date), in accordance with the provisions of the Plan.
PLEASE REMEMBER THAT YOU MAY LOSE VALUABLE TAX BENEFITS IF YOU SELL OR DISPOSE
OF THE STOCK ACQUIRED UPON THE EXERCISE OF THIS OPTION BEFORE (1) TWO YEARS
HAVE PASSED SINCE THE DATE ON WHICH THIS OPTION WAS GRANTED, OR (2) ONE YEAR
HAS PASSED SINCE THE DATE ON WHICH YOU EXERCISED THIS OPTION. PLEASE CONTACT
YOUR PERSONAL TAX ADVISOR FOR MORE INFORMATION.
4. Investment Purpose. By accepting this Option, the Optionee agrees that
any and all shares of stock purchased upon the exercise of this Option will be
purchased for investment purposes, and not with a view to any distribution
thereof, and that each notice of the exercise of any portion of this Option
shall be accompanied by a representation in writing signed by the Optionee
(or by the person or persons entitled to exercise the Option in the event of
the death of the Optionee) that the shares of stock are being purchased in good
faith for personal investment purposes, and not with a view to any distribution
thereof.
5. Stock Restrictions. The Optionee further agrees that:
(a) Each stock certificate issued pursuant to the exercise of the Option granted
hereby shall bear a legend to the effect that the shares represented thereby
have not been registered under the Securities Act of 1993, and may not be
transferred except in accordance of this Incentive Stock Option Agreement and
the Plan.
(b) Subject to the Company's right to repurchase described in paragraph 6
hereof, the shares of stock acquired upon the exercise of the Option may be
transferred, in whole or in part, only upon the following conditions:
(i) Prior to any transfer of any such shares, the holder thereof shall
furnish the Company written notice of the intention to effect such transfer.
Such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall contain an undertaking to furnish such further
information as may be required, to enable counsel to render the opinion referred
below. Promptly after receiving such notice, the Company shall obtain from its
counsel a written opinion (a copy of which shall be furnished to the person
giving such notice) as to whether the proposed transfer may be effected without
registration under the Securities Act of 1993.
(ii) If it is the Opinion of said counsel that no such registration is
necessary under the circumstances, then the holder of the shares for which
transfer has been requested shall be entitled to transfer such shares in
accordance with the terms specified in the written notice given the Company.
Each certificate issued to the transferee to evidence the shares so transferred,
and each certificate evidencing any untransferred balance of shares of stock
acquired by the Optionee upon exercise of this Option, shall bear the
restrictive transfer legend described in paragraph 5(a) hereof unless in the
opinion of said counsel such legend is not then required.
(iii) If it is the opinion of said counsel that the proposed transfer may not
be effected without registration under the Securities Act of 1993, then the
Company shall so notify said holder and said transfer shall not be effected.
(c) The Optionee shall promptly comply with any request by the Company for
information concerning any disposition by the Optionee of any shares acquired
pursuant to this Option which the Company may need in connection with an income
tax return or report which it may be required to file with any governmental
agency.
6. Company's Right to Repurchase Shares. In the event that the Optionee (i)
dies, (ii) ceases to be employed by the company or any of its subsidiary
corporations at any time before the expiration of three(3) years after the date
on which this Option was last exercised or any of the option granted under this
Plan, or (iii) desires to sell, pledge, hypothecate, transfer or otherwise
dispose of or encumber all or any portion of the shares of stock that were
purchased upon the exercise of this Option, the Company shall have the right
to repurchase all or any portion of the shares of stock which wee acquired by
the Optionee (or by the person or persons entitled to exercise this Option in
the event of the death of the Optionee) pursuant to the exercise of this Option,
upon the following terms and conditions:
(a) Period -- Unless exercisable as a result of the death of the Optionee, the
Company's right shall commence upon the date of which the Optionee ceases to be
employed by the Company or one of its subsidiary corporations or the date on
which the Optionee delivers to the Company written notice of desire to sell,
pledge, hypothecate, transfer or otherwise dispose of or encumber all or any
portion of the stock purchased upon the exercise of this Option, and shall
expire thirty (30) days after such date. Failure of the Company to exercise
its right during such thirty (30) day period shall be deemed to constitute a
waiver of such right. However, if the Optionee fails to sell, pledge,
hypothecate, transfer or otherwise dispose of or encumber all or any portion
of the stock that was acquired upon the exercise of this Option within sixty
(60) days after the date on which the Company shall be deemed to have waived its
right, its right shall be reinstated and again operative upon the Optionee's
death, termination of employment or any subsequent proposed disposition of such
stock.
In the event that its right to repurchase becomes exercisable by reason of the
death of the Optionee, the Company's right shall commence on the date of the
Optionee's death and shall expire twelve (12) months after the date on which
it receives written notice of the Optionee's death from the legal representative
appointed by and qualified in a probate court of competent jurisdiction. If
no legal representative of the Optionee is appointed within sixty (60) days
after the death of the Optionee, then the Company shall be considered a
creditor of the estate and shall have all rights conferred upon creditors of the
estate of the Optionee by the state in which the Optionee was domiciled at the
date of death.
(b) Exercise -- The Company shall exercise its right by delivering to the
Optionee, the legal representative or the person or persons who exercised this
Option after the death of the Optionee (the "Holder") a written notice stating
the number of shares with respect to which it is exercising its right to
repurchase. Such written notice shall be deemed to be effective as of the
earlier of (i) the date on which it is received by the Holder, or (ii) the date
on which it is placed in the United States Mail, postage prepaid and addressed
to the Holder.
(c) Price -- The price at which shares of stock may be repurchased by the
Company upon the exercise of its right described in this paragraph 6 shall be
fair market value of such shares on the date that such right is exercised. In
the event that the Company's right becomes exercisable by reason of the
Optionee's desire to sell, pledge, hypothecate, transfer or otherwise dispose
of or encumber such stock, however, the purchase price shall not be less than
any bona fide cash offer which the Optionee has receive therefor.
(d) Payment -- The Company may pay for the stock repurchased from the Holder
pursuant to its exercise of the right described in this paragraph 6 --
(i) if the Holder has held such option stock for three years or less,
either by a lump sum cash payment at the time it exercises its right to
repurchase pursuant to this paragraph 6, or, at the Company's discretion, partly
by a lump sum cash payment (in the amount equal to the lesser of (A) the
original option price paid by the Holder for such stock, or (B) the then fair
market value of such stock) at the time of repurchase and partly by a promissory
note requiring the Company to make equal annual cash installment payments over a
period of not more than ten (10) years, or
(ii) if the Holder has held such option stock for more than three years, by a
lump sum cash payment at the time it exercises its right to repurchase pursuant
to this paragraph 6, unless the Holder will, upon completion of the Company's
repurchase of all or a portion of the option stock and taking into account all
prior sales by the Holder of Cerner Common Stock to the Company, have sold back
to the Company an aggregate number of shares exceeding one-half of one percent
(1/2%) of its issued and outstanding shares of Cerner Common Stock (determined
at the time of such repurchased), in which event the Company may, in its sole
discretion, elect to pay partly by a lump sum cash payment (in the amount equal
to the lessor of (A) the original option price paid by the Holder for such
stock, or (B) the then fair market value of such stock) at the time of
repurchase and partly by a promissory note requiring the Company to make equal
annual cash installment payments over a period of not more than ten (10) years.
Simple interest shall accrue on the unpaid balance of any promissory note issued
by the Company pursuant to this paragraph 6 at the rate of ten percent (10%)
per year.
7. Notices. Any notices or other communications required or allowed to be
made or given to the Company under the terms of this Agreement shall be
addressed to the Company in care of its secretary at its offices at 2800
Rockcreek Parkway, North Kansas City. Missouri 64117, and any notice to be
given to the Optionee shall be addressed to the Optionee at the address given
beneath the signature hereto. Either party hereto may from time to time change
the address to which notices are sent to such party be giving written notice of
such change to the other party. Any notice hereunder shall be deemed to have
been duly given if and when addressed as aforesaid, registered and deposited,
postage and registry fee prepaid, in a post office regularly maintained by the
United States Government.
8. Binding Effect. This Agreement shall bind, and except as specifically
provided in the Plan and this Agreement, shall inure to the benefit of, the
respective heirs, legal representatives, successors and assigns of the parties
hereto.
9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers hereunto duly authorized and its corporate seal to be hereunto
affixed, and the Optionee has hereunto set hand as a the day and year first
above written.
CERNER CORPORATION
[CORPORATE SEAL] By:/s/Neal L. Patterson
Neal L. Patterson, Chairman
ATTEST:
/s/Clifford W. Illig
Clifford W. Illig, President
/s/Charles O. Whitcraft
Optionee
9751 North Brooklyn
Kansas City, MO 64155
---------------------
Address
EXHIBIT 10(u)
1994 CERNER PERFORMANCE PLANS
TABLE OF CONTENTS
Overview* 1
Rewardable Events Specifications* 2
Plan Administration* 3
Component Plan Descriptions* 4
Sections included
1. Applicable Roles
2. Responsibility/Scope
3. Plan Goals
4. Plan Concepts
5. Incentive Compensation
6. Other Plan Considerations
Rewardable Event Objectives* 5
Glossary of Terms* 6
Appendices 7
1. Payout Computation Examples*
2. Target Bonus Level Matrix
3. Master REO Control Sheet
4. TBL Control Sheet
* denotes those sections distributed to each participant
<PAGE>
Overview (Section 1)
Cerner Performance Plans are intended to provide
additional, performance-based compensation opportunities
to participating associates based on the attainment of
corporate and individual performance goals. The amount
of the compensation available is based on the associate's
role and overall performance evaluation for the year.
Payments under these plans are made on a quarterly basis.
The Plan year for all plans begins April 1 and ends March
31.
This document describes the structure common to all
Cerner Performance Plans. Figure 1 provides a graphical
representation of the architecture of the Plans. All
plans within the performance plan architecture are
assigned to one of the four major organizational units
within Cerner - Product, Client, Functional or
International. Within each group, one or more "Component
Plans" have been defined with specific design elements
common to all participants, such as objectives to be
obtained, the incentives available and the criteria to
participate. Further, the measurements applied within
each Component Plan are determined by the role of the
associate and, for presentation purposes, associate roles
are structured into Staff, Management and Executive
levels. Sections included later in this document define
the specific attributes of the various Component Plans
created under this Master Plan.
For the 1994/1995 Plan year, CPP has been expanded to
incorporate the incentive plans previously included in
the Sales Compensation Plans. Effective this year, all
Cerner incentive pay plans are now defined and included
under the broad heading of CPP. With this change, we are
continuing the integration of all such plans under a
common architecture. More importantly, we are further
integrating the day-to-day operations of the
organization, with all associates working under similar
pay structures and working towards consistent goals with
consistent rewards.
CPP OBJECTIVES
Cerner's Performance Plans create, within each
participating associate's total compensation, a variable
component which is based on quantifiable and measurable
indicators related to performance, whether company,
group, team or personal. These Plans are used to
communicate clearly to the participants what is expected
from them relative to the operation of Cerner. Further,
they are intended to incent each associate to attain a
higher level of team and individual performance. The
performance plan approach provides the opportunity for
additional earnings to the individual while also
increasing his or her "motivation" to manage effectively.
All associates are part of a team. Therefore, it is
logical that individual performance as measured by
compensation should be tied to team success. When the
team does well, team associates should be rewarded
commensurately. Likewise, when the team does not
perform, each associate should share in the shortfall.
By tying a portion of total compensation to team success,
each associate will be more focused on how individual
operations and management decisions impact not only
day-to-day results, but also the long-term health of the
organization.
Cerner Performance Plans include elements of both team
and individual performance. The available incentive
amount in each plan and the "factors" which determine how
much incentive is actually earned by each associate are
determined by the component plan tied to the role of each
associate. These "factors" are intended to provide
common incentives to associates across the organization
who are responsible for common goals and objectives. In
addition, each associate directly impacts the actual
incentive paid by the Plans through his or her personal
effectiveness and performance. These factors serve to
directly link overall corporate team performance and
individual payments.
Selected component plans within the Product and Client
organizations include sales-related objectives and
commensurate incentives tied to performance against sales
goals. In some cases, these incentives make up 100% of
the available target incentives; in others, sales-related
objectives are combined with other performance measures
to provide expanded incentive opportunities.
ELIGIBILITY
Eligibility to participate in a specific Plan is
determined by the role of the associate. The effective
dates for participation for eligible associates are as
follows:
Associates new to Cerner and participating in a staff-level plan
first plan quarter after three full months of employment
All other participants and plans (including transfers into plan roles)
first plan quarter following employment (or assumption of role)
CPP ARCHITECTURE
All CPP plans have in common the elements of:
- Rewardable Events, which define what is important
to Cerner's business operations;
- Incentive Compensation, which define how much
additional compensation is available to each
associate participating in a specific plan;
- Annual Performance Evaluation, which is used in
most plans to modify the potential payout
available based on the associate's individual
performance
Rewardable Events (REs) are objective metrics which are
readily quantifiable and which define specific business
outcomes, goals or targets tied to the annual Operating
Plans of the Company. REs are defined across teams and
are grouped within each component plan to provide a set
of goal measurements unique to the roles of the
associates on the team. The specific objective, or
target, associated with each RE may differ from plan to
plan, even though the definition of the RE remains
constant. REs are generally evaluated on a defined
frequency as a binary decision: the objective is achieved
or it is not. In the case of sales-related REs as
defined in the following paragraphs, objectives are
typically stated as quarterly or year-to-date targets or
a pre-defined payout level.
Figure 2, the Rewardable Event Weighting Matrix,
identifies the REs assigned to each Component Plan and
the weighting used within the plan for each RE. Section
2, Rewardable Event Specifications, provides a more
detailed definition of each RE. The references for each
RE are to the associated Component Plan Section and
identify specific measurement techniques,
responsibilities and other unique attributes of each RE.
Per Plan/Product Group Quotas are specific REs which have
been established to incorporate the achievement of pre-
determined sales quotas over a period of time. Quotas
are generally established as bookings margin objectives
by specific product group. They are also typically
defined by associate within the component plan, to
reflect the overall corporate objectives established by
product and by region. Attainment of these REs is
measured quarterly and has both quarterly and year-to-
date components. Per Deal REs, also referred to as
commissions, are available to specific associates whose
roles are directly responsible for the selling process.
Per Deal incentives are payable based on pre-defined
commission rates as applied to the Deal Margin on each
product sale. Specific rules are defined elsewhere in this
plan document and the associated Component Plan documentation
regarding payment of Per Deal Incentives.
INCENTIVE COMPENSATION available within CPP is based on
one of two methodologies. Sales-related REs have
associated with them pre-defined incentive payments which
are available to the associate if the related objective
or target is achieved. These incentives are defined
within the respective component plans. All other RE
based incentives are tied to the role of the associate
and the component plan in which he or she participates.
Two factors determine these incentive amounts:
The first factor, the TARGET BONUS LEVEL (TBL) is a
dollar amount expressed as an annual payout. TBLs
are established for each component plan, for each
role in the component plan and for each associate
playing that role. TBLs are designed to recognize
the importance of the role to Cerner and the
associate's relative experience in the role. As
responsibility increases, the potential incentive
available increases. For 1994, TBLs are defined for
each role in a Component Plan and are documented
separately for each participant.
The TBL is factored by the ANNUAL PERFORMANCE
EVALUATION (APE), the second factor in the
computation of incentive payments under CPP.
Subjective metrics are considered in the individual
annual review process to determine an APE for each
associate. The APE is used as an adjusting factor
applied to the defined TBL within certain component
plans to recognize the associate's personal
contribution to team and corporate objectives. The
APE is the result of the careful evaluation of
performance of the associate by his or her manager
and/or group executive.
Performance in role is a major factor in determining
the actual incentive payable under CPP. Performance
is considered in the context of the plan year for
which the associate is being evaluated, not an
overall Cerner historical evaluation. It is focused
on performance, not the performer. The APE is
related to but not necessarily the same as the
Career Performance Evaluation.
A "pro forma" APE will be developed at the start of
the plan year, separate in some cases from the
associate's Career Performance Evaluation, which is
tied to anniversary date. At the end of the plan
year, the "actual" APE is established during a
review of performance for the plan year and will be
used as described in the following sections to
adjust the CPP plan payment for the year. The APE
is further defined by the following factors:
Quality
Your ability to develop quality processes,
quality people and a quality organization.
Team Player
Your ability to work within your team and the
larger Cerner team to help Cerner achieve its
objectives.
Enterprise Perspective
Your ability to make decisions and to
participate constructively in the operations
and management processes, acting in the best
interests of Cerner and its clients.
Future Metrics
We will continually evaluate potential metrics
for incorporation into individual Cerner
Performance Plans to ensure that the plans
remain responsive to group and corporate goals.
Annual Performance Evaluation Factor
As noted above, the TBL payable is increased or decreased
based on the associate's APE. The APE will determine the
APE Factor, a multiplier which clearly ties the available
incentive to individual performance for the plan year.
The APE Factor will be multiplied by the TBL to compute
the maximum incentive available. The current factors are
as follows:
<TABLE>
<CAPTION>
Executive Plans All Other Plans
Annual Performance Evaluation APE Factor APE Factor
<S> <C> <C>
9 130% 130%
8 120% 120%
7 95% 95%
6 80% 80%
5 50% 70%
4 25% 50%
3 10% 40%
2 0% 10%
1 0% 0%
</TABLE>
INCENTIVE PAYMENT COMPUTATIONS
Incentive payments are computed differently for each
"class" of incentive.
Per Plan/Product Quota Incentives and Per Deal Incentives
are computed based on the pre-defined objectives and
associated incentives for each.
