April 14, 1997
Dear Shareholder:
The Annual Meeting of Shareholders of Cerner Corporation (the
"Company") will be held at 10:00 a.m., local time, on May 20,
1997, 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 II Directors.
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 the appointment of KPMG Peat Marwick LLP
as independent public accountants of the Company for 1997. The
Board of Directors recommends that you vote for KPMG Peat
Marwick LLP.
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 20, 1997
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
20, 1997, 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 two Class II Directors to serve for a three
year term until the 2000 Annual Meeting of Shareholders and
until their respective successors are duly elected and
qualified;
b. 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 January 3,
1998; and
c. 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, 1997, 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,
/s/Richard J. Wall, Jr.
Richard J. Wall, Jr.
Secretary
Kansas City, Missouri
April 14, 1997
<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 20, 1997, 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, 1997, on or about April 14, 1997.
Only the holders of record of shares of Common Stock as of
the close of business on March 28, 1997 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,
1997, there were outstanding and entitled to vote a total of
32,857,844 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. Your 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 Thomas C. Tinstman, M.D. and Clifford W. Illig
as Class II Directors to serve for a three year term until
the 2000 Annual Meeting of Shareholders and until their
respective successors are duly elected and qualified;
b. to ratify and approve the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending January 3, 1998; and
c. in the discretion of the proxy holder as to any other
matter coming before the Annual Meeting.
<PAGE>
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, 1997
(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.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of Shares
Name and Address of Beneficial Owner Ownership Outstanding
- ------------------------------------ ----------------- -----------------
<S> <C> <C> <C>
Neal L. Patterson 3,491,741 (1) 10.60%
Clifford W. Illig 3,551,894 (2) 10.79%
Waddell & Reed, Inc. 1,791,800 (3) 5.45%
Jeffrey C. Reene 153,833 *
Gerald E. Bisbee, Jr. 81,400 (4) *
Michael E. Herman 54,000 (5) *
Thomas C. Tinstman, M.D. 29,317 (6) *
Jack A. Newman, Jr. 18,501 (7) *
John C. Danforth 13,300 (8) *
Thomas A. McDonnell 8,000 (9) *
All directors, nominees and executive
officers, as a group (12 persons) 7,474,141 22.57%
____________________
<FN>
* Less than one percent
(1)Includes 36,000 shares issuable under presently exercisable
stock options, 196,000 shares held in trust for minor
children with Jeanne Lillig-Patterson, wife of Neal L.
Patterson, serving as trustee and 9,000 shares, which Mr.
Patterson gifted to a charitable foundation, for which he has
shared voting and dispositive power. Excludes 46,566 shares
held by Jeanne Lillig-Patterson, wife of Neal L. Patterson,
as to all of which Mr. Patterson disclaims beneficial
ownership. The address for Mr. Patterson is Cerner
Corporation, 2800 Rockcreek Parkway, Kansas City, Missouri
64117.
(2)Includes 24,000 shares issuable under presently exercisable
stock options, 144,000 shares held in trust for minor
children with Bonne A. Illig, wife of Clifford W. Illig,
serving as trustee and 88,900 shares, which Mr. Illig gifted
<PAGE>
to a charitable foundation, for 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 31, 1997, and filed
by Waddell & Reed, Inc., Waddell & Reed Inc. has sole
dispositive and voting power with respect to 1,791,800 shares
of Common Stock. The address for Waddell & Reed, Inc. is 6300
Lamar Avenue, Overland Park, Kansas 66202-4200.
(4)Includes 80,000 shares issuable under presently exercisable
stock options.
(5)Includes 16,000 shares issuable under presently exercisable
stock options, 15,000 shares held by the Herman Family
Trading Company, a partnership in which Mr. Herman is a
general partner, 20,000 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 and 200
shares owned by his son as to which Mr. Herman disclaims
beneficial ownership.
(6)Includes 7,000 shares issuable under presently exercisable
stock options.
(7)Includes 10,000 shares issuable under presently exercisable
stock options.
(8)Includes 8,000 shares issuable under stock options which are
exercisable on May 14, 1997.
