April 19, 1999
Dear Shareholder:
The Annual Meeting of Shareholders of Cerner Corporation (the "Company")
will be held at 10:00 a.m., local time, on May 28, 1999, at the Cerner
Associate Center, located on the Cerner campus at 2901 Rockcreek Parkway,
North Kansas City, Missouri 64117. 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 John C. Danforth, Thomas A. McDonnell
and Neal L. Patterson, the present Class I Directors, to stand for election
as Class I Directors for a term ending at the 2002 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 the appointment of KPMG LLP as independent public accountants of
the Company for 1999. The Board of Directors recommends that you vote for
the approval of KPMG 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 postage prepaid envelope
will help ensure that as many shares as possible are represented.
Very truly yours,
CERNER CORPORATION
/s/Neal L. Patterson
Neal L. Patterson
Chairman of the Board of Directors,
Chief Executive Officer and President
Enclosures
<PAGE>
CERNER CORPORATION
2800 Rockcreek Parkway
North Kansas City, Missouri 64117
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Cerner Corporation, a Delaware corporation (the "Company"), will be held at
the Cerner Associate Center, located on the Cerner campus at 2901 Rockcreek
Parkway, North Kansas City, Missouri 64117, on May 28, 1999, at 10:00 a.m.,
local time, and thereafter as it may from time to time be adjourned, for
the following purposes:
a. to elect three Class I Directors to serve for a three year term
until the 2002 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 LLP as the Company's independent auditors for the
fiscal year ending January 1, 2000; 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 April 2, 1999 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
North Kansas City, Missouri
April 19, 1999
<PAGE>
CERNER CORPORATION
2800 Rockcreek Parkway
North 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 28, 1999, commencing at 10:00 a.m., local
time, at the Cerner Associate Center, located on the Cerner campus at 2901
Rockcreek Parkway, North Kansas City, Missouri 64117, 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
April 2, 1999, on or about April 19, 1999.
Only the holders of record of shares of Common Stock as of the close
of business on April 2, 1999 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 April 2, 1999, there were outstanding and entitled to vote a
total of 33,600,380 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 John C. Danforth, Thomas A. McDonnell and Neal L. Patterson
as Class I Directors to serve for a three year term until the 2002 Annual
Meeting of Shareholders and until their respective successors are duly
elected and qualified;
b. to ratify and approve the selection of KPMG LLP as the Company's
independent auditors for the fiscal year ending January 1, 2000; 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 15, 1999 (unless
otherwise indicated below), with respect to the beneficial ownership of
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 Beneficial Percent of Shares
Name and Address of Beneficial Owner Ownership Outstanding
- ------------------------------------ ----------------- -----------------
<S> <C> <C>
Neal L. Patterson....................... 3,575,071 (1) 10.61%
Clifford W. Illig....................... 3,594,408 (2) 10.68%
Putnam Investments, Inc................. 2,123,854 (3) 6.33%
Waddell & Reed Financial, Inc........... 1,761,200 (4) 5.25%
Jeffrey C. Reene........................ 114,112 *
Gerald E. Bisbee, Jr.................... 81,400 *
Michael E. Herman....................... 77,000 (5) *
Jack A. Newman, Jr...................... 51,133 *
Thomas C. Tinstman, M.D................. 47,927 *
Paul M. Black........................... 35,999 *
John C. Danforth........................ 29,300 *
Thomas A. McDonnell..................... 24,000 *
All directors and executive officers,
as a group (19 persons)................. 7,884,975 23.07%
____________________
</TABLE>
* Less than one percent
(1) Includes 216,000 shares held in trust for minor children with Jeanne
Lillig-Patterson, wife of Neal L. Patterson, serving as trustee and
30,000 shares for which Mr. Patterson has shared voting and dispositive
power. Excludes 46,669 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 195,667 shares held in trust for minor children with Bonne A.
Illig, wife of Clifford W. Illig, serving as trustee and 68,828 shares for
which Mr. Illig has shared voting and dispositive power. The address for
Mr. Illig is Cerner Corporation, 2800 Rockcreek Parkway, Kansas City,
Missouri 64117.
(3) According to a Schedule 13G, dated February 17, 1999 and filed by Putnam
Investments, Inc. and Marsh & McLennan, Companies, Inc., Putnam
Investments, Inc. and Putnam Investment Management, Inc. have shared
dispositive power with
<PAGE> 2
respect to 2,123,854 shares of common stock. The address for Putnam
Investments, Inc. and Putnam Investment Management, Inc. is One Post
Office Square, Boston, Massachusetts 02109.
