CERNER Cerner Corporation
2800 Rockcreek Parkway
Kansas City, MO
64117-2551
(816)221-1024
(816)474-1742 Fax
April 17, 1998
Dear Shareholder:
The Annual Meeting of Shareholders of Cerner Corporation (the
"Company") will be held at 10:00 a.m., local time, on May 22,
1998, 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 Gerald E. Bisbee, Jr. and
Michael E. Herman, the present Class III Directors, to stand for
election as Class III Directors for a term ending at the 2001
Annual Meeting of Shareholders. 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 Stock Option Plan D and
the appointment of KPMG Peat Marwick LLP as independent public
accountants of the Company for 1998. The Board of Directors
recommends that you vote for the amendment to Stock Option Plan D
and 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
/s/Clifford W. Illig
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 22, 1998
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
22,1998, 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 III Directors to serve for a three year
term until the 2001 Annual Meeting of Shareholders and until
their respective successors are duly elected and qualified;
b. To amend Stock Option Plan D by increasing the number
of shares subject to the Plan from 2,600,000 to 4,600,000.
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 January 2,
1999; 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 27, 1998 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/Randy D. Sims
Randy D. Sims
Secretary
<PAGE>
Kansas City, Missouri
April 17, 1998
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 22, 1998, 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 27, 1998, on or about April 17, 1998.
Only the holders of record of shares of Common Stock as of
the close of business on March 27, 1998 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 27,
1998, there were outstanding and entitled to vote a total of
32,711,541 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 Gerald E. Bisbee, Jr. and Michael E. Herman as
Class III Directors to serve for a three year term until the 2001
Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified;
b. To amend Stock Option Plan D to increase the number
of shares of Common Stock of the Company subject to the
Plan from 2,600,000 to 4,600,000.
c. to ratify and approve the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending January 2, 1999; 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 2, 1998
(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>
Amount and Nature
of BeneficialPercent of Shares
<CAPTION>
Name and Address of Beneficial Owner Ownership Outstanding
<S> <C> <C>
Neal L. Patterson................. 3,522,908 (1) 10.77%
Clifford W. Illig................. 3,566,499 (2) 10.91%
AMVESCAP PLC ..................... 2,922,400 (3) 8.95%
Jeffrey C. Reene.................. 113,966 *
Gerald E. Bisbee, Jr.............. 81,400 (4) *
Michael E. Herman................. 59,000 (5) *
Alan D. Dietrich.................. 50,376 (6) *
Thomas C. Tinstman, M.D........... 37,860 (7) *
Jack A. Newman, Jr................ 33,151 (8) *
John C. Danforth.................. 21,300 (9) *
Thomas A. McDonnell............... 16,000 (10) *
All directors and executive officers,
as a group (15 persons).......... 7,595,967 23.02%
</TABLE>
____________________
* Less than one percent
(1)Includes 72,000 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 30,000 shares, which Mr.
Patterson gifted to a charitable foundation, for which he has
shared voting and dispositive power. Excludes 46,568 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 48,000 shares issuable under presently exercisable
stock options, 195,667 shares held in trust for minor children
with Bonne A. Illig, wife of Clifford W. Illig, serving as
trustee and 75,418 shares, which Mr. Illig gifted 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 February 9, 1998, and filed
by AMVESCAP PLC, AMVESCAP PLC has shared dispositive and voting
power with respect to 2,922,400 shares of Common Stock.
AMVESCAP PLC is a Parent Holding Company in accordance with Rule
13d-1(b) (ii) (G). The subsidiaries which acquired the Common
Stock being reported by the holding company are AVZ, Inc., AIM
Management Group, Inc., AMVESCAP Group Services, Inc., INVESCO,
Inc., and INVESCO North American Holdings, Inc. The address for
AMVESCAP PLC is 11 Devonshire Square, London EC2M 4 YR, England.
(4)Includes 80,000 shares issuable under presently exercisable
stock options.
(5)Includes 24,000 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 and 20,000 shares held in the Michael E.
Herman Revocable Trust. Excludes 1,850 shares owned by his
spouse and 570 shares owned by his son as to which Mr. Herman
disclaims beneficial ownership.