(9)Includes 8,000 shares issuable under stock options which are
exercisable on May 14, 1997.
</TABLE>
<PAGE>
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 seven. During the fall of 1996,
Charles S. Runnion, III, then an executive officer and Class II
Director, resigned to take another position. The Board of
Directors has elected not to nominate a new director to fill this
position. As a result, the three classes of directors would not
be as equal as possible since Class II would only have one member
while Classes I and II each have three members. Therefore,
Clifford W. Illig has agreed to resign as a Class III Director
effective at the Annual Meeting and stand for election as a Class
II Director in order to balance the Classes.
The Board of Directors intends to present for action at the
Annual Meeting the election of Thomas C. Tinstman, M.D., a
present Class II Director, whose term expires at the Annual
Meeting, and Clifford W. Illig, a present Class III Director, as
Class II Directors, to serve for a three year term until the 2000
Annual Meeting of Shareholders, and until their respective
successors are duly elected and qualified.
The Directors in Class I (Neal L. Patterson, Thomas A.
McDonnell and John C. Danforth) and the Directors in Class III
(Gerald E. Bisbee, Jr., and Michael E. Herman) have been elected
to terms expiring at the time of the Annual Meetings of
Shareholders in 1999 and 1998, respectively. No shareholder may
vote in person or by proxy for greater than two 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.
It is intended that shares represented by a Proxy given
pursuant to this solicitation will be voted in favor of the
election of Thomas C. Tinstman, M.D. and Clifford W. Illig as the
Class II Directors, unless such authority is specifically
withheld. In the event that either 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
<PAGE>
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:
<TABLE>
<CAPTION>
Director Since/
Name Age Term Expires
- ---- --- ---------------
<S> <C> <C>
To Serve in Office Until 1999 (Class I)
Neal L. Patterson (1) 47 1980/1999
Thomas A. McDonnell (2)(3) 51 1996/1999
John C. Danforth (2)(3) 60 1996/1999
To Serve in Office Until 2000 (Class II)
Clifford W. Illig (1) 46 1980/2000
Thomas C. Tinstman, M.D. 52 1989/2000
To Serve in Office Until 1998 (Class III)
Gerald E. Bisbee, Jr. (2) 54 1988/1998
Michael E. Herman (1)(3) 55 1995/1998
<FN>
____________________
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
</TABLE>
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 has been a Director of the Company since
May 1996. 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 Corporation.
Michael E. Herman has been a Director of the Company since
May 1995. He is President of the Kansas City Royals Baseball
Club, Chairman of the Investment Committee of the 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 Janus Capital Corporation, Seafield Capital Corporation,
Agouron Pharmaceuticals, Inc., and SCH Corporation.
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.
<PAGE>
Thomas A. McDonnell has been a Director of the Company since
May 1996. He is President and Chief Executive Officer of DST
Systems, Inc., a provider of sophisticated information processing
and computer software services and products, primarily to mutual
funds, insurance providers, banks and other financial services
organizations. Mr. McDonnell joined DST Systems, Inc. in 1969
and has been President since 1973. Mr. McDonnell is a director
of DST Systems, Inc., Janus Capital Corporation, Nellcor-Puritan-
Bennett Corporation, Informix Software, Inc., BHA Group, Inc.,
and Computer Sciences Corporation.
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.
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, and
Compensation Committees of the Board of Directors, but does not
have a Nominating Committee. During 1996, the Board of Directors
held nine meetings. Each incumbent director attended at least 90
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.
<PAGE>
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 28,
1996 exceeded $100,000:
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation All Other
------------------- Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1)
- --------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Neal L. Patterson 1996 350,000 90,000 660
Chairman of the Board of Directors and 1995 339,744 123,750 654
Chief Executive Officer 1994 293,750 66,016 654
Jack A. Newman, Jr. (2) 1996 317,596 131,250 660
Executive Vice President 1995 - - -
1994 - - -
Clifford W. Illig 1996 275,000 78,750 660
President and Chief Operating Officer 1995 275,513 116,250 654
1994 264,500 66,016 654
Thomas C. Tinstman, M.D. (3) 1996 300,000 - 660
Senior Vice President 1995 75,000 - 106
1994 - - -
Jeffrey C. Reene 1996 158,325 75,755 660
Executive Vice President 1995 156,450 75,525 654
1994 152,675 52,083 654
<FN>
____________________
(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 $60, being the
insurance premiums paid by the Company with respect to term
life insurance for each named individual.
