Cerner Corporation
2800 Rockcreek Parkway
Kansas City, Missouri
64117-2551
(816)221-1024
(816)474-1742 Fax
April 3, 1996
Dear Shareholder:
The Annual Meeting of Shareholders of Cerner Corporation (the
"Company") will be held at 10:00 a.m., local time, on May 14,
1996 at the American Heartland Theater located at 2450 Grand
Avenue, Kansas City, Missouri 64108. The enclosed notice of the
meeting and proxy statement contains detailed information about
the business to be transacted at the meeting.
The Board of Directors has nominated two Class I Directors to
continue service on the Board and one new Class I and one new
Class II Director. The Board recommends that you vote for the
nominees.
In addition to the election of the Board of Directors, you are
being asked to approve an amendment to the Company's Certificate
of Incorporation increasing the total number of authorized shares
of Common Stock from 50,000,000 to 150,000,000 and the
appointment of KPMG Peat Marwick LLP as independent public
accountants of the Company for 1996. The Board of Directors
recommends that you vote for these proposals.
On behalf of the Board of Directors and Management, I cordially
invite you to attend the Annual Meeting of Shareholders.
The prompt return of your Proxy in the enclosed business reply
envelope will help insure that as many shares as possible are
represented.
Very truly yours,
CERNER CORPORATION
Clifford W. Illig
President and Chief Operating Officer
Enclosures
<PAGE>
CERNER CORPORATION
2800 Rockcreek Parkway
Kansas City, Missouri 64117
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Cerner Corporation, a Delaware corporation (the
"Company"), will be held at the American Heartland Theater
located at 2450 Grand Avenue, Kansas City, Missouri 64108, on May
14, 1996, at 10:00 a.m., local time, and thereafter as it may
from time to time be adjourned, for the following purposes:
a. to elect three Class I Directors to serve for a three
year term until the 1999 Annual Meeting of Shareholders and
to elect one Class II Director to serve for a one year term
until the year 1997 Annual Meeting of Shareholders and until
their respective successors are duly elected and qualified;
b. to consider a proposal to amend the Certificate of
Incorporation of the Company to increase the total number of
authorized shares of stock from 51,000,000 to 151,000,000
and to increase the number of authorized shares of the
Common Stock, par value $.01 per share, of the Company from
50,000,000 to 150,000,000;
c. to consider and act upon ratification and approval of
the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 28,
1996; and
d. to consider and act upon any other matters which may
properly come before the Annual Meeting of Shareholders or
any adjournment thereof.
The foregoing matters are more fully described in the
accompanying Proxy Statement.
In accordance with the provisions of the Bylaws of the
Company, the Board of Directors has fixed the close of business
on March 28, 1996, as the record date for the determination of
the holders of Common Stock entitled to notice of, and to vote
at, the Annual Meeting of Shareholders.
The Board of Directors of the Company solicits you to sign,
date and promptly mail the proxy in the enclosed postage prepaid
envelope, regardless of whether or not you intend to be present
at the Annual Meeting of Shareholders. You are urged, however,
to attend the Annual Meeting of Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS,
Richard J. Wall, Jr.
Secretary, Vice President
and General Counsel
Kansas City, Missouri
April 3, 1996
<PAGE>
CERNER CORPORATION
2800 Rockcreek Parkway
Kansas City, Missouri 64117
___________________________
PROXY STATEMENT
___________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cerner
Corporation, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Shareholders of the Company to be held on
May 14, 1996, commencing at 10:00 a.m., local time, at the
American Heartland Theater, 2450 Grand Avenue, Kansas City,
Missouri 64108, and any adjournment thereof (the "Annual
Meeting"). The Company anticipates mailing this Proxy Statement,
the accompanying form of Proxy and the Notice of Annual Meeting
of Shareholders to the holders of record of outstanding shares of
Common Stock, par value $.01 per share, of the Company (the
"Common Stock") as of March 28, 1996, on or about April 3, 1996.
Only the holders of record of shares of Common Stock as of
the close of business on March 28, 1996 are entitled to vote on
the matters to be presented at the meeting, either in person or
by proxy. Holders of shares of Common Stock are entitled to one
vote per share outstanding in their names on the record date with
respect to such matters. At the close of business on March 28,
1996, there were outstanding and entitled to vote a total of
____________ shares of Common Stock, constituting all of the
outstanding voting securities of the Company.
You are requested to complete, date and sign the
accompanying Proxy and return it promptly in the enclosed postage
prepaid envelope. Such Proxy may be revoked at any time prior to
its exercise by written notice of revocation delivered to the
Secretary of the Company. Attendance at the Annual Meeting will
not in and of itself constitute a revocation of a Proxy, but your
Proxy will not be used if you attend the Annual Meeting and
prefer to vote in person. The persons designated as proxies were
selected by the Board of Directors and are officers and directors
of the Company. Proxies duly executed and received in time for
the Annual Meeting will be voted in accordance with shareholders'
instructions. If no instructions are given, Proxies will be
voted as follows:
a. to elect Neal L. Patterson, Charles S. Runnion, III and
John C. Danforth as Class I Directors to serve for a three
year term until the 1999 Annual Meeting of Shareholders and
to elect Thomas A. McDonnell as a Class II Director to serve
for a one year term until the 1997 Annual Meeting of
Shareholders and until their respective successors are duly
elected and qualified;
b. to amend the Certificate of Incorporation of the
Company to increase the total number of authorized shares of
stock from 51,000,000 to 151,000,000 and to increase the
number of authorized shares of the Common Stock, par value
$.01 per share, of the Company from 50,000,000 to
150,000,000;
c. to ratify and approve the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending December 28, 1996; and
d. in the discretion of the proxy holder as to any other
matter coming before the Annual Meeting.