(6)Includes 17,000 shares issuable under presently exercisable
stock options.
(7)Includes 15,500 shares issuable under presently exercisable
stock options.
(8)Includes 25,000 shares issuable under presently exercisable
stock options.
(9)Includes 16,000 shares issuable under stock options
which are exercisable on May 14, 1998.
(10)Includes 16,000 shares issuable under stock options
which are exercisable on May 14, 1998.
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. The authorized number of directors is
seven.
The Board of Directors intends to present for action at the
Annual Meeting the election of Gerald E. Bisbee, Jr. and Michael
E. Herman, whose terms expire at the Annual Meeting, as Class III
Directors to serve for a three year term until the 2001 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 II
(Clifford W. Illig and Thomas C. Tinstman, M.D.) have been
elected to terms expiring at the time of the Annual Meetings of
Shareholders in 1999 and 2000, 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 Gerald E. Bisbee, Jr. and Michael E. Herman as the
Class III 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
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>
Director Since/
Name Age Term Expires
<CAPTION>
<S> <C> <C>
To Serve in Office Until 1998 (Class III)
Gerald E. Bisbee, Jr. (2) 55 1988/1998
Michael E. Herman (1)(3) 56 1995/1998
To Serve in Office Until 1999 (Class I)
Neal L. Patterson (1) 48 1980/1999
Thomas A. McDonnell (2)(3) 52 1996/1999
John C. Danforth (2)(3) 61 1996/1999
To Serve in Office Until 2000 (Class II)
Clifford W. Illig (1) 47 1980/2000
Thomas C. Tinstman, M.D. 53 1989/2000
</TABLE>
____________________
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
Gerald E. Bisbee, Jr. has been a Director of the Company
since February 1988. Mr. Bisbee is President of The Bisbee
Group, a consulting firm. He has been a director of Apache
Medical Systems, Inc. since December 1989. He was Chief
Executive Officer of Apache Medical Systems from December 1989 to
December 1997. 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 has been a Director, President and Chief
Operating Officer for more than five years.
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.,
Computer Sciences Corporation, and Euronet Services, Inc.
Neal L. Patterson has been Chairman of the Board of
Directors and Chief Executive Officer of the Company for more
than five years.
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 1997, the Board of Directors
held three meetings.
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 Executive Committee did not meet during
1997.
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 Audit
Committee met three times during 1997.
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 Compensation Committee met twice
during 1997.
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 January 3,
1998 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 1997 375,961 196,876 660
Chairman of the Board of 1996 350,000 90,000 660
Directors and Chief 1995 339,744 123,750 654
Executive Officer
Jack A. Newman, Jr. (2) 1997 350,520 198,631 660
Executive Vice President 1996 317,596 131,250 660
1995 - - -
Clifford W. Illig 1997 299,519 175,000 660
President and Chief 1996 275,000 78,750 660
Operating Officer 1995 275,513 116,250 654
Alan D. Dietrich 1997 172,115 192,990 660
Senior Vice President 1996 135,023 86,818 660
1995 117,694 58,017 654
Jeffrey C. Reene 1997 193,621 170,000 660
Executive Vice President 1996 158,325 75,755 660
1995 156,450 75,525 654
<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 $60, being the
insurance premiums paid by the Company with respect to term
life insurance for each named individual.
(2) Mr. Newman became an executive officer of the Company on
January 2, 1996.
</TABLE>
Stock Option Plans
The following table reports information with respect to the
award of stock options during the year ended January 3, 1998 for
each of the named executive officers in the Summary Compensation
Table:
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Number of Percent of
Securities total options
underlying granted to Exercise
Options employees price Expiration Grant date
Name granted (#) in fiscal year ($/Sh) date present value ($)
- ---- ---------- -------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Neal L. Patterson -- -- -- -- --
Jack A. Newman, Jr. (1)(2) 25,000 1.6 15.00 02/24/22 240,914
Clifford W. Illig -- -- -- -- --
Alan D. Dietrich (1)(2) 20,000 1.3 15.00 02/24/22 192,731
Jeffrey C. Reene -- -- -- -- --
<FN>
____________________
(1)These options were issued at a price that exceeded the fair
market value of the Company's Common Stock on the date of
grant. The options become exercisable in varying amounts
per year, assuming the optionee remains an employee of the
Company, over a period of 10 years from the date of grant.