RE incentives are generally computed by the following
formula:
Quarterly Payment = [% Attainment of Rewardable Events]
x
[ TBL x 25% ]
x
[APE Factor]
where:
- % Attainment of Rewardable Events is the sum of
---------------------------------
the individually-weighted REs credited for the
quarter
- TBL x 25% is the Target Bonus Level for a
---------
specific Component Plan and role, and 25% as a
multiplier computes the quarterly maximum
incentive available;
- APE Factor, or Annual Performance Evaluation
----------
Factor, reflects the associate's personal
performance evaluation for the Plan year.
<TABLE>
1994 REWARDABLE EVENT WEIGHTING MATRIX
Product Group
Executive Mgt SR/Staff Special
----------------------- ----------------- ---------- -------
Rewardable Events Cycle PGE PLE/M PLE/E GSM PLM/M PLM/E PGM CMS PLBA TBLRK
------------------------ ----------------- ---------- -----
100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
------------------ ----------- ------------------------ ------------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Satisfaction
1 Associate Sat A 20% 10% 10% 10% 10% 10% 10%
2 Client Satisfaction-
External Q 20% 20% 20% 20%
3 Client Satisfaction-
Internal S
4 Project Satisfaction S
5 Product Satisfaction Q/S/A 20% 20%
Service
6 Installation Cycle Q 20%
7 Service Levels Q 30%
Sales
8 Bookings Q 20% 30% 30% 80% 20%
9 Per Plan/Per Deal
Quality
10 PIM Process Quality Q 20%
Financial
11 Billings (Cash Flow) Q 20%
12 Cost Control -
Expenses Q 25%
13 Cost Control -
Personnel Q 25%
14 Cost Control -
Pers & Exps Q 20% 20% 20%
15 Group Contribution
Margin Q 30% 30% 30%
16 Operating Ratio Q
17 EPS-Region Q
18 EPS-Corporate Q 30% 30%
Goals
19 Goal Attainment Q 30% 20% 20% 30% 30% 20% 20% 100%
(2)
Legend
PGE Product Group Executive
PLE/M Product Line Executive/Mature Products
PLE/E Product Line Executive/Emerging Products
GSM Group Senior Management
PLM/M Product Line Management/Mature Products
PLM/E Product Line Management/Emerging Products
PGM Product Group Management
CMS Clinical Marketing Specialist
PLBA Product Line Business Analyst
TBLRCK Tablerock Project
Notes:
2) Special plan for all Tablerock team staff - see documentation.
</TABLE>
<TABLE>
1994 REWARDABLE EVENT WEIGHTING MATRIX
Client Group
<CAPTION>
Regional Organization Kansas City Organization
------------------------------------------------ ------------------------
Executive Mgt Sr/Staff Exec Mgt Sr/Staff
-------------------------- ------- -------- ----- --- -------------
Rewardable Events Cycle CEGM RVP PE BE RMM ASM AE CT CS PLE/T CGM TLS TLP CWT
-------------------------- ------- ---------- ----- --- ---------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
----------------- --------- --------------------------- --------- ---------- ----- ---- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Satisfaction
1 Associate Sat A 10% 5% 10% 10% 10%
2 Client Satisfaction-
External Q 10% 10% 20% 20% 34% 34% 20% 10% 10% 40% 20%
3 Client Satisfaction-
Internal S
4 Project Satisfaction S 30% 15% 15%
5 Product Satisfaction Q/S/A
Service
6 Installation Cycle Q 20% 33% 33% 20% 20%
7 Service Levels Q 40% 30%
Sales
8 Bookings Q 20% 10% 30%
9 Per Plan/Per Deal Q (1) (1) (1) (1) (1) (1)
Quality
10 PIM Process Quality Q
Financial
11 Billings (Cash Flow) Q 20% 30% 25% 25% 30% 20%
12 Cost Control-
Expenses Q
13 Cost Control-
Personnel Q
14 Cost Control-
Pers & Exps Q 15% 10% 10%
15 Group Contribution
Margin Q
16 Operating Ratio Q 20% 30% 20% 33% 33% 20%
17 EPS-Region Q 25% 75% 30%
18 EPS- Corporate Q 20% 10%
Goals
19 Goal Attainment Q 20% 40% 60% 20% 70%
(3) (A) (A) (A)
Legend
CEGM Client Executive - General Manager
RVP Regional Vice President
PE Project Executive
BE Branch Executive
RMM Regional Marketing Manager
ASM Area Sales Manager
AE Account Executive
CT Client Team
CS Communications/contracts Specialist
PLE/T Product Line Executive/Technologies
CGM Client Group Management
TLS Team Leader - Services
TLP Team Leader - Products
CWT Client Worksystem Team
Notes:
A) Goals may include on or more other REs
1) Refer the component plan documentation for a description
of the per/plan deal incentive and other, sales-related
incentives
3) Actual weighting varies somewhat from the amounts shown for this plan
</TABLE>
<TABLE>
1994 REWARDABLE EVENT WEIGHTING MATRIX
Functional and International Groups
<CAPTION>
Executive Mgt/SR/Staff Executive Sr/Staff
--------- ------------ --------------- --------
Rewardable Events Cycle CE FGE FGM FT IEGM IRE IOM PM
--------- ------------ --------------- --------
100% 100% 100% 100% 100% 0% 0% 0%
----------------- ------ ---------- ------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Satisfaction
1 Associate Sat A 20% 10% 10% 10% 10% (B) (B)
2 Client Satisfaction-
External Q 20% 10% (B) (B)
3 Client Satisfaction-
Internal S 20% 20% 20%
4 Project Satisfaction S (B)
5 Product Satisfaction Q/S/A
Service
6 Installation Cycle Q
7 Service Levels Q
Sales
8 Bookings Q (B) (B)
9 Per Plan/Per Deal
Quality
10 PIM Process Quality Q
Financial
11 Billings (Cash Flow) Q (B)
12 Cost Control-Expenses Q 20%
13 Cost Control-Personnel Q 20%
14 Cost Control-Pers & Exps Q 15% 10% 15% (B)
15 Group Contribution
Margin Q
16 Operating Ratio Q (B)
17 EPS-Region Q 25% (B)
18 EPS-Corporate Q 60% 30% 15% 20% (B)
Goals
Goal Attainment Q 40% 60% 20% (B)
(A)
Legend
Functional
CE Corporate Executive
FGE Functional Group Executive
FGM Functional Group Management
FT Functional Team
International
IEGM International Executive - General Manager
IRE International Region Executive
IOM International Operations Management
PM Project Management
Notes:
A) Goals may include one or more other REs
B) Specific weightings vary by country
</TABLE>
<TABLE>
CERNER PERFORMANCE PLANS REWARDABLE EVENT SPECIFICATIONS
<CAPTION>
Rewardable Rewardable Measurement Measurement
Event No. Event Responsibility Methodology Description
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Associate
Satisfaction Human Resources Based on the annual measurement of overall career
satisfaction of associate as determined by the annual
Associate Survey. Several questions are combined to
develop a composite view of satisfaction, including
both short and long term perspectives.
2 Client
Satisifaction
External Client Group Based on data obtained via periodic surveys of
each installed client, specifically determined by
the question on the survey asking overall
satisfaction. A satisfaction index is computed by
including all neutral and positive responses in the
numerator and total responses in the denominator.
A The summary of all branches will be added up and
added up and averaged to come up with the total.
B By region.
C The summary of the International branches will be
added up and averaged to come up with the total.
D The branch executive client satisfaction is a
combination of the annual client satisfaction
survey and in-process client satisifaction. The
weighting will be 2x in-process surveys and 1x
annual client survey.
E The summary of all Beckman clients will be added
up and averaged to come up with the total.
3 Client
Satisifaction
Internal Varies Varies Based on the periodic measurement of the
"satisfaction" of associates with the service
levels provided by the major Functional groups
within Cerner: Administration, CBS, Finance
and Properties. The metric takes into account
both the attainment of defined service objectives
as well as the perception of the services
provided by each group or team.
4 Project
Satisfaction Client Group Based on client survey once on the five-month
anniversary of contract signing and again at
conversion. Surveys will be mailed to the system
manager and the Executive Project Sponsor. (BE
will identify this person and be responsible for
getting the name and address.) Project
satisfaction will be measured on the Executive
Project Sponsor survey only (based on their
response to the overall satisfaction question at
the end of the survey); 100% of the Executive
Sponsor surveys must be returned to achieve the
objective.
5 Product
Satisfaction Product Group Based on survey of specific clients. Determined
by the survey question asking overall satisfaction.
No more than 10% of the clients surveyed can be
dissatisfied for this metric to be met.
6 Installation
Cycle Finance Determined by "wall clock" time from contract
signing to conversion. (I.E. is a standalone
pathnet deal signs in January, 199x, then the net
must be converted by November, 199X. There are
two different cycles: one for standalone Nets and
one for Nets included in HNA. In the future,
productivity measurements need to be factored into
this metric. All contracts signed beginning Q493
will be counted in this metric. Conversion will
be counted based upon the actual client conversion
and having the FSI code installed in the warehouse.
All line items in the contract must be converted
for this metric to be achieved. Installation
timeframes are listed below:
PathNet - Discrete - 10 months
RadNet - Discrete - 9 months
PharmNet - Discrete - 8 months
MedNet - Discrete - 7 months
OCF - Discrete - 12 months
PathNet - HNA - 12 months
RadNet - HNA - 11 months
PharmNet - HNA - 10 months
MedNet - HNA - 9 months
CareNet - HNA - 20 months
ProNet - HNA - 16 months
OCF - HNA - 14 months
PathTrac - 3 months
MSMEDS - 6 months (Note: Will be calculated based
on deals signed July 1, 1994 and after.)
7 Service
Levels Varies Where service levels have been defined for
various services, whether internally or externally,
then attainment of service levels becomes a
rewardable event. For the Client Organization,
levels have been established in the Catalog of
Services.
8 Bookings Finance Based on margin contract bookings.
A Bookings margin by Net, contract only not add-ons.
B Total contract bookings margin by region.
C Total International contract bookings by country.
D Bookings margin for Beckman, PathNet Worksystems
and RadNet Worksystems.
9 Per Plan/Per Deal Finance Based on the attainment of pre-defined Sales
objectives for per deal margin.
10 PIM Process
Quality Product Group This metric is calculated by tracking the number
of PIMs (Product Internal Memorandums) submitted
by each product team within the quarter. Quality
failures are tracked within the quarter. Quality
failures are tracked within the quarter for both
internal product certification failures and PIM
failures occurring at the client site. The total
number of failures occurring within the quarter
are compared to the total number of PIMs
submitted during the same period for each product
team. If the number of failures in the period is
greater than 10% of the total PIM submissions,
the team did not meet their quality goals for the
quarter.
11 Billings
(Cash Flow) Finance Based on margin on invoices sent to clients.
Acceptance billings are counted upon payment
of invoice.
A Billings margin by Region.
B Billings margin for Beckman contracts.
C Billings margin by International region.
D Billings margin for hardware and sublicensed
software.
E Sum of all regions' billings margin, excluding
Beckman, PathNet Worksystems and RadNet
Worksystems.
12 Cost Control
Expenses Finance Actual expenses by organization must be less
than or equal to budget.
A Total Product Organization expenses excluding
CBS, capitalized software and amortization.
B Expenses related to specific groups within
Functional Organization.
13 Cost Control
Personnel Finance Actual Personnel cost by organization must be
less than or equal to budget.
A Total Product Organization expenses excluding
CBS, capitalized software and amortization.
B Personnel cost related to specific groups within
Functional Organization.
14 Cost Control
Pers & Expenses Finance Actual expenses and personnel costs combined by
organization must be less than or equal to
budget.
A Total Personnel costs and expenses related to
specific groups within Product Organization.
B Personnel costs and expenses related to specific
groups within Client Organization.
C Personnel costs and expenses related to specific
groups within Functional Organization.
D Personnel costs and expenses related to specific
groups within International Organization.
E Total personnel costs and expenses for the
client services and sales organizations.
15 Group
Contribution
Margin Finance Computed by subtracting all group operations and
group support expenses from the total margin
on revenue. (per the Operating Statement)
A Per Net - Operating Statement.
16 Operating Ratio Finance Computed as the ratio of the net operating margin
divided by the straight-line project margin on
revenue. Operating ratios have the advantage of
flexing expenses based on the amount of margin
being generated. Expenses are actual incurred by
the group on behalf of the group.
A Per Region - Operating ratio.
B International - Operating ratio.
C Beckman and Worksystems
17 EPS - Region Finance Computed by subtracting all unit operating expenses
(Branch, Client and Sales) from the GAAP margin for
each region.
A U.S. by branch
B International by Country (Region)
C U.S. bonus will be divided equally between regions
that associate is responsible for.
D This "region" includes Beckman, PathNet Worksystems
and RadNet Worksystems.
18 EPS - Corporate Finance Measured by the variance over or under the earnings
per share objective for Cerner Consolidated.
19 Goal Attainment Varies Individual goals will be established on a quarterly
basis. There should be no more than five (5) goals
for any associate in a given quarter. Goals must
be mutually established by the associate and
his or her manager and approved by the group V.P.
prior to the start of the applicable quarter.
</TABLE>
PLAN ADMINISTRATION (Section 3)
-------------------
The following points further clarify the procedures for
computing the incentive payment each quarter.
REWARDABLE EVENT - QUARTERLY VS. YTD MEASUREMENT
As noted in Section I, REs are binary factors: if the
goal is achieved, the factor is applied; if the goal is
not achieved, the factor is not applied. Therefore, if
all goals are met, the multiplier for the target
incentive is 100%, i.e., the maximum available incentive
will be earned.
In most cases, each of these factors is evaluated
quarterly, based on achievement of a year to date goal.
Therefore, it is possible to miss a goal, and the
associated incentive payment, in one quarter and achieve
the year to date goal and incentive in the next.
However, incentive payments do not carry forward. If an
incentive is not earned in the quarter in which it is
available, it will not be available in future quarters,
regardless of goal attainment.
REWARDABLE EVENT - NON-QUARTERLY MEASUREMENTS
Several REs are measured on other than a quarterly basis,
e.g., Associate Satisfaction, Project Satisfaction,
Internal Client Satisfaction. For these REs, the amount
of incentive associated per the weight assigned is "held
back" from the quarterly payments and included, in total,
in the quarter in which the RE is measured.
For example, with a TBL of $6,000 and a Project
Satisfaction RE weighted at 20%, $300 per quarter for
the first three quarters of the Plan year will not be
available. In the fourth quarter, assuming the annual
objective for Project Satisfaction is attained, the
total available incentive for all four quarters of
$1,200 will be paid.
ADVANCE VS. FINAL INCENTIVE PAYMENTS FOR RE INCENTIVES
The incentives payable for each of the first three
quarters in the plan year are considered Advance
Incentive Payments and will be computed using the pro
forma APE for the plan year. For the fourth quarter, the
Final Incentive Payment will be computed using the actual
APE for the plan year. Advance Incentive Payments for
the previous three quarters will be re-computed using
this actual APE. Any differences between the Advance
Incentive Payments and the actual incentive calculation,
either positive or negative, resulting from a change in
the APE will be included with the fourth quarter final
incentive payment. If the net result of all incentives
payable in the fourth quarter is less than zero, the
negative amount will be carried forward for repayment
from future incentives.
PAYMENT CYCLES
Bonus payments for a given quarter will be made by the
15th of the second month of the succeeding quarter.
PLAN PARTICIPATION TERMINATION AND TRANSFERS
If an associate's participation in a Cerner Performance
Plan is terminated due to termination of employment or
transfer to a non-Performance Plan role, the associate
will be entitled to payment for any earned but not paid
amounts. Payments are earned only for completed
quarters; i.e, if participation is terminated in the
middle of a plan quarter, no incentive will be paid for
that quarter. Further, when determining the final amount
to be paid, the associate's APE will be reviewed and
updated as appropriate per normal plan procedures for
end-of-plan-year processing.
If an associate transfers from one Performance Plan-based
role to another, participation in the previous plan will
be "closed out" per normal end-of- plan-year processing
under the provisions of the previous Plan, including
final APE evaluation and RE analysis. Participation in
the new Plan will be effective as of the beginning of the
following quarter. Whenever possible, such transfers
should be coordinated to be effective as of the beginning
of a quarter to avoid partial quarter issues.
Glossary (Section 6)
--------
Add On Product
Any product which cannot be installed standalone (e.g. CCL,
Rules, CPP, Bar Code Systems, Service Management).
Advance Incentive Payment
Payments made under Cerner Performance Plans for the first
three quarters of the plan year are considered Advance
Incentive Payments because they are based on the Pro Forma
APE. All Advance Incentive Payments will be re-computed at
plan year-end using the Actual APE.
Annual Performance Evaluation (APE)
The APE represents assessment of performance during the
current incentive plan year as developed by the responsible
manager and/or group executive. This evaluation will relate
to but not necessarily be the same as the Career Performance
Evaluation. The APE is used to determine the APE Factor,
which applies the APE to the computation of the maximum
available incentive under the applicable incentive plan.
The Pro Forma APE is determined at the beginning of the plan
year and is used to compute Advance Incentive Payments. The
Actual APE is determined retrospectively at the end of the
plan year and is used to compute the Final Incentive Payment,
including any necessary re-calculation of Advance Incentive
Payments.
APE Factor
The APE Factor is determined by the APE and is used to factor
the target incentive to consider the Annual Performance
Evaluation. Like the APE, it will be determined on both a
pro forma and an actual basis.
Bookings Margin
Bookings Margin equals total bookings revenue less the cost
of hardware and sublicense software. Bookings Margin = Bookings
Revenue - (Hardware Cost + Sublicense Software Cost)
Career Performance Evaluation (CPE)
The CPE is the evaluation developed in conjunction with the
annual performance review and career planning discussion. It
is intended to represent a long term view of performance,
contribution and commitment to Cerner. It may not always be
the same as the APE. Differences will arise based on
particularly challenging assignments, outside issues which
temporarily impact career focus, and significant changes in
responsibility, which typically occur when an associate is
promoted.
