Document:

exv10w1

 

Exhibit 10.1

CERNER CORPORATION

2005 ENHANCED SEVERANCE PAY PLAN

As Amended and Restated Effective September 12, 2005

     SECTION 1. Introduction.

          (a) Purpose. Cerner Corporation and its United States-based wholly-owned subsidiaries
(“Cerner”) value the contributions of their Associates and take measures to create and maintain a
productive and fulfilling work environment. However, Cerner recognizes that business needs, an
Associate’s work performance or other reasons may require termination of employment. At any point
during an Associate’s employment, Cerner may choose to terminate the employment relationship.

          Because employment with Cerner is at-will, Cerner has no obligation to compensate any
Associate upon termination from his or her employment other than as may be provided in that
Associate’s Cerner Associate Employment Agreement or as specifically set forth in this 2005
Enhanced Severance Pay Plan (“Plan”). Cerner values its Associates and is interested in helping to
mitigate the financial hardship caused by business conditions or other factors necessitating a
termination.

          (b) Overview. Generally, this Plan provides enhanced Severance Benefits to Associates
upon either a (i) “Non-CIC Severance” or (ii) “CIC Severance”, as such terms are defined herein.
Cerner expressly reserves the right to amend or terminate this Plan, or the benefits provided
hereunder, at any time; provided, however, that no such amendment or termination shall occur with
respect to the CIC Severance Benefits after the occurrence of a Change in Control.

          (c) Summary Plan Description. This Plan document also constitutes the Summary Plan
Description for the Plan.

     SECTION 2. Definitions. 

          Certain capitalized terms used herein are defined parenthetically throughout this Plan and/or
defined in this Section 2.

          (a) Associate. “Associate” means an employee of Cerner.

          (b) Beneficial Ownership. “Beneficial Ownership”, “Beneficial Owner” or “Beneficially
Own” shall have the same meaning as such terms are used in Rule 13d-3 of the Exchange Act.

          (c) Board. “Board” means the Board of Directors of Cerner Corporation.

          (d) Cause. “Cause” means an Eligible Associate’s (i) material breach of his/her
Employment Agreement or material neglect of his/her duties and responsibilities

 

 

thereunder, (ii) fraud against Cerner, (iii) misappropriation of Cerner’s assets, (iv)
embezzlement from Cerner, (v) theft from Cerner, (vi) acts resulting in the arrest and indictment
for a crime involving drug abuse, violence, dishonesty or theft, or (vii) act or failure to take
any action that results in a violation of the Sarbanes-Oxley Act of 2002, or any related statutes,
laws or regulations.

          (e) Change in Control. “Change in Control” means:

            (i) The acquisition by any “Person” (as the term “person” is used for purposes of
Section 13(d) or 14(d) of the Exchange Act) of Beneficial Ownership of thirty-five percent
(35%) or more of either: (A) the then outstanding shares of common stock of Cerner
Corporation (the “Outstanding Cerner Common Stock”), or (B) the combined voting power of the
then outstanding voting securities of Cerner Corporation entitled to vote generally in the
election of the Board’s directors (the “Outstanding Cerner Voting Securities”); provided,
however, that for purposes of this subsection (i), the following acquisitions shall not
constitute a Change in Control: (X) any acquisition directly from Cerner, (Y) any
acquisition by Cerner, or (Z) any acquisition by any Associate benefit plan (or related
trust) sponsored or maintained by Cerner Corporation or any corporation controlled by
Cerner; or

            (ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a Board director subsequent to the date hereof whose
election, or nomination for election by Cerner’s shareholders, was approved by a vote of at
least a majority of the Board directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or removal of Board
directors or other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or

            (iii) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Cerner (a “Business Combination”),
in each case, unless, following such Business Combination, (A) all or substantially all of
the individuals and entities who were the Beneficial Owners, respectively, of the
Outstanding Cerner Common Stock and Outstanding Cerner Voting Securities immediately prior
to such Business Combination Beneficially Own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of Cerner Corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of such
transaction owns Cerner or all or substantially all of Cerner’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Cerner Common Stock and
Outstanding Cerner Voting Securities, as the case may be, (B) no Person (excluding any
Associate benefit plan (or related trust) of Cerner or such corporation resulting from such
Business Combination) Beneficially Owns, directly or

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indirectly, 35% or more of, respectively, the then outstanding shares of common stock
of Cerner Corporation resulting from such Business Combination or the combined voting power
of the then outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (C) at least a majority of the
members of the Board resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

            (iv) Approval by the shareholders of Cerner Corporation of a complete liquidation or
dissolution of Cerner.

          (f) CIC Protected Period. “CIC Protected Period” means the period beginning on the
effective date of a Change in Control and ending on the one-year anniversary of such effective
date.

          (g) CIC Severance. “CIC Severance” means, at any time during the CIC Protected
Period, an Eligible Associate’s termination of employment with Cerner (or its successor) due to (i)
Cerner’s (or its successor’s) termination without Cause of the Eligible Associate’s employment, or
(ii) the Eligible Associate’s resignation for Good Reason.

          (h) CIC Severance Benefits. “CIC Severance Benefits” means those severance benefits
set forth in Section 4(b) that, provided an Eligible Associate is entitled to receive such benefits
in accordance with Section 3, the Eligible Associate receives following a CIC Severance.

          (i) CIC Week of Severance Pay. A “CIC Week of Severance Pay” means an Eligible
Associate’s: (i) regular weekly base rate of pay in effect on the effective date of a CIC Severance
(prior to any reductions taken for payroll taxes, income tax withholdings, elective deferrals made
to or in connection with Cerner’s Associate benefit plans, and excluding any overtime, bonuses,
commissions, premium pay, benefits, expense reimbursements, etc.), plus (ii) the average annual
cash bonus the Associate had received from Cerner during the three (3) years preceding the CIC
Severance (prior to any reductions taken for payroll taxes, income tax withholdings, elective
deferrals made to or in connection with Cerner’s Associate benefit plans, and excluding any
overtime, bonuses, commissions, premium pay, benefits, expense reimbursements, etc.), divided by 52
weeks. For example, a CIC Week of Severance Pay for an Eligible Associate whose: (i) annual base
salary (excluding the pay and benefits listed above) is $52,000, and (ii) whose average annual cash
bonus received during the three (3) years preceding the CIC Severance is $15,600, would be $1,000
($52,000/52 weeks) plus $300 ($15,600/52 weeks), equaling a CIC Week of Severance Pay of $1,300.
Cerner’s cash bonus plan currently pays a bonus, if earned, following each fiscal quarter of
Cerner. When calculating the average annual cash bonus, the actual cash bonus paid to the
Associate (or earned but not yet paid for the most recent full fiscal quarter preceding the CIC
Severance) for the twelve (12) consecutive full Cerner fiscal quarters immediately preceding the
CIC Severance shall be included in the calculation of the Associate’s average annual cash bonus for
the three (3) years preceding the CIC Severance. If the Associate has not been employed by Cerner
for twelve (12) consecutive full Cerner fiscal quarters immediately prior to the CIC Severance, the
average annual cash bonus received by such Associate shall be calculated based on the number of
consecutive full

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fiscal quarters the Associate has been employed by Cerner immediately prior to the CIC
Severance and adjusted to equal a yearly average. For avoidance of all doubt, the calculation of
average annual cash bonus shall not include any sales commissions or similar payments received by
an Associate based on individual sales or contracts signed with Cerner clients.