(2)The grant date present value was calculated using the Black-
Scholes option pricing model with the following weighted
average assumptions: expected dividend yield of zero
percent; expected stock volatility of 56.9%; risk-free
interest rate of 6.2%; and expected years until exercise of
eight years for each option.
</TABLE>
The following table reports information with respect to the
January 3, 1998 option values for each of the named executive
officers in the Summary Compensation Table:
<TABLE>
Aggregated Option Exercises In Last Fiscal Year and January 3, 1998
Option Values
<CAPTION>
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
January 3, 1998 In-the-Money Options at
Shares (#) January 3, 1998 ($)
--------------- -----------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable(1) Unexercisable (1)
- ----- ----------- ----------- ---------------- -----------------------
<C> <C> <C> <C> <C>
Neal L. Patterson - - 72,000/288,000 0/0
Jack A. Newman, Jr. - - 22,500/152,500 33,750/366,250
Clifford W. Illig - - 48,000/192,000 0/0
Alan D. Dietrich - - 11,000/ 49,000 103,813/413,688
Jeffrey C. Reene - - 0/0 0/0
<FN>
____________________
(1)The numbers in the column headed Number of Securities
Underlying Unexercised Options at January 3, 1998 and the
dollar amounts in the column headed Value of Unexercised In-
the-Money Options at January 3, 1998 reflect (i) the number
of shares of Common Stock into which options are exercisable
and unexercisable and (ii) the difference between the fair
market value on January 3, 1998, 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 1997, payments, excluding
expense reimbursements, were $9,000 to Mr. Bisbee, $6,000 to Mr.
Herman, $10,000 to Mr. McDonnell, and $10,000 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 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 Board of Directors comprised the
Stock Option Committee for Stock Option Plan D during 1997 and
Mr. Illig and Mr. Patterson comprised the Stock Option Committee
for Stock Option Plan E during 1997.
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 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 sole goal
during the 1997 plan year consisted of earnings per share.
Attainment by Messrs. Patterson and Illig of this goal 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 1997
the Company's executive officers, as a group, earned
approximately 93 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 1997, the
Compensation Committee considered, among other matters, the
Company's performance during 1996 and the compensation of the
five most highly compensated officers for 1995 and 1996 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 January
3, 1998 consisted of $375,961 in salary and $196,876 in payments
earned under the Company's incentive plan. Mr. Patterson earned
approximately 88 percent of the incentives available under the
incentive plan during 1997. In determining Mr. Patterson's salary
and potential incentive plan payments for 1997, the Compensation
Committee considered, among other matters, the Company's
performance during 1996 and the compensation of the chief
executive officer for 1995 and 1996 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.
Long-Term Incentive Compensation
The long-term incentive compensation for executive officers
consists of awards of stock options granted under the Company's
stock option plans typically upon their commencement of
employment with the Company or promotion to executive officer and
stock options granted during the employment as executive
officers. The Compensation Committee believes stock options
create an incentive for executive officers to contribute to
sustained, long-term growth in the Company's performance. 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 or greater than the fair market value
of the Common Stock on the date of the grant of the stock option.
Members of the Compensation Committee:
John C. Danforth
Michael E. Herman
Thomas A. McDonnell
Company Performance
The following graph presents a comparison for the five-year
period ended December 31, 1997 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) and the
Nasdaq Computer/Data Processing Group (as calculated by The
Center for Research in Security Prices):
<TABLE>
Comparison of Five Year Cumulative Return Among
Cerner Corporation, Nasdaq Computer and Data
Processing Index and Nasdaq Stock Market (US Companies)
<CAPTION>
Nasdaq Computer Nasdaq Stock
Measurement Period Cerner and Data Market
(Fiscal Year Covered) Corp. Processing Index (US Companies)
<S> <C> <C> <C>
Measurement Point-12/31/92 $100 $100 $100
FYE 12/31/93 $157.50 $105.80 $114.80
FYE 12/31/94 $159.70 $128.50 $112.20
FYE 12/31/95 $148.40 $195.70 $158.70
FYE 12/31/96 $112.20 $241.50 $195.20
FYE 12/31/97 $152.90 $296.70 $239.50
</TABLE>
The above comparison assumes $100 was invested on December
31, 1992 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.