Component Plan
The Component Plan defines the unique attributes of a
specific incentive plan for a role or group of roles. These
plans identify the rewardable events which will be used for
the participants, the objectives for each rewardable event,
the weight assigned to each rewardable event, the Target
Bonus Levels for participants, and any other considerations
unique to the component plan.
Deal Margin
Deal Margin is Net Bookings Margin plus Support Margin.
Final Incentive Payment
This is the amount of incentive payable at the end of the
plan year, considering achievement of rewardable events
throughout the year and the actual APE for the year.
Net Bookings Margin
Net Bookings Margin is Bookings Margin minus a standard cost
for both software development (10% of the list software
price) and installation (5% of the list software price).
List software price is from the current Cerner Price List
which is appropriate for the client and is typically based on
bed size.
Net Bookings Margin = Bookings Margin - (15% * List Software Price)
The List Software Price will come from the then current
Cerner Price List.
Net Extensions
Any product which is part of a Net but can be installed
standalone (i.e. Blood Bank Transfusion, Microbiology,
Anatomic Pathology).
Optional Schedules/Products
No incentive compensation (per deal or per plan/quota) is
earned until the client exercises the option in writing.
Plan Year
The plan year for all CPP component plans is April 1 through
March 31.
Product Demonstration
The formal process of presenting the functionality of
product(s). This Plan refers to demonstrations specifically
to prospective clients.
Proposal/RFP Preparation
The process of responding to a Request for Proposal or
submitting a voluntary proposal in an effort to being
selected as software supplier for the healthcare provider.
The preparation involves presenting automated solutions to
processes through description of Cerner product functionality.
Rewardable Events
Rewardable Events are those objective metrics which determine
the incentive payable under the plan. Rewardable events are
pre-defined goals or objectives for specific business
outcomes which have associated with them weights, or
multipliers. These weights are applied to the target
incentive on a binary basis. If the rewardable event goal or
objective is achieved, the associated weight is applied to
the target incentive. If the rewardable event goal or
objective is not achieved, a weight of 0 is applied to the
target incentive. Rewardable Events relate the incentive
available under the plan to the achievement of clearly
defined management goals.
Rewardable Event Objective
The target established for the rewardable event for the
period of measurement, e.g., EPS of $.30 for Q1, Client
Satisfaction of 80% for Q3.
Site Visit
The presentation to a prospective client of Cerner product
usage and utilization at a Cerner client facility. Cerner
associates accompany the prospective client to the facility.
Support Margin
Support Margin equals 12 months of software support if the
support was not discounted in the deal. If software support
is discounted from the current Cerner Price List, then
Support Margin equals zero. Support Margin continues to be a
component of Deal Margin for the 1994-95 Sales Year.
Target Bonus Level
The Target Bonus Level is the potential amount of bonus
available under the applicable incentive plan for each
performance group.
Appendix 1 (Section 7)
EXAMPLES
The following examples illustrate the computation of a
Performance Plan incentive in two scenarios. All dollar
amounts are rounded to the nearest whole dollar.
<TABLE>
Scenario 1 - Plan "A"
Target Bonus Level - $6,000 Pro Forma APE and Factor - 7 (95%)
Actual APE and Factor - 7 (95%) All REs are measured quarterly, with
weights as indicated
<CAPTION>
Rewardable Events Achieved Gross Bonus
RE1 RE2 RE3 RE4 RE5 Bonus Computation Earned
<S> <C> <C> <C> <C> <C> <C> <C>
PQ1 Y Y Y Y Y $6,000x95%x25%x[.10+.20+.25+.25+.20] $1,425
PQ2 Y N N Y Y $6,000x95%x25%x[.10+.00+.00+.25+.20] $ 784
PQ3 Y Y N N Y $6,000x95%x25%x[.10+.20+.00+.00+.20] $ 713
PQ4 Y Y Y Y Y $6,000x95%x25%x[.10+.20+.25+.25+.20] $1,425
------
Total Gross Incentive Earned for Plan Year $4,347
No adjustment was required in PQ4 because the participant's Actual
APE did not change from the Pro Forma APE.
</TABLE>
<TABLE>
Scenario 2-Plan "B"
Target Bonus Level - $4,500 Pro Forma APE and Factor - 6 (80%)
Actual APE and Factor - 7 (95%) RE 1 is measured annually; all
others qtrly, with weights as indicated. Therefore, the weight of 20%
assigned to RE1 results in $180 ($4,500/4 x 80% x 20%) per quarter
being withheld in Q1 through Q3 for evaluation in Q4.
<CAPTION>
Rewardable Events Achieved Gross Bonus
RE1 RE2 RE3 RE4 RE5 Bonus Computation Earned
<S> <C><C> <C> <C> <C> <C> <C>
PQ1 - Y Y Y N $4,500x80%x25%x[.00+.20+.15+.15+.00] $ 450
PQ2 - N Y Y Y $4,500x80%x25%x[.00+.00+.15+.15+.30] $ 540
PQ3 - Y N N Y $4,500x80%x25%x[.00+.20+.00+.00+.30] $ 450
PQ4 - Y N Y Y $4,500x80%x25%x[.00+.20+.00+.15+.30] $ 585
------
Total Gross Incentive Before Year-end Adjustment $2,025
</TABLE>
plus re-computation of all quarters for Actual APE
PQ1 $4,500x95%x25%x[.00+.20+.15+.15+.00] $ 534
PQ2 $4,500x95%x25%x[.00+.00+.15+.15+.30] $ 641
PQ3 $4,500x95%x25%x[.00+.20+.00+.00+.30] $ 534
PQ4 $4,500x95%x25%x[.00+.20+.00+.15+.30] $ 695
net of previous payments ($450+$540+$450+$585) -$2,025 $ 379
------- ------
plus: Re-computation for attainment of annual RE1
PQ1 $4,500x95%x25%x[.20] $ 214
PQ2 $4,500x95%x25%x[.20] $ 214
PQ3 $4,500x95%x25%x[.20] $ 214
PQ4 $4,500x95%x25%x[.20] $ 214
Total $ 856
------
Total Gross Incentive Earned for Plan Year $3,260
------
The year end adjustment created by the change from the
pro forma APE of "6" to the actual APE of "7" resulted in
an additional $379 for Q1 through Q4.
The attainment of the annual rewardable event resulted in
achievement of an incentive payment of $856.
Appendix 2
Patterson - $150,000
Illig - $150,000
<TABLE>
REWARDABLE EVENT OBJECTIVES
<CAPTION>
Rewardable PQ1 94 PQ2 94 PQ3 94 PQ4 94 Measurement
Event Weighting Cycle PP YTD PP YTD PP YTD PP YTD Methodology
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Associate
Satisfaction 20% A N/A N/A N/A 80% 1
(2) Client
Satisfaction -
External 20% Q 90% 90% 90% 90% 2 A
(3) EPS -
Corporate 60% Q 0.36 0.74 1.11 1.38 18
</TABLE>
Runnion - $75,000
Reene - $75,000
Dietrich - $60,000
Breedlove - $60,000
<TABLE>
REWARDABLE EVENT OBJECTIVES
<CAPTION>
Rewardable PQ1 94 PQ2 94 PQ3 94 PQ4 94 Measurement
Event Weighting Cycle PP YTD PP YTD PP YTD PP YTD Methodology
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Associate
Satisfaction 10% A N/A N/A N/A 80% 1
(2) Client
Satisfaction -
External 10% Q 90% 90% 90% 90% 2A
(3) Cost Control -
Pers & Exps 15% Q 7,498 15,345 23,748 33,067 14E
(4) EPS Region 25% Q 17C
BOS/WDC .09/.20 .21/.49 .41/.66 0.70
DET/KCM .08/.13 .23/.28 .41/.49 0.60
ATL/DAL .21/.10 .46/.26 .69/.42 0.90
SEA/LAX .11/.28 .31/.39 .45/.60 0.60
(5) EPS Corporate 20% Q 0.36 0.74 1.11 1.38 18
(6) Goal Attainment 20% Q * * * * 19
</TABLE>
Willett - $60,000
<TABLE>
REWARDABLE EVENT OBJECTIVES
<CAPTION>
Rewardable PQ1 94 PQ2 94 PQ3 94 PQ4 94 Measurement
Event Weighting Cycle PP YTD PP YTD PP YTD PP YTD Methodology
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Associate
Satisfaction 10% A N/A N/A N/A 80% 1
(2) Client
Satisfaction -
External 10% Q N/A N/A N/A 90% 2C
(3) Cost
Control -
Pers & Exps 15% Q 1,513 2,999 4,477 5,935 14D
(4) EPS - Region 25% Q * 0.06 0.09 0.13 17B
(5) EPS -
Corporate 20% Q 0.36 0.74 1.11 1.38 18
(6) Goals 20% Q * * * * 19
</TABLE>
Whitcraft - $60,000
Margulies - $75,000
<TABLE>
REWARDABLE EVENT OBJECTIVES
<CAPTION>
Rewardable PQ1 94 PQ2 94 PQ3 94 PQ4 94 Measurement
Event Weighting Cycle PP YTD PP YTD PP YTD PP YTD Methodology
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Associate
Satisfaction 20% A N/A N/A N/A 80% 1
(2) Cost Control -
Expenses 25% Q 1,071 2,425 3,699 4,627 12A
(3) Cost Control -
Personnel 25% Q 4,380 9,383 14,715 20,499 13A
(4) EPS Corporate 30% Q 0.36 0.74 1.11 1.38 18
</TABLE>
EXHIBIT 10(w)(i)
Standard Form of Agreement Between
Owner and Contractor where the basis of
payment is the Cost of the Work Plus a Fee
with a Guaranteed Maximum Price
------------------------------------------------------------------------------
AGREEMENT
made as of the First day of
September in the year of Nineteen Hundred and Ninety-Four
Between the Owner
(Name and address)
Cerner Properties, Inc.
2800 Rock Creek Parkway
Suite 601
Kansas City, Missouri 64117
and the Contractor:
(Name and address)
J. E. Dunn Construction Company
929 Holmes
Kansas City, Missouri 64106
the Project is:
(Name and address)
Associate Center and Guest Center
2800 Rock Creek Parkway
Kansas City, Missouri 64117
the Architect is:
(Name and address)
Hollis + Miller Group, Inc.
5000 W. 95th Street
Suite 100
Prairie Village, Kansas 66207
<PAGE>
The Owner and Contractor agree as set forth below.
ARTICLE 1
---------
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, Addenda issued prior to execution of this Agreement, other
documents listed in this Agreement and Modifications issued after execution
of this Agreement; these form the contract, and are as fully a part of the
Contract as if attached to this Agreement or repeated herein. The Contract
represents the entire and integrated agreement between the parties hereto
and supersedes prior negotiations, representations or agreements, either
written or oral. An enumeration of the Contract Documents is inconsistent
with this Agreement, this Agreement shall govern.
ARTICLE 2
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THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract
Documents (which shall be made part of this Contract by future Amendment)
except for Work indicated in the Contract to be the responsibility of others.
Additionally, the Contractor shall provide Pre-construction Services as
described in Paragraph 2.2 hereof.
2.2 PRECONSTRUCTION SERVICES
2.2.1 Provide preliminary evaluation of the program and Project budget
requirements, each in terms of the other. With the Architects assistance,
prepare preliminary estimates of Construction Cost early schematic designs
based on area, volume or other standards. Assist the Owner and the Architect
in achieving mutually agreed upon program and Project budget requirements and
other design parameters. Provide cost evaluations of alternative materials
and systems.
2.2.2 Review designs during their development. Advise on site use and
improvements, selection of materials, building systems and equipment and method
of Project delivery. Provide recommendations on relative feasibility of
construction methods, availability of materials and labor, time requirements
for procurement, installation and construction, and factors related to cost
including, but not limited to, costs of alternative designs or materials,
preliminary budgets and possible economies.
2.2.3 Provide for the Architect's and the Owner's review and acceptance, and
periodically update, a Project Schedule that coordinates and integrates the
Contractor's services and the Owner's responsibilities with anticipated
construction schedules.
2.2.4 Prepare for the Owner's approval a more detailed estimate of Construction
Cost, developed by using estimating techniques which anticipate the various
elements of the Project, and based on Schematic Design Documents prepared by
the Architect. Update and refine this estimate periodically as the Architect
prepares Design Development and Construction Documents. Advise the owner and
the Architect if it appears that the Construction Cost may exceed the Project
budget. Make recommendations for corrective action.
2.2.5 Coordinate Contract Documents by consulting with the Owner and the
Architect regarding Drawings and Specifications as they are being prepared,
and recommending alternative solutions whenever design details affect
construction feasibility, cost or schedules.
2.2.6 Develop a Project Construction Schedule providing for all major elements
such as phasing of construction and times of commencement and completion
required of each separate Contractor. Provide the Project Construction
Schedule for each set of biding Documents.
2.2.7 Investigate and recommend a schedule for the Owner's purchase of materials
and equipment requiring long lead time procurement, and coordinate the schedule
with the early preparation of portions of the Contract Documents by the
Architect. Expedite and coordinate delivery of these purchases.
2.2.8 Prequalify Bidders and develop Bidder's interest in the Project.
Establish bidding schedules. With the assistance of the Architect, issue
Bidding Documents to Bidders. Conduct pre-bid conferences to familiarize
Bidders with the Bidding Documents and with any special systems, materials or
methods. Assist the Architect with the receipt of questions from Bidders, and
with the issuance of Addenda.
2.2.9 Receive Bids and prepare bid analysis.
ARTICLE 3
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RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence established
by this Agreement and covenants with the Owner to cooperate with the Architect
and utilize the Contractor's best skill, efforts and judgment in furthering the
interests of the Owner; to furnish efficient business administration and
supervision; to make best efforts to furnish at all times an adequate supply
of workers and materials ; and to perform the Work in the best way and
expeditious and economical manner consistent with the interests of the Owner.
The Owner agrees to exercise best efforts to enable the Contractor to perform
the Work in the best way and most expeditious manner by furnishing and
approving in a timely way information required by the Contractor and making
payments to the Contractor in accordance with requirements of the Contract
Documents.
ARTICLE 4
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DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time
Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice issued by the Owner.
(Insert the date of commencement, if it differs from the date of this
Agreement or, if applicable, state that the date will be fixed in a notice to
proceed.)
The date of commencement shall be fixed in a Notice to proceed issued by the
Owner.
Unless the date of commencement is established by a notice to proceed issued
by the Owner, the Contractor shall notify the Owner in writing not less than
five days before commencing the Work to permit timely filing of mortgages,
mechanic's liens and other security interests.
4.2 The Contractor shall achieve Substantial Completion of the entire Work
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial
Completion of certain portions of the Work, if not stated elsewhere in the
Contract Documents.)
in accordance with the schedule hereafter developed by the Contractor and
approved by the Owner at acceptance of the Guaranteed Maximum Price
, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages to failure to complete on
time.)
4.3 Liquidated damages shall not be applicable to this Agreement.
ARTICLE 5
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CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of Work as
defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum, percentage of Cost of the Work or other provisions
for determining the Contractor's Fee, and explain and explain how the
Contractor's Fee is to be adjusted for change in the Work.)
Upon acceptance of the Guaranteed Maximum Price, the Owner will reimburse the
Contractor for Project Administration costs incurred during the Pre-construction
Phase on the basis of costs authorized under Article Seven herein.
In consideration of the performance of the Construction Phase of the Contract,
the Owner agrees to pay the Contractor in current funds as compensation for
his services a Contractor's Fee in the fixed amount to be determined pursuant
to Paragraph 5.3 following. Said Fee is included in the Guaranteed Maximum
Price set forth in Paragraph 5.2 below. The Contractor's Fee shall not be
reduced on account of costs savings realized by the Owner pursuant to
Paragraph 5.2 below.
The Contractor's Fee shall be increased or decreased by an amount equal to
three percent (3%) of the Cost of any Change in the Work as defined herein.
5.2 GUARANTEED MAXIMUM PRICE
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed the amount determined pursuant to Paragraph
5.3 following), subject to additions and deductions by Change Order as
provided in the Contract Documents. Such maximum sum is referred to in the
Contract Documents as the Guaranteed Maximum Price. Costs which would cause
the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor
without reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any
savings)
If the final Cost of the Work plus the Contractor's Fee is less than the
Guaranteed Maximum Price (as may be adjusted by Change Order), such savings
shall accrue one hundred percent (100%) to the Owner.
5.2.2 The Guaranteed Maximum Price is based upon the following alternates,
if any, which are described in the Contract Documents and are hereby accepted
by the Owner:
(State the numbers or other identification of accepted alternates, but only
if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decisions
on other alternates are to be made by the Owner subsequent to the executuion
of this Agreement, attach a schedule of such other alternates showing the
amount for each and the date until which that amount is valid.)
None
5.2.3 The amounts agreed to for unit prices, if any, are as follows: None
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1.)
5.3 Guaranteed Maximum Price Amendment:
Contractor will be furnished with plans and specifications (the Bid Documents)
issued by the Architect for the entire work sufficiently developed so that
Contractor may obtain bids from subcontractors and materialmen for the various
scope of work. After the Bid Documents have been issued and an estimated Cost
of the Work for it been agreed to, the Contractor and Owner shall execute a
written Amendment to this Contract establishing, a) the estimated Cost of the
Work, and b) the Contractor's Fee, referred to in Paragraph 5.1, which shall
equal three percent (3%) of the estimated Cost of the Work. The sum of the
estimated Cost of the Work and the Contractor's Fee shall be referred to as
the Guaranteed Maximum Price ("GMP"). Prior to the execution by Contractor
and Owner of an Amendment establishing the Guaranteed Maximum Price, Contractor
shall not execute any subcontract or purchase order under this Contract
without the express written authorization of the Owner. If a mutually
agreeable GMP cannot be agreed upon within 60 calendar days after the date
Contractor receives plans and specifications sufficiently detailed for
Contractor to develop a GMP proposal, the Owner may terminate this Agreement
without liability to Contractor, except as to those costs previously
authorized as above or for Pre-construction services in Paragraph 5.1.