          (j) COBRA. “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.

          (k) Code. “Code” means the Internal Revenue Code of 1986, as amended.

          (l) Eligible Associate. “Eligible Associate” means an individual who: (i) is a
permanent, full-time salaried Associate on the U.S. payroll of Cerner, as determined by Cerner’s
employment records; and (ii) has entered into an Employment Agreement. The determination of
whether an Associate is an Eligible Associate shall be made by the Plan Administrator, in its sole
discretion, and such determination shall be binding and conclusive on all persons. In no event
shall part-time Associates, interns or independent contractors be Eligible Associates.

          (m) Employment Agreement. “Employment Agreement” means an Eligible Associate’s then
current Cerner Associate Employment Agreement with Cerner.

          (n) Exchange Act. “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

          (o) Good Reason. “Good Reason” means, without an Eligible Associate’s express written
consent: (i) a material adverse change in the Eligible Associate’s authority, duties or job
responsibilities (except for such subordination in duties and job responsibilities as may normally
be required due to Cerner’s change from an independent business entity to a subsidiary or division
of another corporate entity); or (ii) a reduction of 5% or more to an Eligible Associate’s annual
salary and cash bonus opportunity in effect prior to the Change in Control; provided, however, an
isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by
Cerner promptly after receipt of notice thereof given by the Eligible Associate shall not
constitute Good Reason.

          (p) Non-CIC Severance. “Non-CIC Severance” means at any time, other than during a CIC
Protected Period, an Eligible Associate’s termination of employment with Cerner due to: (i)
termination by Cerner, other than for Cause, of the Eligible Associate’s employment due to
reorganization, restructuring, unsatisfactory work performance (other than where such
unsatisfactory work performance is deliberate), or for other reasons as determined by the Plan
Administrator in its sole discretion to constitute a Non-CIC Severance. Without limitation, the
following events and reasons shall not constitute a Non-CIC Severance:

                 (i) death;

                 (ii) disability;

                 (iii) voluntary resignation (regardless of the circumstances surrounding the Eligible
Associate’s decision to resign);

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                 (iv) retirement;

                 (v) discharge by Cerner for any other reason other than unsatisfactory work performance
(including absenteeism, misconduct, refusal to transfer to an equivalent position that does not
require relocation, failure to return to work after an approved leave of absence, insubordination,
violation of Cerner’s rules or policies, dishonesty, deliberate unsatisfactory performance, etc.);

                 (vi) entering military duty; or

                 (vii) CIC Severance.

          (q) Non-CIC Severance Benefits. “Non-CIC Severance Benefits” means those severance
benefits set forth in Section 4(a) that, provided an Eligible Associate is entitled to receive such
benefits in accordance with Section 3, the Eligible Associate receives following a Non-CIC
Severance.

          (r) Plan Administrator. “Plan Administrator” means the person or entity specified as
such in Section 7.

          (s) Role Level. “Role Level” means an Eligible Associate’s designated category of
employment as specified by Cerner’s current employment classification hierarchy. In the event
Cerner changes its hierarchy structure, the Role Levels specified in this Plan shall refer to the
equivalent Role Level under any new classification scheme.

          (t) Severance Benefits. “Severance Benefits” means either CIC Severance Benefits or
Non-CIC Severance Benefits.

          (u) Week of Severance Pay. “Week of Severance Pay” means an Eligible Associate’s
regular weekly base rate of pay in effect on the effective date of a Non-CIC Severance (prior to
any reductions taken for payroll taxes, income tax withholdings, elective deferrals made to or in
connection with Cerner’s Associate benefit plans, and excluding any overtime, bonuses, commissions,
premium pay, benefits, expense reimbursements, etc.). For example, a Week of Severance Pay for an
Eligible Associate whose annual base salary as of the Non-CIC Severance (excluding the pay and
benefits listed above) is $52,000, would be $1,000 ($52,000/52 weeks).

          (v) Year of Service. “Year of Service” means, with respect to an Eligible Associate,
each period of twelve (12) consecutive months of full-time employment by Eligible Associate with
Cerner beginning with the Associate’s full-time employment commencement date with Cerner and ending
with the day preceding the anniversary of such date in the next and all succeeding years. No
partial Years of Service shall be credited under this Plan nor will prorated Severance Benefits be
paid for any fractional Year of Service.

     SECTION 3. Entitlement for Severance Benefits

          (a) Entitlement. Subject to the exceptions set forth below in Section 3(b), an
Eligible Associate shall be entitled to receive either the Non-CIC Severance Benefits or the CIC

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Severance Benefits described below in Section 4, upon experiencing a Non-CIC Severance or CIC
Severance, respectively, and provided that the following conditions are satisfied:

                 (i) The Eligible Associate’s termination of employment with Cerner must have constituted
either a CIC Severance or Non-CIC Severance. In no event shall an Associate’s leave during one of
Cerner’s recognized leave programs constitute a termination of employment event under this Plan,

                 (ii) Following or in connection with the Eligible Associate’s termination of employment, the
Eligible Associate must comply with all transition assistance requests of Cerner, to Cerner’s
satisfaction, such as aiding in the location of files and documents, returning all Cerner property
and repaying any amounts owed Cerner, and

                 (iii) With respect to and in connection with a Non-CIC Severance only, the Eligible Associate
has, after the Eligible Associate’s termination of employment, properly executed and delivered to
Cerner a Severance and Release Agreement with Cerner that provides for an irrevocable and complete
release of all present and future claims by Eligible Associate.

          (b) Exceptions to Severance Entitlement. An Eligible Associate will not receive
Severance Benefits under this Plan in the following circumstances, as determined in the Plan
Administrator’s sole discretion:

                 (i) The Eligible Associate’s Associate Employment Agreement (or amendments or supplement
thereto) provides that none of the benefits provided under this Plan or any other broad-based
Cerner severance plan or policy shall apply to such Associate. In such a case, such Associate’s
severance benefits, if any, shall be governed by the terms of such Associate Employment Agreement
(as amended or supplemented).