AMENDMENT OF STOCK OPTION PLAN D
The Board of Directors of the Company is recommending to the
shareholders an amendment to Stock Option Plan D which would
increase the number of shares of Common Stock for which options
could be granted under Stock Option Plan D from 2,600,000 to
4,600,000. At March 2, 1998, there were outstanding options to
acquire 4,408,857 shares of the Company's Common Stock under the
Company's stock option plans. At March 2, 1998, the Company could
have issued options for an aggregate of 380,034 additional shares
of Common Stock under the Company's stock option plans.
The Board of Directors believes that the use of relatively
long vesting schedules combined with long option expiration dates
facilitates the Company's hiring and retaining good employees and
meets the Company's goal of establishing a broad based, long-term
orientation for the Company's high performance employees. Since
the beginning of 1995 the Company has granted options to purchase
an aggregate of 4,145,951 shares of Common Stock of the Company
under the Company's stock option plans. Approximately 90 percent
of the options had vesting schedules of ten years or more at the
time of grant and the Company currently intends to continue
issuing options with long vesting schedules. The Company believes
that the combination of long vesting schedules and the
requirement that the optionee be employed by the Company at the
time of exercise will cause a smaller percentage of the option to
be exercised than would be the case for options with shorter
vesting schedules.
Under Stock Option Plan D stock options may be granted to
employees, directors, advisors and consultants to the Company and
any of its subsidiaries.
Description of Stock Option Plan D
Shares Subject to Options. Currently a maximum of 2,600,000
shares of Common Stock may be issued upon exercise of options
under Stock Option Plan D. If the amendment is approved a
maximum of 4,600,000 shares of Common Stock may be issued upon
exercise of options granted under Stock Option Plan D. Options
for 2,425,908 shares were outstanding under Stock Option Plan D
as of March 2, 1998. As of March 2, 1998 the market value of the
shares for which options could be issued under Stock Option Plan
D was $3,590,648. If the amendment is approved, the market value
of the shares for which options could be granted under Stock
Option Plan D will increase to $44,840,648, based on the March 2,
1998 valuation. The number of shares subject to Stock Option
Plan D and any outstanding options and the option price of
outstanding options may be adjusted in the event of any stock
dividend, stock split, reorganization, merger, consolidation,
liquidation or any combination or exchange of shares of Common
Stock.
Administration. Stock Option Plan D is administered by the a
Stock Option Committee consisting of not less than two nor more
than five members of the Board of Directors who are appointed by
the Board (the " Committee"). Subject to the provisions of
Stock Option Plan D, the Committee has sole authority to
determine who will be granted options, the price at which the
options may be exercised, when the options will be granted, the
time or times when options will be exercisable, the duration of
the options and the form of the option agreement; provided
however that the Board of Directors must approve any grant of
more than 100,000 shares to an individual.
Option Price. The option price of each option is determined
by the Committee. All outstanding options have been issued at or
above the fair market value of the shares subject to the options
on the date of grant. The Company expects to continue to follow
this pricing procedure. Options may be exercised by paying the
stock option price in cash, with shares of Common Stock or by
surrender of options having a net value equal to the exercise
price.
Eligible Option Holders. Subject to selection by the
Committee, any employee, director, advisor or consultant to the
Company or any of its subsidiaries is eligible to be granted one
or more options pursuant to Stock Option Plan D.
Maximum Option Term. Options may be granted for whatever
period of time is determined by the Committee.
Nontransferability. No option is transferable by the
optionee except by will or by the laws of descent or
distribution.
Exercise of Options. Options under Stock Option Plan D are
exercisable at the times and on the terms and conditions set
forth in the option agreement authorized by the Committee.
Termination of Options. Options will terminate concurrently
with termination of employment for any reason other than death.