ARTICLE 6
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CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in
the Work may be determined by any of the methods listed in Subparagraph 7.3.3
of the General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with
the Owner's prior consent on the basis of cost plus a fee), the terms "cost"
and "fee" as used in Clause 7.3.3.3 of the General Conditions and the terms
"costs" and "a reasonable allowance for overhead and profit" as used in
Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned
to them in the General Conditions and shall not be modified by Articles 5,7
and 8 of the Agreement. Adjustments to subcontracts awarded with the Owner's
prior consent on the basis of cost plus a fee shall be calculated in
accordance with the terms of those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and
"costs" as used in the above-referenced provisions of the General Conditions
shall mean the Cost of the Work as defined in Articles 7 of this Agreement
and the terms "fee" and "a reasonable allowance for overhead and profit" shall
mean the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
6.2
6.3
ARTICLE 7
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COSTS TO BE REIMBURSED
7.1 The term Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at
rates not higher than the standard paid at the place of the Project except
with prior consent of the Owner. The Cost of the Work shall include only
the items set forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's
agreement, at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative
personnel with the Owner's agreement. (see 14.3.1)
(If it is intended that the wages or salaries of certain personnel stationed
at the Contractor's principal or other offices shall be included in the Cost
of the Work, identify in Article 14 the personnel to be included and whether
for all or only part of their time.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits required by law or collective bargain-
ing agreements and, for personnel not covered by such agreements, customary
benefits such as sick leave, medical and health benefits, holidays, vacations
and pensions, provided such costs are based on wages and salaries included in
the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the
requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment incorporated
in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials, if any, shall be handed over
to the Owner at the completion of the Work or, at the Owner's option, shall be
sold by the Contractor; amounts realized, if any, from such sales shall be
credited to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND
RELATED ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery,
equipment, and hand tools not customarily owned by the construction workers,
which are provided by the Contractor at the site and fully consumed in the
performance of the Work; and cost less salvage value on such items if not fully
consumed, whether sold to others or retained by the Contractor. Cost for
items previously used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and
hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site, whether rented from the Contractor
or others, and costs of transportation, installation, minor repairs and
replacements, dismantling and removal thereof. Rates and quantities of
equipment rented shall be subject to the Owner's prior approval.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and
parcel delivery charges, telephone service at the site, reasonable petty
cash expenses of the site office and costs of document reproductions.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of
the Contractor's personnel incurred while traveling in discharge of duties
connected with the Work. Out of town travel shall be authorized in advance
by Owner.
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for
insurance and bonds and deductibles incurred. Deductible amounts shall not
exceed $5,000 per occurance.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.
7.1.5.4 Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions
or other provisions of the Contract Documents and which do not fall within
the scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents provided, however, that
the Owner shall be notified in advance of such cost; the cost of defending
suits or claims for infringement of patent rights arising from such requirement
by the Contract Documents; payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent; provided, however, that such costs
of legal defenses, judgment and settlements shall not be included in the
calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any,
and provided that such royalties, fees and costs are not excluded by the
last sentence of Subparagraph 3.17.1 of the General Conditions or other
provisions of the Contract Documents.
7.1.5.6 Deposits lost for causes other than the Contractor's fault or
negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the
extent approved in advance in writing by the Owner.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1
which are incurred by the Contractor:
7.2.1 In taking action to prevent threatened damage, injury or loss in case
of an emergency affecting the safety of persons and property, as provided
in Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the
Contractor or the Contractor's foremen, engineers or superintendents, or
other supervisory, administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph
7.2.2, provided such damage did not result from the fault or negligence of
the Contractor or the Contractor's personnel, and only to the extent that
the cost of such repairs is not recoverable by the Contractor from others
and the Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied
by a Subcontractor or material supplier and not corrected by them, provided
such defective or nonconforming Work did not result from the fault or neglect
of the Contractor or the Contractor's personnel adequately to supervise and
direct the Work of the Subcontractor or material supplier, and only to the
extent that the cost of correcting the defective or nonconforming Work is not
recoverable by the Contractor from the Subcontractor or material supplier.
ARTICLE 8
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COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be
provided in Article 14.
8.1.2 Expenses of the Contractor's principal office and offices other than
the site office.
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the Contractor's
capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically provided
in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph
13.5 of this Agreement, costs due to the fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of them, or for
whose acts any of them may be liable, including but not limited to costs for
the correction of damaged, defective or nonconforming Work, disposal and
replacement of materials and equipment incorrectly ordered or supplied, and
making good damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be
exceeded.
ARTICLE 9
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DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue
to the Owner if (1) before making the payment, the Contractor included them
in an Application for Payment therefore from the Owner, or (2) the Owner
has deposited funds with the Contractor with which to make payments; otherwise,
cash discounts shall accrue to the Contractor. Trade discounts, rebates,
refunds and amounts received from sales of surplus materials and equipment
shall accrue to the Owner, and the Contractor shall make provisions so that
they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost
of the Work.
ARTICLE 10
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SUBCONTRACTS AND OTHER AGREEMENTS
10.1 Those portions of the Work that the Contractor does not customarily perform
with the Contractor's own personnel shall be performed under subcontracts or
by other appropriate agreements with the Contractor. The Contractor shall
obtain bids from Subcontractors and from suppliers of materials or equipment
fabricated especially for the Work and shall deliver such bids to the Architect.
The Owner will then determine, with the advice of the Contractor and subject
to the reasonable objection of the Architect, which bids will be accepted.
The Owner may designate specific persons or entities from whom the Contractor
shall obtain bids; however, if a Guaranteed Maximum Price has been established,
the Owner may not prohibit the Contractor from obtaining bids from others.
The Contractor shall not be required to contract with anyone to whom the
Contractor has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions,
but the Owner requires that another bid be accepted; then the Contractor may
require that a Change Order be issued to adjust the Guaranteed Maximum Price
by the difference between the bid of the person or entity recommended to the
Owner by the Contractor and the amount of the subcontract or other agreement
actually signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment provisions
of Paragraph 12.8, and shall not be awarded on the basis of cost plus a fee
without prior consent of the Owner.
ARTICLE 11
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ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the
Owner. The Owner and Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.
ARTICLE 12
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PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner
shall make progress payments on account of the Contract Sum to the Contractor
as provided below and elsewhere in the Contract Documents. Applications for
Payment shall be submitted on AIA Documents G702 & G703.
12.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Architect not
later than the last day of a month, the Owner shall make payment to the
Contractor not later than the fifteenth day of the following month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than fifteen days
after the Architect receives the Application for Payment.
12.4 With each Application for Payment the Contractor shall submit evidence
required by the Owner or Architect to demonstrate that disbursements already
made by the Contractor on account of the Cost of the Work equal or exceed (1)
progress payments already received by the Contractor; less (2) that portion of
those payments attributable to the Contractor's Fee; plus (3) payrolls for the
period covered by the present Application for Payment; plus (4) retainage
provided in Subparagraph 12.5.4 if any, applicable to prior progress payments.
Additional documentation as allowed pursuant to Article Eleven shall be
available to Owner during any audit it may undertake of Contractor's records
from time to time.
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent
schedule of values submitted by the Contractor in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed
Maximum Price among the various portions of the Work, except that the
Contractor's Fee shall be shown as a single separate item. The schedule of
values shall be prepared in such form and supported by such data to substantiate
its accuracy as the Architect may require. This schedule, unless objected to
by the Architect, shall be used as a basis for reviewing the Contractor's
Applications for Payment.
12.5.2 Applications for Payment shall show the percentage completion of each
portion of the Work as of the end of the period covered by the Application
for Payment. The percentage completion shall be the lesser of (1) the
percentage of that portion of the Work which has actually been completed or
(2) the percentage obtained by dividing (a) the expense which has actually been
incurred by the Contractor on account of that portion of the Work for which
the Contractor has made or intends to make actual payment prior to the next
Application for Payment by (b) the share of the Guaranteed Maximum Price
allocated to that portion of the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable
to completed Work as determined by multiplying the percentage completion of
each portion of the Work by the share of the Guaranteed Maximum Price allocated
to that portion of the Work in the schedule of values. Pending final determ-
ination of cost to the Owner of changes in the Work, amounts not in dispute
may be included as provided in Subparagraph 7.3.7 of the General Conditions,
even though the Guaranteed Maximum Price has not been adjusted by Change
Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable
to materials and equipment delivered and suitably stored at the site for
subsequent incorporation in the Work or, if approved in advance by the Owner,
suitably stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee. The Contractor's Fee shall be computed
upon the Cost of the Work described in the two preceding Clauses at the rate
stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum
in that Paragraph, shall be an amount which bears the same ratio to that
fixed-sum Fee as the Cost of the Work in the two preceding Clauses bears to a
reasonable estimate of the probable Cost of the Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications
for Payment, or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the
General Conditions.
12.5.4 Retainage shall be as follows:
(if it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in
Clause 12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph
12.7 below, and (3) the retainage, if any, provided by other provisions of the
Contract, insert provision for such additional retainage here. Such provision,
if made, should also describe any arrangement for limiting or reducing the
amount retained after the Work reaches a certain state of completion.)
A five percent (5%) retainage from the aggregate of cost and fee shall be
withheld from each progress payment until the Work is substantially complete.
At substantial completion, all retainages shall be paid to Contractor except
an amount equal to twice the value of incomplete punch list work.
12.6
12.7
12.8 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has made a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Paragraph 12.4
or other supporting data; that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertain
how or for what purposes the Contractor has used amounts previously paid on
account of the Contract. Such examinations, audits and verifications, if
required by the Owner, will be performed by the Owner's accountants acting
in the sole interest of the Owner.
ARTICLE 13
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FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the Contractor except for the Contractor's
responsibility to correct defective or nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment: (2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Contractor and reviewed by the Owner's accountants; and
(3) a final Certificate for Payment has then been issued by the Architect;
such final payment shall be made by the Owner not more than 30 days after the
issuance of the Architect's final Certificate for Payment, or as follows:
13.2 The amount of the final payment shall be calculated as follows:
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.
13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the
Work as the Owner's accountants report to be substantiated by the Contractor's
final accounting, and provided the other conditions of Paragraph 13.1 have
been met, the Architect will, within seven days after receipt of the written
report of the Owner's accountants, either issue to the Owner a final Certificate
for Payment with a copy to the Contractor, or notify the Contractor and Owner
in writing of the Architect's reasons for withholding a certificate as
provided in Subparagraph 9.5.1 of the General Conditions. The time periods
stated in this Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of
the General Conditions.
13.4 If the Owner's accountants report the Cost of the Work as substantiated
by the Contractor's final accounting to be less than claimed by the Contractor
the Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration
shall be made by the Contractor within 30 days after the Contractor's receipt
of a copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated
amount reported by the Owner's accountants becoming binding on the Contractor.
Pending a final resolution by arbitration, the Owner shall pay the Contractor
the amount certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the
Contractor incurs costs described in Article 7 and not excluded by Article 8
to correct defective or nonconforming Work, the Owner shall reimburse the
Contractor such costs and the Contractor's Fee applicable thereto on the same
basis as if such costs had been incurred prior to final payment, but not in
excess of the Guaranteed Maximum Price, if any. If the Contractor has
participated in savings as in determining the net amount to be paid by the
Owner to the Contractor.
ARTICLE 14
----------
MISCELLANEOUS PROVISIONS
14.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that
provision as amended or supplemented by other provisions of the Contract
Documents.
14.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at
the legal rate prevailing from time to time at the place where the Project
is located.
(insert rate of interest agreed upon, if any)
Rate of interest shall be ten percent (10%) per annum. No interest shall
accrue on monies withheld to the extent they relate to work which is the
subject of a bonafide dispute.
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's
and Contractor's principal places of business, the location of the Project
and elsewhere may affect the validity of the provision. Legal advice should
be obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
14.3 Other provisions:
14.3.1 Pursuant to Paragraph 7.1.1.2, the salaries of Project Administration,
Construction Operations and Billings and Payment staff assigned to the
Project shall be reimbursable, including payroll taxes, insurance and benefits,
for that portion of their time attributable to the Work of the Project.
14.3.2 The Construction Phase of this Agreement, and the performance thereof
by both parties is contingent upon the obtainment of all necessary zoning and
permits for this Project and written notice by the Owner to the Contractor
to proceed with the Work.
14.3.3 The Owner shall provide the Contractor with evidence of construction
financing as follows: A letter from Mark Twain Bank showing available credit
in excess of the Contract Sum for this Project.
ARTICLE 15
----------
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article
14 of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the
amount the Contractor would be entitled to receive under Paragraph 15.3 below,
except that the Contractor's Fee shall be calculated as if the Work had been
fully completed by the Contractor, including a reasonable estimate of the
Cost of the Work for Work not actually completed.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the amount, if any, to be paid to the Contractor
under Subparagraph 14.2.4 of the General Conditions shall not cause the
Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the
Contractor would be entitled to receive under Paragraph 15.3 below.
15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the Owner shall then pay the Contractor an
amount calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date
of termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the
date of termination at the rate stated in Paragraph 5.1 or, if the Contractor's
Fee is stated as a fixed sum in that Paragraph, an amount which bears the
same ratio to that fixed-sum Fee as the Cost of the Work at the time of
termination bears to a reasonable estimate of the probable Cost of the Work
upon its completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase
or rental at the election of the Owner, for any equipment owned by the
Contractor which the Owner elects to retain and which is not otherwise
included in the Cost of the Work under Subparagraph 15.3.1. To the extent
that the Owner elects to take legal assignment of the subcontracts and
purchase orders (including rental agreements), the Contractor shall, as a
condition of receiving the payments referred to in the Article 15, execute
and deliver all such papers and take all such steps, including the legal
assignment of such subcontracts and other contractual rights of the Contractor,
as the Owner may require for the purpose of fully vesting in the Owner the
rights and benefits of the Contractor under such subcontracts or purchase
orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the Guaranteed Maximum Price, if any, shall
be increased as provided in Subparagraph 14.3.2 of the General Conditions
except that the term "cost of performance of the Contract" in that
Subparagraph shall be understood to mean the Cost of the Work and the term
"profit" shall be understood to mean the Contractor's Fee as Described in
Paragraphs 5.1 and 6.3 of this Agreement.
15.5 The Work may be terminated by the Owner without cause, in which case the
Contractor shall be compensated pursuant to the provisions of Paragraph 15.1
herein and Paragraph 14.4 of the General Conditions.
ARTICLE 16
----------
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between
Owner and Contractor, AIA Document A111, 1987 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
16.1.3 The Supplementary Conditions of the Contract are those dated
September 1, 1994, attached hereto and made a part hereof.
16.1.4 The Specifications are those contained in the Project Manual dated
as in Paragraph 16.1.3
Section Title Pages
To be added by Amendment
16.1.5 The Drawings are as follows, and are dated unless a different date is
shown below:
(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)
Number Title Date
To be added by Amendment
16.1.6 The Addenda, if any, are as follows:
Number Date Pages
To be added by Amendment
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in
this Article 16.
16.1.7 Other Documents, if any, forming part of the Contract Documents are
as follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid. Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to
be part of the Contract Documents.)
Exhibit A, Notice to Owner, attached hereto.
Other Contract Documents for each phase, including Project Manuals
(with specifications) and plans shall be added at the time the GMP is
fixed or Amended pursuant to Paragraph 5.3 herein.
This Agreement is entered into as of the day and year first written above
and is executed in at least three original copies of which one is to be
delivered to the Contractor, one to the Architect for use in administration
of the Contract, and the remainder to the Owner.
OWNER: Cerner Properties, Inc. CONTRACTOR: J.E. DUNN CONSTRUCTION
/s/Clifford W. Illig /s/Terrence P. Dunn
(Signature) (Signature)
Clifford W. Illig Terrence P. Dunn
President President
(Printed name and title) (Printed name and title)
<PAGE>
EXHIBIT A
NOTICE TO OWNER
FAILURE OF THIS CONTRACTOR TO PAY THOSE PERSONS SUPPLYING
MATERIAL OR SERVICES TO COMPLETE THIS CONTRACT CAN RESULT IN
THE FILING OF A MECHANIC'S LIEN ON THE PROPERTY WHICH IS THE
SUBJECT OF THIS CONTRACT PURSUANT TO CHAPTER 429, RSMo. TO AVOID
THIS RESULT YOU MAY ASK THIS CONTRACTOR FOR "LIEN WAIVERS" FROM
ALL PERSONS SUPPLYING MATERIAL OR SERVICES FOR THE WORK
DESCRIBED IN THIS CONTRACT. FAILURE TO SECURE LIEN WAIVERS MAY
RESULT IN YOUR PAYING FOR LABOR AND MATERIAL TWICE.
EXHIBIT 10(w)(ii)
SUPPLEMENT TO GENERAL CONDITIONS OF
THE CONTRACT FOR CONSTRUCTION
Owner: Cerner Properties, Inc.
Contractor: J. E. Dunn Construction Company
Dated as of: September 1, 1994
This Supplement modifies, deletes from and adds to the General Conditions
of the Contract for Construction, AIA Document A201, Fourteenth Edition, 1987.
Except to the extent modified by the express provisions of this Supplement or
by necessary implication, all provisions of the General Conditions shall
remain in effect. If and to the extent that this Supplement is inconsistent
with the Standard Form of Agreement (AIA Document A111, hereinafter the
"Agreement"), the Specifications or the General Conditions, this Supplement
shall control.
ARTICLE 1
---------
1.3.1. Add the following at the end of Subparagraph 1.3.1:
The provisions of this Subparagraph 1.3.1 govern the rights and obligations
of the Contractor with respect to the Drawings, Specifications and other
documents prepared by the Architect, but shall not be deemed to restrict
any rights the Owner may have with respect thereto under the agreement
between the Owner and the Architect concerning the Project.