QUORUM REQUIREMENTS
The presence in person or by proxy of holders of record of a
majority of the outstanding shares of Common Stock is required
for a quorum to transact business at the Annual Meeting, but if a
quorum should not be present, the Annual Meeting may be adjourned
from time to time until a quorum is obtained.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth information, as of March 1, 1996
(unless otherwise indicated below), with respect to the
beneficial ownership of the issued and outstanding shares of
Common Stock by (i) each person known to the Company to own
beneficially more than 5 percent of the aggregate shares of
Common Stock outstanding, (ii) each director and nominee for
election as a director, (iii) each executive officer named in the
Summary Compensation Table, and (iv) the executive officers and
directors of the Company as a group. Each of the persons, or
group of persons, in the table below has sole voting power and
sole dispositive power as to all of the shares shown as
beneficially owned by them, except as otherwise indicated.
Amount and Nature
of Beneficial Percent of Shares
Name and Address of Beneficial Owner Ownership Outstanding
- ------------------------------------ ----------------- -----------------
Neal L. Patterson 3,233,513 (1) 9.94%
Clifford W. Illig 3,527,288 (2) 10.84%
Waddell & Reed Investment Management 3,374,504 (3) 10.37%
Company and Waddell & Reed Asset
Management Company
Twentieth Century Companies, Inc., 1,755,400 (4) 5.46%
Investors Research Corporation,
Twentieth Century Investors, Inc. and
James E. Stowers, Jr.
Charles S. Runnion, III 194,229 *
Jeffrey C. Reene 121,703 (5) *
David M. Margulies, M.D. 97,090 *
Gerald E. Bisbee, Jr. 81,400 (6) *
David J. Hart 40,000 (7) *
Michael E. Herman 26,000 (8) *
Thomas C. Tinstman, M.D. 25,012 *
John C. Danforth --- ---
Thomas A. McDonnell --- ---
All directors and executive officers
as a group (16 persons) 7,491,002 (9) 22.80%
____________________
* Less than one percent
(1) Excludes 196,000 shares held in trust for minor children with
Jeanne Lillig-Patterson, wife of Neal L. Patterson serving as
trustee and 46,563 shares held by Jeanne Lillig-Patterson,
wife of Neal L. Patterson, as to all of which Mr. Patterson
disclaims beneficial ownership. Includes 9,000 shares, which
Mr. Patterson gifted to a charitable foundation, of which he
has shared voting and dispositive power. The address for Mr.
Patterson is Cerner Corporation, 2800 Rockcreek Parkway,
Kansas City, Missouri 64117.
(2) Includes 144,000 shares held in trust for minor children with
Bonne A. Illig, wife of Clifford W. Illig, serving as trustee
and 99,000 shares, which Mr. Illig gifted to a charitable
foundation, of which he has shared voting and dispositive
power. The address for Mr. Illig is Cerner Corporation, 2800
Rockcreek Parkway, Kansas City, Missouri 64117.
(3) According to Schedule 13G, dated, January 10, 1996, and filed
by Waddell & Reed Investment Management Company and Waddell &
Reed Asset Management Company, Investment Advisors registered
under Section 203 of the Investment Advisor's Act of 1940.
Waddell & Reed Investment Management Company has sole
dispositive and voting power with respect to 2,897,600 shares
of Common Stock. Waddell & Reed Asset Management Company has
sole dispositive and voting power with respect to 476,904
shares of Common Stock. The address for Waddell & Reed
Investment Management Company and Waddell & Reed Asset
Management Company is 6300 Lamar Avenue, Overland Park,
Kansas 66202-4200.
(4) According to Schedule 13G, dated, February 9, 1996, and filed
by Twentieth Century Companies, Inc. ("TCC"), Investors
Research Corporation ("IRC"), Twentieth Century Investors,
Inc. ("TCI") and James E. Stowers, Jr. IRC is an Investment
Adviser registered under Section 203 of the Investment
Advisors Act of 1940, and is a wholly-owned subsidiary of
TCC. Mr. James E. Stowers, Jr., controls TCC by virtue of
his beneficial ownership of a majority of the voting stock of
TCC. As a result of its status as investment advisor to six
investment companies registered under Section 8 of the
Investment Company Act and to several institutional
investors, IRC is deemed to be the beneficial owner of
1,775,400 shares of common stock. TCC, as a result of its
control of IRC, and Mr. Stowers, as a result of his control
of TCC, are also deemed to beneficially own all such shares
deemed to be beneficially owned by IRC. Mr. Stowers, TCC and
IRC all disclaim beneficial ownership of the shares. The
ownership of one investment company client of IRC, TCI,
totaled 1,650,000 shares of the outstanding common stock.
The address for Twentieth Century Companies, Inc., Investors
Research Corporation, Twentieth Century Investors, Inc., and
James E. Stowers, Jr. is 4500 Maine Street, P.O. Box 418210,
Kansas City, MO 64141-9210.
