10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
(X)	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 28, 2002
	OR
(   )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
	For the transition period from            to

Commission File Number 0-15386

CERNER CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 43-1196944
(I.R.S. Employer
Identification Number)

2800 Rockcreek Parkway North Kansas City, Missouri 64117 (816) 221-1024 (Address of principal executive offices, including zip code; Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
(Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    X No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2).

Yes    X No

The aggregate value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 29, 2002 was $1,332,849,165.

     At February 28, 2003, there were 35,564,589 shares of Common Stock outstanding, of which 7,514,852 shares were owned by affiliates. The aggregate market value of the outstanding Common Stock of the Registrant held by non-affiliates, based on the closing sale price of such stock on February 28, 2003, was $926,036,866.

     Documents incorporated by reference: portions of the Registrant’s Proxy Statement for the 2003 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.

TABLE OF CONTENTS

Part I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 4A. Executive Officers of the Company
PART II
	Item 5. Market for the Registrant’s Common Stock and Related Security Holder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EX-4(d) First Amendment to Credit Agreement
EX-10(x) Note Purchase Agreement
EX-10(y) Executive Deferred Compensation Plan
EX-22 Subsidiaries of Registrant
EX-23 Consent of Independent Auditors
EX-99.1 Certification
EX-99.2 Certification

Part I

Item 1. Business

Overview

Cerner Corporation (“Cerner” or the “Company”) is a Delaware business incorporated in 1980. The Company’s principal offices are located at 2800 Rockcreek Parkway, North Kansas City, Missouri 64117. Its telephone number is (816) 221-1024. The Company’s Web site address is www.cerner.com. The Company makes available free of charge, on or through its Web site, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities Exchange Commission.

Cerner is taking the paper chart out of health care, eliminating error, variance and unnecessary waste in the care process. With more than 1,500 clients worldwide, Cerner is the leading supplier of health care information technology. Cerner® solutions give end users secure access to clinical, administrative and financial data in real time. Consumers retrieve appropriate care information and educational resources via the Internet.

Cerner implements these solutions as stand-alone, combined or enterprise-wide systems. Cerner solutions can be managed by the Company’s clients or via an application outsourcing/hosting model. Cerner provides hosted solutions from its data center in Lee’s Summit, Missouri.

Cerner solutions are designed and developed using the Cerner Millennium™ architecture. The Cerner Millennium architecture is a state-of-the-art technology infrastructure that combines clinical, financial and management information applications. The Cerner Millennium architecture provides access to an individual’s electronic medical record at the point of care and organizes information for the specific needs of the physician, nurse, laboratory technician, pharmacist or other care provider.

Health care organizations utilize data gathered and stored within the Cerner Millennium architecture to improve the safety, efficiency and productivity of the entire enterprise. The Cerner Millennium architecture also delivers medical knowledge to the point of care to help clinicians predict outcomes of treatment plans and deliver the most effective care.

Health Care Industry

The health care industry in the United States remains highly fragmented, very complex and remarkably inefficient. While science and medical technology continue to make significant progress in dealing with human disease and injury, the management and clinical processes within delivery organizations have made little progress in the past 20 years. Even today, the clinical workflow at most organizations depends on manual, paper-based medical records systems augmented by partial automation. This scattered approach has created an industry in which inappropriate variances in medical outcomes and wasted resources are commonplace.

Significant pressures are at work within the health care industry to eliminate variance and waste. Several parties, including the government, employer groups and consumer organizations, are demanding heightened efforts to eliminate medical error and reduce the costs of health care delivery. Financial pressures, a workforce shortage and government regulations create additional challenges for health care executives.

In November 1999, the Institute of Medicine of the National Academy of Science (“IOM”) released a report titled “To Err is Human,” which estimated that up to 98,000 lives are lost each year due to preventable medical errors. That makes medical error one of the top 10 causes of death in the United States.

2

A follow-up IOM report in March 2001 cited the use of information technology (“IT”) as critical to improving the quality and safety of health care. Yet, the IOM’s November 2002 report, “Fostering Rapid Advances in Health Care,” still cited, “despite some laudable examples of integrated care, the delivery system consists of silos, often lacking even rudimentary information capabilities to exchange patient information, coordinate care across settings and multiple providers, and ensure continuity of care over time.” The pressure to spark change remains strong, and continues to intensify. Most health care organizations have yet to implement comprehensive, enterprise-wide IT solutions. The Washington Post, in a December 2002 article, said that “the vast majority of hospitals still rely on paper charts that often can’t be located and are difficult to decipher, rather than more accessible and legible computerized medical records. Fewer than 3 percent have fully implemented computerized drug ordering systems, which have consistently shown dramatic reductions in drug errors.”

In addition to the recent reports cited above, which both justify and promote the use of IT solutions in health care organizations, the Leapfrog Group (“Leapfrog”), a consortium of large employers, is calling for systemic change in the health care industry. Leapfrog recommends that employers select health plans with hospitals that, among other criteria, employ a computerized physician order entry system (“CPOE”) as a primary method for eliminating medication-related errors. Leapfrog estimates that 1 million serious medication errors occur annually in United States hospitals, and that the total cost to United States hospitals is believed to exceed $2 billion each year. [Leapfrog Group, 2000]. And a staggering number of errors prove preventable, as shown, for example, in a study by David W. Bates, M.D., and colleagues, released in March, 2003 in the Journal of the American Medical Association, which revealed that more than 42 percent of serious, life-threatening or fatal adverse drug events that occurred among an outpatient study sample were deemed preventable.

On the financial front, health care organizations are reporting improved bottom lines compared to a few years ago when the effects of the Balanced Budget Act were most damaging. According to a Deloitte & Touche survey, 67 percent of hospital Chief Executive Officers (“CEOs”) report that their organizations are profitable, up from 58 percent in 2000. But “the median profit margin among respondents was a mere 2.1 percent. CEOs believe that profits will increase modestly to a 3.1 percent margin over the next five years.” [Deloitte & Touche’s “The Future of Health Care: An Outlook from the Perspective of Hospital CEOs,” 2002].

Despite a forecasted increase in profit margins, surveyed hospital CEOs still worry about financial failure in the future. Claims processing is just one example of an area contributing to staggering waste; it is projected that 25 to 30 percent of health care expenditures are lost to inefficiencies in claims processing, which translates to $400-$480 billion wasted annually, according to a September 2002 Healthcare Informatics article. Other leading hospital CEO concerns include decreasing reimbursement for Medicare and Medicaid cases, rising costs of employee salaries, skyrocketing drug costs and a greater need for capital investments to meet the demands of a growing consumer base.

Another factor adding to the increased financial pressure on health care organizations is the implementation of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Health care organizations must find money within their budgets to pay for measures to comply with HIPAA. HIPAA governs security and patient confidentiality and requires a centralized and systematic method of access control. Most health care organizations estimate they will spend $2.5 million to comply with security and confidentiality requirement deadlines that will become effective in 2003. Cerner believes compliance with both the security and patient confidentiality and the access control HIPAA regulations is best achieved with a single, unified IT solutions architecture.

Another threat to the health care system is a growing shortage of personnel. According to a 2002 American Hospital Association Workforce Study, 89 percent of hospital CEOs report significant workforce shortages. The shortages impact all areas of the hospital, but most prevalently affect nursing, radiology and pharmacy.

Many hospitals are turning to IT solutions to help recruit and retain clinicians, as IT solutions can significantly reduce the amount of paperwork clinicians perform. A recent study commissioned by the American Hospital Association and performed by consulting firm PricewaterhouseCoopers found that

3

each hour of skilled nursing care results in 30 minutes of paperwork, while each hour of emergency department care generates a full hour of subsequent paperwork. [PricewaterhouseCoopers, 2001].

IT solutions automate processes and reduce the time clinicians spend poring over paperwork. Clinicians can then devote more time to patients and can deliver a higher quality of care—both of which contribute to increased job satisfaction.

The workforce issues are particularly critical as health care providers prepare for the increased demand for services that Baby Boomers will create. By 2010, the average Baby Boomer will be 65 years old. The sheer number of older consumers needing health care including management of chronic conditions will overburden the system, analysts predict. In addition, these health care consumers will be more knowledgeable than prior generations about the use of IT solutions in service industries and Cerner believes will demand the use of IT solutions to improve the efficiency and quality of health care in their communities.

In order to stay competitive in this dynamic marketplace, health care organizations must deploy IT solutions that automate the paper-based medical records system and create stronger relationships with consumers, physicians, hospitals and managed care organizations. These same IT solutions also must help organizations reduce costs and comply with regulatory requirements.

Cerner has proactively addressed the changing and increasing needs of the health care industry discussed above by developing the Cerner Millennium architecture. See “Cerner Technology—Cerner Millennium Architecture” for a more in-depth explanation of this unparalleled architecture.

The Cerner Vision

Cerner solutions and the Company's business approach are organized around a central vision of how health care can and should operate. This vision is founded on four steps:

• Automate the Core Processes of Health Care

• Connect the Person

• Structure the Knowledge

• Close the Loop

Automate the Core Processes
Cerner is dedicated to the elimination of the paper medical record and paper-based processes.

As long as medical information is isolated in a paper record, the inadequacies of today’s health care delivery system will remain. Nurses and pharmacists will be forced to interpret illegible and incomplete orders. Physicians will not benefit from the real-time, contextual reference information available in automated solutions. And clinicians throughout a health care organization will continue to search for the single copy of the paper-based record. When it is not readily available, they will be forced to make critical care decisions without adequate information.

The elimination of the paper record will lead to improved quality and safety of health care. It will increase productivity and generate better documentation from which clinical outcomes, financial performance and resource utilization can be benchmarked and analyzed.

With an electronic medical record, clinicians view demographic information, medical history, lab results, vital signs and treatment plans, along with notes from health care team members. Guidelines and pathways relevant to the person’s medical condition help the physician make the best possible decisions in diagnosing and treating the patient. This comprehensive view of the person’s health ensures safer and higher-quality care.

Online documentation and physician order entry reduce errors and eliminate duplication of services—and the costs associated with both. Documentation required to write claims and seek reimbursement for services is maintained efficiently, thus reducing claim denials and shortening the time that passes between claims submission and payment.

4

Once all the steps of health care are captured electronically, the enhanced documentation will create the foundation for data collection that will be the backbone of structuring the knowledge of health care.

Connect the Person
Cerner is dedicated to helping its clients build a personal health system, a new medium between the person and the physician, which empowers the individual and delivers higher-quality health care across communities .

The health care system is undergoing fundamental change as the person moves to the center of health care delivery. Increasing access to expert knowledge over the Internet and a cultural shift toward self-directed care are moving the center of power and control away from the health care provider and toward the health care consumer.

With the personal health record, individuals can store and access their medical information securely from anywhere they have Internet access. When combined with personalized health content, consumers gain a better sense of the care they are receiving and the options available to them. They communicate better with providers and, resulting in healthier communities.

Structure the Knowledge
Cerner is dedicated to building information systems that treat every clinical decision as a learning event. Cerner solutions enable the industry to structure, store and study the application and outcomes of medical practice.

Medicine must have a structure that allows physicians to record treatment and outcomes in such a way that it can be compared and contrasted with other methods. A common data foundation that can exactly capture the meaning of input from the diverse nomenclatures of physicians and clinicians is a necessary first step.

Cerner solutions store health care data and provide a framework for comparability. This enables physicians to make sense of and glean value from the information that is gathered through automated processes and connected persons. Without a knowledge framework, data collected will provide no real benefit. By building this structure, Cerner opens the door for every encounter with a patient and every piece of new knowledge to be catalogued, measured and analyzed. This knowledge framework will deliver better care and an improved understanding of medicine.

Close the Loop
Cerner is dedicated to building information systems that deliver evidence-based medicine, dramatically reducing the average time from the discovery of an improved method to the change in medical practice.

Advances in technology offer great opportunities in health care and must be used to deliver better care faster. The information learned must be applied. Today, patients may wait as long as 10 years before new medical knowledge reaches widespread use. With systems designed to embed evidence-based medicine inside the clinician’s workflow#using pathways, guidelines and alerts#physicians know that every medical decision is based on the best and most recent knowledge available. The results will be better outcomes and reduced variance.

The Cerner Strategy

Key elements of Cerner’s business strategy include:

Penetrate the integrated health care provider market. Large health care systems represent a significant component of the health care information technology market. These organizations focus on improving safety and reducing costs through operating efficiencies. Cerner’s enterprise-wide, person-centric, clinical and management solutions provide the technology to manage health care across an organization, significantly reduce costs, improve the efficiency of delivery and enhance the quality of care.

Increase market share in individual domains and further penetrate the existing client base. Cerner expects continued growth in clinical domain systems for specific markets such as nursing, physician office, laboratory, pharmacy, radiology, surgery, emergency medicine and cardiology, as institutions look

5

to restructure and reengineer these high-cost centers. Cerner anticipates growth in sales of new solutions, such as its Clinically Driven Revenue Cycle™ solution launched in 2001, new management reporting data warehouse launched in 2002, Executable Knowledge® content acquired in 2002 and home health care solution to be introduced in 2003. The Company also intends to aggressively market Cerner clinical and management information systems and services to its existing client base.

Remain committed to a common architecture. Because Cerner believes that the constituents in health management need to work together to benefit defined populations in a community, Cerner has made a commitment to a single, unified architecture as its platform for healthcare information management solutions that span the health enterprise. This platform enables the Cerner Millennium architecture to be scalable on a linear basis, using either Cerner compatible modules for process-oriented applications or competitive systems interfaced using open system protocols.

Expand solutions and services. Building upon the Cerner Millennium architecture, Cerner intends to continue expanding the range of applications and services offered to providers. These new solutions and services will complement existing solutions, address clients’ emerging IT needs and employ technological advances. Cerner believes that major opportunities exist as providers reach into new markets and offer more alternative services to remain competitive. The Company believes these organizations will find value in having personal health records and trusted medical information accessible to the individual in the home. Cerner recognizes the potential value of the aggregate database being developed by its broad client base. This database would be a powerful means of enabling comparative or normative procedure evaluations. The substantial project management, process redesign, technology integration and training involved in health care systems taking advantage of the opportunities provided by clinical and management information technology represent a significant market for Cerner’s consulting services.

Continue pursuit of excellence in implementations. Since the introduction of the Cerner Millennium architecture – a revolutionary concept and application offering that ventured into complex, uncharted territories – Cerner has dramatically improved the implementation process. With the benefit of more than 1,700 Cerner Millennium conversions (at the conclusion of 2002) and more than 4,700 associates, including nearly 800 clinicians and more than 1,800 consultants, Cerner has steadily decreased implementation timelines while increasing the number of applications converted within those timelines. The Cerner Implementation Methodology and Accelerated Solutions Center, along with deep expertise in transition management and workflow optimization, have enabled Cerner to create and deploy best practices that contribute significantly to speed and value.

Offer its solutions on a hosted solution basis. The Company offers Cerner Millennium solutions through its application outsourcing option. This option delivers IT services that include software, computer hardware, implementation, technical support, wide-area network services and automatic software upgrades. Unlike traditional software implementations, software delivered through the application outsourcing option is not installed at the clients facility, but is delivered, operated and maintained in Cerner’s solutions center in a rapidly accelerated implementation timeframe. Using hosted solutions, any size organization can access the same robust clinical applications, architecture and user-interface advantages that were previously only available to larger institutions.

Cerner Technology—Cerner Millennium Architecture

The cornerstone of Cerner’s technology strategy is the Cerner Millennium architecture, the single architecture around which each of Cerner’s solutions is developed. This person-centric, single data model, open and highly scalable architecture allows Cerner to meet the clinical, financial, management and business information requirements of a health care delivery system across the continuum of care. The Cerner Millennium architecture, the core of which was developed between 1994 and 1999, is Cerner’s computing platform. The Cerner Millennium architecture uses flexible n-tiered client/server technology to optimize distributed computing performance and scalability across multiple client and server platforms. The Cerner Millennium architecture and applications were designed and developed to accommodate health care specific requirements for mission-critical computing and secure access from all settings along the care delivery continuum. The breadth of focus and functionality of the Cerner Millennium architecture and solutions are well suited for large-scale and enterprise application technologies for health care organizations.

6

The value of the Cerner Millennium architecture to a client organization is the enterprise-wide use of a single system based on a fully unified common architecture and database. With its single data model and comprehensive electronic medical record, the Cerner Millennium architecture provides secure, real-time access to all information across multiple applications, domains, organizations and physical locations, including physician, hospital, nursing, laboratory, pharmacy and consumers, to all authorized providers requiring such access. Given its unified and open design, the Cerner Millennium architecture can also provide a centralized repository of clinical and financial transactions to help standardize access and messaging of disparate applications across a health system.

The alternative to a single architectural approach is to use disparate systems based on differing architectures and data structures to automate the care process across the continuum of care. These disparate systems must be interfaced together and rely on these interfaces to transmit, modify and arrange data exchanged between them, which limits the data’s usefulness across multiple systems and inhibits real-time access. In addition, many of these systems lack functional scalability and cannot operate across multiple provider settings or locations within a health care organization, constraining organizations’ potential to realize full benefits in operational efficiencies and care quality.

Several overarching capabilities are embedded into the Cerner Millennium architecture. First is the capability for person-centric transactions and secure messaging, which consider the breadth of requirements not only of a patient, but also of healthy consumers. Second is health care community dynamics, which take into account the flexibility required by the constantly changing relationships between health care organizations, physicians and consumers, and the need to maintain complex security and user preferences based on the context and business attributes of the transaction in a community setting. Third is the ability to proactively deliver patient, provider and condition-specific knowledge and content in the form of alerts, best practices and pathways—content in context—at the point of decision, empowering physicians with the most complete, most timely information available when making decisions about care delivery.