(2)Mr. Newman became an executive officer of the Company on
January 2, 1996.
(3)Dr. Tinstman became an executive officer of the Company on
October 1, 1995.
</TABLE>
<PAGE>
Stock Option Plans
The following table reports information with respect to the
award of stock options during the year ended December 28, 1996
for each of the named executive officers in the Summary
Compensation Table:
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Number of Percent of
Securities total options
underlying granted to Exercise
Options employees price Expiration Grant date
Name granted (#) in fiscal year ($/Sh) date present value ($)
- ---- ----------- -------------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Jack A. Newman, Jr. (1)(3) 150,000 15.9% 20.50 12/29/21 1,938,454
Thomas C. Tinstman, M.D. (2)(3) 100,000 10.6% 18.50 01/12/21 1,166,224
<FN>
____________________
(1)These options were issued at the fair market value of the
Company's Common Stock on the date of grant. The options
become exercisable in varying amounts ranging from 10,000
shares to 20,000 shares per year, assuming the optionee
remains an employee of the Company, over a period of 10 years
from the date of grant except that such options may become
exercisable earlier in the event that there occurs a change
of control of the Company or both Neal L. Patterson and
Clifford W. Illig are no longer employed by the Company.
(2)These options were issued at the fair market value of the
Company's Common Stock on the date of grant. The options
become exercisable in varying amounts ranging from 7,000
shares to 13,000 shares per year, assuming the optionee
remains an employee of the Company, over a period of 10 years
from the date of grant except that such options may become
exercisable earlier in the event that there occurs a change
of control of the Company.
(3)The grant date present value was calculated using the Black-
Scholes option pricing model with the following assumptions:
expected dividend yield of zero percent; expected volatility
factor of 49.2%; weighted-average risk-free interest rate of
6.3%; and a weighted-average expected life of eight years for
each option.
</TABLE>
The following table reports information with respect to the
December 28, 1996 option values for each of the named executive
officers in the Summary Compensation Table:
<TABLE>
Aggregated Option Exercises In Last Fiscal Year and December 28, 1996 Option Values
<CAPTION>
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
December 28, In-the-Money Options at
1996 (#) December 28, 1996 ($)
Shares ----------------- ------------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable (1) Unexercisable (1)
- ---- ------------ -------- ----------------- ------------------------
<S> <C> <C> <C> <C>
Neal L. Patterson - - 36,000/324,000 0/0
Jack A. Newman, Jr. - - 10,000/140,000 - /0
Clifford W. Illig - - 24,000/216,000 0/0
Thomas C. Tinstman, M.D. - - -/100,000 - /0
Jeffrey C. Reene 152,000 2,686,500 - -
<FN>
____________________
(1)The numbers in the column headed Number of Securities
Underlying Unexercised Options/SARs at December 28, 1996 and
the dollar amounts in the column headed Value of Unexercised
In-the-Money Options at December 28, 1996 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.
</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 1996, payments, excluding
expense reimbursements were $15,500 to Mr. Bisbee, $15,000 to Mr.
Herman, $11,000 to Mr. McDonnell, and $11,000 to Mr. Danforth.
Executive Compensation
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. The Stock Option Committee of the Board of
Directors (the "Stock Option Committee") is comprised of all of
the members of the Board of Directors of the Company. 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 including those recommended by the Compensation
Committee.