                 (ii) The Associate breaches the terms and conditions of his/her Cerner Associate Employment
Agreement (including, without limitation, violating the non-competition provisions thereof).

                 (iii) With respect to Non-CIC Severance Benefits only: (a) the Eligible Associate’s employment
termination is in connection with the sale, divesture or other disposition of the stock or assets
of any subsidiary, division or other operating unit of Cerner or any of its subsidiaries
(“Operating Unit”) (or part thereof) which does not constitute a Change in Control (a
“Transaction”), and the Eligible Associate is offered continued employment, or continues in
employment, with the divested Operating Unit (or part thereof) or the purchaser of the stock or
assets of the Operating Unit (or part thereof), or one of such purchaser’s affiliates (the
“Post-Transaction Employer”), as the case may be, on terms and conditions that would not constitute
Good Reason, and (b) Cerner obtains an agreement from the Post-Transaction Employer, enforceable by
the Eligible Associate, to provide (or Cerner agrees to provide) severance pay, if the Eligible
Associate accepts the offered employment or continues in employment with the Post-Transaction
Employer or its affiliates following the Transaction, at least equal to the severance pay set forth
in Section 4(a) payable upon a Non-CIC Severance termination of the Eligible Associate’s employment
with the Post-Transaction Employer or its affiliates within the six (6) month period following the
Transaction. For purposes of this Section 3(b)(iii), the term

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“Good Reason” shall have the meaning ascribed to it in this Plan, but the term “Cerner” as it
is used in such definition shall be deemed to refer to the Post-Transaction Employer employing the
Eligible Associate after the Transaction. For avoidance of doubt, in the circumstances described
in the first sentence of this Section 3(b)(iii), the Eligible Associate shall not be entitled to
receive Non-CIC Severance Benefits under Section 4(a) whether or not the Eligible Associate accepts
the offered employment or continues in employment. Except as to separate severance benefits Cerner
may itself expressly agree to in writing to provide in connection with a Transaction (as
contemplated by subpart (b) of the first sentence of this Section 3(b)(iii)), the provisions of
this Section 3(b)(iii) do not create any entitlement to Severance Benefits from Cerner in any
circumstances whatsoever and are to be construed solely as a limitation on such entitlement in the
circumstances herein set forth.

     SECTION 4. Severance Benefits.

          (a) Non-CIC Severance Benefits: If the termination of an Eligible Associate’s
employment constitutes a Non-CIC Severance, Cerner shall pay the Eligible Associate an amount of
severance pay based on the Eligible Associate’s Role Level and Years of Service with Cerner as of
the effective date of such termination. The amount of such severance pay shall be equal to: (i) a
Week of Severance Pay for such Eligible Associate multiplied by (ii) that number set forth in the
matrix below that corresponds to the Eligible Associate’s Role Level and Years of Service with
Cerner.

Severance Matrix

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Role Level 4
Years of

Service 6
	 	Cabinet
	 	Level 1

(V.P.’s -

nonCabinet)
	 	Level 1

(Directors)
	 	Levels 2 and 3

(Managers & Sr.

Managers)
	 	Levels 4 and

5 (Sr. Staff)
	 	Levels 6

and 7

(Staff)
	 
	>10 Years
	 	52 (Weeks)
	 	32 (Weeks)
	 	24 (Weeks)
	 	16 (Weeks)
	 	12 (Weeks)
	 	8 (Weeks)
	 
	5-10 Years
	 	36 (Weeks)
	 	24 (Weeks)
	 	18 (Weeks)
	 	12 (Weeks)
	 	9 (Weeks)
	 	6 (Weeks)
	 
	2-5 Years
	 	24 (Weeks)
	 	16 (Weeks)
	 	12 (Weeks)
	 	8 (Weeks)
	 	6 (Weeks)
	 	4 (Weeks)
	 
	0-2 Years
	 	16 (Weeks)
	 	10 (Weeks)
	 	6 (Weeks)
	 	4 (Weeks)
	 	3 (Weeks)
	 	2 (Weeks)
	 

          (b) CIC Severance Benefits. If the termination of an Eligible Associate’s
employment constitutes a CIC Severance, Cerner shall pay the Eligible Associate an amount of
severance pay based on the Eligible Associate’s Role Level and Years of Service with Cerner as of
the effective of such termination. The amount of such severance pay shall be equal to: (i) a CIC
Week of Severance Pay for such Eligible Associate multiplied by (ii) that number set forth in the
matrix above that corresponds to both the Eligible Associate’s Role Level and Years of Service with
Cerner, multiplied by 1.5.

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          (c) Form of Payment. Severance Benefits paid under this Plan will be paid in a lump
sum or, if the Plan Administrator elects, as salary continuation (without interest) on regularly
scheduled paydays of Cerner for the applicable severance period or some other method.
Notwithstanding the foregoing, in the event that the Plan Administrator determines that any cash
Severance Benefits provided under this Section 4 fails to satisfy the distribution requirements of
Section 409A(a)(2)(A) of the Code as a result of Section 409A(a)(2)(B)(i) of the Code, the payment
of such benefit shall be accelerated or delayed to the extent necessary so that the benefit is
either not subject to the provisions of Section 409A(a)(1) of the Code or so that the distribution
is made in accordance with Section 409A(a)(2)(B)(i).

          (d) Withholding. All Severance Benefits made under this Plan will be subject to
applicable withholding for federal, state and local taxes. If any Eligible Associate is indebted
to Cerner at his or her termination date, Cerner reserves the right to offset any Severance
Benefits under this Plan by the amount of such indebtedness.

SECTION 5. Employment.

          (a) No Modification of Associate Employment Agreements. This Plan shall not modify
any terms of an Eligible Associate’s Employment Agreement, including but not limited to the type of
employment relationship, the Associate’s obligations and continuing obligations set forth therein.

          (b) Limitation on Associate Rights. This Plan shall not give any Associate the right
to be retained in the service of Cerner or interfere with or restrict the right of Cerner to
terminate the employment of any Associate.

          (c) Changed Decisions. Cerner has the right to cancel or reschedule the effective
date of an Eligible Associate’s employment termination. An Eligible Associate will not be eligible
for any Severance Benefits under this Plan if the Eligible Associate’s employment termination is
canceled by Cerner, or if the Eligible Associate is offered an opportunity to return to work or
have his or her employment reinstated with Cerner.

     SECTION 6. Relation to Other Benefits and Pay

          (a) COBRA. Associates and their dependents covered under one or more of Cerner’s
group health plans may be eligible for continuation coverage pursuant to the federal COBRA law.
This Plan does not provide Associates or their dependents with any greater right to continuation
coverage than what the federal COBRA law requires.