Diverse Cerner clients located around the globe are reaping the benefits of the Cerner Millennium architecture, increasing efficiency and improving care quality. A brief sampling of client feedback includes:

“We believe in Cerner’s ability to execute on its vision and have benefited greatly from the decision to partner with Cerner. Cerner’s architecture makes it the best CPOE solution for the University of Illinois Medical Center. As we develop more advanced clinical decision support, Cerner Millennium places critical patient information—including laboratory results—within the decision-making process. The advancements we have made fully support our mission to provide the highest possible scientific and ethical standards in all that we do: patient care, education and research.” Joy Keeler, Assistant Vice Chancellor, University of Illinois at Chicago

“I always talk about Cerner, the rules and alerts, when I go to schools to talk to students. Technology is a very high value for them. Information technology is an investment in the future of our workforce.” Terrie Sterling, Vice President of Patient Care Services, Our Lady of the Lake Regional Medical Center (Louisiana)

“Morale gets a boost because PowerChart reduces the frustration and time previously associated with trying to obtain paper records, plus it provides legible records and rapid access to lab results and dictated documents. Communication between providers in different venues is faster and less repetitive. I have noticed a significant improvement in the quality and timeliness of documentation, because staff members know that their work will be available, read and used by other providers.” Dr. Corabell Arps, Pediatric/Adolescent Psychology, Eastern Maine Healthcare

Throughout 2003 and 2004, Cerner will focus on further contemporizing the Cerner Millennium architecture with new technologies and human interfaces that enhance usability, personalization and system management via browser-based applications.

7

Solutions

The Cerner Millennium platform of applications is a single-architecture health care information system capable of both retrieving and disseminating clinical and financial information across an entire health system. The Cerner Millennium solution families are dedicated to meeting the automation needs of virtually every segment of the care continuum.

Cerner solutions can be acquired individually or as a fully unified health information system. Cerner also markets more than 200 solutions options that complement Cerner’s major information systems. In addition, Cerner offers comprehensive consulting services—including learning services, readiness assessments, planning and change management and process redesign—and also sells third-party computers and related hardware to its software licensees.

Cerner’s solution categories include:

• Enterprise Repositories, which are the data repositories underlying all solutions.

• Enterprise-wide Solutions, which automate processes across and throughout the health system enterprise, including:

• Clinical, which automate critical processes across the health care continuum.

• Decision Support and Knowledge, which enhance clinical and business processes with information and actions.

• Consumer, which support Internet-based health care communities that effectively connect individuals, providers and health systems.

• Packaged Solutions, which address key processes in health care.

• Health Care Organizations, which address key segments in health care organizations.

• Technologies, which are used for developing applications or connecting other technologies and systems to the Cerner Millennium architecture.

Enterprise Repositories

The unique architecture of Cerner Millennium sets Cerner apart from the competition. A key part of the Cerner Millennium architecture is the data repositories the underlying foundation for Cerner applications which allow health care organizations to manage and make use of the data collected along the health care continuum.

The Open Clinical Foundation® repository manages clinical information, providing the foundation for the electronic medical record.

The Open Research Foundation™ repository provides open repository storage of clinical and medical information to support medical research.

The Open Image Foundation™ repository provides the clinical and document imaging foundation for the electronic medical record.

8

Enterprise-Wide Solutions

Access Management
The CapStone® Enterprise Access Management System creates the enterprise master person index (“EMPI”) and automates the identification, eligibility, registration and scheduling processes across hospitals, clinics, physician practices and other care delivery organizations.

Care Management
PowerChart® Electronic Medical Record System is the enterprise clinician’s desktop solution for viewing, ordering, documenting and managing care delivery, including the PowerOrders™ offering for physician ordering.

Financial and Operational
The ProFit™ Enterprise Billing and Accounts Receivable System is Cerner’s system for revenue accounting, billing and accounts receivable for the entire health system as well as each individual domain or organization. The ProFit system brings together clinical and financial data to ensure accurate charge capture and billing.

Cerner ProVision™ Document Image Management System is an integrated solution that manages document images across the entire health care organization.

The ProFile™ Health Information Management System helps meet the operation’s management needs of the health information management (medical records) department and includes functionality for the various coding and completion tasks.

Clinical Systems

Points of Care
The INet® Intensive Care Management System is designed to automate the entire care process in intensive care settings. It supports chart review and browsing, order management, documentation management and automatic data acquisition.

The CareNet® Acute Care Management System is designed to automate the entire care process in acute or institutional settings. The application collects, refines, organizes and evaluates detailed clinical and management data. It enables the entire care team to manage individual activities and plans, as well as measure outcomes and goals.

The CVNet® Cardiology Information System automates the processes within the cardiology department, supporting the scheduling, ordering, documentation and data capture required by professionals in the cardiology domain.

The SurgiNet® Surgery and Anesthesia Information System is designed to address the needs of the surgical department, including automating the functions of professional staff and material resource scheduling, inventory management, perioperative documentation, anesthesia management, and providing financial and operational analysis tools to support continuous improvement in the surgical service.

The FirstNet® Emergency Department Information System provides a comprehensive solution to the challenges emergency departments face to streamline process flows, comply with HIPAA and Emergency Medical Treatment and Active Labor Act regulations, comply with the Centers for Medicare and Medicaid Services requirements and ensure appropriate reimbursement. The FirstNet® system is an emergency department clinician and management tool for quick and effective patient tracking, ordering, results and medical record review, online clinical documentation, prescription writing, patient education and evidence-based coding.

The PowerChart Office™ Management System supports the broad range of clinical and business activities that occur within a physician office, clinic or large physician organization. This system ties the

9

physician office together with other medical entities and automates key care team activities in both primary and specialty care settings.

The ProCure™ Enterprise Supply Chain Management solutions connect the materials management processes to clinical processes—from scheduling to outcomes—to establish the supply chain as a byproduct of the care process.

Clinical Centers
The PathNet® Laboratory Information System addresses the clinical, financial and managerial needs of a comprehensive laboratory setting with unified solutions for: general laboratory, microbiology, blood bank transfusion services, anatomic pathology, Human Leukocyte Antigen (“HLA”) and outreach programs. The PathNet® system automates laboratory processes while capturing crucial data for operational success, ensuring the production of accurate and timely reports and the maintenance of accessible laboratory records.

The RadNet® Radiology Information System addresses the operational and management requirements of radiology departments or services. It allows a department to replace its manual, paper-based system of record keeping with an efficient computer-based system.

Cerner ProVision™ PACS (picture archival and communications system) is fully unified with Cerner’s radiology information system to manage filmless storage, viewing, reporting and distribution of images. Using Cerner’s end-to-end, fully unified radiology information and image management systems, radiologists can improve operational efficiencies and reduce medical error.

The PharmNet® Pharmacy Information System empowers rapid pharmacy order entry and support of the clinical pharmacy in either an inpatient or retail setting. The PharmNet® system streamlines medication order entry, enabling the pharmacist or technician to place all types of pharmaceutical orders, and automates dispensing functions.

Decision Support and Knowledge

The PowerInsight™ solution is a comprehensive health care intelligence and data warehouse for health care. It enables clinical leadership and health care executives to collect, measure, analyze and benchmark data, thereby deriving insights to enable positive changes in clinical processes and operational performance.

The Discern Expert® solution is an event-driven, rules-based decision support software application that allows users to define clinical and management rules that are applied to event data captured or generated by other applications. It supports both synchronous (real-time, interactive) processing and asynchronous (noninteractive) processing of events.

The Discern Explorer® solution is a decision support solution unified with other Cerner Millennium clinical and management information systems that allows clients to execute predetermined or ad hoc queries and reports regarding process-related data that is generated by the other applications.

The Care Designs™ solutions are clinical pathways and protocols that automate the specific plans of care for an individual and are used in conjunction with the PowerNote™ offering.

Zynx Health™ solutions include clinical pathways, which help physicians assess and treat illnesses based on the most current medical knowledge.

The Cerner Multum™ drug database provides caregivers and consumers alike with access to drug information and the ability to perform drug interaction checking to prevent adverse events.

Cerner APACHE™ clinical decision support and outcomes management systems manage the clinical and financial outcomes of high-risk patients in critical and acute care.

10

The Health Facts® repository is Cerner’s comparative data warehouse for benchmarking information and services for subscribers to support their own improvement processes.

The HealthSentry™ bio-surveillance network collects critical biological information about potential disease outbreaks and analyzes data for specific patterns or trends.

Consumer

Cerner’s IQHealth™ systems enable health care organizations to create an Internet-based health care community that connects individuals to their health care providers. IQHealth™ systems empower consumers and patients to record, track and store health information to better manage their own health and that of their loved ones. With IQHealth™ systems, sponsoring organizations can create and brand a “health exchange” to improve their presence in the community, better support individuals in their self-care actions including management of chronic conditions such as diabetes and asthma and enhance existing centers of excellence.

IQHealth™ systems include Web Portal Services, Health Content, Survey and Assessment Tools, Personal Health Record, Physician and Consumer Messaging and Disease-Specific Modules.

Packaged Solutions

Computerized Physician Order Entry (CPOE)
Cerner offers a step-by-step total CPOE solution ranging from basic automation to complete medication integration.

Cerner HealthSmart™ CPOE Direct is a stand-alone approach to CPOE for organizations that are taking initial steps in streamlining the orders process. This level of automation leverages the industry’s most robust CPOE application, the PowerOrders offering, and includes key functionality, like clinical documentation, order sets, starter content, rules packages and basic reporting tools, to deliver immediate benefits.

Cerner HealthSmart™ CPOE Connect takes clients to the next level by leveraging existing information systems. This intermediate level of Cerner’s solution extends a stand-alone CPOE system into two other critical areas of the orders process, pharmacy and nursing.

Cerner HealthSmart™ Medication Integration is the first comprehensive clinical information solution to support the complete medication orders process by connecting each care team member#physician, pharmacist and nurse—through a common, seamless data model.

Revenue Cycle Management
Cerner HealthSmart™ Revenue Cycle Integration draws upon the powerful capabilities of the CapStone® and ProFit™ systems to help health care organizations streamline and automate processes from registration through billing, realizing substantial savings and speeding the revenue collection process. Cerner’s revolutionary Clinically Driven Revenue Cycle™ approach proactively manages the revenue cycle as an outcome of the clinical automation process.

Health Care Organizations

Cerner also offers solutions designed for specific segments in the health care industry.

Cerner solutions for the Integrated Delivery Network allow organizations to serve multiple facilities, with differing needs, across various geographic locations.

Community Hospital Solutions automate clinical and business processes in the community hospital. Community Hospital Solutions suites include administrative, clinical, patient care, hospital integration and community.

Cerner solutions for the Children’s Hospital setting specifically address those issues unique to the pediatric hospital setting.

11

Cerner solutions for Correctional Facilities allows organizations to provide quality care for inmates amid many challenges, including inmate transfers to different facilities and the threat of litigation.

Cerner solutions for Academic Medical Centers allow medical centers to focus on delivering high-quality care and to carry out high-level teaching and research functions.

Cerner also offers solutions to meet the needs of federal health care organizations, including the Department of Veterans Affairs and the Department of Defense. These organizations have specific requirements for IT solutions.

Technologies

The MillenniumObjects™ toolkit is a collection of reusable programming elements from the revolutionary Cerner Millennium architecture. These segments of code, or objects, allow third-party developers to create front-end applications that draw upon the data model and proven functionality of the Cerner Millennium architecture.

The Open Engine Application Gateway™ System facilitates the exchange of data and assists in the management of interfaces between foreign systems in a network environment. It serves as a solution kit to help write interface code.

The Open Port Interface™ System represents Cerner’s standardized technology for providing reliable foreign system, medical device and other standard interfaces in a timely manner. Message translation and data mapping are done with point-and-click solutions and a scripting environment. Communications protocols are configured via table-driven parameters. These sophisticated methodologies result in decreased implementation times and greater client satisfaction.

Software Development

Cerner commits significant resources to developing new health information system solutions. As of December 28, 2002, approximately 1,591 associates were engaged full-time in software solutions development activities. Total expenditures for the development and enhancement of the Company’s software solutions were approximately $149,985,000, $113,872,000 and $90,694,000 during the 2002, 2001 and 2000 fiscal years, respectively. These figures include both capitalized and non-capitalized portions and exclude amounts amortized for financial reporting purposes.

The Company expects to continue investment and development efforts for its current and future solution offerings. As new clinical and management information needs emerge, Cerner intends to enhance its current software solutions lines with new versions released to clients on a periodic basis. In addition, Cerner plans to: expand its current software solutions lines by developing additional information systems for clinical, financial, operational and/or consumer use; continue to support simultaneous use of Cerner’s solutions across multiple facilities; and, continue to expand in the global marketplace.

The Company is committed to maintaining open attributes in its system architecture through operability in a diverse set of technical and application environments. The Company strives to design its systems to co-exist with disparate applications developed and supported by other suppliers. This effort is exemplified by Cerner’s Open Engine, Open Port and MillenniumObjects software solutions lines.

See “Cerner Technology—Cerner Millennium Architecture” for a discussion of the development of Cerner’s latest generation of software solutions.

Sales and Marketing

The markets for Cerner’s information system solutions include integrated delivery networks, physician groups and networks and their management service organizations, managed care organizations, hospitals, medical centers, free-standing reference laboratories, blood banks, imaging centers, pharmacies, pharmaceutical manufacturers, employer coalitions and public health organizations. To

12

date, a substantial portion of system sales has been in clinical applications in hospital-based provider organizations. Cerner’s Millennium architecture is highly scalable, with applications being used in hospitals ranging from under 50 beds to over 2,000 beds and managed care settings with over 2,000,000 members. All Cerner Millennium applications are designed to operate on either computers manufactured by HP Computer Corporation or IBM’s RISC System/6000 AIX (UNIX) platform, thereby allowing Cerner to be price competitive across the full range of size and organizational structure of health care providers. The sale of a health information system usually takes approximately nine to eighteen months, from the time of initial contact to the signing of a contract.

The Company’s executive marketing management is located in its North Kansas City, Missouri, headquarters, while its client representatives are deployed across the United States and globally. In addition to the United States, the Company, through subsidiaries and joint ventures, has sales staff and/or offices in Australia, Belgium, Canada, Argentina, Germany, Singapore, Malaysia, Saudi Arabia and the United Kingdom. Cerner’s consolidated revenues include foreign sales of $29,412,000, $22,350,000 and $25,815,000 for the 2002, 2001 and 2000 fiscal years, respectively. The Company supports its sales force with technical personnel who perform demonstrations of Cerner’s solutions and assist clients in determining the proper hardware and software configurations. The Company’s primary direct marketing strategy is to generate sales contacts from its existing client base and through presentations at industry seminars and tradeshows. Cerner attends a number of major tradeshows each year and sponsors executive conferences, which feature industry experts who address the information system needs of large health care organizations.

Client Services

All of Cerner’s clients enter into software maintenance agreements with Cerner for support of their Cerner systems. In addition to immediate software support in the event of problems, these agreements allow clients the use of new releases of the Cerner solutions covered by maintenance agreements. Each client has 24-hour access to the client support staff located at Cerner’s world headquarters in North Kansas City, Missouri and the Company’s global support organization in Brussels, Belgium. Most of Cerner’s clients also enter into hardware maintenance agreements with Cerner. These arrangements normally provide for a fixed monthly fee for specified services. In the majority of cases, Cerner subcontracts hardware maintenance to the hardware manufacturer.

Backlog

At December 28, 2002, Cerner had a contract backlog of approximately $732,719,000 as compared to approximately $566,280,000 at December 29, 2001. Such backlog represents system sales from signed contracts, which had not yet been recognized as revenue. The Company recognizes revenue on a percent of completion basis, based on certain milestone conditions, for its software products. At December 28, 2002, the Company had approximately $84,054,000 of contracts receivable, which represents revenues recognized under the percentage of completion method but not yet billable under the terms of the contract. At December 28, 2002, Cerner had a software support and maintenance backlog of approximately $269,153,000 as compared to approximately $221,393,000 at December 29, 2001. Such backlog represents contracted software support and hardware maintenance services for a period of twelve months. The Company estimates that approximately 51 percent of the aggregate backlog at December 28, 2002 of $1,001,872,000 will be recognized as revenue during 2003.

Other Factors Affecting The Company’s Business

Information under the caption “Factors That May Affect Future Results of Operations, Financial Condition of Business” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 is incorporated herein by reference. Such information includes a discussion of various factors that could, among other things, affect the Company’s business in the future, including: (a) variations in the Company’s quarterly operating results; (b) volatility of the Company’s stock price; (c) market risk of investments; (d) changes in the health care industry; (e) significant competition; (f) the Company’s proprietary technology may be subjected to infringement claims or may be infringed upon; (g) possible regulation of the Company’s software by the U.S. Food and Drug Administration or other government regulation; (h) the possibility of product-related liabilities; (i)

13

possible failures or defects in the performance of the Company’s software; (k) the possibility that the Company’s anti-takeover defenses could delay or prevent an acquisition of the Company; and, (l) risks associated with the Company’s global operations.

Number of Employees (“Associates”)

As of December 28, 2002, the Company employed 4,791 associates.

Item 2. Properties

The Company’s world headquarters offices are located in a Company-owned office park in North Kansas City, Missouri, containing approximately 500,000 square feet of useable space (the “Campus”). As of December 28, 2002, the Company was using approximately 480,000 square feet and substantially all of the remainder was leased to tenants. In the first quarter of 2002, the Company began construction of a new facility situated between the buildings located at 2800 and 2900 Rockcreek Parkway on the Campus. This facility, when completed, will be approximately 134,000 square feet in size and will house office, cafeteria and meeting space for the Company. Planned occupancy date of this new facility is the second quarter of 2003. In 2002, the Company began construction of a new office building located on the Campus. This facility, when completed will house office and meeting space for the Company. The planned occupancy date of this new facility is third quarter of 2003.