(4) According to a Schedule 13G, dated February 12, 1999 and filed by
Waddell & Reed Financial, Inc., Waddell & Reed Investment Management
Company, registered under Section 203 of the Investment Advisor's Act of
1940, has sole dispositive and voting power with respect to 1,761,200
shares of Common Stock. The address for Waddell & Reed Financial, Inc. and
Waddell & Reed Investment Management Company is 6300 Lamar Avenue, Overland
Park, Kansas 66202.
(5) Excludes 865 shares owned by Mr. Herman's spouse and 250 shares owned
by his son as to which Mr. Herman disclaims beneficial ownership.
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 John C. Danforth, Thomas A. McDonnell and Neal L.
Patterson, whose terms expire at the Annual Meeting, as Class I Directors
to serve for a three year term until the 2002 Annual Meeting of
Shareholders, and until their respective successors are duly elected and
qualified.
The Directors in Class II (Clifford W. Illig and Thomas C. Tinstman,
M.D.) 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 2000 and 2001, respectively. No shareholder
may vote in person or by proxy for greater than three 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 John C.
Danforth, Thomas A. McDonnell and Neal L. Patterson as the Class I
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.
<PAGE> 3
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
---- --- ---------------
<S> <C> <C>
To Serve in Office Until 1999 (Class I)
Neal L. Patterson (1) 49 1980/1999
Thomas A. McDonnell (2)(3) 53 1996/1999
John C. Danforth (2)(3) 62 1996/1999
To Serve in Office Until 2000 (Class II)
Clifford W. Illig (1) 48 1980/2000
Thomas C. Tinstman, M.D. 54 1989/2000
To Serve in Office Until 2001 (Class III)
Gerald E. Bisbee, Jr. (2)(3) 56 1988/2001
Michael E. Herman (1)(3) 57 1995/2001
____________________
</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 Chairman, President and Chief Executive
Officer of ReGen Biologics, Inc., a company which designs, engineers and
manufactures tissue engineered products for orthopedic applications. He
has been a director of Apache Medical Systems, Inc. since December 1989.
He was Chairman and Chief Executive Officer of Apache Medical Systems from
December 1989 to December 1997. Apache Medical Systems, Inc. implements
software decision support systems for intensive care units. Mr. Bisbee has
served as a director of SG Pacific 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 and Agouron Pharmaceuticals, Inc.
Clifford W. Illig has been a Director of the Company for more than
five years. Mr. Illig served as Chief Operating Officer of the Company for
more than five years until October 1998 and as President of the Company for
more than five years until March 1999. Mr. Illig was appointed Vice
Chairman of the Board of Directors in March 1999.
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, 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. Mr.
Patterson was appointed President of the Company in March 1999.
<PAGE> 4
Thomas C. Tinstman, M.D. has been a Director of the Company since May
1989. In November, 1995 Dr. Tinstman became Senior Vice President and
Chief Medical Officer 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 1998, the Board of Directors held four
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 1998.
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 1998.
The Compensation Committee reviews and approves the Company's
compensation policies and practices, establishes compensation for directors
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 three times during
1998.
<PAGE> 5
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 2, 1999 exceeded $100,000:
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- ---------------------- All Other
Compensation
Fiscal Number of Stock ------------
Name and Principal Position Year Salary($) Bonus($) Options Granted ($) (1)
- --------------------------- ------ --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Neal L. Patterson 1998 386,539 126,564 25,000 660
Chairman of the Board of Directors, 1997 375,961 196,876 - 660
Chief Executive Officer and President 1996 350,000 90,000 - 660
Clifford W. Illig 1998 307,693 112,500 15,000 660
Vice Chairman of the Board of Directors 1997 299,519 175,000 - 660
1996 275,000 78,750 - 660
Jack A. Newman, Jr. 1998 369,230 131,094 - 660
Executive Vice President 1997 350,520 198,631 25,000 660
1996 317,596 131,250 150,000 660
Paul M. Black 1998 203,847 135,417 29,940 660
Senior Vice President and 1997 188,846 230,136 29,940 660
and Chief Sales Officer 1996 130,058 101,008 10,120 660
Jeffrey C. Reene (2) 1998 207,693 101,547 48,800 660
Executive Vice President 1997 193,621 170,000 - 660
1996 158,325 75,755 - 660
____________________
</TABLE>
(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 $60, being the insurance premiums paid by the
Company with respect to term life insurance for each named individual.
(2) Jeffrey C. Reene resigned his position with the Company effective March
22, 1999.