(5) Includes 120,000 shares issuable under presently exercisable
stock options.
(6) Includes 80,000 shares issuable under presently exercisable
stock options.
(7) Includes 40,000 shares issuable under presently exercisable
stock options.
(8) Includes 8,000 shares issuable under presently exercisable
stock options, 10,000 shares held by the Herman Family
Trading Company, a partnership in which Mr. Herman is a
general partner, 5,000 shares held in the Michael E. Herman
Revocable Trust and 3,000 shares held by Vail Fishing
Partners, a partnership in which Mr. Herman is a general
partner. Excludes 2,800 shares owned by his spouse, as to
which Mr. Herman disclaims beneficial ownership.
(9) Includes 305,800 shares issuable under presently exercisable
stock options, but excludes 70,844 shares beneficially owned
solely by spouses.
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides
that the number of directors of the Company shall be fixed by, or
in the manner provided in, the Bylaws of the Company and divided
into three classes as nearly equal as possible, each having a
term of three years. Each year the term of office of one class
of directors expires. Immediately following the Annual Meeting
the number of directors will be eight.
The Board of Directors intends to present for action at the
Annual Meeting the election of Neal L. Patterson and Charles S.
Runnion, III, present Class I Directors, whose terms expire at
the Annual Meeting, and John C. Danforth, as a Class I Director,
to serve for a three year term until the 1999 Annual Meeting of
Shareholders, and Thomas A. McDonnell as a Class II Director to
serve for a one year term until the 1997 Annual Meeting of
Shareholders, and until their respective successors are duly
elected and qualified.
The Directors in Class II (David M. Margulies, M.D. and
Thomas C. Tinstman, M.D.) and the Directors in Class III
(Clifford W. Illig, Gerald E. Bisbee, Jr., and Micheal E. Herman)
have been elected to terms expiring at the time of the Annual
Meetings of Shareholders in 1997 and 1998, respectively. David
J. Hart, a Class I director, is retiring from the Board of
Directors at the Annual Meeting. David M. Margulies, M.D. is
resigning from the Board of Directors effective at the Annual
Meeting in order to increase the percentage of non management
directors on the Board of Directors. No shareholder may vote in
person or by proxy for greater than four nominees at the Annual
Meeting. Shareholders do not have cumulative voting rights in
the election of directors. Directors will be elected by the
plurality vote of the holders of shares of Common Stock entitled
to vote at the Annual Meeting and present in person or by proxy.
Three directors are to be elected as the only members of
Class I at this meeting, for a term of three years and until
their respective successors are duly elected and qualified, and
one director as a member of Class II, for a term of one year and
until his successor is duly elected and qualified. It is
intended that shares represented by a Proxy given pursuant to
this solicitation will be voted in favor of the election of Neal
L. Patterson, Charles S. Runnion, III and John C. Danforth as the
Class I Directors and Thomas A. McDonnell as a Class II Director,
unless such authority is specifically withheld. In the event
that any of such persons should become unavailable for election,
it is intended that the shares of Common Stock represented by the
Proxy will be voted for such substitute nominees as may be
nominated by the Board of Directors. All of the above named
persons have indicated willingness to serve if elected and it is
not anticipated that any of them will become unavailable for
election.
The Certificate of Incorporation and Bylaws of the Company
provide that advance notice of shareholder nominations for an
election of directors must be given. Written notice of the
shareholder's intent to make a nomination at a meeting of
shareholders must be received by the Secretary of the Company not
later than 120 days in advance of the date of such meeting in the
case of an annual meeting and, in the case of a special meeting,
not more than seven days following the date of notice of the
meeting. The notice must contain (i) the name and address of the
shareholder who intends to make the nomination and of the person
to be nominated, (ii) a representation that the shareholder is a
holder of record of stock of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting to nominate the person specified in the notice, (iii) the
names and addresses, as they appear in the Company's books, of
such shareholder, (iv) the class and number of shares
beneficially owned by such nominating shareholder and each
nominee proposed by such shareholder, (v) a description of all
arrangements or understandings between the nominating shareholder
and each nominee and any other person or persons (naming such
person or persons), pursuant to which the nomination or
nominations are to be made, (vi) such other information regarding
each nominee proposed by such shareholder as would have been
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission, as
then in effect, if the Company were soliciting proxies for the
election of such nominees, and (vii) the consent of the nominee
to serve as a director of the Company if so elected. No such
notice has been received, and the chairman of the Annual Meeting
is entitled to refuse to acknowledge the nomination of any person
which is not made in compliance with the foregoing procedure. In
any event, the Board of Directors has no reason to believe that
anyone will attempt to nominate another candidate for director.
The following table sets forth certain information as to the
persons nominated by the Board of Directors for election as
directors of the Company and each director whose term of office
will continue after the Annual Meeting:
Director Since/
Name Age Term Expires
---- --- ---------------
To Serve in Office Until 1999 (Class I)
Neal L. Patterson (1) 46 1980/1999
Charles S. Runnion, III (1) 48 1989/1999
John C. Danforth 59 /1999
To Serve in Office Until 1998 (Class III)
Clifford W. Illig (1) 45 1980/1998
Gerald E. Bisbee, Jr. (2)(3)(4) 53 1988/1998
Michael E. Herman (3)(4) 54 1995/1998
To Serve in Office Until 1997 (Class II)
Thomas C. Tinstman, M.D. (3)(4) 51 1989/1997
Thomas A. McDonnell 50 /1997
____________________
(1) Member of Executive Committee.