In the spring of 2001, the Company acquired property formally owned by Harrah’s Operating Company, Inc., located along the north riverbank of the Missouri River, approximately 2 miles from the Company’s Campus. This property consists of an 80,000 square foot building and a 1,300-car parking garage. The building has been renovated for use as a corporate training, meeting and event center for the Company. The Company has also made use of the parking garage to meet overflow-parking demands on the Company’s Campus.

The Company also leases office space in: San Jose, California; Los Angeles, California; Denver, Colorado; Lake Mary, Florida; Waltham, Massachusetts; Detroit, Michigan; St. Louis, Missouri; Houston, Texas; Washington, D.C.; Chesapeake, Virginia; and, Vienna, Virginia. The Company operates its primary solutions center (or data center) in leased space in Lee’s Summit, Missouri. Globally, the Company also leases office space in: Sydney, Australia; Brussels, Belgium; and, Aachen and Idstein, Germany. Cerner Arabia, a joint venture in which the Company maintains a 40% equity interest, leases space in Riyadh, Saudi Arabia.

Item 3. Legal Proceedings

The Company has no material pending litigation.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the stockholders of the Company during the fourth quarter of the fiscal year ended December 28, 2002.

14

Item 4A. Executive Officers of the Company

The following table sets forth the names, ages, positions and certain other information regarding the Company’s executive officers as of February 15, 2003. Officers are elected annually and serve at the discretion of the Board of Directors.

Name	Age	Positions
Neal L. Patterson	53	Chairman of the Board of Directors and Chief Executive Officer
Clifford W. Illig	52	Vice Chairman of the Board of Directors
Earl H. Devanny, III	51	President and President of Cerner Southeast
Glenn P. Tobin, Ph.D.	41	Executive Vice President, Chief Operating Officer and President of Cerner Great Lakes
Paul M. Black	44	Executive Vice President of U.S. Client Organization
Jack A. Newman, Jr.	55	Executive Vice President
Marc G. Naughton	48	Senior Vice President and Chief Financial Officer
Jeffrey A. Townsend	39	Senior Vice President and Chief Engineering Officer
Stanley M. Sword	41	Senior Vice President and Chief People Officer
Randy D. Sims	42	Vice President, Chief Legal Officer and Secretary
Douglas M. Krebs	45	Vice President and President of Cerner Global
Richard J. Flanigan, Jr.	43	Vice President and President of Cerner North Atlantic
Zane M. Burke	36	Vice President and President of Cerner West
Mike Valentine	34	Vice President and President of Cerner Mid America

Neal L. Patterson has been Chairman of the Board of Directors and Chief Executive Officer of the Company for more than five years. Mr. Patterson also served as President of the Company from March of 1999 until August of 1999.

Clifford W. Illig has been a Director of the Company for more than five years. He also served as Chief Operating Officer of the Company for more than five years until October 1998 and as President of the Company for more than five years until March of 1999. Mr. Illig was appointed Vice Chairman of the Board of Directors in March of 1999.

Earl H. Devanny, III joined the Company in August of 1999 as President. In January of 2003 Mr. Devanny was named interim President of Cerner Southeast. Prior to joining the Company, Mr. Devanny served as president of ADAC Healthcare Information Systems, Inc. Prior to joining ADAC, Mr. Devanny served as a Vice President of the Company from 1994 to 1997. Prior to that he spent seventeen years with IBM Corporation.

Glenn P. Tobin, Ph.D. joined the Company in April of 1998 as General Manager and Senior Vice President. On October 29, 1998, Dr. Tobin was appointed Executive Vice President and Chief Operating Officer. In January of 2003, Mr. Tobin was named interim President of Cerner Great Lakes. Prior to joining the Company, Dr. Tobin served as a senior consultant with McKinsey and Co., Inc. for more than five years.

15

Paul M. Black joined the Company in March of 1994 as a Regional Vice President. He was promoted in June 1998 to Senior Vice President and Chief Sales Officer and to Executive Vice President in September of 2000. In January of 2003 Mr. Black was Executive Vice President of the U.S. Client Organization. Prior to joining the Company, he spent twelve years with IBM Corporation.

Jack A. Newman, Jr. joined the Company in January of 1996 as Executive Vice President. Prior to joining the Company, he was with KPMG LLP for twenty-two years. Immediately prior to joining Cerner he was National Partner-in-Charge of KPMG’s Healthcare Strategy Practice.

Marc G. Naughton joined the Company in November 1992 as Manager of Taxes. In November 1995 he was named Chief Financial Officer and in February 1996 he was promoted to Vice President. He was promoted to Senior Vice President in March 2002.

Jeffrey A. Townsend joined the Company in June 1985. Since that time he has held several positions in the product organization and was promoted to Vice President in February 1997. He was appointed Chief Engineering Officer in March 1998. He was promoted to Senior Vice President in March 2001.

Stanley M. Sword joined the Company in August 1998 as Vice President. He was promoted to Senior Vice President in March 2002. Prior to joining Cerner, he served as a client partner in the outsourcing practice of AT&T Solutions and as the Vice President of Organization Development for NCR Corporation. Prior to joining AT&T, Mr. Sword spent ten years with Accenture Consulting in a variety of roles within the systems integration practice.

Randy D. Sims joined the Company in March 1997 as Vice President and Chief Legal Officer. Prior to joining the Company, Mr. Sims worked at Farmland Industries, Inc. for three years where he served most recently as Associate General Counsel. Prior to Farmland, Mr. Sims was in-house legal counsel at The Marley Company for seven years, holding the position of Assistant General Counsel when he left to join Farmland.

Douglas M. Krebs joined the Company in June 1994 as a Regional Vice President. He was promoted to Senior Vice President and Area Manager in April 1999. On February 1, 2000, Mr. Krebs was appointed as President of Cerner Global. Prior to joining Cerner, he spent fifteen years with IBM Corporation.

Richard J. Flanigan, Jr. joined the Company in November 1994 as a Regional Vice President. In 1997, his responsibilities were extended and he was named as General Manager. He was promoted to Senior Vice President in April 2000 and to President of Cerner North Atlantic in January 2003. Prior to joining Cerner, Mr. Flanigan spent more than thirteen years in sales and management positions at IBM Corporation.

Zane M. Burke joined the Company in September 1996 as U.S. Corporate Controller. Since that time he has held several positions in the finance organization and was promoted to Vice President in 2000 and President of Cerner West in January 2003. Prior to joining the Company, Mr. Burke was with KPMG LLP for six years.

Mike Valentine joined the Company in December 1998 as Director of Technology. He was promoted to Vice President in 2000 and President of Cerner Mid America in January of 2003. Prior to joining the Company, Mr. Valentine spent two years with Maryville Data Systems and more than five years with Accenture Consulting.

16

PART II

Item 5. Market for the Registrant’s Common Stock and Related Security Holder Matters

The Company’s common stock trades on The NASDAQ Stock Market^SM under the symbol CERN. The following table sets forth the high, low and last sales prices for the fiscal quarters of 2002 and 2001 as reported by The NASDAQ National Market System. These quotations represent prices between dealers and do not include retail mark-up, mark-down or commissions, and do not necessarily represent actual transactions.

	2002						2001
	High		Low		Last		High		Low		Last
First quarter		52.06		43.14		47.71		61.50		30.81		34.25
Second quarter		57.00		46.23		47.83		49.50		28.00		42.00
Third quarter		45.54		35.88		35.99		57.35		37.57		49.50
Fourth quarter		38.34		27.65		29.50		60.00		45.06		50.69

At January 31, 2003, there were approximately 1,600 owners of record. To date, the Company has paid no dividends and it does not intend to pay dividends in the foreseeable future. Management believes it is in the stockholders’ best interest to reinvest funds in the operation of the business.

Item 6. Selected Financial Data

		2002			2001			2000		1999			1998
		(1)(2)(3)			(4)(5)			(6)(7)		(11)(12)			(13)
								(8)(9)(10)
(In thousands, except per share data)
Statements of Earnings Data:
Revenues		$	751,852			542,423			403,712		338,267			329,924
Operating earnings			90,820			61,350			24,810		1,768			32,552
Earnings (loss) before income taxes, cumulative effect of a change in accounting principle and extraordinary item			80,625			(63,314	)		172,123		302			33,268
Cumulative effect of a change in accounting for goodwill, net of $486 income tax benefit			(786	)		—			—		—			—
Extraordinary item – early extinguishment of debt			—			—			—		(1,395	)		—
Net earnings (loss)			48,022			(42,366	)		105,265		(1,211	)		20,589
Earnings (loss) per share before extraordinary item:
	Basic		1.36			(1.21	)		3.08		.01			.63
	Diluted		1.30			(1.21	)		2.96		.01			.61
Earnings (loss) per share:
	Basic		1.36			(1.21	)		3.08		(.04	)		.63
	Diluted		1.30			(1.21	)		2.96		(.04	)		.61
Weighted average shares outstanding:
	Basic		35,458			34,907			34,123		33,623			32,825
	Diluted		37,050			34,907			35,603		33,916			33,667
Balance Sheet Data:
Working capital		$	282,135			189,488			186,181		170,053			118,681
Total assets			779,279			712,302			616,411		660,891			436,485
Long-term debt, net			136,636			92,132			102,299		100,000			25,000
Stockholders’ equity			441,244			394,839			343,717		378,937			271,143

17

(1)	Includes a gain on the sale of shares of WebMD common stock. The impact of this gain is a $3.3 million, net of $1.9 million tax expense, increase in net earnings and an increase to diluted earnings per share of $.09 for 2002.
(2)	Includes a charge for impairment of investments. The impact of this charge is a $6.3 million, net of $3.6 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of $.17 for 2002.
(3)	Includes the cumulative effect of a change in accounting for goodwill. The impact of this change is a $.8 million, net of $.5 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of $.02 for 2002.
(4)	Includes a gain on the settlement of the WebMD performance warrants. The impact of this gain is a $4.8 million, net of $2.7 million tax expense, increase in net earnings and an increase to diluted earnings per share of $.13 for 2001.
(5)	Includes a charge on the adjustment of the carrying value of the WebMD shares. The impact of this charge is an $81.4 million, net of $46.1 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of ($2.21) for 2001.
(6)	Includes an investment gain of $120.4 million, net of $68.3 million tax expense, related to the conversion of shares of CareInsite common stock to shares of WebMD common stock. The impact of this investment gain on diluted earnings per share was $3.38 for 2000.
(7)	Includes an investment loss of $24.5 million, net of $13.9 million tax benefit, related to the sale of shares of WebMD common stock. The impact of this investment loss on diluted earnings per share was ($.69) for 2000.
(8)	Includes a charge of $6.7 million related to the write-down of intangible assets associated with the acquisition of Health Network Ventures, Inc. The impact of this charge on diluted earnings per share was ($.19) for 2000.
(9)	Includes a charge of $3.2 million related to the acquisition of CITATION Computer Systems, Inc. The impact of this charge on diluted earnings per share was ($.09) for 2000.
(10)	Includes a charge of $1.0 million, net of $.7 million tax benefit, related to the acquisition of ADAC Healthcare Information Systems, Inc. The impact of this charge on diluted earnings per share was ($.03) for 2000.
(11)	Includes a charge of $5.8 million, net of $3.6 million tax benefit, related to the cost in excess of revenues of completing fixed fee implementation contracts. The impact of this charge on diluted earnings per share was ($.17) for 1999.
(12)	Includes a charge of $.9 million, net of $.5 million tax benefit, related to the accrual of branch restructuring costs. The impact of this charge on diluted earnings per share was ($.03) for 1999.
(13)	Includes a charge of $3.1 million, net of $1.9 million tax benefit, related to the acquisition of Multum Information Services, Inc. The impact of this charge on diluted earnings per share was ($.09) for 1998.

18

Summary Pro-Forma Financial Data
(Statements of Earnings Data Excluding Noted Gains, Losses and Charges)

		2002		2001		2000		1999			1998
		(1)(2)(3)		(4)(5)		(6)(7)(8)(9)		(11)(12)			(13)
						(10)
(In thousands, except per share data)
Statements of Earnings Data, Excluding Noted Gains, Losses and Charges:
Revenues		$	751,852		542,605		403,712		338,267			329,924
Operating earnings			90,820		61,532		24,810		1,768			32,552
Earnings before income taxes and extraordinary item			85,352		56,723		33,518		11,109			38,306
Extraordinary item – early extinguishment of debt			—		—		—		(1,395	)		—
Net earnings			51,825		34,217		20,366		5,462			23,687
Earnings per share before extraordinary item:
	Basic		1.46		.98		.60		.20			.72
	Diluted		1.40		.93		.57		.20			.70
Earnings per share:
	Basic		.1.46		.98		.60		.16			.72
	Diluted		1.40		.93		.57		.16			.70
Weighted average shares outstanding:
	Basic		35,458		34,907		34,123		33,623			32,825
	Diluted		37,050		36,843		35,603		33,916			33,667

19

(1)	Pro-Forma Statement of Earnings Data excludes a gain on the sale of shares of WebMD common stock. The impact of this gain is a $3.3 million, net of $1.9 million tax expense, increase in net earnings and an increase to diluted earnings per share of $.09 for 2002.
(2)	Pro-Forma Statement of Earnings Data excludes a charge on impairment of investments. The impact of this charge is a $6.3 million, net of $3.6 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of $.17 for 2002.
(3)	Pro-Forma Statement of Earnings Data excludes the cumulative effect of a change in accounting for goodwill. The impact of this change is a $.8 million, net of $.5 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of $.02 for 2002.
(4)	Pro-Forma Statement of Earnings Data excludes a gain on the settlement of the WebMD performance warrants. The impact of this gain is a $4.8 million, net of $2.7 million tax expense, increase in net earnings and an increase to diluted earnings per share of $.13 for 2001.
(5)	Pro-Forma Statement of Earnings Data excludes a charge on the adjustment of the carrying value of the WebMD shares. The impact of this charge is an $81.4 million, net of $46.1 million tax benefit, decrease in net earnings and a decrease to diluted earnings per share of ($2.21) for 2001.
(6)	Pro-Forma Statement of Earnings Data excludes an investment gain of $120.4 million, net of $68.3 million tax expense, related to the conversion of shares of CareInsite common stock to shares of WebMD common stock. The impact of this investment gain on diluted earnings per share was $3.38 for 2000.
(7)	Pro-Forma Statement of Earnings Data excludes an investment loss of $24.5 million, net of $13.9 million tax benefit, related to the sale of shares of WebMD common stock. The impact of this investment loss on diluted earnings per share was ($.69) for 2000.
(8)	Pro-Forma Statement of Earnings Data excludes a charge of $6.7 million related to the write-down of intangible assets associated with the acquisition of Health Network Ventures, Inc. The impact of this charge on diluted earnings per share was ($.19) for 2000.
(9)	Pro-Forma Statement of Earnings Data excludes a charge of $3.2 million related to the acquisition of CITATION Computer Systems, Inc. The impact of this charge on diluted earnings per share was ($.09) for 2000.
(10)	Pro-Forma Statement of Earnings Data excludes a charge of $1.0 million, net of $.7 million tax benefit, related to the acquisition of ADAC Healthcare Information Systems, Inc. The impact of this charge on diluted earnings per share was ($.03) for 2000.
(11)	Pro-Forma Statement of Earnings Data excludes a charge of $5.8 million, net of $3.6 million tax benefit, related to the cost in excess of revenues of completing fixed fee implementation contracts. The impact of this charge on diluted earnings per share was ($.17) for 1999.
(12)	Pro-Forma Statement of Earnings Data excludes a charge of $.9 million, net of $.5 million tax benefit, related to the accrual of branch restructuring costs. The impact of this charge on diluted earnings per share was ($.03) for 1999.
(13)	Pro-Forma Statement of Earnings Data excludes a charge of $3.1 million, net of $1.9 million tax benefit, related to the acquisition of Multum Information Services, Inc. The impact of this charge on diluted earnings per share was ($.09) for 1998.

20

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

In 2002, the Company set records in bookings, revenues, pro-forma earnings and cash flow for the third consecutive year. The Company continued to expand the breadth of its applications, offering nearly 50 different information technology solutions at the end of 2002. The strength of the Company’s application breadth is evidenced in record bookings contributions from ten different major application categories in 2002. The Company continued to build new client relationships and expand market share in 2002, with approximately 40 percent of new business bookings coming from clients that had no prior relationship with the Company. The Company also continued to strengthen its strategic presence in Europe. Operationally, the Company brought more than 500 Cerner Millennium applications live in 2002, bringing the total number of live applications to more than 1,700.

The Company continued to increase its presence in new markets in 2002. During 2002, the Company made good progress at implementing its new patient accounting solution, ProFit, and now has over 10 sites live. Cerner ProVision, the Company’s enterprise-wide image management solution that was launched in 2001, was brought live by four clients and sold to another 12 during 2002. The Company also expanded its managed services business and now has over 80 clients relying on its data center for hosting of technology services.

