Cerner Corporation (NASDAQ:CERN) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersItem 9.01 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective September 11, 2017, to approval of the Board of Directors of Cerner Corporation ("Cerner"), Cerner entered into Executive Severance Agreements (collectively, the "Agreements") with the following Cerner executives: Zane Burke, President; Marc Naughton, Executive Vice President and Chief Financial Officer; Mike Nill, Executive Vice President and Chief Operating Officer; and Jeffrey Townsend, Executive Vice President and Chief of Staff (each an "NEO" and, collectively, the "NEOs"). Cerner entered into the Agreements with the NEOs for the purpose of updating the employment arrangements with the NEOs to promote the retention of these NEOs to ensure continuity and stability in Cerner's business. Each of the Agreements supplements and amends their respective employment agreements with Cerner.
The Agreements include a contractual right to severance payments and benefits upon certain termination events as follows:
Termination by Cerner for Cause or on account of death or Disability or resignation by the NEO other than a Constructive Termination (before a Change in Control) or for Good Reason (after a Change in Control): If an NEO's employment is terminated by Cerner for Cause or on account of the NEO's death or Disability, the NEO will be entitled to: i) any accrued but unpaid base salary; ii) any owed reimbursements for unreimbursed business expenses; and iii) such employee benefits (including equity compensation or cash bonuses earned as of the termination date but not yet paid), if any, to which the NEO may be entitled under Cerner's employee benefit plans as of the NEO's termination date (the foregoing amounts described in clause i), ii) and iii) are collectively referred to as the "Accrued Amounts"). If an NEO resigns other than on account of a Constructive Termination (before a Change in Control) or for Good Reason (after a Change in Control), the NEO will be entitled to the Accrued Amounts; provided, that if the NEO resigns with fewer than 30 days' notice, or leaves employment prior to the 30-day notice period without Cerner's permission, the NEO will only be entitled to the Accrued Amounts through the date the NEO submits a notice of resignation.
Termination by Cerner other than for Cause or on account of death or Disability or resignation following Constructive Termination (in each case, prior to a Change in Control): Subject to the NEO executing and delivering a customary severance agreement and release, if, prior to a Change in Control or at any time after 12 months following a Change in Control, an NEO's employment is terminated by Cerner for any reason other than Cause or on account of death or Disability or the NEO resigns following a Constructive Termination, the NEO will be entitled to the Accrued Amounts and the following severance payments and benefits (less normal tax and payroll deductions):
Severance Pay: i) two years' base salary (based on such NEO’s annual base salary at the time of the termination), and ii) two times the average annual cash bonus received during the three-year period immediately preceding the termination. These severance payments will generally be payable pro rata during a 24 month severance term on Cerner's regular paydays.
Benefits: payments having an aggregate value equal to 24 times the difference between the monthly COBRA continuation premium cost to cover the NEO and the NEO's dependents (to the extent covered under Cerner’s health, vision and dental plans on the date of the NEO’s termination) and the monthly amount the NEO was paying for such coverage at the effective date of the NEO's termination, payable pro rata during the 24 month severance term.
Equity Awards: immediate vesting of all stock options or stock appreciation rights and any other outstanding equity-based compensation awards not intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code, and for all outstanding equity-based compensation awards that are intended to constitute "performance-based compensation" under Section 162(m) such will vest or be forfeited in accordance with the terms of the award agreements if the applicable performance goals are satisfied.
Any of the above-described severance payments, equity award acceleration benefits or other benefits may be reduced under the Agreements if i) any portion of such payments or benefits become subject to the golden parachute penalty provisions in under Section 280G or Section 4999 of the Internal Revenue Code and ii) by reducing such payments or benefits the NEO is able to receive a larger portion of such payments and benefits by being able to avoid such golden parachute penalties.
Termination by Cerner other than for Cause or on account of death or Disability or resignation by an NEO for Good Reason (in each case, upon or following a Change in Control): Subject to the NEO executing and delivering a customary severance agreement and release, if there is a Change in Control of Cerner and within 12 months following the effective date of the Change in Control an NEO’s employment is terminated by Cerner for any reason other than for Cause or on account of death or Disability or the NEO resigns for Good Reason, the NEO will be entitled to the Accrued Amounts and the following severance payments and benefits (less normal tax and payroll deductions):
Severance Pay: i) two years' base salary (based on such NEO’s annual base salary at the time of the termination or resignation), and ii) two times the average annual cash bonus received during the three-year period immediately preceding the termination or resignation. These severance payments will be payable in a lump sum payment.
Benefits: payments having an aggregate value equal to 24 times the difference between the monthly COBRA continuation premium cost to cover the NEO and the NEO's dependents (to the extent covered under Cerner’s health, vision and dental plans on the date of the NEO’s termination) and the monthly amount the NEO was paying for such coverage at the effective date of the NEO's termination, payable pro rata during the 24 months following the termination or resignation.
Equity Awards: consistent with current practice, if there is a Change in Control, the Agreements provide for accelerated vesting of 50% of any outstanding and unvested equity incentive awards granted under any of Cerner's equity incentive plans and held by an NEO on the date that the Change in Control becomes effective. The remaining 50% of any unvested equity incentive award that has not yet vested will become fully vested upon the effective date of such termination or resignation. Outstanding equity awards with performance-based vesting will become vested as if an "at-target" level of goal achievement had been obtained.
Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Agreements. The foregoing descriptions of the Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of each Agreement filed as Exhibits 10.1 through 10.4 to this current report on Form 8-K, which are incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits
10.1Amended Employment Agreement between Cerner Corporation and Zane M. Burke
10.2Amended Employment Agreement between Cerner Corporation and Michael R. Nill
10.3Amended Employment Agreement between Cerner Corporation and Jeffrey A. Townsend
10.4Amended Employment Agreement between Cerner Corporation and Marc G. Naughton
CERNER CORP /MO/ ExhibitEX-10.1 2 a101.htm EXHIBIT 10.1 Exhibit Exhibit 10.1CERNER EXECUTIVE SEVERANCE AGREEMENTThis Cerner Executive Severance Agreement (this “Executive Severance Agreement”),…To view the full exhibit click here
About Cerner Corporation (NASDAQ:CERN)
Cerner Corporation is a supplier of healthcare information technology (HCIT). The Company offers a range of intelligent solutions and services that support the clinical, financial and operational needs of organizations. Its segments include Domestic and Global. The Domestic segment includes the business activity in the United States. The Global segment includes the business activity in Aruba, Australia, Austria, Belgium, Brazil, Canada, Cayman Islands, Chile, Denmark, Egypt, England, Finland, France, Germany, Guam, India, Ireland, Luxembourg, Malaysia, Mexico, Netherlands, Norway, Portugal, Qatar, Romania, Saudi Arabia, Singapore, Slovakia, Spain, Sweden, Switzerland and the United Arab Emirates. It offers software, hardware, professional and managed services. Its solutions are offered on the unified Cerner Millennium architecture and on the HealtheIntent cloud-based platform. Its solutions include Cerner ITWorks, Cerner RevWorks, PowerWorks and CommunityWorks, among others.