ARTICLE 2
---------
2.3.1 Delete the word "persistently" in the first sentence of
Subparagraph 2.3.1.
2.4.1. Delete the first two sentences of Subparagraph 2.4.1. and
substitute the following in lieu thereof:
If the Contractor defaults or neglects to carry out the work in
accordance with the Contract Documents and fails within a seven-day
period after receipt of written notice from the Owner to commence and
continue correction of such default or neglect with diligence and
promptness, the Owner may, without prejudice to other remedies the Owner
may have, commence and continue to carry out the Work.
Delete the fourth sentence of Subparagraph 2.4.1 in its entirety. Add at
the end of Subparagraph 2.4.1 the following sentence:
The right of the Owner to correct deficiencies pursuant to this
Subparagraph 2.4.1 shall not give rise to any duty on the part of the
Owner to exercise this right for the benefit of the Contractor or any
other person or entity.
ARTICLE 3
---------
3.2.4. Add the following provision as a new Subparagraph 3.2.4:
3.2.4. In any and all cases of discrepancies in dimensions,
words, numbers, drawings, and/or specifications, the matter shall
immediately be submitted in writing to the Architect for his decision, and
without such decision such discrepancies shall not be adjusted by the
Contractor, save only at Contractor's expense, and in case of any
settlement of any complications arising from such adjustment by the
Contractor made without such decision of the Architect, the Contractor
shall bear all extra expenses involved.
3.3.2. At the end of Subparagraph 3.3.2, add, "Subcontractors or Sub
subcontractors."
3.5.1. Add the following sentence at the end of Subparagraph 3.5.1:
The obligations of the Contractor under all provisions for warranties,
guaranties and provisions relating to correction of Work contained in the
Contract Documents shall be cumulative and no such provision shall be
deemed to limit the Contractor's obligations under any other such
provision.
3.18.1. Delete the first sentence of Subparagraph 3.18.1 and substitute
the following in lieu thereof:
To the fullest extent permitted by law, the Contractor shall indemnify and
hold harmless the Owner, Architect, Architect's consultants, and agents
and employees of any of them from and against claims, damages, losses and
expenses, including but not limited to punitive damages and attorneys'
fees, arising out of or resulting from performance of the Work but only to
the extent caused in whole or in part by tortious or negligent acts or
omissions of the Contractor, a Subcontractor, anyone directly or indirectly
employed by them or anyone for whose acts they may be liable, regardless of
whether or not such claim, damage, loss or expense is caused in part by the
tortious or negligent acts or omissions of a party indemnified hereunder.
To the extent that Owner has paid Contractor, the Contractor shall
indemnify and hold harmless the Owner and Owner's lenders, if any, against
any assertion of claims for mechanics' liens by Subcontractors, Sub-
subcontractors or material suppliers, and against any assertion of security
interests by suppliers of goods or materials.
3.18.3. Delete the phrase "provided such giving or failure to give is the
primary cause of the injury or damage" from Subparagraph 3.18.3 and substitute
in lieu thereof the phrase "to the extent such giving or failure to give is
the cause of the injury or damage."
ARTICLE 4
---------
4.1.4. Delete Subparagraph 4.1.4 in its entirety and add the following
provision in lieu thereof:
4.1.4. The contractual arrangements between the Owner
and the Architect are governed by a separate written agreement between
the Owner and the Architect, and nothing contained in these General
Conditions shall be deemed to control over anything to the contrary
contained in such separate written agreement as to the legal
relationship between the Owner and the Architect.
4.2.1. Change the word "representative" in the third line of
Subparagraph 4.2.1 to "consultant."
4.3.3. Add the following provision at the end of the first sentence of
Subparagraph 4.3.3:
; provided, however, that this requirement and the requirement of
Subparagraph 4.3.9 shall not apply to Claims by the Owner arising from
any of the matters referred to in Clauses 4.3.5.1, 4.3.5.3.
4.3.5.2. Add the following provision to Clause 4.3.5.2, before the
semicolon: ", and claims made by the Owner pursuant to Paragraphs 3.5 and
12.2."
4.4.4. Delete the phrase ", which decision shall be final and binding on the
parties but subject to arbitration" from Subparagraph 4.4.4.
4.5. Delete Paragraph 4.5 in its entirety. Any and all references contained
in the General Conditions to arbitration shall be of no effect.
ARTICLE 7
---------
7.1.1. Add the following sentence at the end of Subparagraph 7.1.1:
Under no circumstances shall any change in the Work be authorized or
performed except as expressly provided for in accordance with this
Article 7. No change in the Contract Time or Contract Sum shall be
permitted except as set forth in a change order signed by the Owner,
Contractor and Architect, or as determined under Paragraph 7.3 pursuant
to a Construction Change Directive signed by the Owner and Architect.
ARTICLE 8
---------
8.3.1. Add the following at the end of the last sentence of
Subparagraph 8.3.1:
; provided, however, that in no event shall the Contract Time be
extended in the aggregate for more than 20 days beyond the date
established for Substantial Completion of the Work under Paragraph 4.2
of the Agreement, except for delay attributable to the Owner or
Architect, or an employee or separate contractor of either, or caused by
unavoidable casualties or other factors (e.g. weather).
ARTICLE 9
---------
9.3.1. Add the following Clause 9.3.1.3 to Subparagraph 9.3.1:
9.3.1.3. Until Substantial Completion of the Work, the Owner shall pay
95% of the amount due to the Contractor on account of progress payments.
Following the date of Substantial Completion and the receipt by the Owner
of consent of surety to release of a portion of the retainage, the Owner
shall pay 95% of the amount due to the Contractor on account of progress
payments.
9.3.3. Delete the last sentence of Subparagraph 9.3.3 and add at the end
of the first sentence of Subparagraph 9.3.3, the phrase ", free and clear
of liens, claims, security interests and encumbrances."
9.3.4. Add the following provision as a new Subparagraph 9.3.4:
9.3.4. The Contractor shall supply a Contractor's Release or Waiver of
liens with each Application for Payment with respect to the work,
materials and equipment for which payment is requested and prior to
receipt of funds for any subsequent application for payment, shall supply, with
respect to the work, materials and equipment for which payment has previously
been requested and received, separate Releases or Waivers of Liens from all
Subcontractors and separate Releases or Waivers of Liens from material and
equipment suppliers for material and equipment.
9.7.1. Delete from the first sentence of Subparagraph 9.7.1 the words
"the Architect does not issue a Certificate for Payment, through no fault
of the Contractor, within seven days after receipt of the Contractor's
Application for Payment, or if".
9.8.1. Insert after the words "Contract Documents" in Subparagraph 9.8.1
the words "and when all required certificates of occupancy, if any, have
been issued".
ARTICLE 10
----------
10.1.4. Add the following new Subparagraph 10.1.5:
10.1.5. The Contractor shall supply the Owner and the Architect with
Material Safety Data Sheets (MSDS) on any hazardous materials that the
Contractor, any Subcontractor or any Sub-subcontractor intends to, or does,
bring on site in connection with the performance of the Work. In addition,
the Contractor shall remove all surplus chemicals and hazardous materials
brought on site by the Contractor, any Subcontractor, or any Sub
subcontractor or otherwise in connection with performance of the Work. In
empty) be placed in any trash dumpster or trash truck or other waste
disposal system for disposal at any public trash dump or other waste
disposal site not authorized by law to receive such hazardous materials.
ARTICLE 11
----------
11.1.1.7. Insert following the words "Paragraph 3.18" in Clause 11.1.1.7
of Subparagraph 11.1.1 the words "or Subparagraph 10.2.5."
11.1.2. Delete the phrase ", whether written on an occurrence or claims-
made basis," in Subparagraph 11.1.2 and substitute in lieu thereof the
words "shall be written on an occurrence basis and".
In addition, add the following new Clauses 11.1.2.1 and 11.1.2.2 to
Subparagraph 11.1.2:
11.1.2.1. The insurance required by Subparagraph 11.1.1 shall be
written for not less than the following limits, or greater if required
by law:
1. Workers' Compensation (Voluntary Compensation by any
exempt entities):
(a) State (all) and applicable Federal statutory;
(b) Employer's Liability:
$100,000 per Accident
$500,000 Disease, Policy Limit
$100,000 Disease, Each Employee
2. Commercial General Liability (including Premises-Operations;
Independent Contractors' Protective; Products and Completed Operations;
Broad Form Property Damage; personal injury; blanket contractual;
explosion, collapse and underground):
(a) Combined Single Limit Bodily Injury & Property Damage:
$1,000,000 per occurrence
$1,000,000 aggregate
(b) Products and Completed Operations Insurance shall be
maintained for a minimum period of 5 years after final payment, and
the Contractor shall continue to provide evidence of such coverage
to the Owner on an annual basis during the aforementioned period.
(c) Contractual Liability (Hold Harmless Coverage) -
Combined Single Limit Bodily Injury & Property Damage:
$1,000,000 per occurrence
$1,000,000 aggregate
(d) Personal Injury (with Employment Exclusion deleted, if applicable):
$1,000,000 aggregate
(e) If the General Liability includes a General Aggregate, such
General Aggregate shall be not less than $1,000,000. The policy
shall be endorsed to have General Aggregate apply to this Project
only.
3. Business Auto Liability (including owned, non-owned and hired vehicles):
Combined Single Limit Bodily Injury and Property Damage:
$1,000,000 per accident
4. Umbrella Excess Liability:
$10,000,000 over primary insurance
No Self-Insured Retention
11.1.2.2. The Owner shall be named as an additional insured on the
Commercial General Liability and Umbrella Liability policies required under
Clause 11.1.2.1. The Certificates showing that all coverages required of
the Contractor under the Contract Documents are in effect shall be delivered
to the Owner before the Work is commenced.
11.1.3. There shall be added to Paragraph 11.1.3 the following two
sentences:
Contractor shall obtain and furnish to Owner Certificates of Insurance
from all of Contractor's subcontractors evidencing minimum limits as
specified in Paragraphs 11.1.2.1.1, 11.1.2.1.2 and 11.1.2.1.3 of Document
A201. The Owner shall be named as an additional insured under the General
Liability Policies of all such subcontractors.
11.3.1.5. Add the following provision as a new Clause 11.3.1.5:
11.3.1.5. The deductible for the property insurance to be
maintained by the Owner under this Paragraph 11.3 is $1,000 per claim;
the Contractor shall pay costs not covered because of such deductible.
The limit of such insurance on covered property at any one temporary
storage site is $1,000,000; the limit of such insurance on covered
property in or on any one vehicle while in transit is $1,000,000. The
limitations described in this Clause 11.3.1.5 are accepted by the Contractor
as meeting the requirements of this Paragraph 11.3.
11.3.2. Add the following at the end of subparagraph 11.3.2:
The insurance required by this Subparagraph 11.3.2 shall be provided with
a limit of $7,000,000, and a $1,000 deductible and shall cover boilers,
fixed vessels and electric steam generators and all unfired vessels
requiring operating permits.
11.3.7. In line 9 of Subparagraph 11.3.7, after the word "Work," add the
following phrase: "even though such damage may have been occasioned by the
negligence of the person or entity in whose favor this waiver is made,".
11.3.10. Delete from the first sentence in Subparagraph 11.3.10 the
words "; if such objection be made, arbitrators shall be chosen as provided
in Paragraph 4.5". In addition, delete the second and third sentences of
Subparagraph 11.3.10, and substitute in lieu thereof the following
sentence:
If such objection be made, the Owner shall not make any settlement with
respect to such loss until a resolution has been reached by agreement
between such parties in interest and the insurers or by a court of
competent jurisdiction.
ARTICLE 13
----------
13.2.1. Delete the second sentence of Subparagraph 13.2.1 and
substitute the following in lieu thereof:
The Contractor may not assign its rights or obligations under this
Contract. The Owner may assign its rights and obligations hereunder to its
lender, if any, and the Contractor agrees to enter into an agreement with
such lender pursuant to which, at such lender's request, the Contractor
will complete the Work upon appropriate provision for payment of the
balance of the Contract Sum. Any entity which shall succeed to the rights
of the Owner shall be entitled to enforce its rights hereunder.
In addition,(i) delete the words "either party" in the immediately
following sentence and substitute in lieu thereof the words "the
Contractor", and (ii) delete the words "that party" in the same sentence
and substitute the word "it" in lieu thereof.
13.3.1. Delete Subparagraph 13.3.1 in its entirety and add the following
new Subparagraph 13.3.1 in lieu thereof:
13.3.1. Written notice shall be deemed to have been duly served if delivered
in person, or sent by registered or certified mail, postage prepaid, or sent
by overnight courier, to the following person and address, or to such other
person or address specified by prior notice to the sender given pursuant to
this Subparagraph 13.3.1:
If to Owner: Cerner Properties, Inc.
2800 Rockcreek Parkway
Kansas City, MO 64117
Attn: Clifford W. Illig, President
If to Contractor: J. E. Dunn Construction Company
929 Holmes
Kansas City, MO 64106
Attn: Terrence P. Dunn
13.7. Delete Paragraph 13.7 in its entirety.
ARTICLE 14
-----------
14.1.2. Insert between the words "including" and "reasonable" in the
phrase", including reasonable overhead" in Subparagraph 14.1.2 and the
phrase ", if the Contract is terminated for the reasons set forth in Clauses
14.1.1.3, 14.1.1.4, or 14.1.1.5,".
14.2.1. Delete the word "persistently", and delete the word "or" following
the word "jurisdiction", in Clause 14.2.1.3 of Subparagraph 14.2.1. In
addition, insert "; or" following the words "Contract Documents" in Clause
14.2.1.4 and add the following new Clause 14.2.1.5:
14.2.1.5. becomes insolvent or admits in writing its inability
to pay its debts as they come due, makes an assignment for the benefit of
creditors, files or has filed against it a petition in bankruptcy or
proceedings for the appointment of a receiver or trustee for any substantial
part of its property, or commences any action under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law now or
hereafter in effect.
14.4. Termination by the Owner for convenience.
14.4.1. The Owner may, without cause, and upon seven (7) days notice, order
the Contractor in writing to terminate performance of the Contract. The
Contractor shall then have 60 days following the termination date to submit
to the Owner its claim for termination costs. Such costs to be paid by the
Owner within 30 days of presentation shall include those costs allowed by
Paragraph 14.1.2 hereof.
OWNER: CONTRACTOR:
CERNER PROPERTIES, INC.
By:/s/Clifford W. Illig By:/s/Terrence P. Dunn
Printed Name: Clifford W. Illig Printed Name: Terrence P. Dunn
Title: President Title: President
EXHIBIT 10(w)(iii)
AMENDMENT NO. 1
to the
AGREEMENT
BETWEEN OWNER and CONTRACTOR
MODIFICATION and AMENDMENT
made as of the 24th day of October in the year Nineteen Hundred and Ninety-
Four.
Between the Owner: Cerner Properties, Inc.
2800 Rockcreek Parkway, Suite 601
Kansas City, Missouri 64117
and the Contractor: J. E. Dunn Construction Company
929 Holmes
Kansas City, Missouri 64106
The Project: Cerner Associate Center
2800 Rockcreek Parkway
Kansas City, Missouri 64117
The Architect: Hollis & Miller Group
309 SW Market Street
Lee's Summit, Missouri 64063-2315
The Owner and the Contractor agree as set forth below:
Whereas, the Owner and Contractor have previously agreed to amend their
Agreement to establish a scope, costs, schedule and Contract Documents, and
Whereas, the Owner and Contractor now wish to so amend their Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree to Amendment of their Contract
dated September 1, 1994, as set forth below:
1. This Amendment No. 1 is for the Early Bid Package.
2. In accordance with Paragraphs 4.1 and 4.2, the Date of Commencement
shall be the date of this Amendment and the substantial completion date
shall be pursuant to a mutually agreed upon Contractor's project
schedule.
3. In accordance with Paragraphs 5.2 and 5.3 of the Agreement, the
Guaranteed Maximum Price for the Work of this Amendment shall be
established as: Three Million Three Hundred Thirty Two Thousand
One Hundred Thirty Nine Dollars ($3,332,139.00), which includes
deductive value engineering alternates 1 through 9 totaling
$224,600.00.
Pursuant to Paragraphs 5.1 and 5.3, the Contractor's Fee
applicable to the work of this amendment shall be established as:
Ninety Seven Thousand One Hundred Fifty Eight Dollars ($97,158.00)
4. Pursuant to Paragraphs 16.13 through 16.17 of the Agreement, the
Contract Documents describing the Scope of Work of this Amendment and
upon which the G.M.P. stated in Item #3 above is based, are as follows:
Paragraph Description Title Date
--------- ----------- ------- ------
16.1.3 Supplementary & Cerner Associate August 22, 1994
Other Conditions Center - Early (Ref. Exhibit A)
Bid Package
Project Manual
16.1.4 Specifications Cerner Associate August 22, 1994
Center - Early (Ref. Exhibit A)
Bid Package
Project Manual
16.1.5 Drawings Cerner Associate August 22, 1994
Center - Early (Ref. Exhibit A)
Bid Package
16.1.6 Addenda No. 1 September 8, 1994
No. 2 September 15, 1994
16.1.7 Other Documents Proposal & October 25, 1994
Clarifications
(9 pages)
This Modification and Amendment entered into as of the day and year first
written above.
OWNER: CONTRACTOR:
CERNER PROPERTIES, INC. J. E. DUNN CONSTRUCTION COMPANY
BY:/s/Clifford W. Illig BY:/s/Barrett Brady
Barrett Brady
Executive Vice President
<PAGE>
EXHIBIT A
----------
1. Contract between Owner and Contractor dated September 1, 1994.
2. General Conditions, AIA Document A201, as supplemented and included
in the Project Manual.