          (b) Other Benefit Plans. Eligibility, coverage and benefits under other Cerner
benefit plans (e.g., any group life, disability, accidental death, retirement, stock plans, etc.)
are governed by the terms of those respective plans. This Plan does not provide Associates or
their beneficiaries and dependents with any greater eligibility, coverage or benefits than what
such plans provide.

          (c) Offset of Benefits. Except as may otherwise be specifically provided for in an
Associate’s Employment Agreement, the amount of any Severance Benefits paid under this Plan is in
lieu of, and not in addition to, any other severance an Eligible Associate may otherwise

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be entitled to receive from Cerner, including under a Cerner Associate Employment Agreement or
other document.

          (d) Integration with Other Payments. Severance Benefits paid under this Plan are not
intended to duplicate benefits such as pay-in-lieu of notice, severance pay, workers compensation
wage replacement, disability pay, or similar benefits or pay under other benefit plans, severance
programs, employment agreements, or applicable laws, such as the WARN Act. In the event such other
pay or benefits is payable to an Eligible Associate, Severance Benefits under this Plan will be
reduced accordingly or, alternatively, pay or benefits previously paid under this Plan will be
treated as having been paid to satisfy other pay or benefit obligations. In either case, the Plan
Administrator, in its sole discretion, will determine how to apply this provision and may override
other provisions in the Plan in doing so. This provision, however, shall not preclude an otherwise
Eligible Associate from receiving any payments under a Cerner Performance Plan (CPP) or any pay for
accrued vacation under Cerner’s separate CPP or vacation policy, as may be amended from
time-to-time. CPP and pay for accrued vacation, if any, shall be paid pursuant to the terms of
those separate plans or policies.

          (e) Reemployment. If an Eligible Associate is reemployed by Cerner while Severance
Benefits are still payable under the Plan, all such Severance Benefits will cease, except as
otherwise specified by the Plan Administrator, in its sole discretion.

     SECTION 7. Plan Administration.

          (a) Plan Administrator. The Plan is administered by Cerner, which is the Plan
Administrator under the Employee Retirement Income Security Act of 1974 (“ERISA”). It is the
responsibility of the Plan Administrator to ensure that the Plan is administered in accordance with
its terms. It is also the responsibility of the Plan Administrator to explain any rights and
benefits that an Eligible Associate may have under the Plan and to answer any questions which an
Eligible Associate may have. The Plan Administrator maintains all documents which comprise the
Plan and annual filings, if any, which are prepared for the Plan. If you have any questions
regarding the Plan, you should review these available documents. The Plan Administrator may, but
is not required to, adopt rules and regulations of uniform applicability in its interpretation and
implementation of the Plan. The Plan Administrator may require each Eligible Associate to submit,
in such form as it shall deem reasonable and acceptable, proof of any information which the Plan
Administrator finds necessary or desirable for the proper administration of the Plan.

          (b) Exclusive Discretion. The Plan Administrator has full and complete discretionary
authority to determine eligibility for benefits under the Plan and to construe and interpret the
terms of the Plan. In making any decision or resolving any disputes, Cerner shall have full and
complete discretionary authority to (i) construe and interpret the provisions of the Plan and to
determine the right of any person to any interest in or eligibility for any benefit under the Plan,
and (ii) make any and all factual determinations necessary to determine the right of any person to
any interest in or eligibility for any benefit under the Plan; and, no person shall be entitled to
any benefit or interest under this Plan if Cerner decides in its discretion that there is no
entitlement to that benefit or interest. Decisions of Cerner shall be final, binding and
conclusive upon all parties.

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     SECTION 8. Amendment or Termination

          Cerner, acting through its Chief Executive Officer, Chief Financial Officer, Chief Legal
Officer or Chief People Officer, has the right, in its nonfiduciary settlor capacity, to amend the
Plan or to terminate it at any time, prospectively or retroactively, for any reason or no reason,
without notice, including discontinuing or eliminating benefits; provided, however, that no such
amendment or termination shall affect the right to any unpaid benefit of any Eligible Associate
whose termination date has occurred prior to such amendment or termination of the Plan and provided
further that no amendment or termination shall occur with respect to the CIC Severance Benefits
after the occurrence of a Change in Control.

     SECTION 9. Claims and Appeal Procedure

          (a) Initial Claim. If benefits under this Plan become due, the Plan Administrator
will notify you as to the amount of benefits you are entitled to, the duration of such benefit, the
time the benefit is to commence and other pertinent information concerning your benefit. If you
have been denied a benefit under the Plan, or if you feel that the benefit which has been given to
you is not accurate, you may file a claim with the Plan Administrator. If a claim for benefit is
denied by the Plan Administrator, the Plan Administrator shall provide you with written or
electronic notification of any adverse benefit determination within ninety (90) days after receipt
of the claim unless special circumstances require an extension of time for processing the claim.
If such an extension of time for processing is required, written or electronic notice indicating
the special circumstances and the date by which a final decision is expected to be rendered shall
be furnished to you. In no event shall the period of extension exceed one hundred eighty (180)
days after receipt of the claim. The notice of denial of the claim shall set forth:

            (i) The specific reason or reasons for the adverse determination;

            (ii) Reference to the specific plan provisions on which the determination is based;

            (iii) A description of any additional material or information necessary for you to perfect the
claim, and an explanation of why such material or information is necessary; and

            (iv) A description of the plan’s review procedures and the time limits applicable to such
procedures, including a statement of your right to bring a civil action under ERISA section 502(a)
following an adverse benefit determination on review.

          You (or your duly authorized representative) may review pertinent documents and submit issues
and comments in writing to the Plan Administrator. If you fail to appeal such action to the Plan
Administrator in writing within the prescribed period of time described in the next section, the
Plan Administrator’s adverse determination shall be final, binding and conclusive.

          (b) Appeal. In the event of an adverse benefit determination, you may appeal the
adverse determination by giving written notice to the Plan Administrator within 60 days after

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receipt of the notice of adverse benefit determination. The Plan Administrator may hold a
hearing or otherwise ascertain such facts as it deems necessary and shall render a decision which
shall be binding upon both parties. The appeal procedure shall:

                 (i) Provide you at least 60 days following receipt of a notification of an adverse benefit
determination within which to appeal the determination;

                 (ii) Provide you the opportunity to submit written comments, documents, records, and other
information relating to the claim for benefits;

                 (iii) Provide that you shall be provided, upon request and free of charge, reasonable access
to, and copies of, all documents, records, and other information relevant to your claim for
benefits; and

                 (iv) Provide for a review that takes into account all comments, documents, records, and other
information submitted by you relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination.