Health care organizations remain under significant pressures to improve the quality of care and eliminate variance and waste. Several parties, including the government, employer groups and consumer organizations, are demanding heightened efforts to eliminate medical error and reduce the costs of health care delivery. The Institute of Medicine has issued three major reports since 1999 that identify preventable medical errors as a major cause of death in the United States and suggest implementing information technology as a key part of the solution to preventing these unnecessary deaths. The Leapfrog Group, a consortium of large employers, continues to call for systemic change in the health care industry, and is a major proponent of requiring deployment of computerized physician order entry systems to reduce medical errors. The industry is also facing significant clinician shortages, particularly in nursing, radiology and pharmacy. The aging Baby Boomers, whose average age will be 65 years old in 2010, are expected to put added pressure on the health care system as their need for care increases. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) adds an additional element of complexity for health care organizations around security and patient confidentiality.

The Company believes most of the issues faced by health care organizations today can be effectively addressed with information technology. And the Company believes that its investment in the Cerner Millennium architecture creates a major competitive advantage. Cerner Millennium is a fully integrated, large-scale, contemporary, enterprise-wide architecture. This unification and the breadth of the Company’s solutions position the Company very well to help health care organizations address the critical issues they face today.

Results of Operations

Year Ended December 28, 2002, Compared to Year Ended December 29, 2001

The Company’s revenues increased 39% to $751,852,000 in 2002 from $542,423,000 in 2001. The Company had net earnings of $48,022,000 in 2002 compared to a net loss of $42,366,000 in 2001. Net earnings, before special charges and credits, were $51,825,000 in 2002 compared to $34,217,000 in 2001. Operating results for 2002, as described below, included a gain on the sale of available-for-sale securities and a charge for the impairment of investments, and a change in accounting principle for goodwill. Operating results for 2001, as described below, included a gain on software license settlement and investment losses.

Revenues - In 2002, revenues increased due to an increase in system sales, support of installed systems and an increase in services. System sales increased 36% to $332,274,000 in 2002 from $244,979,000 in 2001. Included in system sales are revenues from the sale of software, hardware and sublicensed software. The increase in system sales is due to an increase in new contract bookings in 2002 compared to 2001.

21

Support, maintenance and service revenues increased 41% to $419,578,000 in 2002 from $297,444,000 in 2001. Support and maintenance revenues were $171,238,000 and $140,666,000 in 2002 and 2001, respectively. Services revenues were $248,340,000 and $156,778,000 in 2002 and 2001, respectively. Included in support, maintenance and service revenues are support and maintenance of software and hardware, and professional services, excluding installation. This increase was due primarily to the increase in professional services, resulting from an increase in services related to and services provided into the Company’s installed and converted client base.

At December 28, 2002, the Company had $732,719,000 in contract backlog and $269,153,000 in support and maintenance backlog, compared to $566,280,000 in contract backlog and $221,393,000 in support and maintenance backlog at the end of 2001.

Cost of Revenues - The cost of revenues includes the cost of third party consulting services, computer hardware and sublicensed software purchased from computer and software manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers. The cost of revenues was 22% of total revenues in 2002, and 21% of total revenues in 2001. Such costs, as a percent of revenues, typically have varied as the mix of revenue (software, hardware, services and support) components carrying different margin rates changes from period to period. The increase in the cost of revenue as a percent of total revenues resulted principally from an increase in the percent of revenue from computer hardware and sublicensed software, which carry a higher cost of revenue percentage.

Sales and Client Service - Sales and client service expenses include salaries of client service personnel, communications expenses and unreimbursed travel expenses. Also included are sales and marketing salaries, travel expenses, tradeshow costs and advertising costs. These expenses as a percent of total revenues were 42% in both 2002 and 2001. The increase in total sales and client service expenses is attributable to the cost of a larger field sales and services organization and marketing of new solutions.

Software Development - Software development expenses include salaries, documentation and other direct expenses incurred in software development and amortization of software development costs. Total expenditures for software development, including both capitalized and noncapitalized portions, for 2002 and 2001 were $149,985,000 and $113,872,000, respectively. These amounts exclude amortization. Capitalized software costs were $49,984,000 and $37,828,000 for 2002 and 2001, respectively.

General and Administrative - General and administrative expenses include salaries for corporate, financial and administrative staffs, utilities, communications expenses and professional fees. These expenses as a percent of total revenues were 7% in both 2002 and 2001.

Interest Expense, Net - Interest income was $1,080,000 in 2002 compared to $2,896,000 in 2001. This decrease is due primarily to a decrease in interest rates and average invested cash. Interest expense was $6,635,000 in 2002 compared to $7,321,000 in 2001, primarily as a result of lower borrowing levels during the year.

Other Income, Net - Other income decreased to $87,000 in 2002 from $182,000 in 2002. Included in other revenues are revenues from office space leased to third parties.

Gain (Loss) on Sale of Investment — In December 2002, the Company exercised 1,048,783 warrants of WebMD with an exercise price of $3.08 and a cost basis and carrying value of $4,146,000. The warrants were scheduled to expire on January 26, 2003. In December 2002, the Company sold 1,048,783 shares of WebMD for $8,242,000. Accordingly, the Company recorded an investment gain of $527,000, net of $342,000 in tax, as a result of the exercise of the warrants and the sale of the shares. In the second quarter of 2002, the Company sold 14,820,527 shares of WebMD for $90,119,000. Accordingly, the Company recorded an investment gain of $2,736,000, net of $1,572,000 in tax, as a result of the sale.

22

Impairment of Investment — The Company’s policy is to review declines in fair value of its marketable equity securities for declines that may be other than temporary. Based on events occurring in the fourth quarter of 2002, the Company recorded a charge of $6,281,000, net of tax of $3,623,000, for the impairment of various investments in non-publicly traded securities. The charge is primarily related to a $3,464,000, net of tax, write down of the Company’s investment in Protocare, Inc, a non-publicly traded company. During the second quarter of 2001, the Company recorded a write-down of its investment in WebMD from $15.00 to $5.79. Accordingly, the Company recognized a charge to earnings of $81,419,000, net of $46,197,000 in tax.

Gain on Software License Settlement — On June 18, 2001, the Company reached an agreement with WebMD Corporation regarding certain performance metrics related to specified levels of physician usage arising out of the original license transaction between the Company and WebMD. Under the agreement, the Company received 2,000,000 shares of WebMD stock, valued at $11,580,000, in exchange for $432,000 in cash and the cancellation of various obligations due to the Company by WebMD. As a result of this agreement, the Company recognized a gain of $4,836,000, net of $2,744,000 in tax.

Income Taxes - The Company’s effective tax rate was an expense of 39% in 2002 and a benefit of 33% in 2001. The benefit is a result of the loss on the WebMD shares and other permanent differences.

Effective December 30, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” As a result, goodwill and intangible assets with indefinite lives are no longer amortized but are evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an impairment test based on fair value. The Company completed its transitional review of the Company’s goodwill values in the second quarter of 2002. As a result of this review, the Company determined that goodwill arising from the acquisition of Mitch Cooper and Associates was impaired due to declining demand and margins in this business. Mitch Cooper and Associates was a supply chain re-engineering consulting practice. The impairment charge to reflect this goodwill at fair value was $786,000, net of tax, and is reflected as a cumulative effect of a change in accounting principle as of the beginning of 2002. The Company used a discounted cash flow analysis to determine the fair value of the reporting units.

Year Ended December 29, 2001, Compared to Year Ended December 30, 2000

The Company’s revenues increased 35% to $542,423,000 in 2001 from $400,824,000 in 2000. The Company had a net loss of $42,366,000 in 2001 compared to net earnings of $105,265,000 in 2000. Net earnings, before special charges and credits were $34,217,000 in 2001 compared to $20,366,000 in 2000. Operating Results for 2001, as described below, included a gain on software license settlement and investment losses. Operating results for 2000, as described below, included a realized investment gain and loss, write-offs of acquired in-process research and development and a write-down of intangible assets.

Revenues - In 2001, revenues increased due to an increase in system sales and support of installed systems. System sales increased 37% to $244,979,000 in 2001 from $179,173,000 in 2000. Included in system sale are revenues from the sale of software, hardware, sublicensed software and professional services. The increase in system sales is due to an increase in new contract bookings in 2001 compared to 2000.

Support and maintenance and service revenues increased 34% in 2001 compared to 2000. Support and maintenance revenues were $140,666,000 and $114,896,000 in 2001 and 2000, respectively. Service revenues were $156,778,000 and $106,755,000 in 2002 and 2001, respectively. Included in support, maintenance and service revenues are support and maintenance of software and hardware, and professional services, excluding installation. This increase was due primarily to the increase in professional services, resulting from an increase in services related to and services provided into the Company’s installed and converted client base.

23

At December 29, 2001, the Company had $566,280,000 in contract backlog and $221,393,000 in support and maintenance backlog, compared to $439,943,000 in contract backlog and $184,360,000 in support and maintenance backlog at the end of 2000.

Cost of Revenues - The cost of revenues includes the cost of third party consulting services, computer hardware and sublicensed software purchased from computer and software manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers. The cost of revenues was 21% of total revenues in 2001, and 22% of total revenues in 2000. Such costs, as a percent of revenues, typically have varied as the mix of revenue (software, hardware, services and support) components carrying different margin rates changes from period to period. The decrease in the cost of revenue as a percent of total revenues resulted principally from a decrease in the percent of revenue from computer hardware and sublicensed software, which carry a higher cost of revenue percentage.

Sales and Client Service - Sales and client service expenses include salaries of client service personnel, communications expenses and unreimbursed travel expenses. Also included are sales and marketing salaries, travel expenses, tradeshow costs and advertising costs. These expenses as a percent of total revenues were 42% in both 2001 and 2000. The increase in total sales and client service expenses is attributable to the cost of a larger field sales and services organization and marketing of new software solutions.

Software Development - Software development expenses include salaries, documentation and other direct expenses incurred in software development and amortization of software development costs. Total expenditures for software development, including both capitalized and noncapitalized portions, for 2001 and 2000 were $113,872,000 and $90,694,000, respectively. These amounts exclude amortization. Capitalized software costs were $37,828,000 and $30,982,000 for 2001 and 2000, respectively.

General and Administrative - General and administrative expenses include salaries for corporate, financial and administrative staffs, utilities, communications expenses and professional fees. These expenses as a percent of total revenues were 7% in both 2001 and 2000.

Write-off of Acquired In-Process Research and Development – Write-off of acquired in-process research and development includes expenses resulting from the acquisitions of CITATION Computer Systems, Inc. and ADAC Healthcare Information Systems, Inc. in 2000.

Write-down of Intangible Assets – Write-down of intangible results from the decision to discontinue a portion of the Health Network Ventures, Inc. business as more fully described in Note 2 to the Consolidated Financial Statements.

Interest Expense, Net - Interest income was $2,896,000 in 2001 compared to $3,645,000 in 2000. This decrease is due primarily to a decrease in invested cash. Interest expense was $7,321,000 in 2001 compared to $7,316,000 in 2000.

Other Income, Net — Other revenues decreased to $182,000 in 2001 from $3,669,000 in 2000. Included in other revenues are revenues from office space leased to third parties and other investment revenues. This decrease was due to a decrease in other investment revenue.

Gain (Loss) on Sale of Investment – On December 12, 2000, the Company sold 4,273,509 shares of WebMD for $25,641,000. Accordingly, the Company recorded an investment loss of $24,539,000, net of $13,923,000 of tax, as a result of the sale.

Impairment of Investment — The Company’s policy is to review declines in fair value of its marketable equity securities for declines that may be other than temporary. As a result of that policy, during the second quarter of 2001, the Company recorded a write-down of its investment in WebMD from $15.00 to $5.79. Accordingly, the Company recognized a charge to earnings of $81,419,000, net of $46,197,000 in tax.

24

Gain on Software License Settlement — On June 18, 2001, the Company reached an agreement with WebMD Corporation regarding certain performance metrics related to specified levels of physician usage arising out of the original license transaction between the Company and WebMD. Under the agreement, the Company received 2,000,000 shares of WebMD stock, valued at $11,580,000, in exchange for $432,000 in cash and the cancellation of various obligations due to the Company by WebMD. As a result of this agreement, the Company recognized a gain of $4,836,000, net of $2,744,000 of tax.

Realized Gain on Exchange of Stock – On February 13, 2000, CareInsite entered into an agreement to merge with WebMD. The merger of CareInsite and WebMD (“Merger”) closed on September 12, 2000. Prior to the Merger, the carrying value of the CareInsite stock was $6.22 per share, the market price of WebMD on September 12, 2000 was $15.00 per share. Upon the exchange of CareInsite stock for WebMD stock, the Company recorded an investment gain of $120,362,000, net of $68,292,000 of tax, as a result of the exchange.

Income Taxes - The Company’s effective tax rate was a benefit of 33% in 2001 and an expense of 39% in 2000. The benefit is a result of the loss on the WebMD shares and other permanent differences.

Liquidity and Capital Resources

The Company had total cash and cash equivalents of $142,543,000 at the end of 2002 and working capital of $282,135,000 compared to cash and cash equivalents of $107,536,000 at the end of 2001 and working capital of $189,488,000.

The Company generated cash of $36,850,000, $64,838,000 and $53,313,000 from operations in 2002, 2001 and 2000, respectively. Cash flow from operations decreased in 2002 due primarily to a $31,200,000 tax payment related to the sale of shares of WebMD. Cash flow from operations increased in 2001 and 2000, due primarily to the increase in net earnings before noncash charges, increased collection of receivables, improved payment terms and record level of conversions.

Cash used in investing activities consisted primarily of capitalized software development costs of $49,984,000 and $37,828,000 and purchases of capital equipment, land and buildings of $59,699,000 and $25,722,000 in 2002 and 2001, respectively. The Company also completed acquisitions of businesses for $26,016,000 and $4,045,000 in 2002 and 2001, respectively. The Company had proceeds of $95,134,000 from the sale of shares of WebMD in 2002.

Revenues provided under support and maintenance agreements represent recurring cash flows. Support and maintenance revenues increased 22% in 2002, 2001 and 2000, and the Company expects these revenues to continue to grow as the base of installed systems grows.

On December 20, 2002, the Company completed a $60,000,000 private placement of debt pursuant to a Note Agreement dated December 15, 2002. The Series A Senior Notes, with a $21,000,000 principal amount at 5.57%, are payable in three equal annual installments beginning in December 2006. The Series B Senior notes, with a $39,000,000 principal amount at 6.42%, are payable in four equal annual installments beginning December 2009. The proceeds were used to repay the outstanding amount under the bank loan agreement and will be used for general corporate purposes. The Note Agreement contains certain net worth and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets and pay dividends. The Company was in compliance with all covenants at December 28, 2002.

The Company’s liquidity is influenced by many factors, including the amount and timing of the Company’s revenues, its cash collections from its clients and the amounts the Company invests in software development, acquisitions and capital expenditures. The Company has a loan agreement with a bank that provides for a current revolving line of credit for working capital purposes. In June 2002, the Company expanded its credit facility by entering into an unsecured revolving credit agreement with a group of banks led by U.S. Bank. The new credit facility increased the amount the Company may borrow from $45,000,000 to $90,000,000. The fee rate on the new facility is approximately the same as the prior facility. The revolving line of credit is unsecured and requires monthly payments of interest only. Interest is payable at the Company’s option at a rate based on prime (4.25% at December 28, 2002) or LIBOR

25

(1.42% at December 28, 2002) plus 2%. The interest rate may be reduced by up to 1% if certain net worth ratios are maintained. At December 28, 2002, the Company had no outstanding borrowings under this agreement and had $90,000,000 available for working capital purposes. The agreement contains certain net worth, current ratio and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets and pay dividends. A commitment fee of 1/2% or 3/10% is payable quarterly based on the usage of the revolving line of credit. The revolving line of credit matures on May 31, 2005. The Company believes that its present cash position, together with cash generated from operations, will be sufficient to meet anticipated cash requirements during 2003.

On April 15, 1999, the Company completed a $100,000,000 private placement of debt pursuant to a Note Agreement dated April 1, 1999. The Series A Senior Notes, with a $60,000,000 principal amount at 7.14%, are payable in five equal annual installments beginning in April 2002. The Series B Senior Notes, with a $40,000,000 principal amount at 7.66%, are payable in six equal annual installments beginning April 2004. The proceeds were used to retire the Company’s existing $30,000,000 of debt, and the remaining funds will be used for capital improvements and to strengthen the Company’s cash position. The Note Agreement contains certain net worth, current ratio, and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets and pay dividends. The Company was in compliance with all covenants at December 28, 2002.

At December 28, 2002, the Company was committed to spending approximately $63,000,000 under construction contracts for two new buildings at its North Kansas City headquarters complex. At December 28, 2002, the Company had spent $26,464,000. The construction will be financed by the Company’s cash position, cash generated from operations and if necessary the line of credit.

The following table represents a summary of the Company’s contractual obligations and commercial commitments as of December 28, 2002, except those arising in the ordinary course.

	Payments due by period
											2008 and
Obligations (in thousands)	2003		2004		2005		2006		2007		thereafter		Total
Long-Term Debt Obligations		12,202		19,302		18,667		25,667		13,667		59,333		148,838
Lease Obligations		10,781		6,052		1,264		425		—		—		18,522
Acquisition Related Commitments		—		1,499		—		—		7,500		—		8,999
Supplier Software Purchase Commitments (1)		1,150		—		—		—		—		—		1,150
Building Commitments (2)		36,536		—		—		—		—		—		36,536
Total		60,669		26,853		19,931		26,092		21,167		59,333		214,045

(1)	Excludes purchase obligations for which Cerner has a client commitment.
(2)	The Company has the right to terminate the underlying construction contracts and the related future commitments under such contracts but has no plans or intentions of stopping construction.