3. Drawings dated August 22, 1994, listed as follows:
C1.1 through C5.2
S100 through S302
A0.0, A0.2, A1.1, A2.1 through A2.5, A6.1 through A6.5, A7.1
through A7.6, A8.1, A11.1, A11.3
M1.1 through M1.4
P1.1 through P1.4
ME1.1, E1.1 through E1.4
SP-1 through SP-5
4. Project Manual dated August 22, 1994 titled Cerner Associate Center-
Early Bid Package Project Manual.
5. Addenda
-------
No. 1 dated September 8, 1994
No. 2 dated September 15, 1994
<PAGE>
October 25, 1994
Mr. Steve Lee
Cerner Corporation
2800 Rock Creek Parkway
Kansas City, Missouri 64117
Re: Cerner Associates Center
J. E. Dunn Project No. 821
Dear Steve:
Enclosed for your review is a copy of our Guaranteed Maximum Price proposal
for the Early Bid Package on the above referenced project. With assistance
of the Hollis & Miller Group, we have provided recommended value
engineering alternates which bring the cost of the work within the + 5% of
the median range estimate figure.
We have also had the opportunity to look forward and project the Final Bid
Package costs. From our cost projections it is apparent that the project
has evolved to a level higher than our schematic range estimate assumptions.
This is an understandable progression that occurs as the design and
expectations are further refined and detailed.
We do believe if the budget is of major concern the cost can be reduced by
re-designing various elements prior to issuance of the Final Bid Package.
We look forward to receiving your direction in this matter.
Sincerely,
J.E. DUNN CONSTRUCTION COMPANY
/s/Mark M. Morton
Mark M. Morton
MMM/jr
Enclosure
cc: Charlie Williams, Cerner
Leon Roberts, Hollis & Miller
Doug Cook, Hollis & Miller
File (2)
<PAGE>
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY OF BUDGET ANALYSIS
2. BUDGET ANALYSIS SUMMARY
3. VALUE ENGINEERING ALTERNATES - RECOMMENDED
4. VALUE ENGINEERING ALTERNATES - PROPOSED
5. EARLY BID PACKAGE ESTIMATE
6. PROJECT DESCRIPTION AND CLARIFICATION
<PAGE>
EXECUTIVE SUMMARY of BUDGET ANALYSIS
------------------------------------
Original Range Estimate dated July 20, 1994 $7,949,026
Less Accepted Value Engineering Alternates 1,165,700 CR
Revised Range Estimate Dated July 27, 1994 $6,783,326
EARLY BID PACKAGE
------------------
Early Bid Package dated August 22, 1994 $3,556,739
Less Recommended Value Engineering Alternates 224,600 CR
Revised Early Bid Package Cost $3,332,139
Less Early Bid Package Median Budget $3,180,177 CR
Variance from Early Bid Package Median Budget + $ 151,962
(Note: The Early Bid Package costs are within the
+ 5% range of the July 27, 1994 revised budget.)
Cost variance in the Early Package are due to:
1. Site Utilities
2. Machine Excavation
3. Precast Concrete
Explanation of variance in the Early Package:
1. Site Utilities - Additional 8" water line and associated appurtenances
required by the City of North Kansas City, Missouri.
2. Machine Excavation - Unforeseen soil condition requiring extensive
undercut of foundation system and recompaction of soil.
3. Precast - Premium due to market conditions and schedule requirements
of the project have caused precast costs to overrun from budget.
FINAL BID PACKAGE
------------------
Potential cost overruns on the Final Bid Package:
1. Architectural $ 345,000
2. Mechanical $ 245,000
3. Electrical $ 180,000
-----------
Potential Total Overrun $ 770,000
Explanation of cost overruns in the Final Package:
1. Refinement of the final design has introduced many new items, increased
quantity of budgeted items and inclusion of previously deleted items.
Examples of these items include: access flooring, wood flooring,
lockers, folding partitions, mesh partitions, daycare exterior
storage rooms, drywall light coves, projection screens in gym, locker
units, acoustical wall and ceiling panels, special coatings,
millwork, folding partitions, wire mesh partitions etc...
2. Refinement and changes in the anticipated use of various scopes within
the building have impacted the budget. Examples of the changes are:
changing the lobby/corridor spaces to reception and prefunction
areas, changing the gymnasium to a multipurpose/auditorium area and
upgrading the meeting room finishes to boardroom-like finishes.
3. A general refinement of the mechanical and electrical systems have also
impacted the budget. Examples include premium rooftop units,
sophisticated temperature controls, premium light fixtures, dimming
system and programmable lighting system etc...
<PAGE>
VALUE ENGINEERING ALTERNATES - RECOMMENDED
October 21, 1994
1. Utilize a precast face mix which significantly reduces the unit cost
of same from the specified $248/CY mix to within range of $126/CY to
$160/CY and incorporate a sandblast/waterwash finishes.
Approximate Deduct: $94,200 - $134,000
2. Substitute limestone aggregate for granite at the interior exposed
walls. Also, a light sandblast would need to be substituted for the
water wash in order to not reveal the limestone. The mix would
contain the same dye as the specified mix and with the light
sandblast only be slightly lighter.
Deduct: $ 8,200
3. Eliminate the curved precast wall panels at the daycare perimeter and
provide segmented precast wall panels.
Deduct: $ 3,200
4. Modify the column and beam feature on the west side of the building to
12" diameter columns and 14" thick single piece beams. The beams will
have a hand-finish on the beam side which faces the structure. It may
also be possible to hand finish the top of the beam in lieu of the
inside face.
Deduct: $12,500
5. Eliminate the 9" thick panel sections and change to 8" thick throughout.
This simplifies the formwork requirements from that currently
required. In addition 1" depressions may be added to various
locations, upon engineering review, at no cost, and 10" precast panel
thicknesses are unaffected.
Deduct: $27,200
6. Delete the 24 each - 12" round bollards added by Addendum No. 2.
Deduct: $25,600
7. Delete bowstring joists at canopies and replace with a self supporting
roof system which will be defined further in the final package. Note
this is not a net deduct as the final design requires completion.
Deduct: $17,500
8. Substitute Vulcraft or Wheeling acoustical deck with NRC of .90 for
specified Epic ER2A with NRC of .95 in the gymnasium area.
Deduct: $30,900
9. Eliminate face block at pool equipment rooms, the receiving dock
perimeter (rooms A113, A114 & A112), the gym storage (room B111),
pool storage areas (room C122, C123, C124 &C118).
Deduct: $ 5,300
TOTAL ADDITIONAL VALUE ENGINEERING ALTERNATES: $224,600
<PAGE>
Project Description and Clarification
Early Bid Package
October 21, 1994
1. This Proposal is based on the drawings and specifications prepared by
The Hollis & Miller Group dated August 22, 1994, including Civil
Drawings, C1.1 through C5.2; Structural Drawings, S100 through
S302; Architectural Drawings, A0.0, A0.2, A1.1, A2.1 through A2.5,
A6.1 through A6.5, A7.1 through A7.6, A8.1, A11.1, A11.3;
Mechanical Drawings M1.1 through M1.4; Plumbing Drawings P1.1
through P1.4; Electrical Drawings ME1.1, E1.1 through E1.4; Pool
Drawings SP-1 through SP-5. The above referenced Contract Documents
have also been modified by Addendum No. 1 dated September 8, 1994 and
Addendum No. 2 dated September 15, 1994, which are also included in the
GMP proposal.
2. The GMP Proposal excludes the following items:
a. Design Fees
b. Financing Costs
c. Special Inspection Costs
d. Performance Bonds
e. Builder's Risk Insurance
f. Furniture and Artwork
g. Security System
h. Telephone System
i. Material Testing Costs (soil, asphalt, concrete, etc.)
j. Drawing Reproduction
k. Hazardous Material Abatement
l. Landscaping and Irrigation System
m. Utility Company Charges for Extension of Services
n. Development Fees or Special Assessments
3. As it relates to the critical delivery items (namely precast and
structural steel), we are requesting the Design Team review,
approve and return shop drawings with in a one week time period.
Because of the critical nature of these items and their fabrication
time it is imperative the shop drawing review be expedited in order for
the project to be completed in accordance with the schedule.
4. This proposal includes an eight foot plywood fence along Rockcreek
Parkway and the entrance to the Union Pacific Building with wire panel
fence encompassing the remainder of the site. Painting of the site
fence is excluded.
5. We have included asphalt patching required and specifically indicated
on drawing C5.1. However, we are excluding the patching of the re
maining asphalt because of the lack of information on the existing
asphalt section and can not accurately anticipate the extent to which
the asphalt may be damaged during construction. This work will be
reviewed and estimated after the scope of work has been accurately
determined.
6. We have included in this proposal five handicap sign bases (one for
each space), six light pole bases per the Architect's direction and
six steel bollards per Addendum No. 2. Each of these items will be
verified in the next bid package in location, number required or size
specification.
7. We are excluding from this proposal the precast concrete grass pavers,
since this type of work is typically provided by a landscaping
contractor.
8. We have not included in this proposal the colored concrete specified
but not yet defined on the drawings.
9. In this proposal we have included asphalt mixes APWA Type 1 base and
APWA Type 3 surface mixes in lieu of the BM-2b and BM2 indicated on
the plans. This substitution is supported by the specifications and
has been reviewed with the Architect as acceptable.
10. We have estimated the excess topsoil can be stockpiled on-site and
specifically exclude offsite haul-off. The topsoil will be wasted
behind Building No. 5 per the Owner and Architect's direction. Other
material (non-topsoil) will be utilized in eroded areas along the
ravine on the east property line.
11. Quinn Concrete is the apparent low bidder for the precast concrete
materials on the project. They are, however, not members of PCI, but
do provide their own in-house testing and quality control which is
periodically certified by an independent consulting engineer. In
addition, Quinn Concrete is also a Kansas City, Missouri approved
precast supplier.
12. We have included in this proposal 40 sf of glass block at the Daycare
Lobby, turret feature.
13. In our proposal we have included rails at the stair opening at the
gymnasium storage mezzanine. This rail was not detailed in the
drawings, therefore we are providing a 1.5" square tube code
compliant rail. We also have provided the rail at the mezzanine in
the lobby area with a top tube rail and two channel intermediate
rails.
14. We have included in our proposal angle framing at the roof top units
with two framed openings per RTU per details 3/S102 and 4/S102.
EXHIBIT 10(x)
Standard Form of Agreement
Between Owner and Architect
--------------------------------------------------------------------------
AGREEMENT
made as of the Twenty-ninth (29th) day of April in the year of Nineteen
Hundred and Ninety-Four
BETWEEN the Owner:
(Name and address)
Cerner Properties, Inc.
2800 Rockcreek Parkway
Kansas City, Missouri 64117-2551
and the Architect:
(Name and address)
The Hollis & Miller Group, Inc.
5000 West 95th Street, Suite 100
Prairie Village, Kansas 66207-3363
For the following Project:
(Include detailed description of Project, location, address and scope.)
Associate Center and Related Campus Improvements
Rockcreek Office Park
2800 Rockcreek Parkway
Kansas City, Missouri 64117-2551
The Owner and Architect agree as set forth below.
<PAGE>
TERMS AND CONDITIONS OF AGREEMENT BETWEEN OWNER AND ARCHITECT
ARTICLE 1
---------
ARCHITECT'S RESPONSIBILITIES
1.1 ARCHITECT'S SERVICES
1.1.1 The Architect's services consist of those services performed by
the Architect, Architect's employees and Architect's consultants as
enumerated in Articles 2 and 3 of this Agreement and any other services
included in Article 12.
1.1.2 The Architect's services shall be performed as expeditiously as is
consistent with professional skill and care and the orderly progress of the
Work. Upon request of the owner, the Architect shall submit for the Owner's
approval a schedule for the performance of the Architect's services which
may be adjusted as the Project proceeds, and shall include allowances for
periods of time required for the Owner's review and for approval of
submissions by authorities having jurisdiction over the Project. Time
limits established by this schedule approved by the owner shall not, except
for reasonable cause, be exceeded by the Architect or Owner.
1.1.3 The services covered by this Agreement are subject to the time
limitations contained in Subparagraph 11.5.1.
ARTICLE 2
----------
SCOPE OF ARCHITECT'S BASIC SERVICES
2.1 DEFINITION
2.1.1 The Architect's Basic Services consist of those described in
Paragraphs 2.2 through 2.6 and any other services identified in Article 12
as part of Basic Services, and include normal structural, mechanical and
electrical engineering services.
2.2 SCHEMATIC DESIGN PHASE
2.2.1 The Architect shall review the program furnished by the Owner to
ascertain the requirements of the Project and shall arrive at a mutual
understanding of such requirements with the Owner.
2.2.2 The Architect shall provide a preliminary evaluation of the Owner's
program, schedule and construction budget requirements, each in terms of the
other, subject to the limitations set forth in Subparagraph 5.2.1.
2.2.3 The Architect shall review with the Owner alternative approaches to
design and construction of the Project.
2.2.4 Based on the mutually agreed-upon program, schedule and construction
budget requirements, the Architect shall prepare, for approval by the Owner,
Schematic Design Documents consisting of drawings and other documents
illustrating the scale and relationship of Project components.
2.2.5 The Architect shall submit to the Owner a preliminary estimate of
Construction Cost based on current area, blouse or other unit costs.
2.3 DESIGN DEVELOPMENT PHASE
2.3.1 Based on the approved Schematic Design Documents and any adjustments
authorized by the Owner in the program, schedule or construction budget, the
Architect shall prepare, for approval by the Owner, Design Development
Documents consisting of drawings and other documents to fix and describe the
size and character of the Project as to architectural, structural, mechanical
and electrical systems, materials and such other elements as may be
appropriate.
2.3.2 The Architect shall advise the Owner of any adjustments to the
preliminary estimate of Construction Cost.
2.4 CONSTRUCTION DOCUMENTS PHASE
2.4.1 Based on the approved Design Development Documents and any further
adjustments in the scope or quality of the Project of in the construction
budget authorized by the Owner, the Architect shall prepare, for approval by
the Owner, Construction Documents consisting of Drawings and Specifications
setting forth in detail the requirements for the construction of the Project.
2.4.2 The Architect shall assist the Owner in the preparation of the necessary
bidding information, bidding forms, the Conditions of the Contract, and the
form of Agreement between the Owner and Contractor.
2.4.3 The Architect shall advise the Owner of any adjustments to previous
preliminary estimates of Construction Cost indicated by changes in
requirements or general market conditions.
2.4.4 The Architect shall assist the Owner in connection with the Owner's
responsibility for filing documents required for the approval of governmental
authorities having jurisdiction over the Project.
2.5 BIDDING OR NEGOTIATION PHASE
2.5.1 The Architect, following the Owner's approval of the Construction
Documents and of the latest preliminary estimate of Construction Cost, shall
assist the Owner in obtaining bids or negotiated proposals and assist in
awarding and preparing contracts for construction.
2.6 CONSTRUCTION PHASE--ADMINISTRATION OF THE CONSTRUCTION CONTRACT
2.6.1 The Architect's responsibility to provide Basic Services for the
Construction Phase under this Agreement commences with the award of the
Contract for Construction and terminates at the earlier of the issuance to
the Owner of the final Certificate for Payment or 60 days after the date of
Substantial Completion of the Work.
2.6.2 The Architect shall provide administration of the Contract for
Construction as set forth below and in the edition of AIA Document A201,
General Conditions of the Contract for Construction, current as of the date
of this Agreement, unless otherwise provided in this Agreement.
2.6.3 Duties, responsibilities and limitations of authority of the Architect
shall not be restricted, modified or extended without written agreement of
the Owner and Architect with consent of the Contractor, which consent shall
not be unreasonably withheld.
2.6.4 The Architect shall be a representative of and shall advise and
consult with the Owner (1) during construction until final payment to the
Contractor is due, and (2) as an Additional Service at the Owner's direction
from time to time during the correction period described in the Contract for
Construction. The Architect shall have authority to act on behalf of the
Owner only to the extent provided in this Agreement unless otherwise
modified by written instrument.
2.6.5 The Architect shall visit the site at intervals appropriate to the
stage of construction or as otherwise agreed by the Owner and Architect in
writing to become generally familiar with the progress and quality of the Work
completed and to determine in general if the Work is being performed in a
manner indicating that the Work when completed will be in accordance with the
Contract Documents. However, the Architect shall not be required to make
exhaustive or continuous on-site inspections to check the quality or quantity
of the Work. On the basis of on-site observations as an architect, the
Architect shall keep the Owner informed of the progress and quality of the
Work, and shall endeavor to guard the Owner against defects and deficiencies
in the Work. (More extensive site representation may be agreed to as an
Additional Service, as described in Paragraph 3.2.)
2.6.6 The Architect shall not have control over or charge of and shall not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the
Work, since these are solely the Contractor's responsibility under the
Contract for Construction. The Architect shall not be responsible for the
Contractor's schedules or failure to carry out the Work in accordance with
the Contract Documents. The Architect shall not have control over or charge
of acts or omissions of the Contractor, Subcontractors, or their agents or
employees, or of any other persons performing portions of the Work.
2.6.7 The Architect shall at all times have access to the Work wherever it
is in preparation or progress.
2.6.8 Except as may otherwise be provided in the Contract Documents or when
direct communications have been specially authorized, the Owner and
Contractor shall communicate through the Architect. Communications by and
with the Architect's consultants shall be through the Architect.
2.6.9 Based on the Architect's observations and evaluations of the
Contractor's Applications for Payment, the Architect shall review and certify
the amounts due the Contractor.
2.6.10 The Architect's certification for payment shall constitute a
representation to the Owner, based on the Architect's observations at the
site as provided in Subparagraph 2.6.5 and on the data comprising the
Contractor's Application for Payment, that the Work has progressed to the
point indicated and that, to the best of the Architect's knowledge,
information and belief, quality of the Work is in accordance with the
Contract Documents. The foregoing representations are subject to an
evaluation of the Work for conformance with the Contract Documents upon
Substantial Completion, to results of subsequent tests and inspections, to
minor deviations from the Contract Documents correctable prior to completion
and to specific qualifications expressed by the Architect. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified. However, the
issuance of a Certificate for Payment shall not be a representation that the
Architect has (1) made exhaustive or continuous on-site inspections to check
the quality or quantity of the Work, (2) reviewed construction means,
methods, techniques, sequences or procedures, (3) reviewed copies of
requisitions received from Subcontractors and material suppliers and other
data requested by the Owner to substantiate the Contractor's right to
payment or (4) ascertained how or for what purpose the Contractor has used
money previously paid on account of the Contract Sum.