(2) Member of Stock Option Committee.
(3) Member of Audit Committee.
(4) Member of Compensation Committee.
Gerald E. Bisbee, Jr. has been a Director of the Company
since February 1988. He has been Chairman of the Board of
Directors and Chief Executive Officer of Apache Medical Systems,
Inc. since December 1989. Apache Medical Systems, Inc.
implements and analyzes healthcare support systems for intensive
care units. Mr. Bisbee has served as a director of Geriatric and
Medical Centers, Inc. since 1988, and has served as a director of
Yamarchi Capital Funds since 1989.
John C. Danforth is a nominee for Director of the Company.
He has been a partner in the law firm of Bryan Cave LLP since
1995. For more than five years prior to 1995 he was a member of
the United States Senate. Mr. Danforth is a director of Dow
Chemical and General American Life Insurance Company.
Michael E. Herman has been a Director of the Company since
May 1995. He is President of the Kansas City Royals Baseball
Team, Chairman of the Finance Committee of the Ewing-Marion
Kauffman Foundation (President from 1985 to 1990) and was the
Executive Vice President and Chief Financial Officer of Marion
Laboratories, Inc. from 1974 to 1990. Mr. Herman is a director
of Lab One, Inc., Janus Capital Corporation, Seafield Capital
Corporation and Agouron Pharmaceuticals, Inc.
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.
Thomas A. McDonnell is a nominee for Director of the
Company. He is President and Chief Executive Officer of DST
Systems, Inc. Mr. McDonnell joined DST Systems, Inc. in 1969 and
has been President since 1973. Mr. McDonnell is a director of
DST Systems, Inc., The Continuum Company, Inc., First of Michigan
Capital Corporation, Janus Capital Corporation, Nellcor-Puritan-
Bennett Corporation, Informix Software, Inc., and BHA Group, Inc.
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 LabOne since
August 1988.
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.
Thomas C. Tinstman, M.D. has been a Director of the Company
since May 1989. In November, 1995 Dr. Tinstman became Senior
Vice President of the Company. From February, 1994 to October,
1995 Dr. Tinstman was director of Medical Informatics with
University of Texas Medical Branch in Galveston, Texas. Prior to
that he was a physician in private practice with Internal
Medicine Associates, P.C. in Omaha, Nebraska. From 1977 to
January, 1994, Dr. Tinstman served as Associate Medical Director
of Pulmonary Medical Services at Bishop Clarkson Memorial
Hospital and as Medical Director of the Respiratory Therapy
Department of Midland Hospital, both in Omaha, Nebraska. Dr.
Tinstman has served as a director of Smith-Haynes Trust, Inc.
since 1988.
Meetings of the Board and Committees
The Board of Directors has established Executive, Audit,
Compensation and Stock Option Committees of the Board of
Directors, but does not have a Nominating Committee. During
1995, the Board of Directors held six meetings, the Audit
Committee held one meeting and the Compensation Committee held
three meetings. The Executive Committee did not meet during
1995. The Stock Option Committee met twice (and acted by
unanimous written consent on nine other occasions) during 1995.
Each incumbent director attended at least 80 percent of the
meetings of the Board of Directors and each committee of the
Board of Directors of which he was a member.
The Executive Committee acts in place of the Board of
Directors when the Board of Directors is not in session and may
exercise all of the powers of the Board of Directors, except with
respect to certain corporate matters, including mergers,
dissolution, sale of property, issuance of stock, declaring
dividends or amending the Certificate of Incorporation or Bylaws
of the Company.
The Audit Committee assists the Board of Directors in
fulfilling its responsibilities with respect to the accounting
and financial reporting practices of the Company and in
addressing the scope and expense of audit and related services
provided by the Company's independent accountants.
The Compensation Committee reviews and approves the
Company's compensation policies and practices, establishes
compensation for directors and Mr. Illig and Mr. Patterson,
reviews and approves the compensation of the other executive
officers of the Company, and approves major changes in the
Company's benefit plans.
The Stock Option Committee administers the Company's stock
option plans and, among other matters, approves grants of options
under such plans.
EXECUTIVE COMPENSATION
The following table sets forth certain information with
respect to the Chief Executive Officer and the four most highly
compensated executive officers of the Company as to whom the
total salary and bonuses for the fiscal year ended December 30,
1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
All Other
Compensation
Name and Principal Position Year Salary($) Bonus($) ($) (1)
- --------------------------- ---- --------- -------- ------------
Neal L. Patterson 1995 339,744 123,750 654
Chairman of the Board of 1994 293,750 66,016 654
Directors and Chief Executive 1993 246,875 62,423 660
Officer
Clifford W. Illig 1995 275,513 116,250 654
President and Chief Operating 1994 264,500 66,016 654
Officer 1993 226,625 62,423 660
Charles S. Runnion, III 1995 150,587 70,527 654
Executive Vice President and 1994 147,425 102,383 654
Area General Manager 1993 143,150 36,564 660
Jeffrey C. Reene 1995 156,450 75,525 654
Executive Vice President and 1994 152,675 52,083 654
Area General Manager 1993 148,225 36,738 660
David M. Margulies, M.D. 1995 153,987 53,400 654
Executive Vice President of 1994 150,000 34,450 654
Product Engineering 1993 150,000 27,300 660
____________________
(1) Consists of $600, being the Company's matching contribution
to the named individual's account in the Cerner Corporation
Associate 401(k) Retirement Plan, and $54, being the
insurance premiums paid by the Company with respect to term
life insurance for each named individual.