The effects of inflation on the Company’s business during 2002, 2001 and 2000 were not significant.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 143 “Accounting for Asset Retirement Obligations” (“SFAS 143”). The Company is required to adopt SFAS 143 effective December 28, 2002. In July 2002, the FASB issued SFAS No. 146 “Accounting for Exit or Disposal Activities” (“SFAS 146”). SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company does not expect the adoption of SFAS 143 or 146 to have a material effect on its consolidated financial position, results of operations or cash flows. Refer to Note 1 to the accompanying consolidated financial statements for further discussion of these accounting standards.

Critical Accounting Policies

The Company believes that there are several accounting policies that are critical to understanding the Company’s historical and future performance, as these policies affect the reported amount of revenue

26

and other significant areas involving management’s judgments and estimates. These significant accounting policies relate to revenue recognition, software development, other than temporary declines in the market value of investments, allowance for doubtful accounts and potential impairments of goodwill. These policies and the Company’s procedures related to these policies are described in detail below and under specific areas within the Discussion and Analysis of the Company’s financial condition and results of operations. In addition, Note 1 to the accompanying financial statements further expands upon the Company’s accounting policies.

Revenue Recognition

Revenues are derived primarily from the sale of clinical financial and administrative information systems and solutions. The components of the system sales revenues are the licensing of computer software, installation, subscription content and the sale of computer hardware and sublicensed software. The components of support, maintenance and service revenues are software support and hardware maintenance, remote hosting and outsourcing, training, consulting and implementation services.

The Company recognizes revenue in accordance with the provisions of Statement of Position (SOP) No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-4, SOP 98-9 and clarified by Staff Accounting Bulletin (SAB) 101 “Revenue Recognition in Financial Statements.” SOP No 97-2, as amended, generally requires revenue earned on software arrangements involving multiple-elements to be allocated to each element based on the relative fair values of those elements. Revenue from multiple-element software arrangements is recognized using the residual method. Under the residual method, revenue is recognized in a multiple-element arrangement when Company-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement (i.e. professional services, software support, hardware maintenance, hardware and sublicensed software), but does not exist for one or more of the delivered elements in the arrangement (i.e. software solutions). The Company allocates revenue to each element in a multiple-element arrangement based on the element’s respective fair value, with the fair value determined by the price charged when that element is sold separately. Specifically, the Company determines the fair value of the maintenance portion of the arrangement based on the renewal price of the maintenance charged to clients, professional services portion of the arrangement, other than installation services, based on hourly rates which the Company charges for these services when sold apart from a software license, and the hardware and sublicensed software based on the prices for these elements when they are sold separately from the software. If evidence of the fair value cannot be established for the undelivered elements of a license agreement, the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established.

Inherent in the revenue recognition process are significant management estimates and judgments, which influence the timing and the amount of revenue recognition. The Company provides several models for the procurement of its clinical, financial and administrative information systems. The predominant method is a perpetual software license agreement, project-related installation services, implementation and consulting services, computer hardware and sublicensed software and software support. For those arrangements involving the use of services, the Company uses the percentage of completion method of accounting, following the guidance in the AICPA Statement of Position No. 81-1 (SOP 81-1), Accounting for Performance of Construction-Type and Certain Production-Type Contracts.

The Company provides installation services, which include project-scoping services, conducting pre-installation audits and creating initial environments. Because installation services are deemed to be essential to the functionality of the software, software license and installation services fees are recognized over the software installation period using output measures which reflect direct labor hours incurred, beginning at software delivery and culminating at completion of installation, typically a three-to-six month process.

The Company also provides implementation and consulting services, which include consulting activities that fall outside of the scope of the standard installation services. These services vary depending on the scope and complexity requested by the client. Examples of such services may include additional database consulting, system configuration, project management, testing assistance, network consulting and post conversion review services. Implementation and consulting services generally are not deemed

27

to be essential to the functionality of the software, and thus do not impact the timing of the software license recognition, unless software license fees are tied to implementation milestones. In those instances, the portion of the software license fee tied to implementation milestones is deferred until the related milestone is accomplished and related fees become billable and non-forfeitable. Implementation fees are recognized over the service period, which may extend from six months to three years.

Remote hosting and outsourcing services are marketed under long-term arrangements generally over periods of five to 10 years. Revenues from these arrangements are recognized as the services are performed.

Software maintenance fees are marketed under annual and multi-year arrangements and are recognized as revenue ratably over the contracted maintenance term. Hardware maintenance revenues are billed and recognized monthly over the contracted maintenance term.

Subscription and content fees are generally marketed under annual and multi-year agreements and are recognized ratably over the contracted terms.

Hardware and sublicensed software sales are generally recognized upon delivery to the client.

The Company also offers its solutions on an application service provider (“ASP”) or a term license basis, making available Company software functionality on a remote processing basis from the Company’s data centers. The data centers provide system and administrative support as well as processing services. Revenue on software and services provided on an ASP or term license basis is recognized on a monthly basis over the term of the contract. The Company capitalizes related direct costs consisting of third-party costs and direct software installation and implementation costs. These costs are amortized over the term of the arrangement.

In limited cases where the Company has contractually agreed to develop new or customized software code for a client, the Company utilizes percentage of completion accounting in accordance with SOP 81-1.

Deferred revenue is comprised of deferrals for license fees, maintenance and other services for which payment has been received and for which the service has not yet been performed. Long-term deferred revenue, at December 29, 2001, represents amounts received from license fees, maintenance and other services to be earned or provided beginning in periods on or after December 29, 2002.

Software Development Costs

Costs incurred internally in creating computer software solutions are expensed until technological feasibility has been established upon completion of a detailed program design. Thereafter, all software development costs are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each software solutions with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the software solution. The Company is amortizing capitalized costs over five years.

The Company expects that major software information systems companies, large information technology consulting service providers and systems integrators, internet-based start-up companies and others specializing in the health care industry may offer competitive products or services. The pace of change in the health care information systems market is rapid and there are frequent new product introductions, product enhancements and evolving industry standards and requirements. As a result, the capitalized software solutions may become less valuable or obsolete and could be subject to impairment.

Investments

The Company accounts for its investments in equity securities, which have readily determinable fair values as available-for-sale. Available-for-sale securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income.

28

For realized gains and losses on available-for-sale investments, the Company utilizes the specific identification method as the basis to determine cost. Investments in the common stock of certain affiliates over which the Company exerts significant influence are accounted for by the equity method.

The Company has certain other minority equity investments in non-publicly traded securities. These investments are generally carried at cost as the Company owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. The balance of these investments at December 28, 2002 and December 29, 2001 was $876,000 and $18,212,000, respectively. These investments are inherently high risk as the market for technologies and content by these companies are usually early stage at the time of the investment by the Company and such markets may never be significant. The Company could lose its entire investment in certain or all of these companies. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary.

The Company reviews all equity securities for declines in fair value. If such declines are considered to be other than temporary, the cost basis of the individual security is written down to fair value as a new cost basis, and the amount of the write-down is included in earnings

Concentrations

Substantially all of the Company’s cash and cash equivalents and short-term investments, are held at three major U.S. financial institutions. The majority of the Company’s cash equivalents consist of U.S. Government Federal Agency Securities, short-term marketable securities and overnight repurchase agreements. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Substantially all of the Company’s clients are integrated delivery networks, hospitals and other healthcare related organizations. If significant adverse macro-economic factors were to impact these organizations it could materially adversely affect the Company. The Company’s access to certain software and hardware components is dependent upon single and sole source suppliers. The inability of any supplier to fulfill supply requirements of the Company could affect future results.

Allowance for Doubtful Accounts

The Company performs ongoing credit evaluations of its clients and generally does not require collateral from its clients. The Company maintains an allowance for potential losses on a specific identification basis and based on historical experience and management’s judgments.

Goodwill

Effective December 30, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” As a result, goodwill and intangible assets with indefinite lives are no longer amortized but are evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an impairment test based on fair value. The Company completed its review of the Company’s goodwill values in the second quarter of 2002. As a result of this review, the Company determined that goodwill arising from the acquisition of Mitch Cooper and Associates was impaired due to declining demand and margins in this business. Mitch Cooper and Associates was a supply chain re-engineering consulting practice. The impairment charge to reflect this goodwill at fair value was $786,000, net of tax, and is reflected as a cumulative effect of a change in accounting principle as of the beginning of 2002. The Company used a discounted cash flow analysis to determine the fair value of the reporting units. The Company completed three acquisitions subsequent to June 30, 2001, which resulted in approximately, $36.7 million of goodwill that was not amortized in accordance with SFAS 142. For the years ended 2001 and 2000, earnings included $1,758,000 and $1,015,000 of amortization of goodwill, net of tax, respectively. Goodwill amounted to $45,938,000 and $23,879,000 at December 28, 2002 and December 29, 2001, respectively.

29

Factors That May Affect Future Results of Operations, Financial Condition or Business

Statements made in this report, the Annual Report to Shareholders in which this report is made a part, other reports and proxy statements filed with the Securities and Exchange Commission, communications to shareholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, may constitute “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can often be identified by the use of forward-looking terminology, such as “could,” “should,” “will,” “will be,” “will lead,” “will assist,” “intended,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” or “estimate” or variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below as well as those discussed elsewhere in reports filed with the Securities and Exchange Commission. Other unforeseen factors not identified herein could also have such an effect. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time.

Quarterly Operating Results May Vary — The Company’s quarterly operating results have varied in the past and may continue to vary in future periods. Quarterly operating results may vary for a number of reasons including accounting policy changes mandated by regulating entities (including, but not limited to, any accounting policy change concerning the expensing of options), demand for the Company’s software solutions and services, the Company’s long sales cycle, potentially long installation and implementation cycle for these larger, more complex and costlier systems and other factors described in this section and elsewhere in this report. As a result of health care industry trends and the market for the Company’s Cerner Millennium solutions, a large percentage of the Company’s revenues are generated by the sale and installation of larger, more complex and costlier systems. The sales process for these systems is lengthy and involves a significant technical evaluation and commitment of capital and other resources by the client. The sale may be subject to delays due to clients’ internal budgets and procedures for approving large capital expenditures and by competing needs for other capital expenditures and deploying new technologies or personnel resources. Delays in the expected sale or installation of these large contracts may have a significant impact on the Company’s anticipated quarterly revenues and consequently its earnings, since a significant percentage of the Company’s expenses are relatively fixed.

These larger, more complex and costlier systems are installed and implemented over time periods ranging from approximately one month to three years and may involve significant efforts both by the Company and the client. The Company recognizes revenue upon the completion of standard milestone conditions and the amount of revenue recognized in any quarter depends upon the Company’s and the client’s ability to meet these project milestones. Delays in meeting these milestone conditions or modification of the contract relating to one or more of these systems could result in a shift of revenue recognition from one quarter to another and could have a material adverse effect on results of operations for a particular quarter. In addition, support payments by clients for the Company’s solutions generally do not commence until the solution is in use.

The Company’s revenues from system sales historically have been lower in the first quarter of the year and greater in the fourth quarter of the year, primarily as a result of the clients’ year-end efforts to make all final capital expenditures for the current year.

Stock Price May Be Volatile — The trading price of the Company’s common stock may be volatile. The market for the Company’s common stock may experience significant price and volume fluctuations in response to a number of factors including actual or anticipated quarterly variations in operating results, rumors about the Company’s performance or software solutions, changes in expectations of future financial performance or changes in estimates of securities analysts, governmental regulatory action, health care reform measures, client relationship developments, changes occurring in the securities

30

markets in general and other factors, many of which are beyond the Company’s control. As a matter of policy, the Company does not generally comment on rumors.

Furthermore, the stock market in general, and the market for software, health care and high technology companies in particular, has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of the Company’s common stock, regardless of actual operating performance.

Market Risk of Investments — The Company accounts for its investments in equity securities, which have readily determinable fair values as available-for-sale. Available-for-sale securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income. Investments in the common stock of certain affiliates over which the Company exerts significant influence are accounted for by the equity method. Investments in other equity securities are reported at cost. The Company reviews all equity securities for declines in fair value. If such declines are considered to be other than temporary, the cost basis of the individual security is written down to fair value as a new cost basis, and the amount of the write-down is included in earnings.

The Company also has certain other minority equity investments in non-publicly traded securities. These investments are generally carried at cost as the Company owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. The carrying value of these investments at December 28, 2002 and December 29, 2001 was $876,000 and $18,212,000, respectively. These investments are inherently high risk as the market for technologies and content by these companies are usually early stage at the time of the investment by the Company and such markets may never be significant. The Company could lose its entire investment in certain or all of these companies. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary.

At December 28, 2002, marketable securities (which consist of money market and commercial paper) of the Company were recorded at cost, which approximates fair value of approximately $143 million, with an overall average return of approximately 2.3% and an overall weighted maturity of less than 90 days. The marketable securities held by the Company are not subject to significant price risk as a result of the short-term nature of the investments.

The Company has limited exposure to material future earnings or cash flow exposures from changes in interest rates on long-term debt since substantially all of its long-term debt is at a fixed rate. The Company also had no borrowings outstanding under its working capital line of credit, which has a variable interest rate based on prime (4.25% at December 28, 2002) or LIBOR (1.42% at December 28, 2002) plus 2%. To date, the Company has not entered into any derivative financial instruments to manage interest rate risk.

The Company conducts business in several foreign jurisdictions. However, the business transacted is in the local functional currency and the Company does not currently have any material exposure to foreign currency transaction gains or losses. All other business transactions are in U.S. dollars. To date, the Company has not entered into any derivative financial instruments to manage foreign currency risk.

Changes in the Health Care Industry — The health care industry is highly regulated and is subject to changing political, economic and regulatory influences. For example, the Balanced Budget Act of 1997 (Public Law 105-32) contains significant changes to Medicare and Medicaid and began to have its initial impact in 1998 due to limitations on reimbursement, resulting cost containment initiatives, and effects on pricing and demand for capital intensive systems. In addition, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) will have a direct impact on the health care industry by requiring identifiers and standardized transactions/code sets and necessary security and privacy measures in order to ensure the protection of patient health information. These factors affect the purchasing practices and operation of health care organizations. Federal and state legislatures have periodically considered programs to reform or amend the U.S. health care system at both the federal and state level and to change health care financing and reimbursement systems. These programs may contain proposals to increase governmental involvement in health care, lower reimbursement rates or otherwise change the environment in which health care industry participants operate. Health care industry participants may

31

respond by reducing their investments or postponing investment decisions, including investments in the Company’s software solutions and services.

Many health care providers are consolidating to create integrated health care delivery systems with greater market power. These providers may try to use their market power to negotiate price reductions for the Company’s software solutions and services. As the health care industry consolidates, the Company’s client base could be eroded, competition for clients could become more intense and the importance of acquiring each client becomes greater.

Significant Competition — The market for health care information systems is intensely competitive, rapidly evolving and subject to rapid technological change. The Company believes that the principal competitive factors in this market include the breadth and quality of system and software solution offerings, the stability of the information systems provider, the features and capabilities of the information systems, the ongoing support for the system and the potential for enhancements and future compatible software solutions.

Certain of the Company’s competitors have greater financial, technical, product development, marketing and other resources than the Company and some of its competitors offer software solutions that it does not offer. The Company’s principal existing competitors include GE Medical Systems, Siemens Medical Solutions Health Services Corporation, IDX Systems Corporation, McKesson Corporation, Eclipsys Corporation, Medical Information Technology, Inc. (“Meditech”) and Epic Systems Corporation, each of which offers a suite of software solutions that compete with many of the Company’s software solutions and services. There are other competitors that offer a more limited number of competing software solutions.

In addition, the Company expects that major software information systems companies, large information technology consulting service providers and system integrators, internet-based start-up companies and others specializing in the health care industry may offer competitive software/solutions or services. The pace of change in the health care information systems market is rapid and there are frequent new software solution introductions, software solution enhancements and evolving industry standards and requirements. As a result, the Company’s success will depend upon its ability to keep pace with technological change and to introduce, on a timely and cost-effective basis, new and enhanced software solutions and services that satisfy changing client requirements and achieve market acceptance.

Proprietary Technology May Be Subjected to Infringement Claims or May Be Infringed Upon — The Company relies upon a combination of license agreements, confidentiality procedures, employee nondisclosure agreements and technical measures to maintain the confidentiality and trade secrecy of its proprietary information. The Company also relies on trademark and copyright laws to protect its intellectual property. The Company has initiated a patent program but currently has a very limited patent portfolio. As a result, the Company may not be able to protect against misappropriation of its intellectual property.

In addition, the Company could be subject to intellectual property infringement claims as the number of competitors grows and the functionality of its software solutions and services overlaps with competitive offerings. These claims, even if not meritorious, could be expensive to defend. If the Company becomes liable to third parties for infringing their intellectual property rights, it could be required to pay a substantial damage award and to develop noninfringing technology, obtain a license or cease selling the software solutions that contain the infringing intellectual property.

Government Regulation — The United States Food and Drug Administration (the “FDA”) has declared that software products intended for the maintenance of data used in making decisions regarding the suitability of blood donors and the release of blood or blood components for transfusion are medical devices under the Federal Food, Drug and Cosmetic Act (“Act”) and amendments to the Act. As a consequence, the Company is subject to extensive regulation by the FDA with regard to its blood bank software. If other of the Company’s software solutions are deemed to be actively regulated medical devices by the FDA, the Company could be subject to extensive requirements governing pre- and post-marketing requirements including pre-market notification clearance prior to marketing. Complying with these FDA regulations

32

would be time consuming and expensive. It is possible that the FDA may become more active in regulating computer software that is used in health care.