          The decision of the Plan Administrator shall be made within sixty (60) days after the receipt
by the Plan Administrator of the notice of appeal, unless special circumstances require an
extension of time for processing, in which case a decision of Cerner shall be rendered as soon as
possible but not later than one hundred twenty (120) days after receipt of the request for review.
If such an extension of time is required, written or electronic notice of the extension shall be
furnished to you prior to the commencement of the extension. The decision of the Plan
Administrator shall be provided in written or electronic form to you and shall include the
following:

                 (i) The specific reason or reasons for the adverse determination;

                 (ii) Reference to the specific plan provisions on which the benefit determination is based;

                 (iii) A statement that you are entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other information relevant to your
claim for benefits. Whether a document, record, or other information is relevant to a claim for
benefits shall be determined by reference to DOL Regulation Section 2560.503-1 (m)(8); and

                 (iv) A statement describing any voluntary appeal procedures offered by the Plan and your right
to obtain the information about such procedures, and a statement of your right to bring an action
under ERISA section 502(a).

     SECTION 10. Statement of ERISA Rights

          The following statement is required by federal statute. Certain portions of this statement
may not apply to your particular situation or to this Plan.

11

 

          (a) Information About This Plan and Your Benefits. If you become a participant in the
Cerner Corporation Enhanced Severance Pay Plan you are entitled to certain rights and protections
under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan
participants shall be entitled to:

	 	•	 	Examine, without charge, at the Plan Administrator’s office and at other specified
locations, the Plan documents and, if any, copies of all documents filed by the Plan
with the U.S. Department of Labor, such as detailed annual reports and plan
descriptions.
	 
	 	•	 	Obtain copies of all Plan documents and other plan information upon written request
to the Plan Administrator. The Plan Administrator may make a reasonable charge for the
copies.
	 
	 	•	 	Receive a summary of the Plan’s annual financial report, if one is required to be
prepared. The Plan Administrator is required by law to furnish each participant with a
copy of this summary annual report if an annual report is required to be filed with the
Department of Labor.

          (b) Prudent Actions by Plan Fiduciaries. In addition to creating rights for plan
participants, ERISA imposes duties upon the people who are responsible for the operation of the
employee benefit plan. The people who operate your plan, called “fiduciaries” of the plan, have a
duty to do so prudently and in the interest of you and other plan participants and beneficiaries.
No one, including your employer or any other person, may fire you or otherwise discriminate against
you in any way to prevent you from obtaining a welfare benefit or exercising your rights under
ERISA.

          (c) Enforce Your Rights. If your claim for a Plan benefit is denied in whole or in
part you must receive a written explanation of the reason for the denial. You have the right to
have the Plan review and reconsider your claim. Under ERISA, there are steps you can take to
enforce the above rights. For instance, if you request materials from the Plan and do not receive
them within 30 days, you may file suit in a federal court. In such a case, the court may require
the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the control of the
administrator. If you have a claim for benefits which is denied or ignored, in whole or in part,
you may file suit in a state or federal court. If it should happen that plan fiduciaries misuse
the plan’s money, or if you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful the court may order
the person you have sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.

          (d) Assistance with Your Questions. If you have any questions about this Plan, you
should contact the Plan Administrator. If you have any questions about this statement or about
your rights under ERISA, you should contact the nearest office of the Employee Benefits and
Security Administration, U.S. Department of Labor, listed in your telephone directory, or the
Division of Technical Assistance and Inquiries, Employee Benefits and Security

12

 

Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210.

     SECTION 11. Additional Information

          (a) Name and Address of Plan Sponsor and Plan Administrator. The name and address of
the Plan Sponsor and the Plan Administrator is:

Cerner Corporation

2800 Rockcreek Parkway

North Kansas City, MO 64117

EIN: 43-1196944

Telephone: (816) 201-1024

          (b) Type of Administration. The Plan is administered by Cerner Corporation.

          (c) Plan Number. The Plan number is 513.

          (d) Plan Year. The Plan Year ends on December 31.

          (e) Agent For Service of Legal Process. Service of legal process may be made upon the
Plan Sponsor (which is also the Plan Administrator) at the above address.

          (f) Plan Costs. Plan costs are paid by Cerner. The Plan is funded out of Cerner’s
general assets.

          (g) Insurance. Benefits provided by this Plan are not insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA because the insurance provisions under ERISA are not
applicable to the Plan.

     SECTION 12. Governing Law. 

          This Plan is an “employee welfare benefit plan” within the meaning of Section 3(1) of ERISA
and it shall be interpreted, administered, and enforced in accordance with that law. To the extent
that state law is applicable, the statutes and common law of the State of Missouri, excluding any
that mandate the use of another jurisdiction’s laws, shall apply. Without limiting the generality
of this Section 12, it is intended that the Plan comply with Section 409A of the Code, and, in the
event that this Plan is determined to be a “deferred compensation plan” within the meaning of
Section 409A(d)(1) of the Code, Cerner shall, as necessary, adopt such conforming amendments as are
necessary to comply with Section 409A of the Code.

     SECTION 13. Basis of Payments to and From the Plan

          The Plan shall be unfunded, and all cash payments under the plan shall be paid only from the
general assets of Cerner.

13

 

     SECTION 14. Limitation on IRC Section 280G Parachute Payments

          In the event that any Severance Benefit payment to be made under this Plan would cause an
Eligible Associate to be liable for any excise tax under Code section 4999(a), the aggregate amount
of such Severance Benefit shall be reduced by the minimal amount necessary such that the Eligible
Associate is no longer subject to such excise tax. Any determination or calculation made by
Cerner relating to this Section 14, including, but not limited to, any calculation of an Eligible
Associate’s “base amount” as defined in Code section 280G(b)(3), or an Eligible Associate’s
anticipated “parachute payment,” as defined in Code section 280G(b)(2), shall be final, conclusive
and binding on the Eligible Associate.

     SECTION 15. Construction. 

          Where the context so indicates, the singular will include the plural and vice versa. Titles
are provided herein for convenience only and are not to serve as a basis for interpretation or
construction of the Plan. Unless the context clearly indicates to the contrary, a reference to a
statute or document shall be construed as referring to any subsequently enacted, adopted, or
executed counterpart.

14<PAGE>
                                                                    EXHIBIT 10.1

                              SETTLEMENT AGREEMENT

      United States of America, ex. rel. Lorenzo Marrero v. TransTechnology
   Corporation and Breeze-Eastern, a Division of TransTechnology Corporation.
                           Civ. No. 03cv5359 (D.N.J.).