Amendments. The Committee may amend, modify or terminate
Stock Option Plan D without the approval of shareholders, except
that shareholder approval is required for any amendment which
would (i) increase the maximum number of shares of Common Stock
subject to Stock Option Plan D, except adjustments made by reason
of stock splits, stock dividends or made upon changes in
capitalization, (ii) alter the eligibility requirements for the
optionees under Stock Option Plan D or (iii) extend the duration
of Stock Option Plan D.
Duration. No option may be granted under Stock Option Plan
D after January 1, 2005.
Federal Income Tax Consequences. In general, the grant of an
option under Stock Option Plan D does not result in any Federal
income tax consequences to the Company or to the optionee. The
exercise by an optionee of an option under Stock Option Plan D
will generally result in Federal income tax consequences to the
optionee. The excess, if any, of the fair market value of the
Common Stock received upon the exercise of the option at the time
of exercise over the amount paid for such Common Stock is
included in the taxable income of the optionee for the year in
which the option is exercised. Upon exercise of an option by an
optionee, the Company may deduct an amount equal to the amount
included in the optionee's ordinary income, provided the Company
satisfies applicable information reporting and income and payroll
tax withholding requirements.
Miscellaneous Information. To the extent that any option
remains unexercised upon its termination or expiration, the
shares subject to such option will again be available for the
granting of other options under Stock Option Plan D.
Stock Option Plan D does not contain any provisions
requiring an optionee to hold the optioned stock for any period
after exercise of the option. However, such a provision may be
included in any option granted by the Committee.
Stock Option Plan D Benefits
All current directors of the Company, all current executive
officers of the Company (including those that are directors) and
all employees of the Company are eligible to receive options
under Stock Option Plan D. The dollar value and number of
options which will be received by the directors and the five
individuals named in the Summary Compensation Table, all current
executive officers and all employees is not currently
determinable due to the discretionary nature of Stock Option Plan
D. Stock Option Plan D provides that all employees of the
Company are eligible to receive Stock Option Plan D benefits and
that the Committee has sole authority to determine which
employees will be granted options under Stock Option Plan D. As
of the date hereof, the Committee has not decided which
additional employees will be granted such options, although under
the compensation program currently being employed by the Company
it should be expected that most if not all of the employees of
the Company that are considered to be high performance employees,
including executive officers of the Company, will be rewarded
with the grant of additional stock options.
The affirmative vote of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required to
approve the amendment to Stock Option Plan D.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND STOCK OPTION PLAN D.
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 2, 1999. 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 1996 and 1997, respectively, the Company paid
an aggregate of $370,562 and $378,844 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. The Company intends to
continue the use of the airplane in 1998.
The Company has engaged Gerald E. Bisbee, Jr. to provide
consulting services for up to 90 days in connection with the
operations of a subsidiary of the Company. Mr. Bisbee will be
paid $1,200 per day plus expenses when he is on site. The total
of Mr. Bisbee's consulting fees plus expenses is capped at
$100,000.
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 January 3, 1998, 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 January 3, 1998, 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 1999 Annual Meeting of
Shareholders must be received by the Company no later than
January 31, 1999 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.
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 $5,000, 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,
/s/Randy D. Sims
Randy D. Sims
Secretary
Kansas City, Missouri
April 17, 1998
1998 Proxy Card
CERNER CORPORATION
2800 Rockcreek Parkway PROXY
Kansas City, Missouri 64117
This Proxy is for the 1998 Annual Meeting of Shareholders of Cerner
Corporation, a Delaware corporation, to be held May 22, 1998, 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 1998 Annual Meeting of Shareholders
of Cerner Corporation to be held on May 22, 1998, 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.|
--------------------------------------------------------------------
1. Election of Directors: To withhold authority to vote
for any nominee(s), mark the "FOR"
Gerald E. Bisbee, Jr. and Micheal E. Herman 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.
-- --
| | FOR all nominees | |WITHHOLD AUTHORITY to vote for all nominees
-- --
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. Amend Stock Option Plan D by increasing the number of shares subject
to the Plan from 2,600,000 to 4,600,000.
-- -- --
| |FOR | |AGAINST | |ABSTAIN
-- -- --
3. Ratification and approval of the selection of KPMG Peat Marwick LLP as
the independent auditors of Cerner Corporation for the fiscal year ending
January 2, 1999.