Following an inspection by the FDA in March of 1998, the Company received a Form FDA 483 (Notice of Inspectional Observations) alleging non-compliance with certain aspects of FDA’s Quality System Regulation with respect to the Company’s PathNet HNAC Blood Bank Transfusion and Donor products (the “Blood Bank Products”). The Company subsequently received a Warning Letter, dated April 29, 1998, as a result of the same inspection. The Company responded promptly to the FDA and undertook a number of actions in response to the Form 483 and Warning Letter including an audit by a third party of the Company’s Blood Bank Products and improvements to Cerner’s Quality System. A copy of the third party audit was submitted to the FDA in October of 1998 and, at the request of the FDA, additional information and clarification were submitted to the FDA in January of 1999.

There can be no assurance, however, that the Company’s actions taken in response to the Form 483 and Warning Letter will be deemed adequate by the FDA or that additional actions on behalf of the Company will not be required. In addition, the Company remains subject to periodic FDA inspections and there can be no assurances that the Company will not be required to undertake additional actions to comply with the Act and any other applicable regulatory requirements. Any failure by the Company to comply with the Act and any other applicable regulatory requirements could have a material adverse effect on the Company’s ability to continue to manufacture and distribute its software solutions. The FDA has many enforcement tools including recalls, seizures, injunctions, civil fines and/or criminal prosecutions. Any of the foregoing could have a material adverse effect on the Company’s business, results of operations or financial condition.

Product Related Liabilities — Many of the Company’s software solutions provide data for use by health care providers in providing care to patients. Although no such claims have been brought against the Company to date regarding injuries related to the use of its software solutions, such claims may be made in the future. Although the Company maintains product liability insurance coverage in an amount that it believes is sufficient for its business, there can be no assurance that such coverage will cover a particular claim that may be brought in the future, prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful claim brought against the Company, which is uninsured, or under-insured could materially harm its business, results of operations or financial condition.

System Errors and Warranties — The Company’s systems, particularly the Cerner Millennium versions, are very complex. As with complex systems offered by others, the Company’s systems may contain errors, especially when first introduced. Although the Company conducts extensive testing, it has discovered software errors in its software solutions after their introduction. The Company’s systems are intended for use in collecting and displaying clinical information used in the diagnosis and treatment of patients. Therefore, users of the Company software solutions have a greater sensitivity to system errors than the market for software products generally. The Company’s agreements with its clients typically provide warranties against material errors and other matters. Failure of a client’s system to meet these criteria could constitute a material breach under such contracts allowing the client to cancel the contract and obtain a refund and/or damages, or could require the Company to incur additional expense in order to make the system meet these criteria. The Company’s contracts with its clients generally limit the Company’s liability arising from such claims but such limits may not be enforceable in certain jurisdictions or circumstances.

Anti-Takeover Defenses — The Company’s charter, bylaws, shareholders’ rights plan and certain provisions of Delaware law contain certain provisions that may have the effect of delaying or preventing an acquisition of the Company. Such provisions are intended to encourage any person interested in acquiring the Company to negotiate with and obtain the approval of the Board of Directors in connection with any such transaction. These provisions include (a) a Board of Directors that is staggered into three classes to serve staggered three-year terms, (b) blank check preferred stock, (c) supermajority voting provisions, (d) inability of shareholders to act by written consent or call a special meeting, (e) limitations on the ability of shareholders to nominate directors or make proposals at shareholder meetings and (f) triggering the exercisability of stock purchase rights on a discriminatory basis, which may invoke extensive economic and voting dilution of a potential acquirer if its beneficial ownership of the Company’s

33

common stock exceeds a specified threshold. Certain of these provisions may discourage a future acquisition of the Company not approved by the Board of Directors in which shareholders might receive a premium value for their shares.

Risks Associated with the Company’s Global Operations – The Company markets, sells and services its software solutions globally. The Company has established offices around the world, including in North America, Europe and in the Asia Pacific region. The Company will continue to expand its global operations and enter new global markets. This expansion will require significant management attention and financial resources to develop successful direct and indirect global sales and support channels. In some countries, the Company’s success will depend in part on its ability to form relationships with local partners. There is a risk that the Company may sometimes choose the wrong partner. For these reasons, the Company may not be able to maintain or increase global market demand for its software solutions.

Global operations are subject to inherent risks, and the Company’s future results could be adversely affected by a variety of uncontrollable and changing factors. These include:

• Greater difficulty in collecting accounts receivable and longer collection periods;

• Difficulties and costs of staffing and managing foreign operations;

• The impact of economic conditions outside the United States;

• Unexpected changes in regulatory requirements;

• Certification requirements;

• Reduced protection of intellectual property rights in some countries;

• Potentially adverse tax consequences;

• Political instability;

• Trade protection measures and other regulatory requirements;

• Service provider and government spending patterns;

• Natural disasters, war or terrorist acts;

• Poor selection of a partner in a country; and

• Political conditions which may threaten the safety of associates or the continued presence of the Company in these countries.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Information contained under the caption “Factors That May Affect Future Results of Operations, Financial Condition or Business — Market Risk of Investments” set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The Financial Statements and Notes required by this Item are submitted as a separate part of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The Registrant’s Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on May 23, 2003, will contain under the caption “Election of Directors” certain information required by Item 10 of Form 10-K and such information is incorporated herein by this reference. The information required by Item 10 of Form 10-K as to executive officers is set forth in Item 4A of Part I hereof.

34

The Registrant’s Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on May 23, 2003, will contain under the caption “Compliance with Section 16(a) of the Securities Exchange Act of 1934” certain information required by Item 10 of Form 10-K and such information is incorporated herein by this reference.

Item 11. Executive Compensation

The Registrant’s Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on May 23, 2003, will contain under the caption “Executive Compensation” the information required by Item 11 of Form 10-K and such information is incorporated herein by this reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The Registrant’s Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on May 23, 2003, will contain under the caption “Voting Securities and Principal Holders Thereof” the information required by Item 12 of Form 10-K and such information is incorporated herein by this reference.

Item 13. Certain Relationships and Related Transactions

The Registrant’s Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on May 23, 2003, will contain under the caption “Certain Transactions” the information required by Item 13 of Form 10-K and such information is incorporated herein by this reference.

Item 14. Controls and Procedures

Within the 90-day period prior to the filing of this Annual Report on Form 10-K, the Company’s Chairman of the Board and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c)). The principal executive officer and principal financial officer have concluded, based on their review, that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in reports that are filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. No significant changes were made to the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.

35

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Financial Statements and Exhibits.

(1)	Consolidated Financial Statements:
	Independent Auditors’ Report on Consolidated Financial Statements
	Consolidated Balance Sheets - December 28, 2002 and December 29, 2001
	Consolidated Statements of Operations - Years Ended December 28, 2002, December 29, 2001 and December 30, 2000
	Consolidated Statements of Changes In Equity Years Ended December 28, 2002, December 29, 2001 and December 30, 2000
	Consolidated Statements of Cash Flows Years Ended December 28, 2002, December 29, 2001 and December 30, 2000
	Notes to Consolidated Financial Statements

(2) The following financial statement schedule and independent auditors’ report on financial statement schedule of the Registrant for the three-year period ended December 28, 2002 are included herein:

Schedule II — Valuation and Qualifying Accounts,

Independent Auditors’ Report on Consolidated Financial Statement Schedule

All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes

(3) The exhibits required to be filed by this item are set forth below:

Number	Description
3(a)	Restated Certificate of Incorporation of the Registrant, (filed as Exhibit 3(i) to Registrant’s Quarterly Report on Form 10-Q for the year ended June 29, 1996 and incorporated herein by reference).
3(b)	Amended and Restated Bylaws, dated March 9, 2001, (filed as Exhibit 4.2 to Registrant’s Form S-8 filed on September 26, 2001 and incorporated herein by reference).
4(a)	Amended and Restated Rights Agreement, dated as of March 12, 1999, between Cerner Corporation and UMB Bank, n.a., as Rights Agents, which includes the Form of Certificate of Designation, Preferences and Rights of Series A Preferred Stock of Cerner Corporation, as Exhibit A, and the Form of Rights Certificate, as Exhibit B (filed as an Exhibit to Registrant’s current report on Form 8-A/A dated March 31, 1999 and incorporated herein by reference).
4(b)	Specimen stock certificate (filed as Exhibit 4(a) to Registrant’s Registration Statement on Form S-8 (File No. 33-15156) and hereby incorporated herein by reference).

36

Number	Description
4(c)	Credit Agreement between Cerner Corporation and U.S. Bank National Association as administrative agent and head arranger, and LaSalle Bank National Association, as document agent, dated as of May 31, 2002 (filed as Exhibit 4(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2002, and incorporated herein by reference).
4(d)	First Amendment to Credit Agreement between Cerner Corporation and U.S. Bank National Associates as administrative agent and head arranger, and LaSalle Bank National Association, as documentation agent, dated as of July 22, 2002.
4(e)	Cerner Corporation Note Agreement dated as of April 1, 1999 among Cerner Corporation, Principal Life Insurance Company, Principal Life Insurance Company, on behalf of one or more separate accounts, Commercial Union Life Insurance Company of America, Nippon Life Insurance Company of America, John Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance Company, and Investors Partner Life Insurance Company (filed as Exhibit 4(e) to Registrant’s Form 8-K dated April 23, 1999, and incorporated herein by reference).
10(a)	Incentive Stock Option Plan C of Registrant (filed as Exhibit 10(f) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference).*
10(b)	Indemnification Agreements between the Registrant and Neal L. Patterson, Clifford W. Illig, Gerald E. Bisbee, Jr., Ph.D. and Thomas C. Tinstman, M.D., (filed as Exhibit 10(i) to Registrant’s Annual report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference).*
10(c)	Indemnification Agreement between Michael E. Herman and Registrant (filed as Exhibit 10(i)(a) to Registrant’s Quarterly Report on Form 10-Q for the year ended June 29, 1996 and incorporated herein by reference).*
10(d)	Indemnification Agreement between John C. Danforth, and Registrant (filed as Exhibit 10(i)(b) to Registrant’s Quarterly Report on Form 10-Q for the year ended June 29, 1996 and incorporated herein by reference).*
10(e)	Indemnification Agreement between Jeff C. Goldsmith, Ph.D. and Registrant (filed as Exhibit 10(e) to Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000, and incorporated herein by reference).*
10(f)	Indemnification Agreement between William B. Neaves, Ph.D. and Nancy-Ann DeParle and Registrant (filed as Exhibits 10.1 and 10.2 to Registrant’s Form 10-Q for the quarter ended September 29, 2001 and hereby incorporated herein by reference).*
10(g)	Amended Stock Option Plan D of Registrant as of December 8, 2000 (filed as Exhibit 10(f) to Registrant’s Annual Report on Form 10-K for the year ended December 30, 2000, and incorporated herein by reference).*
10(h)	Amended Stock Option Plan E of Registrant as of December 8, 2000 (filed as Exhibit 10(g) to Registrant’s Annual Report on Form 10-K for the year ended December 30, 2000, and incorporated herein by reference).*
10(j)	Long-Term Incentive Plan for 1999 (filed as Exhibit 10(l) to Registrant’s Annual Report on Form 10-K for the year ended January 2, 1999, and incorporated herein by reference).*
10(k)	Promissory Note of Jack A. Newman, Jr. (filed as Exhibit 10(m) to Registrant’s Annual Report on Form 10-K for the year ended January 2, 1999, and incorporated herein by reference).*

37

Number	Description
10(l)	Promissory Notes of Earl H. Devanny, III (filed as Exhibit 10(l) to Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000, and incorporated herein by reference).*
10(m)	Promissory Note of Glenn P. Tobin, Ph.D. (filed as Exhibit 10(o) to Registrant’s Annual Report on Form 10-K for the year ended January 2, 1999, and incorporated herein by reference).*
10(n)	Cerner Corporation Executive Stock Purchase Plan (filed as Exhibit 4(g) to Registrant’s Registration Statement on Form S-8 (File No. 333-77029) and incorporated herein by reference).*
10(o)	Form of Stock Pledge Agreement for Cerner Corporation Executive Stock Purchase Plan (filed as Exhibit 4(h) to Registrant’s Registration Statement on Form S-8 (File No. 333-77029) and incorporated herein by reference).*
10(p)	Form of Promissory Note for Cerner Corporation Executive Stock Purchase Plan (filed as Exhibit 4(i) to Registrant’s Registration Statement on Form S-8 (File No. 333-77029) and incorporated herein by reference).*
10(q)	Employment Agreement of Earl H. Devanny, III (filed as Exhibit 10(q) to Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000, and incorporated herein by reference).*
10(r)	Employment Agreement of Glenn P. Tobin, Ph.D. (filed as Exhibit 10(r) to Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000, and incorporated herein by reference).*
10(s)	Employment Agreement of Stanley M. Sword (filed as Exhibit 10(s) to Registrant’s Annual Report on Form 10-K for the year ended January 1, 2000, and incorporated herein by reference).*
10(t)	Employment Agreement of Jack A. Newman, Jr. (filed as Exhibit 10(s) to Registrant’s Annual Report on Form 10-K for the year ended December 30, 2000, and incorporated herein by reference).*
10(u)	Cerner Corporation 2001 Long-Term Incentive Plan F (filed as Annex I to Registrant’s 2001 Proxy Statement and incorporated herein by reference).*
10(v)	Cerner Corporation 2001 Associate Stock Purchase Plan (filed as Annex II Registrant’s 2001 Proxy Statement and incorporated herein by reference).*
10(w)	Qualified Performance-Based Compensation Plan (filed as Exhibit 10(v) to Registrant’s Annual Report on Form 10-K for the year ended December 30, 2000, and incorporated herein by reference).*
10(x)	Note Purchase Agreement between Cerner Corporation and the purchasers therein, dated December 15, 2002.
10(y)	Cerner Corporation Executive Deferred Compensation Plan.
11	Computation of Registrant’s Earnings Per Share. (Exhibit omitted. Information contained in notes to consolidated financial statements.)
22	Subsidiaries of Registrant.
23	Consent of Independent Auditors.

38

Number	Description
99.1	Certification pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contracts or compensatory plans or arrangements required to be identified by Item 15(a)(3)(b)

(b)	Reports on Form 8-K.
	Report on Form 8-K was filed on January 7, 2003.
(c)	Exhibits.
	The response to this portion of Item 15 is submitted as a separate section of this report.
(d)	Financial Statement Schedules.
	The response to this portion of Item 15 is submitted as a separate section of this report.

39

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CERNER CORPORATION
Dated: March 11, 2003	By:	/s/ Neal L. Patterson Neal L. Patterson Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature and Title	Date
/s/ Neal L. Patterson Neal L. Patterson, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 11, 2003
/s/ Clifford W. Illig Clifford W. Illig, Vice Chairman and Director	March 11, 2003
/s/ Marc G. Naughton Marc G. Naughton, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 11, 2003
/s/ Michael E. Herman Michael E. Herman, Director	March 11, 2003
/s/ Gerald E. Bisbee Gerald E. Bisbee, Jr., Ph.D., Director	March 11, 2003
/s/ John C. Danforth John C. Danforth, Director	March 11, 2003
/s/ Jeff C. Goldsmith Jeff C. Goldsmith, Ph.D., Director	March 11, 2003
/s/ William B. Neaves William B. Neaves, Ph.D., Director	March 11, 2003
/s/ Nancy-Ann DeParle Nancy-Ann DeParle, Director	March 11, 2003

40

CERTIFICATIONS

     I, Neal L. Patterson, Chairman of the Board and Chief Executive Officer of Cerner Corporation, certify that:

     1.     I have reviewed this annual report on Form 10-K of Cerner Corporation;

     2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

     4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

     c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     Date: March 11, 2003

/s/ Neal L. Patterson
Neal L. Patterson
Chairman of the Board
and Chief Executive Officer

41

     I, Marc G. Naughton, Chief Financial Officer of Cerner Corporation, certify that:

     1.     I have reviewed this annual report on Form 10-K of Cerner Corporation;

     2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

     3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

     4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

     c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     Date: March 11, 2003

/s/ Marc G. Naughton
Marc G. Naughton
Chief Financial Officer

42

Independent Auditors’ Report

The Board of Directors and Stockholders
Cerner Corporation:

We have audited the accompanying consolidated balance sheets of Cerner Corporation and subsidiaries as of December 28, 2002 and December 29, 2001, and the related consolidated statements of operations, changes in equity, and cash flows for each of the years in the three-year period ended December 28, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cerner Corporation and subsidiaries as of December 28, 2002 and December 29, 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 28, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 142, “Goodwill and Other Intangible Assets” on December 30, 2001.

KPMG LLP

Kansas City, Missouri
January 23, 2003

Management’s Report

The management of Cerner Corporation is responsible for the consolidated financial statements and all other information presented in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America appropriate to the circumstances, and, therefore, included in the financial statements are certain amounts based on management’s informed estimates and judgments. Other financial information in this report is consistent with that in the consolidated financial statements. The consolidated financial statements have been audited by Cerner Corporation’s independent certified public accountants and have been reviewed by the audit committee of the Board of Directors.

