Item 2.02 Results of Operations and Financial Condition.
On May 5, 2021, Cerner Corporation ("Cerner") announced that it had released its
financial results for the first quarter ended March 31, 2021. A copy of the full
text of the related press release, which is posted on the Investor Relations
section of www.cerner.com under News & Events - Financial Releases, is furnished
as Exhibit 99.1 hereto and incorporated by reference into this Item 2.02.
The information in Exhibit 99.1 is being furnished and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise be subject to the liabilities of that section, nor shall
it be incorporated by reference into any registration statement or other filing
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, except as otherwise expressly stated in such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On April 30, 2021, Cerner and D. Brent Shafer, Cerner's Chief Executive Officer
("CEO") and Chairman of the Board of Directors (the "Board"), mutually agreed to
terms pursuant to which Mr. Shafer will separate and transition from Cerner. To
facilitate the transition in leadership, Mr. Shafer is expected to continue to
serve in his current roles during the search for his successor. Mr. Shafer will
cease to serve as CEO and Chairman of the Board on the earlier of the date the
CEO successor starts with Cerner and December 31, 2021 (the "Transition Date").
Following the Transition Date, Mr. Shafer will continue with Cerner in a
non-executive capacity as a Senior Advisor through the later of May 31, 2022,
and the one-year anniversary date of the Transition Date (the "Departure Date")
to assist with transitioning his duties and responsibilities to the CEO
successor. Mr. Shafer's departure is not the result of any dispute or
disagreement with Cerner, its Board, or its management, or any matter relating
to Cerner's operations, policies or practices.
On the same date, Mr. Shafer and Cerner entered into a letter agreement
memorializing the terms of his termination and transition to Senior Advisor. The
acceleration of Mr. Shafer's departure may qualify as a termination without
cause under his existing employment agreement. However, the parties have agreed
to reduce the severance benefits that would be payable to Mr. Shafer under his
employment agreement as discussed below. Pursuant to such agreement, including
among other matters Mr. Shafer's agreement to provide transition services, and,
in the case of compensation payable following the Transition Date, subject to
his execution and non-revocation of a Transition Agreement containing a general
mutual release of claims, Mr. Shafer will be entitled to the following
compensation:
•For Service as CEO through the Transition Date. Mr. Shafer will continue to:
(i) receive his annual current base salary; (ii) be eligible to receive his
previously disclosed short-term cash incentive award under the Cerner
Corporation 2018 Performance Compensation Plan (as amended, the "CPP") for the
2021 fiscal year based on actual performance, payable in accordance with
Cerner's regular CPP payment schedule and otherwise on the previously disclosed
terms; and (iii) be entitled to a cash payment equal to the difference between
his previously disclosed personal use value of Cerner's corporate aircraft and
the actual value of his personal use through the Transition Date. Mr. Shafer
will not receive the previously disclosed long-term equity incentive award for
fiscal year 2021, which was to consist of 50% performance-based restricted stock
units ("RSUs") and 50% time-based RSUs with an aggregate grant date value of
$8,500,000. In lieu of this award, Mr. Shafer will receive an equity award for
fiscal year 2021 consisting of time-based RSUs with an aggregate grant date
value of $2,500,000 that will vest on the one-year anniversary of the grant
date, subject to early vesting as provided in the letter agreement. Such award
is expected to be granted on May 7, 2021.
•For Service as Senior Advisor following the Transition Date and through the
Departure Date. Mr. Shafer will continue to receive his annual current base
salary through the Departure Date. He will not be eligible for a 2022 merit
increase to his base salary. Upon the effective date of the Transition
Agreement, Cerner will: (i) fully vest each award of Cerner common stock (each a
"Cerner Equity Award") that is an outstanding unvested stock option, which would
have vested by its terms on or before the Departure Date; and (ii) fully vest
each Cerner Equity Award that is an outstanding unvested time-based RSU that
would
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have vested by its terms on or before the Departure Date. All other Cerner
Equity Awards that Mr. Shafer holds on the Transition Date (which, at such time,
will all be unvested performance-based vesting Cerner Equity Awards) will remain
eligible to vest in accordance with the applicable award agreements.
In addition, Mr. Shafer will continue to be eligible to receive benefits through
the Departure Date, in accordance with the terms of Cerner's benefit programs
applicable to all other similarly situated associates. Cerner will pay him in
lump sum following the Departure Date, the value of two years of the difference
between his COBRA coverage premium and what he was paying for his and his
dependents' health, vision and dental coverage at the Departure Date.
Cerner is not providing severance under the terms of Mr. Shafer's employment
agreement. Instead, the letter agreement supersedes and replaces any benefits or
payments that Mr. Shafer might otherwise be eligible to receive in connection
with his termination under his existing employment agreement. In view of the
duration of Mr. Shafer's service and expected future tenure, the parties agreed
to benefits and payments in the letter agreement that are substantially less
than those that Mr. Shafer may have otherwise been entitled to under his
existing employment agreement if his termination was treated as a termination
without cause. Mr. Shafer's existing employment agreement (excluding any right
to any severance payment or severance benefit thereunder) otherwise remains in
full force and effect, and Mr. Shafer continues to be subject to the
non-competition, non-solicitation and confidentiality obligations thereunder.
The foregoing description of the letter agreement (including the Transition
Agreement attached thereto) with Mr. Shafer does not purport to be complete and
is qualified in its entirety by reference to the full text of such letter
agreement (and the Transition Agreement attached thereto). Cerner will file the
letter agreement (and attached Transition Agreement) as an exhibit to a
subsequent periodic report filed with the U.S. Securities and Exchange
Commission.
Item 8.01 Other Events.
On May 5, 2021, Cerner announced that its Board authorized a new share
repurchase program pursuant to which Cerner may repurchase shares of its common
stock in the open market, by block purchase, in privately-negotiated
transactions or through other transactions managed by broker-dealers, or any
combination thereof, at an aggregate purchase price of up to $3.75 billion. The
timing and amount of any share repurchases will be determined by Cerner's
management based on market conditions and other factors. The program will expire
December 31, 2023.
The new share repurchase program is incremental to Cerner's current share
repurchase program, initially approved by the Board on May 23, 2017, and most
recently amended on December 12, 2019, under which $465 million remained
available for repurchase as of May 4, 2021.
Item 9.01 Financial Statements and Exhibits.
d) Exhibits
Exhibit
Number Description
99.1 Press Release of Cerner Corporation dated May 5 , 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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