Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 21, 2021, Cerner Corporation ("Cerner" or the "Company") announced
the appointment of Mark Erceg as its Executive Vice President and Chief
Financial Officer (principal financial officer), to be effective February 22,
2021 (the "Effective Date").
Mr. Erceg, age 51, is joining Cerner after serving as Chief Financial Officer of
Tiffany & Co. ("Tiffany"), from October 2016 to January 2021. In that position,
Mr. Erceg served as the principal financial officer for Tiffany. Prior to
joining Tiffany, Mr. Erceg held the role of Executive Vice President and Chief
Financial Officer for Canadian Pacific Railway Limited, a transcontinental
railway, from 2015 to 2016, and Masonite International Corporation, a global
manufacturer of commercial and residential doors, from 2010 to 2015. Previously,
Mr. Erceg held finance, market strategy, customer response, general management
and global investor relations positions at The Procter & Gamble Company during
his tenure there from 1992 to 2010.
There is no arrangement or understanding between Mr. Erceg and any other person
pursuant to which he was appointed as the Company's Executive Vice President and
Chief Financial Officer, and there is no family relationship between Mr. Erceg
and any directors or executive officers of the Company. Mr. Erceg has no direct
or indirect material interest in any transaction required to be disclosed
pursuant to Item 404(a) of Regulation S-K.
The Company will enter into an employment agreement with Mr. Erceg, effective as
of the Effective Date (the "Employment Agreement"). As approved by the Board's
Compensation Committee, upon the Effective Date, Mr. Erceg will be entitled to,
among other things: (i) an initial annual base salary of $700,000; (ii) an
initial $840,000 annual target cash bonus level opportunity under the Cerner
Performance Plan; (iii) an award of a number of Cerner restricted stock units
("RSUs") equal to $4,600,000 divided by the closing sale price of Cerner common
stock on the date of grant (the "2021 Annual Equity Grant"); and (iv) a one-time
new hire award of a number of Cerner RSUs equal to $2,500,000 divided by the
closing sale price of Cerner common stock on the date of grant (the "New Hire
Grant"). The 2021 Annual Equity Grant to be awarded to Mr. Erceg will consist of
50% time-based RSUs and 50% performance-based RSUs ("PSUs") and will be awarded
during Cerner's executive annual performance and compensation cycle at the same
time and with the same conditions as other Section 16 officer annual grants. The
time-based RSU portion of the 2021 Annual Equity Grant will vest ratably in
equal amounts over three years, and the PSU portion of the 2021 Annual Equity
Grant will cliff vest on the third anniversary of the grant date, subject to
achieving performance metrics established by the Compensation Committee and
continued employment through the vest date. The New Hire Grant to be granted to
Mr. Erceg will consist of 50% time-based RSUs and 50% PSUs. The time-based RSUs
of the New Hire Grant will be granted upon the later of Mr. Erceg's hire date
and February 15, 2021, and will vest ratably in equal amounts over four years.
The PSUs of the New Hire Grant will be awarded during Cerner's executive annual
performance and compensation cycle at the same time and with the same conditions
as other Section 16 officer annual grants and will cliff vest on the third
anniversary of the grant date, subject to achieving performance metrics
established by the Compensation Committee and continued employment through the
vest date.
Under the Employment Agreement, Mr. Erceg's employment with Cerner will be "at
will," which means that Mr. Erceg's employment thereunder may be terminated at
any time, for any reason or for no reason at all by either Mr. Erceg or the
Company. Mr. Erceg will also be entitled to receive the benefits generally
provided to other Cerner associates, and such other benefits as determined by
the Board from time to time, as well as reimbursement for reasonable business
expenses and relocation assistance for his relocation to Kansas City.
Mr. Erceg will also enter into an executive severance agreement with the
Company, effective as of the Effective Date (the "Executive Severance
Agreement"), which will entitle him to contractual rights to severance payments
and benefits upon certain termination events as follows (capitalized terms used
below, but not otherwise defined have the respective meanings given such terms
in the Executive Severance Agreement):
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Termination by us for Cause or on account of death or Disability, or resignation
by Mr. Erceg other than in the event of a Constructive Termination (before a
Change in Control) or for Good Reason (after a Change in Control): If Mr.