<PAGE> 6
Stock Option Plans
The following table reports information with respect to the award of
stock options during the year ended January 2, 1999 for each of the named
executive officers in the Summary Compensation Table:
<TABLE>
Option Grants In Last Fiscal Year
Number of Percent of
securities total options
underlying granted to Exercise
options employees price Expiration Grant date
Name granted (#) in fiscal year ($/Sh) date present value ($)
- ---- ----------- --------------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Neal L. Patterson (1)(3) 25,000 1.3 28.25 05/22/08 483,558
Clifford W. Illig (1)(3) 15,000 .8 28.25 05/22/08 290,135
Jack A. Newman, Jr. - - - - -
Paul M. Black (2)(3) 29,940 1.5 24.00 02/10/13 388,219
Jeffrey C. Reene (1)(3) 4,000 .2 28.25 05/22/08 77,369
(2)(3) 44,800 2.3 25.00 06/01/10 714,169
____________________
</TABLE>
(1) These options were issued at a price that was equal to the fair market
value of the Company's Common Stock on the date of grant. The options
become exercisable seven years from the date of grant or upon the earlier
of attainment of certain long-term stock price goals, assuming the optionee
remains an employee of the Company.
(2) These options were issued at a price that exceeded the fair market
value of the Company's Common Stock on the date of grant. The options
become exercisable in varying amounts per year, assuming the optionee
remains an employee of the Company, over a period of ten years from the
date of grant.
(3) The grant date present value was calculated using the Black-Scholes
option pricing model with the following weighted average assumptions:
expected dividend yield of zero percent; expected stock volatility of
58.5%; risk-free interest rate of 5.0%; and expected years until
exercise of eight years for each option.
<PAGE> 7
The following table reports information with respect to the January 2,
1999 option values for each of the named executive officers in the Summary
Compensation Table:
<TABLE>
Aggregated Option Exercises In Last Fiscal Year and January 2, 1999
Option Values
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
January 2, 1999 In-the-Money Options at
# January 2, 1999
Shares ----------------- -----------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable (1) Unexercisable (1)
- ---- ----------- ----------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Neal L. Patterson - - 108,000/277,000 0/0
Clifford W. Illig - - 72,000/183,000 0/0
Jack A. Newman, Jr. - - 40,000/135,000 263,750/967,500
Paul M. Black - - 15,018/75,232 194,837/636,500
Jeffrey C. Reene - - 0/48,800 0/78,400
____________________
</TABLE>
(1) The numbers in the column headed Number of Securities Underlying
Unexercised Options at January 2, 1999 and the dollar amounts in the
column headed Value of Unexercised In-the-Money Options at January 2,
1999 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 2, 1999, of such shares of
Common Stock and the exercise price of the options.
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 1998, payments, excluding expense reimbursements, were $13,000 to
Mr. Bisbee, $12,000 to Mr. Herman, $13,000 to Mr. McDonnell, and $10,500 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.
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 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 (in some
instances payable by the award of restricted stock of the Company) based
upon incentive plans adopted each year by
<PAGE> 8
the Compensation Committee.
Total annual cash compensation varies each year based on changes in base
salary and in the cash bonus. The incentive plans for executive officers
other than Mr. Patterson 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, in some instances, by a subjective
analysis of the executive's overall performance. For Mr. Patterson the
sole goal during the 1998 plan year consisted of earnings per share.
Attainment by Mr. Patterson of this goal is done on an objective basis
without any subjective analysis of his overall performance. Under the
incentive plans, 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 1998
the Company's executive officers, as a group, earned approximately 53
percent of the targeted incentives 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 1998, the Compensation
Committee considered, among other matters, the Company's performance during
1997 and the compensation levels for 1996 and 1997 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 2, 1999
consisted of $386,539 in salary and $126,564 in payments earned under the
Company's incentive plans. Mr. Patterson earned approximately 32 percent
of the targeted incentives available under the incentive plans during 1998.
In determining Mr. Patterson's salary and potential incentive plan payments
for 1998, the Compensation Committee considered, among other matters, the
Company's performance during 1997 and the compensation of the chief
executive officer for 1996 and 1997 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:
Gerald E. Bisbee, Jr.
John C. Danforth
Michael E. Herman
Thomas A. McDonnell
<PAGE> 9
Company Performance
The following graph presents a comparison for the five-year period
ended December 31, 1998 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 5 year Cumulative Total Return
Among Cerner Corporation,
Nasdaq Computer and Data Processing Index and
Nasdaq Stock Market (US Companies)
<CAPTION>
Measurement Period Nasdaq Computer and Nasdaq Stock Market
(Fiscal Year Covered) Cerner Corporation Data Processing Index (US Companies)
--------------------- ------------------ --------------------- -------------------
<S> <C> <C> <C>
Measurement Pt-12/31/93 $100.00 $100.00 $100.00
Measurement Pt-12/30/94 $101.40 $121.40 $ 97.80
Measurement Pt-12/29/95 $ 94.30 $184.90 $138.30
Measurement Pt-12/31/96 $ 71.30 $228.20 $170.00
Measurement Pt-12/31/97 $ 97.10 $280.40 $208.50
Measurement Pt-12/31/98 $123.00 $500.60 $293.80
</TABLE>
The above comparison assumes $100 was invested on December 31, 1993 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.