Stock Option Plans
The following table reports information with respect to the
award of stock options during the year ended December 30, 1995
for each of the named executive officers in the Summary
Compensation Table:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Percent
of total
options Potential realizable value
Number of granted at assumed annual rates of
Securities to stock price appreciation
underlying employees for option term
Options in Exercise --------------------------
granted fiscal price Expiration
Name (#) year ($/Sh) Date 5% ($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Neal L. Patterson (1) 360,000 30% 29.625 06/28/20 25,450,475 104,887,139
Clifford W. Illig (1) 240,000 20% 29.625 06/28/20 16,966,984 69,924,759
Charles S. Runnion, III --- --- --- --- --- ---
Jeffrey C. Reene --- --- --- --- --- ---
David M. Margulies, M.D. --- --- --- --- --- ---
____________________
(1) These options were issued at the fair market value of the
Company's Common Stock on the date of grant ($29.625 per
share), vest equally in annual installments over a period of
ten years and are only exercisable if the optionee is an
employee of the Company on the date of exercise, except in
the case of the optionee's death while an employee of the
Company in which case his estate can exercise those options
which were vested at the time of his death.
</TABLE>
The following table reports information with respect to the
December 30, 1995 option values for each of the named executive
officers in the Summary Compensation Table:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 30, 1995 OPTION VALUES
<CAPTION>
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
December 30, In-the-Money Options at
1995(#) December 30, 1995 ($)
---------------- -----------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable (1) Unexercisable (1)
---- --------------- ----------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Neal L. Patterson --- --- ---/360,000 ---
Clifford W. Illig --- --- ---/240,000 ---
Charles S. Runnion, III --- --- --- ---
Jeffrey C. Reene --- --- 120,000/32,000 2,227,500/594,000
David M. Margulies, M.D. 210,000 4,872,563 ---/24,000 ---/270,000
____________________
(1) The numbers in the column headed Number of Securities
Underlying Unexercised Options/SARs at December 30, 1995 and
the dollar amounts in the column headed Value of Unexercised
In-the-Money Options at December 30, 1995 reflect (i) the
number of shares of Common Stock into which options are
exercisable and (ii) the difference between the fair market
value of such shares of Common Stock and the exercise price
of the options, respectively.
</TABLE>
Director Compensation
Nonemployee directors of the Company receive compensation of
$2,500 for each meeting of the Board of Directors attended and an
additional $500 for each committee meeting attended, plus
reimbursement for expenses incurred in connection with attendance
at Board of Directors meetings. During 1995, payments, excluding
expense reimbursements, were $8,500 to Dr. Tinstman, $11,000 to
Mr. Bisbee and $3,500 to Mr. Herman. If Mr. Danforth and Mr.
McDonnell are elected as directors of the Company they will be
granted options for 48,000 shares of Common Stock. The exercise
price will be the market value on the date that they are elected
as directors and the options will vest proportionally over a six
year period so long as Mr. Danforth and Mr. McDonnell are a
directors of the Company at each vesting point.
Executive Compensation and Stock Option Committee Report
The Compensation Committee of the Board of Directors (the
"Compensation Committee") is composed of the individuals listed
below. All of the members of the Compensation Committee are
outside directors other than Mr. Tinstman who became an officer
of the Company during November 1995. The Stock Option Committee
of the Board of Directors (the "Stock Option Committee") is
comprised of the individuals listed below who are directors of
the Company. Mr. David J. Hart is retiring from the board of
directors effective at the Annual Meeting. The Compensation
Committee reviews and approves the Company's compensation
policies and practices, establishes compensation for directors
and Mr. Illig and Mr. Patterson, reviews and approves the
compensation of the other executive officers of the Company, and
approves major changes in the Company's benefit plans. The Stock
Option Committee administers the Company's stock option plans
and, among other matters, approves grants of options under such
plans.
The compensation policies of the Company have been designed
to enable the Company to attract, motivate and retain experienced
and qualified executives. The Company seeks to provide
competitive salaries based upon individual performance, together
with annual cash bonuses awarded for the achievement of goals
established by the Compensation Committee. In addition, it has
been the policy of the Company to grant stock options to
executives upon their commencement of employment with the Company
or their becoming such executive officers in an effort to
strengthen the mutuality of interests between such executives and
the Company's shareholders.
Annual Compensation
Total annual cash compensation for executive officers of the
Company consists of base salary and a potential annual cash bonus
based upon an incentive plan adopted each year by the
Compensation Committee. Total annual cash compensation varies
each year based on changes in base salary and in the cash bonus.
The Company's compensation levels are established on a plan year
of April 1 through March 31. Therefore, salaries and bonuses
earned during 1995 are the result of three months under the 1994
plan and nine months under the 1995 plan.
The incentive plan for executive officers other than Mr.