Erceg's employment is terminated by Cerner for Cause or on account of Mr.
Erceg's death or Disability, Mr. Erceg 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 (i.e. when all vesting conditions have been met) as of the
termination date but not yet paid), if any, to which Mr. Erceg may be entitled
under Cerner's employee benefit plans as of his termination date (the foregoing
amounts described in clauses (i), (ii) and (iii) are collectively referred to as
the "Accrued Amounts"). If Mr. Erceg resigns other than on account of a
Constructive Termination (before a Change in Control) or for Good Reason (after
a Change in Control), Mr. Erceg will be entitled to the Accrued Amounts;
provided, that if he resigns with fewer than 30 days' notice, or leaves
employment prior to the end of the 30-day notice period without Cerner's
permission, Mr. Erceg will only be entitled to the Accrued Amounts through the
date he submits a notice of resignation.
Termination by Cerner other than for Cause or on account of death or Disability,
or resignation by Mr. Erceg following Constructive Termination, in each case,
prior to a Change in Control or more than 12 months after a Change in Control:
Subject to Mr. Erceg 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, Mr. Erceg's employment is terminated by Cerner
for any reason other than Cause or on account of death or Disability or Mr.
Erceg resigns following a Constructive Termination, Mr. Erceg will be entitled
to the Accrued Amounts and the following severance payments and benefits (less
normal tax and payroll deductions):
•Severance Pay: two times the sum of (i) Mr. Erceg's annual base salary at the
time of the termination (provided, however, that if Mr. Erceg resigns from
employment following a Constructive Termination because of a material reduction
in his total target compensation, such severance payments will be based on his
annual base salary in effect immediately prior to such reduction), and (ii) 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 Mr. Erceg and his
dependents (to the extent covered under Cerner's health, vision and dental plans
on the date of Mr. Erceg's termination) and the monthly amount Mr. Erceg was
paying for such coverage at the effective date of his termination, payable pro
rata during the 24 month severance term.
•Equity Awards: immediate vesting of any shares or other property relating to
time-based restricted stock or time-based restricted stock unit awards having a
"date of grant" or "grant date" (as listed in such awards) that is at least
twelve (12) months before the effective date of Mr. Erceg's termination and that
were originally, ignoring the application of this acceleration and assuming
continuous employment, scheduled to vest by the second anniversary of the
effective date of his termination.
Per the terms of his Executive Severance Agreement, the following equity awards
would be forfeited: (i) all performance-based equity awards that have not
settled (regardless of whether the original performance-based vesting criteria
may have been satisfied) by the effective date of his termination; (ii) all
time-based restricted stock or time-based restricted stock unit awards having a
"date of grant" or "grant date" (as listed in such awards), within twelve (12)
months of the effective date of his termination; and (iii) all stock options
that have not vested as of the effective date of his termination.
Termination by Cerner other than for Cause or on account of death or Disability,
or resignation by Mr. Erceg for Good Reason, in each case, within 12 months
following a Change in Control: Subject to Mr. Erceg 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 Mr. Erceg's employment is terminated by Cerner for any reason other than
for Cause or on account of death or Disability or Mr. Erceg resigns for Good
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Reason, Mr. Erceg will be entitled to the Accrued Amounts and the following
severance payments and benefits (less normal tax and payroll deductions),
. . .
Item 7.01 Regulation FD Disclosure.
On January 21, 2021, the Company issued a press release announcing certain of
the matters disclosed above under Item 5.02. A copy of the press release is
attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in Item 7.01 of this report (including Exhibit 99.1) is being
furnished pursuant to Item 7.01 and shall not be deemed to be "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise subject to the liabilities of that section, nor shall it be
deemed to be incorporated by reference in any filing under the Securities Act of
1933 or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
d) Exhibits
Exhibit
Number Description
99.1 Press release of Cerner Corporation date d January 21, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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