                                   I. PARTIES

      This Agreement is entered into this 6th day of September 2005, by and
among the United States of America ("United States"), through the Department of
Justice, Lorenzo Marrero ("Relator"), and TransTechnology Corporation and
Breeze-Eastern, a Division of TransTechnology Corporation (collectively
"TransTechnology ") for themselves and any of their predecessors, successors,
assigns, businesses, affiliates, subsidiaries, divisions, employees, agents, and
representatives (hereinafter all jointly referred to as the "Parties").

                                  II. RECITALS

      A. Between 1993 and 2005, Defendants submitted, or caused to be submitted,
claims for payment based on various contracts entered into with entities of the
United States, including the Department of Defense and the United States Coast
Guard.

      B. On November 12, 2003 Relator filed a Qui Tam suit against
TransTechnology in the United States District Court for the District of New
Jersey, captioned as United States of America ex rel. Lorenzo Marrero v.
TransTechnology Corporation and Breeze-Eastern, a Division of TransTechnology
Corporation, Civ. No. 03cv5359 (D.N.J.). In his complaint, the Relator alleged,
among other allegations, that Defendants falsely certified that they complied
with contractual specifications when providing overhaul and repair services to
hoists and hooks used primarily in helicopter applications ("Qui Tam Action").

    U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al, Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 1 of 14

<PAGE>

      C. TransTechnology, Relator, and the United States (through the Civil
Division, Department of Justice and the Office of the United States Attorney for
the District of New Jersey), have engaged in settlement discussions concerning a
disposition of the allegations raised in the Qui Tam Action.

      D. Defendants deny all allegations in the Qui Tam Action and specifically
deny that they violated the Federal Civil False Claims Act, 31 U.S.C. Sections
3729-33 (the "FCA") or in any way acted wrongfully.

      E. The Parties wish, to avoid the time, expense, and risk of litigation by
reaching a settlement of the allegations raised in the Qui Tam Action.

      F. This Settlement Agreement is made in compromise of disputed claims.
Neither the Settlement Agreement, its execution, or the performance of any
obligations under it, including any payments, nor the fact of the settlement, is
intended to be, or shall be understood as, an acknowledgment of responsibility,
admission of liability or wrongdoing, or other expression reflecting upon the
merits of the dispute by TransTechnology, which liability is expressly denied.

                                 III. AGREEMENTS

      In reliance on the foregoing Recitals, and in consideration of the mutual
promises, covenants and obligations of this Settlement Agreement, and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

                                   OBLIGATIONS

    U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al, Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 2 of 14

<PAGE>

      1. After the execution of this Settlement Agreement, TransTechnology shall
- -

      a.    Make cash payments to the United States for the total sum of One
            Million Dollars ($1,000,000.00) as provided on the following payment
            schedule:

            i.    Within five (5) business days of the execution of this
                  settlement agreement, TransTechnology, shall pay to the United
                  States the sum of One Hundred Thousand Dollars ($100,000.00);

            ii.   On or before March 30, 2006, TransTechnology shall pay to the
                  United States the sum of Three Hundred Thousand Dollars
                  ($300,000.00);

            iii.  On or before September 30, 2006, TransTechnology shall pay to
                  the United States the sum of Six Hundred Thousand Dollars
                  ($600,000.00);

      b.    TransTechnology agrees not to submit its claims for payment for
            Breeze-Eastern services performed under work order numbers R08627,
            R08808, and R08817, representing a value of Fifty-Four Thousand and
            Four Hundred and Twenty-Six Dollars ($54,426), and hereby waives the
            right to submit any claim for payment for these work orders.

      c.    TransTechnology shall repair, as is necessary to return to
            serviceable condition, three (3) rescue hoists identified as:

<TABLE>
<CAPTION>
Part Number                  Serial Number
<S>                          <C>
BL-27100-85                  260CK
</TABLE>

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 3 of 14

<PAGE>

<TABLE>
<S>               <C>
BL-27100-185      642CKT
BL-27100-86        127CK
</TABLE>

      The three hoists are to be brought to serviceable condition and made
      available for return to the United States within two (2) months of their
      receipt following the execution of this settlement agreement providing the
      necessary parts are available. TransTechnology will attempt to secure the
      necessary parts within a commercially reasonable period of time. If one or
      more of the hoists cannot be returned to a serviceable condition,
      TransTechnology will provide the United States with a comparable hoist in
      serviceable condition. The agreed upon value for the services provided in
      this sub-paragraph is Fifty-Four Thousand and Four Hundred and Twenty-Six
      Dollars ($54,426).

d.    TransTechnology acknowledges that, except when specifically agreed by the
      United States, the United States has by statute and regulation a right of
      setoff, and TransTechnology confirms that it will not contest, now or
      hereafter,any setoff made pursuant to said statutes and regulations of any
      future payments due to TransTechnology from any United States government
      contract payments in order to satisfy any default by TransTechnology of
      its obligations under paragraph 1 of this Settlement Agreement.

The total value of paragraphs 1 (a), (b), and (c) is $1,108,852.00 and
represents

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 4 of 14

<PAGE>

      the Settlement Amount.

      2. Contingent upon the United States receiving the Settlement Amount
payments and services from TransTechnology and as soon as feasible after receipt
of each payment and service identified in sub-parts (a), (b), and (c) of
paragraph 1, the United States agrees to pay the relator as follows - -

            a.    The United States will pay relator Thirty Thousand, Eight
                  Hundred Eighty-Five Dollars and Twenty Cents ($30,885.20) of
                  the $100,000 cash payment to be made by TransTechnology within
                  a reasonable after the later of the executing this Settlement
                  Agreement or the Court's acceptance thereof, representing a
                  Twenty Percent (20%) relator's share of the cash payment made
                  pursuant to paragraph l(a)(i), and Twenty Percent (20%) of the
                  value of the claims for payment waived by TransTechnology
                  pursuant to paragraph l(b).

            b.    Upon completion of the all services to be performed under
                  paragraph l(c), the United States shall pay relator Ten
                  Thousand, Eight Hundred and Eighty-Five Dollars and Twenty
                  Cents ($10,885.20), representing a Twenty Percent (20%)
                  Relator's share of the agreed value of the services to be
                  performed by TransTechnology pursuant to paragraph 1 (c);

            c.    The United States shall pay Sixty Thousand Dollars ($60,000)
                  to relator after receipt of the $300,000 due on or before
                  March 30, 2006 under paragraph l(a)(ii), representing a Twenty
                  Percent (20 %) Relator's share

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 5 of 14

<PAGE>

                  of TransTechnology's payment made pursuant to paragraph
                  l(a)(ii);

            d.    The United States shall pay One-Hundred Twenty Thousand
                  Dollars ($120,000) to relator after receipt of the $600,000
                  due on or before September 30, 2006 under paragraph l(a)(iii),
                  representing a Twenty Percent (20 %) Relator's share of
                  TransTechnology's payment made pursuant to paragraph
                  l(a)(iii).