2.6.11 The Architect shall have authority to reject Work which does not
conform to the Contract Documents. Whenever the Architect considers it
necessary or advisable for implementation of the intent of the Contract
Documents, the Architect will have authority to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such Work is fabricated, installed or
completed. However, neither this authority of the Architect nor a decision
made in good faith either to exercise or not to exercise such authority
shall give rise
to a duty or responsibility of the Architect to the Contractor,
Subcontractors, material and equipment suppliers, their agents or employees
or other persons performing portions of the Work.
2.6.12 The Architect shall review and approve or take other appropriate
action upon all Contractor's submittals such as Shop Drawings, Product Data
and Samples, but only for the limited purpose of checking for conformance
with information given and the design concept expressed in the Contract
Documents. The Architect's action shall be taken with such reasonable
promptness as to cause no delay in the Work or in the construction of the
Owner or of separate contractors, while allowing sufficient time in the
Architect's professional judgment to permit adequate review. Review of such
submittals is not conducted for the purpose of determining the accuracy and
completeness of other details such as dimensions and quantities or for
substantiating instructions for installation or performance of equipment or
systems designed by the Contractor, all of which remain the responsibility of
the Contractor, to the extent required by the Contract Documents. The
Architect's review shall not constitute approval of safety precautions or,
unless otherwise specifically stated by the Architect, of construction means,
methods, techniques, sequences or procedures. The Architect's approval of a
specific item shall not indicate approval of an assembly of which the item is
a component. When professional certification of performance characteristics
of materials, systems or equipment is required by the Contract Documents,
the Architect shall be entitled to rely upon such certification to
establish that the materials, systems or equipment will meet the performance
criteria required by the Contract Documents.
2.6.13 The Architect shall prepare Change Orders and Construction Change
Directives, with supporting documentation and data if deemed necessary by
the Architect as provided in Subparagraphs 3.1.1 and 3.3.3, for the Owner's
approval and execution in accordance with the Contract Documents, and may
authorize minor changes in the Work not involving an adjustment in the
Contract Sum or an extension of the Contract Time which are not
inconsistent with the intent of the Contract Documents and or the intended
functional use of the Facilities.
2.6.14 The Architect shall conduct inspections to determine the date or
dates of Substantial Completion and the date of final completion, shall
receive and forward to the Owner for the Owner's review and records written
warranties and related documents required by the Contract Documents and
assembled by the Contractor, and shall issue a final Certificate for payment
upon compliance with the requirements of the Contract Documents.
2.6.15 The Architect shall interpret and decide matters concerning
performance of the Owner and Contractor under the requirements of the
Contract Documents on written request of either the Owner or Contractor.
The Architect's response to such requests shall be made with reasonable
promptness and within any time limits agreed upon.
2.6.16 Interpretations and decisions of the Architect shall be consistent
with the intent of and reasonably inferable from the Contract Documents and
shall be in writing or in the form of drawings. When making such
interpretations and initial decisions, the Architect shall endeavor to
secure faithful performance by both Owner and Contractor, shall not show
partiality to either, and shall not be liable for results of interpretations
or decisions so rendered in good faith.
2.6.17 The Architect's decisions on matters relating to aesthetic effect
shall be final if consistent with the intent expressed in the Contract
Documents.
2.6.18 The Architect shall render written decisions within a reasonable time
on all claims, disputes or other matters in question between the Owner and
Contractor relating to the execution or progress of the Work as provided in
the Contract Documents.
ARTICLE 3
---------
ADDITIONAL SERVICES
3.1 GENERAL
3.1.1 The services described in this Article 3 are not included in Basic
Services unless so identified in Article 12, and they shall be paid for by
the Owner as provided in this Agreement, in addition to the compensation for
Basic Services. The services described under Paragraphs 3.2 and 3.4 shall
only be provided if authorized or confirmed in writing by the Owner. If
services described under Contingent Additional Services in Paragraph 3.3 are
required due to circumstances beyond the Architect's control, the Architect
shall notify the Owner prior to commencing such services. If the Owner deems
that such services described under Paragraph 3.3 are not required, the
Owner shall give prompt written notice to the Architect. If the Owner
indicates in writing that all or part of such Contingent Additional
Services are not required, the Architect shall have no obligation to
provide those services.
3.2 PROJECT REPRESENTATION BEYOND BASIC SERVICES
3.2.1 If more extensive representation at the site than is described in
Subparagraph 2.6.5 is required, the Architect shall provide one or more
Project Representatives to assist in carrying out such additional on-site
responsibilities.
3.2.2 Project Representatives shall be selected, employed and directed by
the Architect, and the Architect shall be compensated therefor as agreed by
the Owner and Architect. The duties, responsibilities and limitations of
authority of Project Representatives shall be as described in the edition
of AIA Document B352 current as of the date of this Agreement, unless
otherwise agreed.
3.2.3 Through the observations by such Project Representatives, the
Architect shall endeavor to provide further protection for the Owner
against defects and deficiencies in the Work, but the furnishing of such
project representation shall not modify the rights, responsibilities or
obligations of the Architect as described elsewhere in this Agreement.
3.3 CONTINGENT ADDITIONAL SERVICES
3.3.1 Making revisions in Drawings, Specifications or other documents when
such revisions are:
.1 inconsistent with approvals or instructions previously given by the
owner, including revisions made necessary by adjustments in the Owner's
program or Project budget;
.2 required by the enactment or revision of codes, laws or regulations
subsequent to the preparation of such documents; or
.3 due to changes required as a result of the Owner's failure to render
decisions in a timely manner.
3.3.2 Providing services required because of significant changes in the
Project including, but not limited to, size, quality, complexity, the
Owner's schedule, or the method of bidding or negotiating and contracting
for construction, except for services required under Subparagraph 5.2.5.
3.3.3 Preparing Drawings, Specifications and other documentation and
supporting data, evaluating Contractor's proposals, and providing other
services in connection with Change Orders and Construction Change
Directives.
3.3.4 Providing services in connection with evaluating substitutions
proposed by the Contractor and making subsequent revisions to Drawings,
Specifications and other documentation resulting therefrom.
3.3.5 Providing consultation concerning replacement of Work damaged by fire
or other cause during construction, and furnishing services required in
connection with the replacement of such Work.
3.3.6 Providing services made necessary by the default of the Contractor,
by major defects or deficiencies in the Work of the Contractor, or by
failure of performance of either the Owner or Contractor under the Contract
for Construction.
3.3.7 Providing services in evaluating an extensive number of claims
submitted by the Contractor or others in connection with the Work.
3.3.8 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Architect is party thereto.
3.3.9 Preparing documents for alternate, separate or sequential bids or
providing services in connection with bidding, negotiation or construction
prior to the completion of the Construction Documents Phase.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.1 Providing analyses of the Owner's needs and programming the
requirements of the Project.
3.4.2 Providing financial feasibility or other special studies.
3.4.3 Providing planning surveys, site evaluations or comparative studies of
prospective sites.
3.4.4 Providing special surveys, environmental studies and submissions
required for approvals of governmental authorities or others having
jurisdiction over the Project.
3.4.5 Providing services relative to future facilities, systems and
equipment.
3.4.6 Providing services to investigate existing conditions or facilities
or to make measured drawings thereof.
3.4.7 Providing services to verify the accuracy of drawings or other
information furnished by the Owner.
3.4.8 Providing coordination of construction performed by separate
contractors or by the Owner's own forces and coordination of services
required in connection with construction performed and equipment supplied by
the Owner.
3.4.9 Providing services in connection with the work of a construction
manager or separate consultants retained by the Owner.
3.4.10 Providing detailed estimates of Construction Cost.
3.4.11 Providing detailed quantity surveys or inventories of material,
equipment and labor.
3.4.12 Providing analyses of owning and operating costs.
3.4.13 Providing interior design and other similar services required for or
in connection with the selection, procurement or installation of furniture,
furnishings and related equipment. See Article 12.2.
3.4.14 Providing services for planning tenant or rental spaces.
3.4.15 Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.
3.4.16 Preparing a set of reproducible record drawings showing significant
changes in the Work made during construction based on marked-up prints,
drawings and other data furnished by the Contractor to the Architect.
3.4.17 Providing assistance in the utilization of equipment or systems such
as testing, adjusting and balancing, preparation of operation and
maintenance manuals, training personnel for operation and maintenance, and
consultation during operation.
3.4.18 Providing services after issuance to the Owner of the final
Certificate for Payment, or in the absence of a final Certificate for
Payment, more than 60 days after the date of Substantial Completion of
the Work. See Article 12.3.
3.4.19 Providing services of consultants for other than architectural,
structural, mechanical and electrical engineering portions of the
Project provided as a part of Basic Services.
3.4.20 Providing any other services not otherwise included in this
Agreement or not customarily furnished in accordance with generally
accepted architectural practice.
ARTICLE 4
----------
OWNER'S RESPONSIBILITIES
4.1 The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems and
site requirements.
4.2 The Owner shall establish and update an overall budget for the Project,
including the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs.
4.3 If requested by the Architect, the Owner shall furnish evidence that
financial arrangements have been made to fulfill the Owner's obligations
under this Agreement.
4.4 The Owner shall designate a representative authorized to act on the
Owner's behalf with respect to the Project. The Owner or such authorized
representative shall render decisions in a timely manner pertaining to
documents submitted by the Architect in order to avoid unreasonable delay
in the orderly and sequential progress of the Architect's services.
4.5 The Owner shall furnish surveys describing physical characteristics,
legal limitations and utility locations for the site of the Project, and
a written legal description of the site. The surveys and legal
information shall include, as applicable, grades and lines of streets,
alleys, pavements and adjoining property and structures; adjacent
drainage, rights-of-way, restrictions, easements, encroachments, zoning,
deed restrictions, boundaries and contours of the site; locations,
dimensions and necessary data pertaining to existing buildings, other
improvements and trees; and information concerning available utility services
and lines, both public and private, above and below grade, including inverts
and depths. All the information on the survey shall be referenced to a project
benchmark.
4.6 The Owner shall furnish the services of geotechnical engineers when
such services are requested by the Architect. Such services may include
but are not limited to test borings, test pits, determinations of soil
bearing values, percolation tests, evaluations of hazardous materials,
ground corrosion and resistivity tests, including necessary operations for
anticipating subsoil conditions, with reports and appropriate professional
recommendations.
4.6.1 The Owner shall furnish the services of other consultants when such
services are reasonable required by the scope of the Project and are
requested by the Architect.
4.7 The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the
Contract Documents.
4.7.1 See Article 12.4
4.8 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including
auditing services the Owner may require to verify the Contractor's
Applications for Payment or to ascertain how or for what purposes the
Contractor has used the money paid by or on behalf of the Owner.
4.9 The services, information, surveys and reports required by Paragraphs
4.5 through 4.8 shall be furnished at the Owner's expense, and the
Architect shall be entitled to rely upon the accuracy and completeness
thereof.
4.10 Prompt written notice shall be given by the Owner to the Architect
if the Owner becomes aware of any fault or defect in the Project or
nonconformance with the Contract Documents.
4.11 The proposed language of certificates or certifications requested
of the Architect or Architect's consultants shall be submitted to the
Architect for review and approval at least 14 days prior to execution.
The Owner shall not request certifications that would require knowledge
or services beyond the scope of the Agreement.
ARTICLE 5
---------
CONTRUCTION COST
5.1 DEFINITION
5.1.1 The Construction Cost shall be the total cost or estimated cost to
the owner of all elements of the Project designed or specified by the
Architect.
5.1.2 The Construction Cost shall include the cost at current market
rates of labor and materials furnished by the Owner and equipment
designed, specified, selected or specially provided for by the Architect,
plus a reasonable allowance for the Contractor's overhead and profit. In
addition, a reasonable allowance for contingencies shall be included for
market conditions at the time of bidding and for changes in the Work
during construction.
5.1.3 Construction Cost does not include the compensation of the
Architect and Architect's consultants, the costs of the land, rights-of-way,
financing or other costs which are the responsibility of the Owner as provided
in Article 4.
5.2 RESPONSIBILITY FOR CONSTRUCTION COST
5.2.1 Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost, if any,
prepared by the Architect, represent the Architect's best judgment as a
design professional familiar with the construction industry. It is
recognized, however, that neither the Architect nor the Owner has control
over the cost of labor, materials or equipment, over the Contractor's
methods of determining bid prices, or over competitive bidding, market or
negotiating conditions. Accordingly, the Architect cannot and does not
warrant or represent that bids or negotiated prices will not vary from the
Owner's Project budget or from any estimate of Construction Cost or
evaluation prepared or agreed to by the Architect.
5.2.2 No fixed limit of Construction Cost shall be established as a
condition of this Agreement by the furnishing, proposal or establishment of
a Project budget, unless such fixed limit has been agreed upon in writing
and signed by the parties hereto. If such a fixed limit has been
established, the Architect shall be permitted to include contingencies for
design, bidding and price escalation, to determine what materials,
equipment, component systems and types of construction are to be included in
the Contract Documents, to make reasonable adjustments in the scope of the
Project and to include in the Contract Documents alternate bids to adjust
the Construction Cost to the fixed limit. Fixed limits, if any, shall be
increased in the amount of an increase in the Contract Sum occurring after
execution of the Contract for Construction.
5.2.3 If the Bidding or Negotiation Phase has not commenced within 90 days
after the Architect submits the Construction Documents to the Owner, any
Project budget or fixed limit of Construction Cost shall be adjusted to
reflect changes in the general level of prices in the construction industry
between the date of submission of the Construction Documents to the
Owner and the date on which proposals are sought.
5.2.4 If a fixed limit of Construction Cost (adjusted as provided in
Subparagraph 5.2.3) is exceeded by the lowest bona fide bid or
negotiated proposal, the Owner shall:
.1 give written approval of an increase in such fixed limit;
.2 authorize rebidding or renegotiating of the Project within a reasonable
time;
.3 if the Project is abandoned, terminate in accordance with Paragraph 8.3;
or
.4 cooperate in revising the Project scope and quality as required to reduce
the Construction Cost.
5.2.5 If the Owner chooses to proceed under Clause 5.2.4.4, the Architect,
without additional charge, shall modify the Contract Documents as
necessary to comply with the fixed limit, if established as a condition
of this Agreement. The modification of Contract Documents shall be the
limit of the Architect's responsibility arising out of the establishment
of a fixed limit. The Architect shall be entitled to compensation in
accordance with this Agreement for all services performed whether or not
the Construction Phase is commence.
5.2.6 See Article 12.5.
ARTICLE 6
---------
USE OF ARCHITECT'S DRAWINGS SPECIFICATIONS AND OTHER DOCUMENTS
6.1 The Drawings, Specifications and other documents prepared by the
Architect for this Project are instruments of the Architect's service for
use solely with respect to this Project and, unless otherwise provided, the
Architect shall be deemed the author of these documents and shall retain all
common law, statutory and other reserved rights, including the copyright.
The Owner shall be permitted to retain copies, including reproducible
copies, of the Architect's Drawings, Specifications and other documents
shall not be used by the Owner or others on other projects, for additions to
this Project
or for completion of this Project by others, unless the Architect is
adjudged to be in default under this Agreement, except by agreement in
writing and with appropriate compensation to the Architect.
6.2 Submission or distribution of documents to meet official regulatory
requirements or for similar purposes in connection with the Project is not
to be construed as publication in derogation of the Architect's reserved
rights.
ARTICLE 7
---------
ARBITRATION
7.1 See Article 12.6
7.2
7.3
7.4
ARTICLE 8
---------
TERMINATION, SUSPENSION OR ABANDONMENT
8.1 This Agreement may be terminated by either party upon not less than
seven days' written notice should the other party fail substantially to
perform in accordance with the terms of this Agreement through no fault
of the party initiating the termination.
8.2 If the Project is suspended by the Owner for more than 30 consecutive
days, the Architect shall be compensated for services performed prior to
notice of such suspension. When the Project is resumed, the Architect's
compensation shall be equitably adjusted to provide for expenses incurred
in the interruption and resumption of the Architect's services.
However, such equitable adjustment to the Architect's compensation shall
be paid only in those instances in which the Owner has not extended the
period of time for the Architect's performance of services under this
Agreement equal to the time by which the Project was suspended.
8.3 This Agreement may be terminated by the Owner upon not less than seven
days' written notice to the architect in the event that the Project is
permanently abandoned.
8.4 Failure of the Owner to make payments to the Architect in accordance
with this Agreement shall be considered substantial nonperformance and
cause for termination.
8.5 If the Owner fails to make payment when due the Architect for services
and expenses, the Architect may, upon seven days' written notice to the
Owner, suspend performance of services under this Agreement. Unless
payment in full is received by the Architect within seven days of the date
of the notice, the suspension shall take effect without further notice. In
the event of a suspension of services, the Architect shall have no
liability to the Owner for delay or damage caused the Owner because of
such suspension of services.
8.6 In the event of termination not the fault of the Architect, the
Architect shall be compensated for services performed prior to termination,
together with Reimbursable Expenses then due.
8.7
ARTICLE 9
----------
MISCELLANEOUS PROVISIONS
9.1
9.2 Terms in this Agreement shall have the same meaning as those in AIA
Document A201, General Conditions of the Contract for Construction, current
as of the date of this Agreement.