43

Consolidated Balance Sheets

December 28, 2002 and December 29, 2001

			2002			2001
(Dollars in thousands)
Assets
	Current Assets:
	Cash and cash equivalents		$	142,543			107,536
	Receivables			272,668			220,205
	Inventory			9,041			5,834
	Prepaid expenses and other			23,434			14,101
	Total current assets			447,686			347,676
	Property and equipment, net			134,283			94,705
	Software development costs, net			117,327			96,962
	Goodwill, net			45,938			23,879
	Intangible assets, net			23,155			18,015
	Investments			964			122,992
	Other assets			9,926			8,073
			$	779,279			712,302
Liabilities and Stockholders’ Equity Current Liabilities:
	Accounts payable		$	46,822			20,942
	Current installments of long-term debt			12,202			27,187
	Deferred revenue			45,055			53,304
	Income taxes			4,691			5,661
	Accrued payroll and tax withholdings			47,262			40,565
	Other accrued expenses			9,519			10,529
	Total current liabilities			165,551			158,188
	Long-term debt, net			136,636			92,132
	Deferred income taxes			35,848			62,393
	Deferred revenue			—			4,750
	Stockholders’ Equity:
	Common stock, $.01 par value,150,000,000 shares authorized, 36,732,532 and 36,564,690 shares issued in 2002 and 2001, respectively			367			366
	Additional paid-in capital			226,912			216,811
	Retained earnings			236,572			188,550
	Treasury stock, at cost (1,202,999 and 1,201,625 shares in 2002 and 2001, respectively)			(20,863	)		(20,799	)
	Accumulated other comprehensive income:
		Foreign currency translation adjustment		(1,668	)		(2,095	)
		Unrealized gain (loss) on available-for-sale equity securities (net of deferred tax asset of $23 in 2002 and deferred tax liability of $6,810 in 2001)		(76	)		12,006
	Total stockholders’ equity			441,244			394,839
	Commitments (Note 13)		$	779,279			712,302

See notes to consolidated financial statements.

44

Consolidated Statements of Operations

For the years ended December 28, 2002, December 29, 2001 and December 30, 2000

					2002			2001			2000
(In thousands, except per share data)
Revenues
			System sales		$	332,274			244,979			182,061
			Support, maintenance and services			419,578			297,444			221,651
			Total revenues			751,852			542,423			403,712
Costs and expenses
			Cost of revenues			162,140			115,606			90,118
			Sales and client service			319,265			226,776			169,289
			Software development			129,620			100,186			78,425
			General and administrative			50,007			38,505			29,483
			Write-off of acquired in-process research and development			—			—			4,900
			Write-down of intangible assets			—			—			6,687
			Total costs and expenses			661,032			481,073			378,902
Operating earnings						90,820			61,350			24,810
Other income (expense):
				Interest expense, net		(5,555	)		(4,425	)		(3,671	)
				Other income, net		87			182			792
				Gain (loss) on sale of investments		5,177			(385	)		(38,462	)
				Impairment of investments		(9,904	)		(127,616	)		—
				Gain on software license settlement		—			7,580			—
				Realized gain on exchange of stock		—			—			188,654
				Total other income (expense), net		(10,195	)		(124,664	)		147,313
Earnings (loss) before income taxes and cumulative effect of
		a change in accounting principle				80,625			(63,314	)		172,123
Income taxes						(31,817	)		20,948			(66,858	)
Earnings (loss) before cumulative effect of a change in accounting principle						48,808			(42,366	)		105,265
Cumulative effect of a change in accounting for goodwill, net of $486 income tax benefit						(786	)		—			—
Net earnings (loss)					$	48,022			(42,366	)		105,265
Basic earnings (loss) per share before cumulative effect of a change in accounting principle					$	1.38			(1.21	)		3.08
Cumulative effect of a change in accounting for goodwill						(0.02	)		—			—
Basic earnings (loss) per share					$	1.36			(1.21	)		3.08
Diluted earnings (loss) per share before cumulative effect of a
	change in accounting principle				$	1.32			(1.21	)		2.96
Cumulative effect of a change in accounting principle						(0.02	)		—			—
Diluted earnings (loss) per common share					$	1.30			(1.21	)		2.96

See notes to consolidated financial statements.

45

Consolidated Statements of Changes in Equity

For the years ended December 28, 2002, December 29, 2001 and December 30, 2000

														Accumulated
					Additional						Treasury			Other
	Common Stock				paid-in			Retained			stock			Comprehensive			Comprehensive
	Shares		Amount		capital			earnings			amount			Income			income (loss)
(In thousands)
Balance at January 1, 2000		34,933	$	349		166,735			125,651			(20,796	)		106,998
Exercise of options		439		5		7,050			—			(3	)		—			—
Issuance of common stock grants as compensation		2		—		31			—			—			—			—
Acquisition of business		594		6		14,056			—			—			—			—
Non-employee stock option compensation expense		—		—		229
Fair value of employee stock options exchanged in acquisition of business		—		—		1,089			—			—			—			—
Tax benefit from disqualifying disposition of stock options		—		—		3,525			—			—			—			—
Foreign currency translation adjustment		—		—		—			—			—			(766	)		(766	)
Unrealized loss on available-for-sale equity securities, net of deferred tax benefit of $92,842		—		—		—			—			—			(69,807	)		(69,807	)
Reclassification adjustment for gains recognized in net income, net of deferred taxes of $54,400		—		—		—			—			—			(95,900	)		(95,900	)
Net earnings		—		—		—			105,265			—			—			105,265
Comprehensive income (loss)																		(61,208	)
Balance at December 30, 2000		35,968	$	360		192,715			230,916			(20,799	)		(59,475	)
Exercise of options		235		2		4,065			—			—			—			—
Acquisition of business		362		4		17,667			—			—			—			—
Non-employee stock option compensation expense		—		—		215			—			—			—			—
Tax benefit from disqualifying disposition of stock options		—		—		2,328			—			—			—			—
Associate stock purchase plan discounts		—		—		(179	)		—			—			—			—
Foreign currency translation adjustment		—		—		—			—			—			(1,352	)		(1,352	)
Unrealized gain on available-for-sale equity securities, net of deferred tax expense of $6,810		—		—		—			—			—			12,006			12,006
Reclassification adjustment for losses recognized in net loss, net of deferred taxes of $33,036		—		—		—			—			—			58,732			58,732
Net loss		—		—		—			(42,366	)		—						(42,366	)
Comprehensive income																		27,020
Balance at December 29, 2001		36,565	$	366		216,811			188,550			(20,799	)		9,911
Exercise of options		168		1		3,259			—			(64	)		—
Non-employee stock option compensation expense		—		—		90			—			—			—
Tax benefit from disqualifying disposition of stock options		—		—		1,561			—			—			—
Associate stock purchase plan discounts		—		—		(609	)		—			—			—
Third party warrants		—		—		5,800			—			—			—
Foreign currency translation adjustment		—		—		—			—			—			427			427
Unrealized gain on available-for-sale equity securities, net of deferred benefit of $14		—		—		—			—			—			(76	)		(76	)
Reclassification adjustment for gains recognized in net earnings, net of deferred taxes of $6,810		—		—		—			—			—			(12,006	)		(12,006	)
Net earnings		—		—		—			48,022			—			—			48,022
Comprehensive income																		36,367
Balance at December 28, 2002		36,733	$	367		226,912			236,572			(20,863	)		(1,744	)

See notes to consolidated financial statements.

46

Consolidated Statements of Cash Flows

For the years ended December 28, 2002, December 29, 2001 and December 30, 2000

				2002			2001			2000
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)				$	48,022			(42,366	)		105,265
Adjustments to reconcile net earnings (loss) to
	net cash provided by operating activities:
			Depreciation and amortization		57,346			47,305			37,988
			Common stock received as consideration for sale of license software		—			(750	)		(6,150	)
			Impairments of investments		9,904			127,616			—
			Gain on software license settlement		—			(7,580	)		—
			Realized gain on exchange of stock		—			—			(188,654	)
			Realized (gain) loss on sale of stock		(5,177	)		385			38,462
			Write-down of intangible assets		—			—			6,687
			Write-off of acquired in-process research and development		—			—			4,900
			Impairment of goodwill		1,272			—			—
			Issuance of common stock grants as compensation		—			—			31
			Non-employee stock option compensation expense		90			215			229
			Equity in losses of affiliates		—			1,525			1,095
			Provision for deferred income taxes		8,710			(43,199	)		67,640
			Payment of tax on non-recurring gain from the sale of WebMD		(31,200	)		—			—
			Tax benefit from disqualifying dispositions of stock options		1,561			2,328			3,525
			Loss on disposal of capital equipment		—			—			33
Changes in operating assets and liabilities (net of businesses acquired):
			Receivables, net		(50,364	)		(26,389	)		(14,994	)
			Inventory		(2,762	)		(3,252	)		595
			Prepaid expenses and other		(13,302	)		(8,216	)		(7,025	)
			Accounts payable		20,648			(4,572	)		(3,389	)
			Accrued income taxes		1,791			10,207			(5,329	)
			Deferred revenue		(12,203	)		(2,164	)		5,280
			Other current liabilities		2,570			13,745			7,124
Total adjustments					(11,116	)		107,204			(51,952	)
Net cash provided by operating activities					36,906			64,838			53,313
CASH FLOWS FROM INVESTING ACTIVITIES
			Purchase of capital equipment		(33,235	)		(17,654	)		(16,154	)
			Purchase of land, buildings, and improvements		(26,464	)		(8,068	)		—
			Acquisition of businesses, net of cash received		(26,016	)		(4,045	)		(16,829	)
			Investments in affiliates		—			(1,664	)		(7,370	)
			Proceeds from sale of available for sale securities		95,134			1,572			26,152
			Advance to affiliate		—			—			1,000
			Issuance of notes receivable		(156	)		(205	)		(385	)
			Repayment of notes receivable		451			707			1,152
			Capitalized software development costs		(49,984	)		(37,828	)		(30,982	)
Net cash used in investing activities					(40,270	)		(67,185	)		(43,416	)
CASH FLOWS FROM FINANCING ACTIVITIES
			Proceeds from issuance of long-term debt		70,102			18,088			—
			Repayment of long-term debt		(41,032	)		(1,634	)		(967	)
			Proceeds from third party warrants		5,800			—			—
			Proceeds from exercise of options		3,196			4,067			7,052
			Associate stock purchase plan discounts		(609	)		(179	)		—
Net cash provided by financing activities					37,457			20,342			6,085
Foreign currency translation adjustment					914			(1,352	)		(766	)
Net increase in cash and cash equivalents					35,007			16,643			15,216
Cash and cash equivalents at beginning of year					107,536			90,893			75,677
Cash and cash equivalents at end of year				$	142,543			107,536			90,893
Supplemental disclosures of cash flow information
Cash paid during the year for:
			Interest	$	6,937			7,341			7,348
			Income taxes, net of refund		49,484			9,535			930
Noncash investing and financing activities Issuance of common stock for acquisition of business					—			17,671			14,062
		Issuance of notes payable for acquisition of business			—			—			1,385
		Addition to paid-in capital for the fair value of employee stock options exchanged in the acquisition of business			—			—			1,089

See notes to consolidated financial statements.

47

Notes to Consolidated Financial Statements

1 Summary of Significant Accounting Policies

(a)  Principles of Consolidation - The consolidated financial statements include the accounts of Cerner Corporation and its wholly owned subsidiaries (the Company). All significant intercompany transactions and balances have been eliminated in consolidation.

(b)  Nature of Operations - The Company designs, develops, markets, installs, hosts and supports software information technology and content solutions for healthcare organizations and consumers. The Company also implements these solutions as individual, combined or enterprise-wide systems.

(c)  Revenue Recognition - Revenues are derived primarily from the sale of clinical, financial and administrative information systems and solutions. The components of these revenues are the licensing of computer software, software support and hardware maintenance, remote hosting and outsourcing, training, installation, consulting and implementation services, subscription content, and the sale of computer hardware and sublicensed software.

The Company recognizes revenue in accordance with the provisions of Statement of Position (SOP) No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-4, SOP 98-9 and clarified by Staff Accounting Bulletin (SAB) 101 “Revenue Recognition in Financial Statements”. SOP No 97-2, as amended, generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of those elements. Revenue from multiple-element software arrangements is recognized using the residual method. Under the residual method, revenue is recognized in a multiple element arrangement when Company-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement (i.e. professional services, software support, hardware maintenance and sublicensed software), but does not exist for one or more of the delivered elements in the arrangement (i.e. software solutions). The Company allocates revenue to each element in a multiple element arrangement based on its respective fair value, with the fair value determined by the price charged when that element is sold separately. Specifically, the Company determines the fair value of the maintenance portion of the arrangement based on the renewal price of the maintenance charged to clients, professional services portion of the arrangement, other than installation services, based on hourly rates which the Company charges for these services when sold apart from a software license, and the hardware and sublicense software based on the prices for these elements when they are sold separate from the software. If evidence of the fair value cannot be established for the undelivered elements of a license agreement, the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established.

Inherent in the revenue recognition process are significant management estimates and judgments, which influence the timing and the amount of revenue recognition. The Company provides several models for the procurement of its clinical and financial information systems. The predominant method is a perpetual software license agreement, project related installation services, implementation and consulting services, computer hardware and sublicensed software, and software support. For those arrangements involving the use of services, the Company uses the percentage of completion method of accounting, following the guidance in the AICPA Statement of Position No. 81-1 (SOP 81-1), Accounting for Performance of Construction-Type and Certain Production-Type Contracts.

The Company provides installation services, which include project scoping services, conducting pre-installation audit, and creating initial environments. Because installation services are deemed to be essential to the functionality of the software, software license and installation services fees are recognized over the software installation period using output measures which reflect direct labor hours incurred, beginning at software delivery and culminating at completion of installation, typically a three to six month process.

48

Notes to Consolidated Financial Statements

The Company also provides implementation and consulting services, which include consulting activities that fall outside of the scope of the standard installation services. These services vary depending on the scope and complexity requested by the client. Examples of such services may include additional database consulting, system configuration, project management, testing assistance, network consulting and post conversion review services. Implementation and consulting services are generally not deemed to be essential to the functionality of the software, and, thus, do not impact the timing of the software license recognition, unless software license fees are tied to implementation milestones. In those instances, the portion of the software license fee tied to implementation milestones is deferred until the related milestone is accomplished and related fees become billable and non-forfeitable. Implementation fees are recognized over the service period, which may extend from six months to three years.

Remote hosting and outsourcing services are marketed under long-term arrangements generally over periods of 5 to 10 years. Revenues from these arrangements are recognized as the services are performed.

Software maintenance fees are marketed under annual and multi-year arrangements and are recognized as revenue ratably over the contracted maintenance term. Hardware maintenance revenues are billed and recognized monthly over the contracted maintenance term.

Subscription and content fees are generally marketed under annual and multi-year agreements and are recognized ratably over the contracted terms.

Hardware and sublicensed software sales are generally recognized upon delivery to the client.

The Company also offers its software solutions on an application service provider (“ASP”) or term license basis, making available Company software functionality on a remote processing basis from the Company’s data centers. The data centers provide system and administrative support as well as processing services. Revenue on software and services provided on an ASP or term license basis is recognized on a monthly basis over the term of the contract. The Company capitalizes related direct costs consisting of third party costs and direct software installation and implementation costs. These costs are amortized over the term of the arrangement.

In limited cases where the Company contractually agrees to develop new or customized software code for a client, the Company will utilize percentage of completion accounting in accordance with SOP 81-1.

Deferred revenue is comprised of deferrals for license fees, maintenance and other services for which payment has been received and for which the service has not yet been performed. Long-term deferred revenue, at December 29, 2001, represents amounts received from license fees, maintenance and other services to be earned or provided beginning in periods on or after December 29, 2002.

The Company incurs out-of-pocket expenses in connection with its client service activities, which are reimbursed by its clients. The amounts of “out-of-pocket” expenses and equal amounts of related reimbursements were $28,410,000, $18,379,000 and $13,821,000 for the years ended December 28, 2002, December 29, 2001, and December 30, 2000, respectively. These amounts have been reclassified from sales and client service expense to revenue and cost of revenues. The Company then reclassified these amounts from revenue and cost of revenues to other income and expense.

(d) Fiscal Year - The Company’s fiscal year ends on the Saturday closest to December 31. Fiscal years 2002, 2001 and 2000 consisted of 52 weeks each. All references to years in these notes to consolidated financial statements represent fiscal years unless otherwise noted.

49

Notes to Consolidated Financial Statements

(e)  Software Development Costs - Costs incurred internally in creating computer software products are expensed until technological feasibility has been established upon completion of a detailed program design. Thereafter, all software development costs are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each product with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the product. The Company is amortizing capitalized costs over five years. During 2002, 2001 and 2000, the Company capitalized $49,984,000, $37,828,000 and $30,982,000, respectively, of total software development costs of $149,985,000, $113,872,000, and $90,694,000, respectively. Amortization expense of capitalized software development costs in 2002, 2001, and 2000 was $29,619,000, $24,142,000, and $18,713,000, respectively, and accumulated amortization was $130,172,000, $100,553,000, and $76,411,000, respectively.

The Company expects that major software information systems companies, large information technology consulting service providers and systems integrators, internet-based start-up companies and others specializing in the healthcare industry may offer competitive products or services. The pace of change in the healthcare information systems market is rapid and there are frequent new product introductions, product enhancements and evolving industry standards and requirements. As a result, the capitalized software may become less valuable or obsolete and could be subject to impairment.

(f)  Cash Equivalents – Cash equivalents consist of short-term marketable securities with original maturities less than ninety days.

(g)  Investments – The Company accounts for its investments in equity securities, which have readily determinable fair values as available-for-sale. Available-for-sale securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income. For realized gains and losses on available-for-sale investments, the Company utilizes the specific identification method as the basis to determine cost. Investments in the common stock of certain affiliates over which the Company exerts significant influence are accounted for by the equity method.

The Company also has certain other minority equity investments in non-publicly traded securities. These investments are generally carried at cost as the Company owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. The carrying value of these investments at December 28, 2002 and December 29, 2001 was $876,000 and $18,212,000, respectively. These investments are inherently high risk as the market for technologies and content by these companies are usually early stage at the time of the investment by the Company and such markets may never be significant. The Company could lose its entire investment in certain or all of these companies. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary.