<PAGE>
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 quarterly 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 for 1996 were established on a
plan year of April 1 through March 31. Therefore, salaries and
bonuses earned during 1996 are the result of three months under
the 1995 plan and nine months under the 1996 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 during
the 1995 and 1996 plan years consisted 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 1996 the Company's executive
officers, as a group, earned approximately 52 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 1996, the
Compensation Committee considered, among other matters, the
Company's performance during 1995 and the compensation of the
five most highly compensated officers for 1994 and 1995 of the
Company's principle competitors for which information was
available, 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
28, 1996 consisted of $350,000 in salary and $90,000 in payments
earned under the Company's incentive plan. Mr. Patterson earned
approximately 40 percent of the incentives available under the
incentive plan during 1996, all related to client satisfaction
and employee satisfaction. In determining Mr. Patterson's salary
and potential incentive plan payments for 1996, the Compensation
Committee considered, among other matters, the Company's
performance during 1995 and the compensation of the five most
highly compensated officers for 1994 and 1995 of the Company's
principle competitors for which information was available,
although the Compensation Committee did not target his
compensation to any particular group of these companies.
<PAGE>
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. 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 2.7 percent of the
outstanding equity securities of Apache Medical Systems, Inc.
Mr. Patterson was a member of the Board of Directors of that
corporation and served on its compensation committee until July
14, 1996. Mr. Bisbee is Chairman of the Board of Directors and
Chief Executive Officer of that corporation. As a result, Mr.
Patterson was one of the individuals determining the compensation
of Mr. Bisbee at Apache Medical Systems, Inc.
Committee Members
Members of the Compensation Committee:
John C. Danforth
Michael E. Herman
Thomas A. McDonnell
Members of the Stock Option Committee:
Neal L. Patterson
Clifford W. Illig
Gerald E. Bisbee, Jr.
John C. Danforth
Michael E. Herman
Thomas A. McDonnell
Thomas C. Tinstman, M.D.
<PAGE>
Company Performance
The following graph presents a comparison for the five-year
period ended December 31, 1996 of the performance of the Common
Stock of the Company with the Nasdaq Composite Index (as
calculated by The Center for Research in Security Prices), the
Nasdaq Computer/Data Processing Group (as calculated by The
Center for Research in Security Prices) and an index of peer
companies selected by the Company:
<TABLE>
Comparison of 5 Year Cumulative Total Return
<CAPTION>
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Cerner Corp. 100.00 442.00 696.00 706.00 656.00 496.00
Peer Group 100.00 129.60 96.40 134.90 225.90 313.90
Nasdaq Computer/ 100.00 107.60 113.90 138.20 210.50 259.90
Data Processing Group
Nasdaq Composite Index 100.00 116.40 133.60 130.60 184.70 227.20
</TABLE>
The above comparison assumes $100 was invested on December
31, 1991 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 HBO & Company, Keane Inc., Policy Management Systems
Corporation and Shared Medical Systems Corporation. The
Company's peer group used in the 1996 Proxy also included Cycare
Systems Inc. and Hogan Systems, Inc. Hogan Systems, Inc. was
acquired during 1996 by a company that did not meet the peer
group description and has therefore been deleted from the peer
group. Cycare Systems Inc. was acquired during 1996 by HBO &
Company.
<PAGE>
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 January 3, 1998. 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 and 1996, respectively, the Company paid
an aggregate of $420,555 and $370,562 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. During 1996, the Company made no
royalty payments under the agreement. The Company owns
approximately 2.7 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 28, 1996, 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.
<PAGE>
FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Company for the
fiscal year ended December 28, 1996, 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 1998 Annual Meeting of
Shareholders must be received by the Company no later than
December 20, 1997 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 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 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.
<PAGE>
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
Kansas City, Missouri
April 14, 1997
<PAGE>
CERNER CORPORATION PROXY
2800 Rockcreek Parkway
Kansas City, Missouri 64117
This Proxy is for the 1997 Annual Meeting of Shareholders of Cerner
Corporation, a Delaware corporation, to be held May 20, 1997, 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 1997 Annual Meeting of
Shareholders of Cerner Corporation to be held on May 20, 1997, 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: Clifford W. Illig and Thomas C. Tinstman,
M.D.
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>
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.
2. Ratification and approval of the selection of KPMG Peat Marwick LLP as
the Independent auditors of Cerner Corporation for the fiscal year ending
January 3, 1998.
If you expect to attend the 1997 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 14, 1997.