<PAGE> 10
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of KPMG LLP as the
Company's independent certified public accountants to audit the financial
statements of the Company for the fiscal year ending January 1, 2000. KPMG
LLP has served as auditors for the Company since 1983. It is expected that
representatives of KPMG 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 LLP as independent public
accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL AND
RATIFICATION OF THE SELECTION OF KPMG 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 lease rate is believed to
approximate fair market value for this type of aircraft. During 1997 and
1998, respectively, the Company paid an aggregate of $378,844 and
$457,206 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 1999.
During 1998, the Company engaged Gerald E. Bisbee, Jr. to provide
consulting services in connection with the operations of a newly acquired
subsidiary of the Company. Mr. Bisbee was paid $118,500 and was reimbursed
$60,606 for his travel and living expenses while performing these services.
The Company loaned to Jack A. Newman, Jr., Robert C. Dieterle, Glenn
P. Tobin and Marvin G. Pember, executive officers of the Company, $100,000,
$135,000, $100,000 and $200,000, respectively, when each of them became
employees of the Company. With the exception of Mr. Dieterle, who has made
his first installment payment, such loans remain outstanding but are not
due. The loans to Mr. Newman and Mr. Dieterle are interest-free and the
loan to Mr. Tobin bears interest at the rate of three percent (3%) per
annum. The loan to Mr. Pember is interest-free for the first five (5)
years and thereafter bears interest at the rate of three percent (3%).
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 2, 1999, 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 2, 1999, is enclosed with this Proxy Statement.
<PAGE> 11
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 2000 Annual Meeting of Shareholders must be received
by the Company no later than December 18, 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.
<PAGE> 12
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 $4,000, 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
North Kansas City, Missouri
April 19, 1999
<PAGE> 13
CERNER CORPORATION
FOUNDATIONS RETIREMENT PLAN
TO: All Participants
The Annual Meeting of the Shareholders of Cerner
Corporation (the "Company") will be held at the Cerner
Associate Center on the Cerner campus, at 2901 Rockcreek
Parkway, North Kansas City, Missouri 64117, on May 28, 1999,
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 April 2, 1999.
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 Vivian Vaughan of Cerner
Corporation, Mail Drop WO131, no later than May 17, 1999.
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 Vivian Vaughan at Mail Drop WO131.
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 28, 1999
------------
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 28, 1999, at 10:00 a.m., local
time, at the Cerner Associate Center on the Cerner campus
located at 2901 Rockcreek Parkway, North Kansas City,
Missouri 64117.
I instruct the Trustee to vote all of my shares of
Common Stock as follows:
1. The election of John C. Danforth, Thomas A. McDonnell and
Neal L. Patterson 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 LLP
as the independent auditors of Cerner Corporation for
the fiscal year ending January 1, 2000.
FOR AGAINST ABSTAIN
___ ___ ___
3. Considering and acting upon any other matters which may
properly come before the meeting or any adjournment
thereof.
<PAGE>
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:________________________, 1999
______________________________________
(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 VIVIAN VAUGHAN
AT MAIL DROP WO131.
<PAGE>
CERNER CORPORATION
2800 Rockcreek Parkway PROXY
Kansas City, Missouri 64117
- --------------------------------------------------------------------------------
This Proxy is for the 1999 Annual Meeting of Shareholders of Cerner
Corporation, a Delaware corporation, to be held May 28, 1999, at 10:00
a.m., local time, at the Cerner Associate Center, located on the Cerner
Campus at 2901 Rockcreek Parkway, North Kansas City, Missouri 64117.
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 1999 Annual Meeting of Shareholders
of Cerner Corporation to be held on May 28, 1999, 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 AND 2.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
_______________________________________________________
1. Election of Directors: To withhold authority to vote for any nominee(s), mark
the
John C. Danforth, Thomas A. McDonnell and Neal L. Patterson
"FOR" box and write the name of each such nominee
with respect to which you intend to withhold authority
to
___ FOR all nominees ___ WITHHOLD AUTHORITY to vote for all nominees 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.
- ------------------------------------------------------------------------- -------------------------------------------------------
</TABLE>
2. Ratification and approval of the selection of KPMG LLP as the
independent auditors of Cerner Corporation for the fiscal year ending
January 1, 2000.
_____ 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 and 2.
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 19, 1999.
DATE____________________________________
________________________________________
(Signature)
________________________________________
Signature(s)
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
IN THE ENVELOPE PROVIDED.
If you expect to attend the 1999 Annual
Meeting of Shareholders please check
this box.
------------