-- -- --
| |FOR | |AGAINST | |ABSTAIN
-- -- --
(PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE)
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this
proxy will be voted "FOR" proposals 1, 2 and 3.
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 15, 1998.
DATE: ________________________
________________________
(Signature)
_________________________
Signature(s)
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
IN THE ENVELOPE PROVIDED.
If you expect to attend the
1998 Annual Meeting of
Shareholders please check
---
this box. | |
---
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 22, 1998, 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 27,
1998.
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 Nikki Zeitner 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 Nikki Zeitner 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 22, 1998
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 22, 1998, 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 Gerald E. Bisbee, Jr. and Michael E.
Herman 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. To amend Stock Option Plan D to increase the number of
shares of Common Stock of the Company subject to the Plan
from 2,600,000 to 4,600,000.
FOR AGAINST ABSTAIN
-- -- --
| | | | | |
-- -- --
3. Ratification and approval of the selection of KPMG Peat
Marwick LLP as the independent auditors of Cerner
Corporation for the fiscal year ending January 2, 1999.
FOR AGAINST ABSTAIN
-- -- --
| | | | | |
-- -- --
4. 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:__________________________, 1998
_____________________________________
(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 NIKKI ZEITNER
AT MAIL DROP 1316.
CERNER CORPORATION
NONQUALIFIED STOCK OPTION PLAN D
1. Purpose of Plan. The purpose of the Plan is to encourage
the employees and directors of Cerner Corporation (the "Company")
and its subsidiaries and consultants and advisors to the Company
and its subsidiaries to participate in the ownership of the
Company, and to provide additional incentive for such persons to
promote the success of its business through sharing in the future
growth of such business.
2. Effectiveness of Plan. The provisions of this Plan shall
become effective on the date the Plan is adopted by the Board of
Directors of the Company (the "Board of Directors"), and shall
govern all options granted hereunder. Nothing in this Plan shall
be construed as a modification of any provision of the Cerner
Corporation Incentive Stock Option Plan A, the Cerner Corporation
Incentive Stock Option Plan B or the Cerner Corporation Incentive
Stock Option Plan C.
3. Administration. This Plan shall be administered by a
committee of the Board of Directors consisting of not less than
two nor more than five members of the Board of Directors (the
"Committee") appointed by the members of the Board of Directors.
Subject to the terms, provisions and conditions of the Plan, the
Committee shall have exclusive authority (i) to select the
persons to whom options shall be granted, (ii) to determine the
number of shares subject to each option, (iii) to determine the
time or times when options will be granted, (iv) to determine the
option price of the shares subject to each option, (v) to
determine the time when each option may be exercised, (vi) to fix
such other provisions of each option agreement as the Committee
may deem necessary or desirable, consistent with the terms of
this Plan, and (vii) to determine all other questions relating to
the administration of this Plan; provided however, that any grant
of an option to one individual in excess of 100,000 shares shall
required approval of the Board of Directors.
4. Eligibility. Options to purchase shares of common stock of
the Company ("Cerner Common Stock") shall be granted under this
Plan only to directors and employees of the Company or of any of
its subsidiaries and to advisors and consultants to the Company
and any of its subsidiaries.
5. Shares Subject to the Plan. Options granted under this Plan
shall be granted solely with respect to shares of Cerner Common
Stock. Subject to any adjustments made pursuant to the
provisions of paragraph 10, the aggregate number of shares of
Cerner Common Stock which may be issued upon exercise of all the
options which may be granted under this Plan shall not exceed
4,600,000. If any option granted under this Plan shall expire or
terminate for any reason without having been exercised in full,
the unpurchased shares subject to such option shall be added to
the number of shares otherwise available for options which may be
granted in accordance with the terms of this Plan. The shares to
be delivered upon exercise of the options granted under this Plan
shall be made available, at the discretion of the Committee, from
either the authorized but unissued shares of Cerner Common Stock
or any treasury shares of Cerner Common Stock held by the
Company.