Patterson and Mr. Illig, consists of various objective goals,
both related to areas for which such executive officer has
responsibility and for Company wide performance. Attainment of
each goal is objective, but the amount of the bonus is also
affected by a subjective analysis of the executive's overall
performance. For Mr. Patterson and Mr. Illig, the goals consist
of earnings per share (60 percent), client satisfaction (20
percent) and employee satisfaction (20 percent). Attainment by
Messrs. Patterson and Illig of these goals is done on an
objective basis without any subjective analysis of their overall
performance. Under the incentive plan, each executive may earn
up to a maximum amount approved by the Compensation Committee on
a subjective basis designed to create a significant incentive in
relation to such executive's salary. During 1995 the Company's
executive officers, as a group, earned approximately 73 percent
of the bonuses available.
The salary of each executive officer is approved on a
subjective basis by the Compensation Committee at a level
believed to be sufficient to attract and retain qualified
individuals. In making this determination, the Compensation
Committee considers the executive's performance, salary levels at
other competing businesses and the Company's performance. In
approving salaries and incentive plan payments for 1995, the
Compensation Committee considered, among other matters, the
compensation of the five most highly compensated officers for
1993 and 1994 of the six companies included in the peer company
index shown under the heading "Company Performance", although the
Compensation Committee did not target compensation to any
particular group of these companies. The factors impacting base
salary levels are not independently assigned specific weights but
are subjectively considered by the Compensation Committee.
Mr. Patterson's compensation during the year ended December
30, 1995 consisted of $339,744 in salary and $123,750 in payments
earned under the Company's incentive plan. The Compensation
Committee believes that the increase in Mr. Patterson's
compensation is justified taking in to account the Company's
financial results over the past several years, Mr. Patterson's
value to the Company and the compensation paid by others to
similarly successful chief executive officers. Mr. Patterson
earned approximately 67 percent of the incentives available under
the incentive plan during 1995. In determining Mr. Patterson's
salary and incentive plan payments for 1995, the Compensation
Committee considered, among other matters, the Company's
performance and the compensation of the five most highly
compensated officers for 1993 and 1994 of the six companies
included in the peer company index shown under the heading
"Company Performance", although the Compensation Committee did
not target his compensation to any particular group of these
companies.
Long-Term Incentive Compensation
The long-term incentive compensation for executive officers
has consisted of awards of stock options granted under the
Company's stock option plans typically only upon their
commencement of employment with the Company or promotion to
executive officer and creates an incentive for executive officers
to contribute to sustained, long-term growth in the Company's
performance. The Stock Option Committee and the Compensation
Committee believe that stock options create a mutuality of
interest between the Company's executive officers and
shareholders. During 1995 the Stock Option Committee, in
consultation with the Compensation Committee, granted to Mr.
Patterson and Mr. Illig, respectively, options to purchase
360,000 and 240,000 shares of Common Stock of the Company. These
options were issued at the fair market value of the Company's
Common Stock on the date of grant ($29.625 per share), vest
equally in annual installments over a period of ten years and are
only exercisable if the optionee is an employee of the Company on
the date of exercise, except in the case of the optionee's death
while an employee of the Company in which case his estate can
exercise those options which were vested at the time of his
death. Both the Stock Option Committee and the Compensation
Committee believe that it is in the best interests of the Company
to establish a direct link between Mr. Patterson's and Mr.
Illig's potential long-term compensation and the Company's
performance as measured by changes in the Company's stock price.
Both the Stock Option Committee and the Compensation Committee
believe that it is in the best interests of the Company to
establish a direct link between Mr. Patterson's and Mr. Illig's
potential long-term compensation and the Company's performance as
measured by changes in the Company's stock price. Prior to this
award neither Mr. Patterson nor Mr. Illig had received any stock
options.
Stock option grants provide the right to purchase shares of
Common Stock at a specified exercise price. All stock options
issued to executive officers to date have exercisable prices
equal to the fair market value of the Common Stock on the date of
the grant of the stock option.
Compensation Committee Interlocks and Insider Participation
The Company owns approximately 3.1 percent of the
outstanding equity securities of Apache Medical Systems, Inc.
Mr. Patterson is the Company's representative on the board of
directors of that corporation and serves on its compensation
committee. Mr. Bisbee is Chairman of the Board of Directors and
Chief Executive Officer of that corporation. As a result, Mr.
Patterson is one of the individuals determining the compensation
of Mr. Bisbee at Apache Medical Systems, Inc.
Committee Members
Members of the Compensation Committee:
Thomas C. Tinstman, M.D.
Gerald E. Bisbee, Jr., Ph.D.
David J. Hart
Michael E. Herman
Members of the Stock Option Committee:
Gerald E. Bisbee, Jr., Ph.D.
David J. Hart
Company Performance
The following graph presents a comparison for the five-year
period ended December 29, 1995 of the performance of the Common
Stock of the Company with the Nasdaq Stock Market (as calculated
by The Center for Research in Security Prices) and an index of
peer companies selected by the Company:
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
-------- -------- -------- -------- -------- --------
Cerner Corporation 100.00 256.41 1,133.33 1,784.62 1,810.26 1,682.05
Peer Group 100.00 158.76 204.76 157.65 217.15 366.84
Nasdaq Stock Market 100.00 160.55 186.85 214.50 209.67 296.51
The above comparison assumes $100 was invested on December
31, 1990 in Common Stock of the Company and in each of the
foregoing indices and assumes reinvestment of dividends. The
results of each component issuer of each group are weighted
according to such issuer's stock market capitalization at the
beginning of each year.