      These amounts in total shall be the Relator's share pursuant to 31 U.S.C.
Section 3730(d).

      3. TransTechnology shall pay to the Relator, through his attorneys, or
their designated representative(s), the total sum of Twenty-Five Thousand
Dollars ($25,000) in satisfaction of the Relator's claims under 31 U.S.C.
Section 3730(d) (expenses, attorney's fees, and costs) within five (5) business
days after the execution of this Settlement Agreement.

      4. TransTechnology Corporation and Breeze-Eastern, a Division of
TransTechnology Corporation shall be jointly and severally liable for payments
of the Settlement Amount identified in paragraph one (1) and the payment to the
Relator, though his attorney, identified in paragraph three (3). Cash payments
to the United States of the Settlement Amount identified in paragraph one(l)
shall be made by electronic funds transfer pursuant to written instructions to
be provided to TransTechnology's legal counsel by Michael F. Hertz or his
designated representative. The payment to the Relator through his attorney,
identified in paragraph three (3), shall be made by cashier's or certified check
to the Relator's counsel, Smith Mullin, P.C., in care of Neil Mullin, Esq.

      5. Contemporaneously with the execution of this Settlement Agreement, the
parties shall

    U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al, Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 6 of 14

<PAGE>

execute the attached Stipulation of Dismissal and Proposed Order of Dismissal
(Exhibit A), in which the United States and the Relator agree to dismiss the Qui
Tam Action with prejudice subject to the terms of this Settlement Agreement. The
United States shall file the Stipulation of Dismissal and Proposed Order of
Dismissal with the United States District Court for the District of New Jersey
within five (5) business days after the execution of the Settlement Agreement.

                                    RELEASES

      6. Subject to the exceptions set forth below, in consideration of the
obligations of TransTechnology set forth in this Agreement, and conditioned upon
the full payment of the Settlement Amount by TransTechnology, the United States
agrees to release and discharge TransTechnology, and its predecessors,
successors, assigns, businesses, affiliates, subsidiaries, divisions, directors,
employees, agents, and representatives from any liability or claim the United
States has for civil or administrative monetary damages under the False Claims
Act, 31 U.S.C. Sections 3729-3733; the Contract Disputes Act, 41 U.S.C, 601 et
seq.; the Program Fraud Civil Remedies Act, 31 U.S.C. 3801-3812; or under common
law theories of payment by mistake, unjust enrichment, breach of contract, and
fraud for the allegations in the Qui Tarn Action.

      7. Conditioned upon receipt of the full payment of Twenty-Five
Thousand-Dollars ($25,000) as provided in paragraph three (3), the Relator, for
himself individually, and for his heirs, successors, attorneys, agents, and
assigns, agrees to release TransTechnology, their officers, agents, and
employees, from any liability to Relator arising before the execution of this
agreement from the filing of the Qui Tam, Action, including, but not limited to,
any liability to Relator arising under 31 U.S.C. Section 3730(d) (expenses or
attorney's fees and costs).

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                       Settlement Agreement - Page 7 of 14

<PAGE>

      8. The Relator, for himself individually, and for his heirs, successors,
agents and assigns, fully and finally releases, waives, and forever discharges
the United States, its officers, agents, and employees, from any claims arising
from or relating to 31 U.S.C. Section 3730, including 31 U.S.C. Sections
3730(b), (c), (c)(5), and (d), from any claims arising from the filing of the
Qui Tam Civil Action, and from any other claims for a share of the Settlement
Amount, and in full settlement of any claims Relator may have under this
Agreement. This Agreement does not resolve or in any manner affect any claims
the United States has or may have against the Relator arising under Title 26,
U.S. Code (Internal Revenue Code), or any claims arising under this Agreement.

      9. TransTechnology fully and finally releases the United States, its
agencies, employees, servants, and agents from any claims (including attorneys
fees, costs, and expenses of every kind and however denominated) which they have
asserted, could have asserted, or may assert in the future against the United
States, its agencies, employees, servants, and agents, related to the Qui Tam
Action and the United States' investigation and prosecution thereof.

      10. TransTechnology fully and finally releases the Relator, his heirs,
successors, agents and assigns from any claims (including attorneys fees, costs,
and expenses of every kind and however denominated) which they have asserted,
could have asserted, or may assert in the future against the Relator, his heirs,
successors, agents and assigns related to the Qui Tam Action and the United
States' investigation and prosecution thereof.

      11. Relator agrees that this Settlement Agreement is fair, adequate and
reasonable under all the circumstances and that he will not challenge the
agreement pursuant to 31 U.S.C. Section

        U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al, Civ. No.
                               03cv5359 (D.N.J.).

                       Settlement Agreement - Page 8 of 14

<PAGE>

3730(c)(2)(B).

                             LIMITATIONS OF RELEASES

      12. The United States specifically does not release TransTechnology, or
any other entity or individual under this Agreement from (a) any criminal, civil
or administrative claims arising under Title 26, U.S. Code (Internal Revenue
Code) or Internal Revenue Service Regulations or under Securities or
Environmental laws; (b) any liability under the contracts at issue for any
claims for delivery of any deficient or defective products and/or services
except as alleged in the Qui Tam Action; (c) liability under any express or
implied product/services warranties pertinent to these contracts, or liability
for the failure to deliver items or services due except as alleged in the Qui
Tam Action; (d) any obligations created by this Settlement Agreement or related
to disputes and claims for the enforcement of this Settlement Agreement; (e) the
criminal liability, if any, of any person or entity; (f) administrative action,
if any, by the Department of Defense, the United States Coast Guard, or any
other federal agency to suspend, debar or determine the responsibility of
Defendants, its affiliates, present or former officers or employees; (g) any
criminal, civil, regulatory, or administrative claims, if any, arising under
Title 14, Code of Federal Regulations (Federal Aviation Administration,
Department of Transportation); and (h) any claims for personal injury or
property damage, if any, or for other consequential damages arising from the
products/services delivered under the contracts referred to in the Qui Tam
Action.

      13. TransTechnology agrees that all costs (as defined by Federal
Acquisition Regulation ("FAR") 31.205-47) incurred by or on behalf of
TransTechnology and its officers, directors,

       U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No.
                               03cv5359 (D.N.J.).