6. Option Agreement. Each option granted under this Plan shall
be evidenced by a nonqualified stock option agreement, which
shall be signed by an officer of the Company and by the employee
to whom the option is granted (the "optionee"). The terms of
said nonqualified stock option agreement shall be in accordance
with the provisions of this Plan, but it may include such other
provisions as may be approved by the Committee. The granting of
an option under this Plan shall be deemed to occur on the date on
which the nonqualified stock option agreement evidencing such
option is executed by the Company and the optionee. Each
nonqualified stock option agreement shall constitute a binding
contract between the Company and the optionee, and every
optionee, upon the execution of a nonqualified stock option
agreement, shall be bound by the terms and restrictions of this
Plan and such nonqualified stock option agreement.
7. Option Price. The price at which shares of Cerner Common
Stock may be purchased under an option granted pursuant to this
Plan shall be determined by the Committee.
8. Period and Exercise of Option.
(a) Period--The period during which each option granted
under this Plan may be exercised shall be fixed by the Committee
at the time such option is granted.
(b) Exercise--Any option granted under this Plan may be
exercised by the optionee (or such other person as the Committee
may determine), subject to designation by the Committee in the
stock option agreement, only by (i) delivering to the Company
written notice of the number of shares with respect to which he
is exercising his option right, (ii) paying in full the option
price of the purchased shares in cash or (iii) by delivery to the
Company of that number of shares of Cerner Common Stock having a
fair market value on the date of exercise equal to the sum of the
exercise price of the options to be exercised or (iv)
surrendering on the date of exercise that number of options
which, when multiplied by the excess of the fair market value of
the stock which is subject to the surrendered options on the date
of exercise over the exercise price for said options, results in
a product that is equal to the sum of the exercise price of the
remaining options being exercised. Subject to the limitations of
this Plan and the terms and conditions of the respective stock
option agreement, each option granted under this Plan shall be
exercisable in whole or in part at such time or times as the
Committee may specify in such stock option agreement.
(c) Delivery of certificates--As soon as practicable after
receipt by the Company of the notice described in subsection (b),
and of payment in full of the option price for all of the shares
being purchased pursuant to an option granted under this Plan, a
certificate or certificates representing such shares of stock
shall be registered in the name of the optionee and shall be
delivered to the optionee. However, no certificate for
fractional shares of stock shall be issued by the Company
notwithstanding any request therefor. Neither any optionee, nor
the legal representative, legatee or distributee of any optionee,
shall be deemed to be a holder of any shares of stock subject to
an option granted under this Plan unless and until the
certificate or certificates for such shares have been issued.
(d) Limitations on exercise--The Committee may impose such
limitations on the exercise of any specific nonqualified stock
option agreement as it deems appropriate.
9. Nontransferability of Options. No option granted under this
Plan shall be transferable or assignable by the optionee, other
than by will or by the laws of descent and distribution.
10. Adjustments Upon Changes in Capitalization. In the event of
any change in the capital structure of the Company, including but
not limited to a change resulting from a stock dividend, stock
split, reorganization, merger, consolidation, liquidation or any
combination or exchange of shares, the number of shares of Cerner
Common Stock subject to this Plan and the number of such shares
subject to each option granted hereunder shall be correspondingly
adjusted by the Committee. The option price for which shares of
Cerner Common Stock may be purchased pursuant to an option
granted under this Plan shall also be adjusted so that there will
be no change in the aggregate purchase price payable upon the
exercise of any option.
11. Amendment and Termination of Plan. No option shall be
granted pursuant to this Plan after January 1, 2005, on which
date this Plan will expire except as to options then outstanding,
which options shall remain in effect until they have been
exercised or have expired. The Committee may at any time before
such date amend, modify or terminate the Plan; provided, however,
that the Committee may not, without approval of the Shareholders
of the Company (i) increase the maximum number of shares of
Cerner Common Stock as to which options may be granted pursuant
to the Plan, (ii) alter the eligibility requirements for
optionees under the Plan or (iii) extend the duration of the
Nonqualified Plan. No amendment, modification or termination of
this Plan may adversely affect the rights of any optionee under
any then outstanding option granted hereunder without the consent
of such optionee.
12. Governing Law. This Plan and the rights of all persons
claiming hereunder shall be construed and determined in
accordance with the laws of the State of Missouri.