9.3 Causes of action between the parties to this Agreement pertaining to
acts or failures to act shall be deemed to have accrued and the applicable
statutes of limitations shall commence to run not later than either the
date of Substantial Completion for acts or failures to act occurring prior
to Substantial Completion, or the date of issuance of the final Certificate
for Payment for acts or failures to act occurring after Substantial
Completion.
9.4 The Owner and Architect waive all rights against each other and against
the contractors, consultants, agents and employees of the other for
damages, but only to the extent covered by property insurance during
construction, except such rights as they may have to the proceeds of such
insurance as set forth in the edition of AIA Document A201, General
Conditions of the Contract for Construction, current as of the date of this
Agreement. The Owner and Architect each shall require similar waivers from
their contractors, consultants and agents.
9.5 The Owner and Architect, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this
Agreement and to the partners, successors, assigns and legal representatives
of such other party with respect to all covenants of this Agreement.
Neither Owner nor Architect shall assign this Agreement without the
written consent of the other.
9.6 This Agreement represents the entire and integrated agreement between
the Owner and Architect and supersedes all prior negotiations,
representations or agreements, either written or oral. This Agreement may
be amended only by written instrument signed by both Owner and Architect.
9.7 Nothing contained in this Agreement shall create a contractual
relationship with or a cause of action in favor of a third party against
either the Owner or Architect.
9.8 Unless otherwise provided in this Agreement, the Architect and Architect's
consultants shall have no responsibility for the discovery, presence,
handling, removal or disposal of or exposure of persons to hazardous materials
in any form at the Project site, including but not limited to asbestos,
asbestos products, polychlorinated biphenyl (PCB) or other toxic substances.
9.9 The Architect shall have the right to include representations of the
design of the Project, including photographs of the exterior and interior,
among the Architect's promotional and professional materials. The Architect's
materials shall not include the Owner's confidential or proprietary
information if the Owner has previously advise the Architect in writing of
the specific information considered by the Owner to be confidential or
proprietary. The Owner shall provide professional credit for the
Architect on the construction sign and in the promotional materials for
the Project.
ARTICLE 10
-----------
PAYMENTS TO THE ARCHITECT
10.1 DIRECT PERSONNEL EXPENSE
10.1.1 Direct Personnel Expense is defined as the direct salaries of the
Architect's personnel engaged on the Project.
10.2 REIMBURSABLE EXPENSES
10.2.1 Reimbursable Expenses are in addition to compensation for Basic
and Additional Services and include expenses incurred by the Architect
and Architect's employees and consultants in the interest of the
Project, as identified in the following Clauses.
10.2.1.1 Expense of transportation in connection with authorized out-of-
town travel; long-distance communications; and fees paid for securing
approval of authorities having jurisdiction over the Project.
10.2.1.2 Expense of reproductions, postage and handling of Drawings,
Specifications and other documents.
10.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.
10.2.1.4 Expense of renderings, models and mock-ups requested by the
Owner.
10.2.1.5 Expense of additional insurance coverage or limits, including
professional liability insurance, requested by the Architect and
Architect's consultants.
10.2.1.6
10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
10.3.1 An initial payment as set forth in Paragraph 11.1 is the minimum
payment under this Agreement.
10.3.2 Subsequent payments for Basic Services shall be made monthly and,
where applicable, shall be in proportion to services performed within each
phase of service, on the basis set forth in Subparagraph 11.2.2.
10.3.3 If and to the extent that the time initially established in
Subparagraph 11.5.1 of this Agreement is exceeded or extended through no
fault of the Architect, compensation for any services rendered during the
additional period of time shall be computed in the manner set forth in
Subparagraph 11.3.2.
10.3.4 When compensation is based on a percentage of Construction Cost and
any portions of the Project are deleted or otherwise not constructed,
compensation for those portions of the Project shall be payable to the
extent services are performed on those portions, in accordance with the
schedule set forth in Subparagraph 11.2.2, based on (1) the lowest bona
fide bid or negotiated proposal, or (2) if no such bid or proposal is
received, the most recent preliminary estimate of Construction Cost or
detailed estimate of Construction Cost for such portions of the Project.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES
10.4.1 Payments on account of the Architect's Additional Services and for
Reimbursable Expenses shall be made monthly upon presentation of the
Architect's statement of services rendered or expenses incurred.
10.5 PAYMENTS WITHHELD
10.5.1 No deductions shall be made from the Architect's compensation on
account of penalty, liquidated damages or other sums withheld from
payments to contractors, or on account of the cost of changes in the Work
other than those for which the Architect has been found to be liable.
10.6 ARCHITECT'S ACCOUNTING RECORDS
10.6.1 Records of Reimbursable Expenses and expenses pertaining to
Additional Services and services performed on the basis of a multiple of
Direct Personnel Expense shall be available to the Owner or the Owner's
authorized representative at mutually convenient times.
ARTICLE 11
----------
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 AN INITIAL PAYMENT of N/A Dollars ($-o-) shall be made upon execution
of this Agreement and credited to the Owner's account at final payment.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2, and any other
services included in Article 12 as part of Basic Services, Basic
Compensation shall be computed as follows:
(Insert basis of compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular method of
compensation apply, if necessary)
Fixed Fee of 6-3/4% of approved Project budget.
11.2.2 Where compensation is based on a stipulated sum or percentage of
Construction Cost, progress payments for Basic Services in each phase shall
total the following percentages of the total Basic Compensation payable:
(Insert additional phases as appropriate.)
Schematic Design Phase: five percent ( 5%)
Design Development Phase: thirty percent ( 30%)
Construction Documents Phase: forty percent ( 40%)
Bidding or Negotiation Phase : five percent ( 5%)
Construction Phase: twenty percent ( 20%)
----------------------------------------------------------------------------
Total Basic Compensation one hundred percent (100%)
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1 FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as described in
Paragraph 3.2, compensation shall be computed as follows:
Hourly at Direct Personnel Expense times a multiplier of 3.0 of personnel
performing work on the Project.
11.3.2 FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described in Articles
3 and 12, other than (1) Additional Project Representation, as described
in paragraph 3.2, and (2) services included in Article 12 as part of Basic
Services, but excluding services of consultants, compensation shall be
computed as follows:
(Insert basis of compensation, including rates and/or multiples of Direct
Personnel Expense for Principals and employees, and identify Principals
and classify employees, if required. Identify specific services to which
particular methods of compensation apply, if necessary.)
Hourly at Direct Personnel Expense times a multiplier of 3.0 of
personnel performing work on the Project.
11.3.3 FOR ADDITIONAL SERVICES OF CONSULTANTS, including additional
structural, mechanical and electrical engineering services and those
provided under Subparagraph 3.4.19 or identified in Article 12 as part of
Additional Services, a multiple of one and one tenth (1.1) times the amounts
billed to the Architect for such services.
(Identify specific types of consultants in Article 12, if required.)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 10.2, and any
other items included in Article 12 as Reimbursable Expenses, a multiple of
one (1.0) times the expenses incurred by the Architect, the Architect's
employees and consultants in the interest of the Project if the Owner
compensates the Architect for same within fifteen (15) days of the date of
the Owner's receipt of the Architect's invoice therefor; otherwise, the
Owner will compensate the Architect by a multiple of one and one-tenth (1.1)
times such expenses.
11.5 ADDITIONAL PROVISIONS
11.5.1 IF THE BASIC SERVICES covered by this Agreement have not been
completed within thirty-six (36) months of the date hereof, through no
fault of the Architect, extension of the Architect's services beyond that
time shall be compensated as provided in Subparagraphs 10.3.3 and 11.3.2.
11.5.2 Payments are due and payable thirty (30) days from the date of the
Architect's invoice. Amounts unpaid thirty-one (31) days after the
invoice date shall bear interest at the prime rate established by United
Missouri Bank; provided, however, that for any items of the Architect's services
that are in dispute, the Owner shall notify the Architect in writing of
such dispute within thirty (30) days from the date of the Architect's invoice, -
and the Owner may hold the sums attributable to such disputed services
until such time as the dispute has been resolved.
(usury laws and requirements under the Federal Truth in Lending Act,
similar state and local consumer credit laws and other regulations at the
Owner's and Architect's principal places of business, the location of the
Project and elsewhere may affect the validity of this provision. Specific
legal advice should be obtained with respect to deletions or modifications,
and also regarding requirements such as written disclosures or waivers.)
11.5.3 The rates and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Architect.
ARTICLE 12
----------
OTHER CONDITIONS OR SERVICES
EXHIBIT "A" to Standard Form of Agreement Between Owner and Architect,
dated April 29, 1994, attached.
This Agreement entered into as of the day and year first written above.
OWNER: Cerner Properties, Inc. ARCHITECT: The Hollis & Miller Group, Inc.
By:/s/Clifford W. Illig By:/s/Quentin L. Roberts, Jr.
(signature) (signature)
NAME: Clifford W. Illig NAME: Quentin L. Roberts, Jr. AIA
TITLE: President TITLE: Executive Vice President
(Printed name and title) (Printed name and title)
<PAGE>
EXHIBIT "A"
----------
To Standard Form of Agreement Between Owner and Architect
AIA Document B141, dated April 29, 1994
12.1 The Architect shall advise the Owner, in writing, of any potential
changes to Contract Documents or the Work prior to the initiation of the
change. The Architect shall work with the Owner and Contractor in
preparing any Change orders associated with any changes in the Contract
Documents or the Work.
12.2 Services for Interior Design and specification of loose furniture
per Paragraph 3.4.13 are not part of the basic services. If requested by the
Owner, a fee proposal will be provided for services to include inventory
of existing furniture, selection, bidding, and checking installation of
new furniture. Compensation will be based on the designed scope of
furniture and equipment and shall be negotiated by the parties.
12.3 Notwithstanding Subpart (2) of Subparagraph 2.6.4, as part of
Basic Services, Architect shall conduct an inspection of the building 11 months
after Substantial Completion for the purpose of notifying Contractor of
any warranty problems observed, or noted by Owner, before expiration of
the one-year warranty. (Ref. 3.4.18)
12.4 The Owner shall furnish an Environmental Assessment of the site
when such tests are reasonable required by the Scope of the Project and are
requested by the Architect. (Ref. 4.7.1-Added)
12.5 When Change Orders during construction result solely from
negligent acts or omissions of the Architect or Engineer, deviating from
generally accepted professional standards and practices, the Owner shall pay
the Contractor and Owner shall be entitled to a credit for said changed work
against fees owed Architect by Owner in an amount equal to the difference
in cost between the actual cost of the changed work and the estimated
cost of the changed work had it been included as a part of the work at the
start of the project. Further, the Architect shall make no charge to the
Owner for any additional architectural services resulting solely from such
negligent acts or omissions of the Architect or Engineer. (Ref.5.2.6-
Added)
12.6 Unresolved claims, disputes and other matters in question between
the parties to this Agreement arising out of or relating to this Agreement
or breach thereof, shall be subject to lawful recourse of the parties
pursuant to law in the State of Missouri.
12.7 Indemnification: Architect does hereby agree to indemnify and hold
the Owner harmless from and against any and all liabilities, damages, or
losses arising out of damage to property or physical injury to persons to
the extent caused by or through the negligent acts or omissions of the
Architect.
12.8 During the performance of the Services under this Agreement, the
Architect shall maintain the following insurance:
12.8.1 General liability Insurance with bodily injury and property damage
coverage of $1,000,000 combined single limit, and $1,000,000 aggregate.
12.8.2 Automobile Liability Insurance with bodily injury and property
damage coverage of $1,000,000 combined single limit each accident.
12.8.3 Workers' Compensation Insurance in accordance with statutory
requirements and Employer's Liability Insurance with limits of not less
than $100,000 for each occurrence.
12.8.4 Professional Liability Insurance with limits of not less than
$1,000,000 annual aggregate.
12.9 The Architect shall, upon request, furnish owner with certificate(s)
of insurance which shall be updated from time to time to evidence that the
foregoing coverages and limitations of liability remain in full force and
effect during the term of this Agreement, and which shall include a
provision that such insurance shall not be canceled without at least thirty
(30) day's written notice to Owner. All Project Contractors shall be
required to include Owner and Architect as additional insureds on their
General Liability Insurance policies.
12.10 Should hazardous materials be present or discovered during
construction at the site of the Project, the Owner shall retain and be
responsible for the cost of a special consultant to design and specify
removal of such materials. Architectural services to coordinate with this
special consultant will be considered additional services and be billed as
identified in paragraph 11.3.2.
12.11 Storm water permit services are not included in Basic Services
under Paragraph 2.4.4.
12.12 Services for Acoustical Design, Sound System Design, Theatrical
Lighting, and Food service Design, when reasonably required for the
project and requested by the Architect, shall be additional services per
Paragraph 3.4.19. The Architect shall select and retain a Consultant as
required, subject to written approval by the Owner for these services.
Services shall be billed as identified in Paragraph 11.3.3.
12.13 The Architect shall exercise reasonable care to see that its
services comply with applicable federal, state. and municipal laws,
regulations, and ordinances governing the services covered by this
Agreement, as published and in effect on the date of this Agreement.
12.14 The standard of care for all professional architectural and related
services performed or furnished by the Architect under this Agreement will
be the care and skill ordinarily used by members of the Architect's profession
practicing under similar conditions at the same time and in the same locality.
The Architect makes no warranties, express or implied, under this Agreement or
otherwise, in connection with the Architect's services.
12.15 The Architect will use good-faith efforts to cooperate and coordinate
the Architect's services with those of the Contractor during the pre
construction period.
12.16 The Architect shall, as part of the Basic Services, coordinate the
activities of the Contractor and various consultants (e.g., landscape
architects, security experts, etc.) with respect to the Project.
12.17 With reference to Paragraph 6.1, the Architect agrees:
A. Not to use the Drawings, Specifications and other documents ("Plans")
prepared by the Architect for this Project with respect to any other
persons or for any other projects, and
B. To place copyright notices on all copies of the Plans sent to
subcontractors or otherwise used in this Project, and
C. To require the subcontractors to agree to use the Plans only for this
Project.
D. To place no limits on owner's use of the Plans, except that Owner shall
indemnify and hold the Architect harmless from and against claims
arising out of use of the Plans in a way not agreed by the
Architect and owner, where such use causes harm to Cerner, Cerner
subsidiaries or parent, or any third person, and further except
that the last sentence of Paragraph 6.1 shall hereby be deemed
deleted.
12.18 The Architect shall furnish insurance in the amount no less than
$1,000,000 to fund the indemnification set forth at Paragraph 12.7
above. To the extent permitted by the insurers and if requested in
writing by the Owner following receipt of a price quote, the Owner shall
be shown as an additional insured on all policies, including the
Professional Liability Policy.
OWNER: Cerner Properties, Inc. ARCHITECT: The Hollis & Miller Group, Inc.
By:/s/Clifford W. Illig By:/s/Quentin L. Roberts, Jr.
NAME: Clifford W. Illig NAME: Quentin L. Roberts, Jr., AIA
TITLE: President TITLE: Executive Vice President
EXHIBIT 11
<TABLE>
<CAPTION>
Cerner Corporation
Computation of Earnings per Common Share
Year Ended December 31,
------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net Earnings: $ 19,501,000 $ 14,558,000 $ 9,932,000
------------ ------------ ------------
------------ ------------ ------------
Weighted average number
of common and common
stock equivalent shares:
Weighted average number
of outstanding common
shares: 13,825,552 13,143,351 12,723,144
Dilutive effect (excess
of number of shares issuable
over number of shares
assumed to be repurchased
with the proceeds of
exercised options and
converted warrants based
on the average market
price during the period) 1,055,552 1,435,827 1,617,264
------------ ------------ ------------
14,881,104 14,579,178 14,340,408
Earnings per common and
common stock equivalent
shares: $ 1.31 $ 1.00 $ 0.69
------------ ------------ ------------
------------ ------------ ------------
Weighted average number
of common and common
stock equivalent shares
assuming full dilution:
Additional dilutive effect
(reduction in number of
shares assumed to be
repurchased with the
proceeds of exercised stock
options and converted
warrants based on the end
of the period market price
of the stock, if higher than
the average price) 22,648 63,721 166,550
------------ ------------ ------------
14,903,752 14,642,899 14,506,958
------------ ------------ ------------
------------ ------------ ------------
Earnings per common and
common stock equivalent
shares assuming full
dilution: $ 1.31 $ 0.99 $ 0.68
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
Cerner Megasource, Inc.
Cerner Corporation PTY Limited
Cerner FSC, Inc.
Cerner International, Inc.
Cerner Limited
Cerner Properties, Inc.
Cerner Software Gmbh
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Cerner Corporation:
We consent to incorporation by reference in the Registration
Statements (No. 33-56868, No. 33-55082, No. 33-41580, No. 33-
39777, No. 33-39776, No. 33-20155 and No. 33-15156) on Form S-8
and Registration Statement No. 33-72756 on Form S-3 of
Cerner Corporation of our reports dated February 10, 1995,
relating to the consolidated balance sheets of Cerner
Corporation as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, stockholders' equity, and
cash flows and related schedules for each of the years in the
three-year period ended December 31, 1994, which reports
appear herein or are incorporated by reference in the
December 31, 1994 annual report on Form 10-K of Cerner
Corporation.
KPMG Peat Marwick LLP
Kansas City, Missouri
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,643,000
<SECURITIES> 8,662,000
<RECEIVABLES> 65,882,000
<ALLOWANCES> 734,000
<INVENTORY> 2,218,000
<CURRENT-ASSETS> 83,650,000
<PP&E> 56,943,000
<DEPRECIATION> 15,814,000
<TOTAL-ASSETS> 156,410,000
<CURRENT-LIABILITIES> 31,280,000
<BONDS> 0
<COMMON> 145,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 156,410,000
<SALES> 155,917,000
<TOTAL-REVENUES> 155,917,000
<CGS> 46,426,000
<TOTAL-COSTS> 122,138,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,328,000
<INCOME-PRETAX> 32,541,000
<INCOME-TAX> 12,950,000
<INCOME-CONTINUING> 19,501,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,501,000
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