The peer group of companies was selected based upon their
being in the business of providing large scale software programs
and information system related services. Companies in the peer
group are Cycare Systems, Inc., HBO & Company, Hogan Systems,
Inc., Keane, Inc., Policy Management Systems Corporation and
Shared Medical Systems Corporation.
AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors has approved an amendment to Article
Four of the Certificate of Incorporation of the Company to
increase the total number of authorized shares of stock of the
Company from 51,000,000 shares to 151,000,000 shares and to
increase the number of authorized shares of Common Stock from
50,000,000 to 150,000,000 shares.
The Board of Directors recommends that shareholders consider
and approve a proposal to amend Article Four of the Certificate
of Incorporation of the Company. The Company is now authorized
to issue a total of 51,000,000 shares, consisting of 50,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock.
As of March 28, 1996, __________ shares of Common Stock were
issued and outstanding. In addition 513,018 shares of Common
Stock were held as treasury shares. The one hundred percent
stock dividend declared by the Company during August of 1995 and
the public offering of shares of Common Stock by the Company
during August of 1995 reduced the number of authorized and
unissued shares available to the Company by 17,940,729.
The Company has no present plans or commitments to issue the
additional shares of Common Stock authorized by this proposed
amendment. However, the additional authorized shares of Common
Stock will be available for general corporate purposes, including
financings, acquisitions and employee benefit plans. Having such
additional authorized shares available for issuance in the future
would give the Company flexibility and allow shares of Common
Stock to be issued without the expense and delay of a special
meeting of shareholders, unless such action is required by
applicable law or under the rules of any stock exchange on which
the Company's securities may then be listed.
If the proposed amendment is approved, the additional
shares, when issued will have the same rights as the currently
authorized Common Stock. The holders of Common Stock do not have
preemptive rights to subscribe for additional shares of Common
Stock.
If the proposed amendment is approved, the Board of
Directors would have the authority, subject to the limitations
set forth above, to issue additional shares of Common Stock that
would have a dilutive effect on exiting shareholders. The
additional shares may be issued to impede an attempt by a third
party to gain control of the Company without the approval of the
Board of Directors. As of the date hereof, however, the Company
is not aware of any proposal to take control of the Company.
The affirmative vote of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting is
required for approval of the proposed amendment to the
Certificate of Incorporation of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY
INCREASING THE TOTAL NUMBER OF AUTHORIZED SHARES AND THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK.
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat
Marwick LLP as the Company's independent certified public
accountants to audit the financial statements of the Company for
the fiscal year ending December 28, 1996. KPMG Peat Marwick LLP
has served as auditors for the Company since 1983.
It is expected that representatives of KPMG Peat Marwick LLP
will be present at the Annual Meeting. They will have the
opportunity to make a statement, if they desire to do so, and
also will be available to respond to appropriate questions.
The affirmative vote of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required
for the ratification of the selection of KPMG Peat Marwick LLP as
independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL AND RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK
LLP.
CERTAIN TRANSACTIONS
The Company leases an airplane from a company owned by Mr.
Neal L. Patterson and Mr. Clifford W. Illig. The airplane is
leased on a per mile basis with no minimum usage guarantee. The
Company has a right of first refusal on usage of the airplane to
guarantee its availability to the Company. The lease rate is
believed to approximate fair market value for this type of
aircraft. During 1995 the Company paid an aggregate of $420,555
for rental of the airplane. The airplane is used principally by
Mr. Patterson to increase the number of client visits he can make
and to reduce the physical strain of his heavy travel schedule.
In January of 1995, the Company entered into a license
agreement with Apache Medical Systems, Inc. ("Apache") allowing
the Company to license certain products of Apache to the
Company's clients. Royalty payments to Apache are based upon the
number and size of the Company's clients that license the Apache
products. During 1995 the Company paid $250,000 in advance
royalties under the agreement. The Company owns approximately
3.1 percent of Apache's outstanding equity securities and Mr.
Gerald W. Bisbee, a director of the Company, is the chief
executive officer, a director and stockholder of Apache.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company. Executive officers, directors and holders of ten
percent or more of the Company's equity securities are required
to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on review of the copies of such reports
furnished to the Company or written representations that no other
reports were required, the Company believes that during the
fiscal year ended December 30, 1995, all Section 16(a) filing
requirements applicable to its executive officers, directors and
holders of ten percent or more of the Company's equity securities
were complied with.
FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Company for the
fiscal year ended December 30, 1995, is enclosed with this Proxy
Statement.
GENERAL INFORMATION
Other Matters
The Bylaws of the Company require that for business to be
properly brought before an annual shareholders' meeting, the
Company must have received prior written notice of such business
not later than 120 days in advance of the date of such meeting.
The notice must describe the proposed business, the shareholders'
name and address, a description of the class and number of shares
of stock of the Company which are beneficially owned (as that
term is defined in the Certificate of Incorporation of the
Company) by the shareholder, any material interest of the
shareholder in such business and all other information regarding
the proposal which the Company would be required to provide in a
proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission if proxies for the proposal
were being solicited by the Company. Because no such notice has
been received in a timely manner, the only business which may be
properly brought before the Annual Meeting are the matters set
forth herein or those brought before the meeting by or at the
direction of the Board of Directors.
The Board of Directors does not intend to present any matter
for action at the annual meeting other than the matters referred
to in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is intended that the holders of the
proxies hereby solicited will act in respect of such matters in
accordance with their best judgment.