- ----------------------------- --------------------
Signature DATE
- ----------------------------- --------------------
Signature DATE
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
CERNER CORPORATION
FOUNDATIONS RETIREMENT PLAN
TO: All Participants
The Annual Meeting of the Shareholders of Cerner
Corporation (the "Company") will be held at the American
Heartland Theater located at 2450 Grand Avenue, Kansas City,
Missouri 64108, on May 20, 1997, commencing at 10:00 a.m.
As a participant in the Cerner Corporation Foundations
Retirement Plan (the "Plan"), you are entitled to instruct
American Century Services, Inc., as trustee of the Plan (the
"Trustee"), to vote the shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock"), which
have been credited to you under the Plan as of March 28,
1997.
As of this date, your Plan account has been
credited with the number of shares of Common Stock indicated
on the label affixed to the bottom of the second page of the
enclosed Participant Instruction Form. The number of shares
of Common Stock shown includes shares of Common Stock
purchased with your elective deferrals, Company matching
contributions, and allocations to your account of shares of
Common Stock forfeited by terminated associates, as
allocated by the provisions of the Plan. Therefore, you may
not be fully vested in the total number of shares of Common
Stock indicated.
The Plan gives you the right to direct the Trustee
to vote your shares in accordance with your instructions.
Your votes are to be indicated on the enclosed Participant
Instruction Form and returned to Karen Welle of Cerner
Corporation, Mail Drop 1316, no later than May 9, 1997. The
Trustee may vote only those shares in the Plan for which
valid instructions have been received from the participant.
Please sign and date your form and mail it as promptly as
possible to Karen Welle at Mail Drop 1316.
Your voting instructions are confidential.
AMERICAN CENTURY SERVICES, INC.,
as trustee of Cerner Corporation
Foundations Retirement Plan
<PAGE>
PARTICIPANT INSTRUCTION FORM
UNDER
CERNER CORPORATION
FOUNDATIONS RETIREMENT PLAN
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1997
----------------------------------
I am a participant in the Cerner Corporation
Foundations Retirement Plan (the "Plan") of Cerner
Corporation (the "Company") entitled to vote the number of
shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock") indicated on this form.
I understand that AMERICAN CENTURY SERVICES, INC.,
as trustee of the Plan (the "Trustee"), will vote the shares
of Common Stock upon instructions from participants. I
further understand that I may direct the Trustee to vote
certain shares of Common Stock in favor and certain shares
of Common Stock against any of the proposals, but that to do
so requires separate forms.
I acknowledge receipt of the Company's Notice of
Annual Meeting and Proxy Statement for its Annual Meeting of
Shareholders to be held May 20, 1997, at 10:00 a.m., local
time, at the American Heartland Theater located at 2450
Grand Avenue, Kansas City, Missouri 64108.
I instruct the Trustee to vote all of my shares of
Common Stock as follows:
1. The election of Clifford W. Illig and Thomas C.
Tinstman, M.D. as directors.
___ FOR ___ Withheld as to all nominees
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.
2. Ratification and approval of the selection of KPMG Peat
Marwick LLP as the independent auditors of Cerner
Corporation for the fiscal year ending January 3, 1998.
FOR AGAINST ABSTAIN
----- ---------- ----------
<PAGE>
3. Considering and acting upon any other matters which may
properly come before the meeting or any adjournment
thereof.
I direct that Clifford W. Illig and Neal L.
Patterson, and each or any one of them, be appointed my true
and lawful attorneys, agents and proxies with full power of
substitution in my name to vote at the Annual Meeting, and
at any and all adjournments thereof, with respect to the
shares of Common Stock which have been credited to me under
the Plan for the purpose of any matters which may properly
come before the meeting or any adjournment thereof.
----- a. I hereby grant the power of attorney
referred to above.
----- b. I hereby withhold the grant of the power of
attorney referred to above
Date:________________________, 1997
______________________________________
(Signature of Participant)
(Please sign exactly as your
name appears on the label to
this form. If you are signing
as executor, administrator or
guardian, please give your
full title as such.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PARTICIPANT
INSTRUCTION FORM IN THE ENVELOPE PROVIDED TO KAREN WELLE AT
MAIL DROP 1316.