                       Settlement Agreement - Page 9 of 14

<PAGE>

agents and employees in connection with (a) the matters covered by this
Settlement Agreement, (b) the Government's audit and investigation of the
matters covered by this Settlement Agreement, (c) TransTechnology's
investigation, defense of the matter, and corrective actions relating to the Qui
Tam Action, (d) the negotiation of this Settlement Agreement, and (e) the
payments made to the United States pursuant to this Settlement Agreement shall
be unallowable costs for government accounting purposes. These unallowable costs
will be separately estimated and accounted for by TransTechnology.
TransTechnology will not charge such unallowable costs directly or indirectly to
any contracts with the United States. Any such cost previously submitted or
treated by TransTechnology as an allowable cost for government accounting
purposes shall be withdrawn and any charge or charges previously submitted that
were based on such cost shall be adjusted accordingly.

      14. Notwithstanding the releases set forth in paragraph six (6) above, the
United States expressly reserves all civil claims against individuals, including
any current or former officers, employees, agents or employees of
TransTechnology, not otherwise specifically identified as a defendant in
Paragraph B of Section II (Recitals) of this Settlement Agreement, who have
received written notification that they are the target of a criminal
investigation, are indicted or charged, are convicted or who enter into a plea
agreement arising from the conduct that is the subject of this agreement.

      15. TransTechnology waives and will not assert any defenses
TransTechnology may have to any criminal prosecution or administrative action
relating to the Qui Tam Action that may be based in whole or in part on a
contention that, under the Double Jeopardy Clause in the

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                      Settlement Agreement - Page 10 of 14

<PAGE>

Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the
Eighth Amendment of the Constitution, this Settlement Agreement bars a remedy
sought in such criminal prosecution or administrative action. Nothing in this
paragraph or any other provision of this Agreement constitutes an agreement by
the United States concerning the characterization of the Settlement Amount for
purposes of the Internal Revenue laws, Title 26 of the United States Code.

                                  CONTINGENCIES

      16. In the event of a voluntary or involuntary liquidation or
reorganization case by or against TransTechnology under bankruptcy, receivership
or other insolvency law, TransTechnology agrees not to contest or oppose any
motion filed by the United States seeking relief from or modification of the
automatic stay imposed by 11 U.S.C. Section 362(a) nor to seek relief under 11
U.S.C. Section 105 to enjoin or restrain the United States from recovering
monies owed by TransTechnology arising out of this agreement through offset.
TransTechnology recognizes that this express waiver is in consideration for the
ability to make deferred payments of the Settlement Amount as provided in
paragraph one (1) above.

      17. The Parties agree that, if the United States District Court for the
District of New Jersey fails to enter the Order of Dismissal dismissing Civil
Action No. 03cv5359 (D.N.J.) with prejudice, this agreement shall be null and
void. Should the Court decline to enter the Order of Dismissal dismissing Civil
Action No. 03cv5359 (D.N.J.) with prejudice, the United States will return any
payments TransTechnology may have made pursuant to paragraph (l)(a), the Relator
will return any payments the United States may have made pursuant to paragraph
(2) and will

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                      Settlement Agreement - Page 11 of 14
<PAGE>

return any payments TransTechnology may have made pursuant to paragraph (3), and
TransTechnology may submit the foregone claims for payment identified in
paragraph (l)(b) and may submit a claim for payment for any services provided
under paragraph (l)[c] within a reasonable time after the Court's action.

                            ADDITIONAL CONSIDERATIONS

      18. This document contains the full and complete Agreement with respect to
the matters covered herein. No modification of this Agreement shall be effective
unless in writing and signed by the Parties, and agreed to by the United States.

      19. All parties consent to the public disclosure of this Settlement
Agreement, and information about this Settlement Agreement may be made available
to the public upon request.

      20. Each person who signs this Agreement in a representative capacity
warrants that he or she is duly authorized to do so. Further, each Party for
himself or itself, as the case may be, (i) acknowledges that such Party has been
advised by competent legal counsel in connection with the execution of this
Agreement and the accompanying releases, has read each and every paragraph of
this Agreement, understands the respective rights and obligations set forth
herein, and (ii) represents that the commitments, acknowledgment,
representations, and promises set forth herein are freely and willingly
undertaken and given.

      21. This Settlement Agreement shall be interpreted in accordance with the
federal laws of the United States. The Parties agree that the exclusive
jurisdiction and venue for any dispute arising between and among the Parties
under this Agreement will be the United States District Court for the District
of New Jersey.

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                      Settlement Agreement - Page 12 of 14

<PAGE>

      22. For purposes of construction, this Agreement shall be deemed to have
been drafted by all Parties to this Agreement and shall not, therefore, be
construed against any Party for that reason in any subsequent dispute.

      23. This Agreement is intended to be for the benefit of TransTechnology,
Relator, and the United States only, and by this instrument TransTechnology,
Relator, and the United States do not release any claims against any other
person or entity, except those who may be identified within this Agreement.

      24. Dismissal of the Qui Tam Action is subject to the terms of the
Settlement Agreement.

      25. This document shall be executed in counterparts, with one original
being provided to each party. Each of the counter part documents shall be
considered an original of this document.

///

///

///

///

///

///

///

///

///

///

   U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ. No. 03cv5359
                                    (D.N.J.).

                      Settlement Agreement - Page 13 of 14
<PAGE>

      IN WITNESS WHEREOF, the Parties have executed the foregoing Agreement or
counterparts thereof, intending to be bound.

For UNITED STATES OF AMERICA                For UNITED STATES OF AMERICA

By: /s/ Paul J. Wogaman, Sr.                By: /s/ Stuart A. Minkowitz
    -----------------------------------         --------------------------------

Paul J. Wogaman, Sr.                        Stuart A. Minkowitz
Trial Attorney                              Assistant United States Attorney
Civil Division                              970 Broad Street, Suite 700
United States Department of Justice         Newark, New Jersey 07102
(202)616-4298                               (973)783-7607

Dated the 6th day of September, 2005        Dated the 12th day of August, 2005

For TRANSTECHNOLOGY                         COUNSEL FOR RELATOR
CORPORATION AND ITS DIVISION
BREEZE-EASTERN

By: /s/ Stephen G. Sozio                    By: /s/ Neil Mullin
    -----------------------------------         --------------------------------

Stephen G. Sozio, Esq.                      Neil Mullin, Esq.
Jones Day                                   Smith Mullin, P.C.
901 Lakeside Avenue                         240 Claremont Avenue
Cleveland, Ohio 44114-1190                  Montclair, New Jersey 07042
(216) 586-7201                              (973) 783-7607

Dated the 12th day of August, 2005          Dated the 19th day of August, 2005

QUI TAM RELATOR

/s/ LORENZO MARRERO
---------------------------------------
LORENZO MARRERO

Dated the 19 day of August, 2005

          U.S. ex rel. Lorenzo Merraro v. TransTechnology, et al., Civ.
                             No. 03cv5359 (D.N.J.).

                      Settlement Agreement - Page 14 of 14

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