Deadline for Shareholder Proposals
Proposals by holders of the shares of Common Stock which are
intended to be presented at the 1997 Annual Meeting of
Shareholders must be received by the Company no later than
December 20, 1996 to be eligible for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting. Such
proposals must also comply in full with the requirements of Rule
14a-8 under the Securities Act of 1934 and must comply with the
advance notice and information requirement described under the
heading "GENERAL INFORMATION -- Other Matters" above to be
presented at that meeting.
Voting Matters
In accordance with Delaware law, a shareholder entitled to
vote in the election of directors can withhold authority to vote
for all nominees for directors or can withhold authority to vote
for certain nominees for directors. Abstentions from the
proposal to approve the amendment to the Company's Certificate of
Incorporation or the proposal to approve and ratify the selection
of the Company's independent auditors are treated as votes
against the particular proposal. Broker non-votes on the
election of directors, the proposal to approve the amendment to
the Company's Certificate of Incorporation or the proposal to
approve and ratify the selection of the Company's independent
auditors are treated as shares of Common Stock as to which voting
power has been withheld by the respective beneficial holders and,
therefore, as shares not entitled to vote on the proposal as to
which there is the broker non-vote.
Expenses of Solicitation
All costs of this solicitation will be borne by the Company.
In addition to the use of the mails, proxies may be solicited
personally or by telephone or telegraph by some of the regular
employees of the Company. The Company has engaged Morrow & Co.,
Inc. ("Morrow") as paid solicitors in connection with the Annual
Meeting. Morrow will be paid to solicit proxies and distribute
proxy materials to nominees, brokers and institutions. The
anticipated cost of such services is $3,500, plus expenses. The
Company may reimburse brokers and other persons holding stock in
their names, or in the names of nominees, for their expenses
incurred in sending proxy materials to their principals and
obtaining their proxies. The Company requests that brokerage
houses and other custodians, nominees and fiduciaries forward the
soliciting materials to the beneficial owners of the shares of
Common Stock held of record by such persons.
BY ORDER OF THE BOARD OF DIRECTORS,
Richard J. Wall, Jr.
Secretary, Vice President
and General Counsel
Kansas City, Missouri
April 3, 1996
<PAGE>
CERNER CORPORATION PROXY
2800 Rockcreek Parkway
Kansas City, Missouri 64117
- --------------------------------------------------------------
This Proxy is for the 1996 Annual Meeting of Shareholders of
Cerner Corporation, a Delaware corporation, to be held May 14,
1996, at 10:00 a.m., local time, at the American Heartland
Theater located at 2450 Grand Avenue, Kansas City, Missouri
64108.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CERNER
CORPORATION.
The undersigned hereby appoints Clifford W. Illig and Neal L.
Patterson, and each of them, jointly and severally, with full
power of substitution, as attorneys-in-fact, to vote all the
shares of Common Stock which the undersigned is entitled to vote
at the 1996 Annual Meeting of Shareholders of Cerner Corporation
to be held on May 14, 1996, and at any adjournment thereof, on
the transaction of any and all business which may come before
said meeting, as fully and with the same effect as the
undersigned might or could do if personally present for the
purposes set forth.
The nominees for director are: Neal L. Patterson, Charles S.
Runnion, III, John C. Danforth and Thomas A. McDonnell.
You are encouraged to specify your choice by marking the
appropriate boxes on the reverse side.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE.
-------------
| SEE REVERSE |
| SIDE |
-------------
<PAGE>
- ---- Please mark
| X | your vote as in
- ---- this example
This proxy when properly executed will be voted in the
manner directed herein by the undersigned shareholder(s). If no
direction is made, this proxy will be voted "FOR" the following
proposals.
- -------------------------------------------------------------------------
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3. |
- -------------------------------------------------------------------------
FOR Withheld as to all nominees
---- ----
1. Election of Directors | | | |
---- ----
To withhold authority to vote for any
nominee(s), mark the "FOR" box
and write the name of each such
nominee with respect to which you
intend to withhold authority to vote
on the line provided below.
________________________________________
Unless authority to vote for each
nominee is withheld, this Proxy will
be deemed to confer authority to vote
"FOR" each nominee whose name is not
written on the line provided.
FOR AGAINST ABSTAIN
---- ---- ----
2. Amendment of the Company's | | | | | |
Certificate of Incorporation ---- ---- ----
3. Ratification and approval of the ---- ---- ----
selection of KPMG Peat Marwick | | | | | |
LLP as the independent auditors of ---- ---- ----
Cerner Corporation for the fiscal
year ending December 29, 1996.
If you expect to attend the 1996 Annual
Meeting of Shareholders please check
this box: ----
| |
----
In their discretion, the proxies are to vote upon such other
business as may properly come before the meeting which the board
of directors does not have knowledge of a reasonable period of
time before the solicitation of this proxy.
Please date and sign as name appears hereon. If shares are held
jointly or by two or more persons, each shareholder named should
sign. Executors, administrators, trustees, etc. should so
indicate when signing. If the signer is a corporation, please
sign full corporate name by duly authorized officer. If a
partnership, please sign in partnership name by authorized
person.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement, dated April 8, 1996.
Signature__________________________________ DATE_______________
Signature__________________________________ DATE_______________
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE
PROVIDED.