The Company reviews all equity securities for declines in fair value. If such declines are considered to be other than temporary, the cost basis of the individual security is written down to fair value as a new cost basis, and the amount of the write-down is included in earnings.

(h)  Inventory - Inventory consists primarily of computer hardware and sub-licensed software held for resale and is recorded at the lower of cost (first-in, first-out) or market.

(i) Property and Equipment - Property, equipment and leasehold improvements are stated at cost. Depreciation of property and equipment is computed using the straight-line method over periods of 5 to 39 years. Amortization of leasehold improvements is computed using a straight-line method over the lease terms, which range from periods of two to twelve years.

50

Notes to Consolidated Financial Statements

(j)  Earnings per Common Share – Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. A reconciliation of the numerators and the denominators of the basic and diluted per-share computations is as follows:

(In thousands, except per share data)

	2002						2001								2000
					Per-							Per-							Per-
	Earnings		Shares		Share		Earnings			Shares		Share			Earnings		Shares		Share
	(Numerator)		(Denominator)		Amount		(Numerator)			(Denominator)		Amount			(Numerator)		(Denominator)		Amount
Earnings (loss) per share before cumulative effect of a change in accounting principle
Basic earnings (loss) per share Income available to common stockholders	$	48,808		35,458	$	1.38	$	(42,366	)		34,907	$	(1.21	)	$	105,265		34,123	$	3.08
Effect of dilutive securities Stock options		—		1,592				—			—					—		1,480
Diluted earnings (loss) per share
Income available to common stockholders including assumed conversions	$	48,808		37,050	$	1.32	$	(42,366	)		34,907	$	(1.21	)	$	105,265		35,603	$	2.96
Net earnings (loss) per share
Basic earnings (loss) per share Income available to common stockholders	$	48,022		35,458	$	1.36		(42,366	)	$	34,907	$	(1.21	)	$	105,265		34,123	$	3.08
Effect of dilutive securities Stock options		—		1,592				—			—					—		1,480
Diluted earnings (loss) per share
Income available to common stockholders including assumed conversions	$	48,022		37,050	$	1.30		(42,366	)	$	34,907	$	(1.21	)	$	105,265		35,603	$	2.96

Options to purchase 2,390,000, 299,000, and 521,000 shares of common stock at per share prices ranging from $43.13 to $574.82, $48.19 to $574.82, and $35.88 to $84.07, were outstanding at the end of 2002, 2001 and 2000, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares. Additionally, all options were excluded from the 2001 diluted earnings per share computations as the effect of their inclusion would have been anti-dilutive on the loss per share calculation.

(k)  Foreign Currency - Assets and liabilities in foreign currencies are translated into dollars at rates prevailing at the balance sheet date. Revenues and expenses are translated at average rates for the year. The net exchange differences resulting from these translations are reported in accumulated other comprehensive income. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of earnings. The net gain (loss) resulting from foreign currency transactions was ($1,955,000), $23,813, and ($518,000) in 2002, 2001 and 2000, respectively.

(l) Income Taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

51

Notes to Consolidated Financial Statements

(m)  Impairment of Long-Lived Assets — On December 30, 2001, the Company adopted SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which supersedes certain provisions of APB Opinion No. 30 “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” and supercedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” There was not a cumulative transition adjustment upon adoption. In accordance with SFAS 144, the Company evaluates long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

(n)  Goodwill and Other Intangible Assets – Effective December 30, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” As a result, goodwill and intangible assets with indefinite lives are no longer amortized but are evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an impairment test based on fair value. The Company completed its review of the Company’s goodwill values in the second quarter of 2002. As a result of this review, the Company determined that goodwill arising from the acquisition of Mitch Cooper and Associates was impaired due to declining demand and margins in this business. Mitch Cooper and Associates was a supply chain re-engineering consulting practice. The impairment charge to reflect this goodwill at fair value was $786,000, net of tax, and is reflected as a cumulative effect of a change in accounting principle as of the beginning of 2002. The Company used a discounted cash flow analysis to determine the fair value of the reporting units. The Company’s intangible assets, other than goodwill or intangible assets with indefinite lives, are all subject to amortization and are summarized as follows:

(In thousands)

			December 28, 2002				December 29, 2001
	Weighted
	Average		Gross				Gross
	Amortization		Carrying		Accumulated		Carrying		Accumulated
	Period (Yrs)		Amount		Amortization		Amount		Amortization
Purchased software		5.0	$	28,938		8,649		19,140		4,508
Customer lists		7.0		3,700		1,183		3,700		654
Patents		14.0		377		63		336		40
Non-compete agreements		7.0		50		15		50		9
Total		5.33	$	33,065		9,910		23,226		5,211

Amortization expense was $4,482,000, $2,191,000 and $882,000 for the years ended 2002, 2001 and 2000, respectively.

Estimated aggregate amortization expense for each of the next five years is as follows:

For year ended:	2003	$	6,018
	2004		5,812
	2005		5,224
	2006		3,967
	2007		1,655

52

Notes to Consolidated Financial Statements

The changes in the carrying amount of goodwill for the twelve months ended December 28, 2002 are as follows:

Balance as of December 29, 2001	$	23,879
Goodwill acquired during 2002		23,331
Goodwill impaired during 2002		(1,272	)
Balance as of December 28, 2002	$	45,938

The following is a reconciliation of reported net earnings (loss) to adjusted net earnings (loss) to exclude the effect of amortization expense in the years ended 2001 and 2000 for goodwill that is no longer being amortized.

(In thousands, except per share data)

	2002		2001			2000
Reported net earnings (loss)	$	48,022		(42,366	)		105,265
Add back: Goodwill amortization		—		1,758			1,015
Adjusted net earnings (loss)		48,022		(40,608	)		106,280
Basic earnings per share:
Reported net earnings (loss)	$	1.36		(1.21	)		3.08
Add back: Goodwill amortization		—		.05			.03
Adjusted net earnings (loss)		1.36		(1.16	)		3.11
Diluted earnings per share:
Reported net earnings (loss)	$	1.30		(1.21	)		2.96
Add back: Goodwill amortization		—		.05			.03
Adjusted net earnings (loss)		1.30		(1.16	)		2.99

(o)  Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(p)  Segment Reporting - In June of 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 (SFAS No. 131), “Disclosures about Segments of an Enterprise and Related Information.” SFAS No. 131 establishes annual and interim reporting standards for operating segments of a company. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one operating segment and reports only certain enterprise-wide disclosures.

(q)  Concentrations – Substantially all of the Company’s cash and cash equivalents, short-term investments, are held at three major U.S. financial institutions. The majority of the Company’s cash equivalents consist of U.S. Government Federal Agency Securities, short-term marketable securities, and overnight repurchase agreements. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and, therefore, bear minimal risk.

53

Notes to Consolidated Financial Statements

Substantially all of the Company’s clients are integrated delivery networks, hospitals, and other healthcare related organizations. If significant adverse macro-economic factors were to impact these organizations it could materially adversely affect the Company. The Company’s access to certain software and hardware components is dependent upon single and sole source suppliers. The inability of any supplier to fulfill supply requirements of the Company could affect future results.

The Company performs ongoing credit evaluations of its clients and generally does not require collateral from its clients. The Company maintains an allowance for potential losses on a specific identification basis and based on historical experience and management’s judgments. The Company’s allowance for doubtful accounts as of December 28, 2002 and December 29, 2001 was $8,746,000 and $6,880,000, respectively.

(r)  Accounting for Stock Options — The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations including FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation, as interpretation of APB Opinion No. 25,” issued in March 2000, to account for its fixed–plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The following is a reconciliation of reported net earnings (loss) to adjusted net earnings (loss) had the Company recorded compensation expense based on the fair value at the grant date for its stock options under SFAS 123 for the years ended 2002, 2001 and 2000.

(In thousands, except per share data)

		2002			2001			2000
Reported net earnings (loss)		$	48,022			(42,366	)		105,265
Less: stock-based compensation expense determined
	under fair-value-based method for all awards		(16,640	)		(11,172	)		(7,527	)
Adjusted net earnings (loss)			31,382			(53,538	)		97,738
Basic earnings per share:
Reported net earnings (loss)		$	1.36			(1.21	)		3.08
Less: stock-based compensation expense determined under fair-value-based method for all awards, net of tax			(.47	)		(.32	)		(.22	)
Adjusted net earnings (loss)			.89			(1.53	)		2.86
Diluted earnings per share:
Reported net earnings (loss)		$	1.30			(1.21	)		2.96
Less: stock-based compensation expense determined under fair-value-based method for all awards			(.45	)		(.32	)		(.21	)
Adjusted net earnings (loss)			.85			(1.53	)		2.75

Pro forma net earnings reflect only options granted since January 1, 1995. Therefore, the full impact of calculating compensation expense for stock options under FAS 123 is not reflected in the pro forma net earnings amounts presented above, because compensation cost is reflected over the options’ vesting period of ten years for these options. Compensation expense for options granted prior to January 1, 1995 is not considered.

54

Notes to Consolidated Financial Statements

(s)  Reclassifications – Certain prior year amounts have been reclassified to conform to current year consolidated financial statement presentation.

(t)  Recent Accounting Pronoucements - In June 2001, the FASB issued SFAS No. 143 “Accounting for Assets Retirement Obligations” (“SFAS 143”). SFAS 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirements costs. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value fo the liability is added to the carrying amount of the associated asset, and this additional carrying amount is expensed over the life of the asset. The Company is required to adopt SFAS 143 effective December 28, 2002. The Company does not expect the adoption of SFAS 143 to have a material effect on its consolidated financial position, results of operations or cash flows.

In July 2002, the FASB issued SFAS No. 146 “Accounting for Exit or Disposal Activities” (“SFAS 146”). SFAS 146 addresses the recognition, measurement and reporting of costs associated with exit and disposal activities (i.e., restructuring activities), including costs related to terminating a contract that is not a capital lease and termination benefits due to employees who are involuntarily terminated under the terms of a one-time benefit arrangement.

SFAS 146 supersedes EITF 94-3 and EITF 88-10 and therefore prohibits recognition of a liability based solely on an entity’s commitment to a plan to exit an activity. SFAS 146 requires that: (i) liabilities associated with exit and disposal activities be measured at fair value and changes in the fair value of the liability at each reporting period be measured using an interest allocation approach; (ii) one-time termination benefits be expensed at the date the entity notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period; (iii) liabilities to terminate a contract be recorded at fair value when the contract is terminated; (iv) liabilities related to an existing operating lease/contract, unless terminated, be recorded at fair value, less estimated sublease income, and measured when the contract does not have any future economic benefit to the entity (i.e. the entity ceases to utilize the rights conveyed by the contract); and, (v) all other costs related to an exit or disposal activity be expensed as incurred.

SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. Retroactive application of SFAS 146 is prohibited and, accordingly, liabilities recognized prior to the initial application of SFAS 146 must continue to be accounted for in accordance with EITF 94-3; EITF 88-10 or other applicable preexisting guidance. The Company does not expect the adoption of SFAS 146 to have a material effect on its consolidated financial position, results of operations or cash flow.

2 Business Acquisitions

During the three years ended December 28, 2002, the Company completed eight acquisitions, which were accounted for under the purchase method of accounting. Pro forma results of operations have not been presented for any of the acquisitions because the effects of these acquisitions were not material to the Company on either an individual or an aggregate basis. The results of operations of each acquisition are included in the Company’s consolidated statement of operations from the date of each acquisition.

The amounts allocated to purchased in-process research and development (IPRD) were determined through established valuation techniques in the software industry and were expensed upon acquisition because technological feasibility had not been established and no future alternative uses existed. Research and development costs to bring the products from the acquired companies to technological feasibility, individually or in the aggregate, are not expected

55

Notes to Consolidated Financial Statements

to have a material impact on the Company’s future results of operations or cash flows. Amounts allocated to intangibles are amortized on a straight-line basis over five to seven years. Effective December 30, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” As a result, goodwill and intangible assets with indefinite lives are no longer amortized but are evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an impairment test based on fair value. Amounts allocated to software are amortized based on current and expected future revenues for each product with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the product. The IPRD amounts in the table below are reflected as one-time charges to earnings at the date of acquisition.

A summary of the Company’s significant purchase acquisitions for the three years ended December 28, 2002, is included in the following table (in millions, except share amounts):

56

Notes to Consolidated Financial Statements

Entity Name, Description of Business
Acquired, and Reason Business						Form of
Acquired	Date	Consideration	Goodwill	Developed Technology	IPRD	Consideration
Fiscal 2002 Acquisitions
Image Devices GmbH (d)	10/02	$15.7	$11.9	$4.4	—	$14.3 cash
						$1.4 note payable
Picture archiving and communication system software
Supplier of the image archive component for Cerner ProVision TM PACS
Zynx Health Incorporated (d) (g)	4/02	$15.0	$10.4	$3.3	—	$15.0 cash
						$8.5 software
						credits
Solutions and services that deliver the latest scientific knowledge and best practices
Integrate technology into Cerner
Millennium
Fiscal 2001 Acquisitions
Dynamic Healthcare Technologies	12/01	$20.0	$9.2	$7.5	—	$2.3 cash
						$17.7 362,000
						shares of common
						stock issued
Clinical and diagnostic workflow for pathology, laboratory and radiology
Integrate technology into Cerner
Millennium
APACHE Medical Systems (f)	7/01	$3.6	$5.0	$0.2	—	$3.6 cash
Clinical decision support /outcomes management systems
Integrate knowledge into Cerner
Millennium
Fiscal 2000 Acquisitions
ADAC Healthcare Information Systems, Inc. (a) (f)	11/00	$5.3	$5.5	$3.0	$1.7	$3.9 cash $1.4 note payable
Image management solutions for radiology departments
Integrate technology into Cerner
Millennium
CITATION Computer Systems, Inc.(b)
Laboratory systems for small to mid-sized hospitals	8/00	$17.8	$11.5	$2.7	$3.2	$2.6 cash $14.1 594,000 shares of common stock issued $1.1 vested options assumed
Integrate technology into Cerner
Millennium
Mitch Cooper & Associates (e)
	4/00	$2.0	$2.0	—	—	$2.0 cash
Supply chain re-engineering consulting practice
Integrated knowledge into Cerner
Millennium
Health Network Ventures, Inc. (c)
	4/00	$8.3	$4.2	—	—	$8.3 cash
Software solutions that enable transaction processing between providers and other health-related entities
Integrate knowledge into Cerner
Millennium

57

Notes to Consolidated Financial Statements

(a)  The acquired in-process research and development is related to the PACS (Picture Archiving and Communications Systems) product. The PACS product, when integrated with the Company’s radiology information system, provides a comprehensive radiology solution, from automating and streamlining the information workflow to complete image management. PACS was approximately 86% complete at the time of the acquisition. When ADAC HCIS was acquired, management projected that PACS would be completed in 3 months at an estimated cost of $150,000. The risks associated with PACS are like any other software development project and include changes in technology and competition. The PACS project was valued using the income approach with the following assumptions: material net cash inflows were expected to commence in 2001; no material changes from historical pricing, margins, or expense levels were anticipated; and, a 20% risk adjusted discount rate was applied to the estimated net cash flows. PACS was complete at the end of 2001.

(b)  The acquired in-process research and development is related to CITATION’s enhanced versions of the C-LAB and C-COM products. C-LAB addresses the complex information needs of the laboratory’s general lab, microbiology, anatomical pathology and blood bank departments with a Windows NT client server solution. C-LAB was approximately 68% complete at the time of the acquisition. When CITATION was acquired, management projected that C-LAB would be completed in 6-9 months at an estimated cost of $700,000. The risks associated with C-LAB are like any other software development project and include changes in technology and competition. The C-LAB project was valued using the income approach with the following assumptions: material net cash inflows were expected to commence in 2001; no material changes from historical pricing, margins, or expense levels were anticipated; and, a 20% risk adjusted discount rate was applied to the estimated net cash flows. C-LAB was complete at the end of 2002. C-COM is also designed for a Windows NT client server user and works with other information systems in healthcare facilities by providing a central data repository for clinical orders and results. It then allows for routing of the patient information to all care-providing centers throughout the healthcare enterprise. C-COM was approximately 75% complete at the time of the acquisition. When CITATION was acquired, management projected that C-COM would be completed in 3-6 months at an estimated cost of $500,000. The risks associated with C-COM are like any other software development project and include changes in technology and competition. The C-COM project was valued using the income approach with the following assumptions: material net cash inflows were expected to commence in 2001; no material changes from historical pricing, margins, or expense levels are anticipated; and, a 20% risk adjusted discount rate was applied to the estimated net cash flows. C-COM was complete at the end of 2001.

(c)  Subsequent to the acquisition of Health Network Ventures, Inc., the Company determined that it would discontinue the portion of the business focused on individual physician practice connectivity and transaction processing. As a result of this decision, the Company recorded a charge in the second quarter of 2000 in the amount of $6,687,000 related to a write-down of intangible assets.

(d)  The assets and liabilities of the acquired companies at the date of acquisition are as follows:

	Image Devices		Zynx Health,
	GmbH		Incorporated
Current Assets	$	1,603,000	$	2,656,000
Total Assets	$	18,007,000	$	16,949,000
Current Liabilities	$	4,205,000	$	1,420,000
Total Liabilities	$	4,205,000	$	1,669,000

58

Notes to Consolidated Financial Statements

acquisition of Mitch Cooper and Associates was impaired due to declining demand and margins in this business. Mitch Cooper and Associates was a supply chain re-engineering consulting practice. The impairment charge to reflect this goodwill at fair value was $786,000, net of tax and is reflected as a cumulative effect of a change in accounting principle as of the beginning of 2002. The Company used a discounted cash flow analysis to determine the fair value of the reporting units.

(f)  The following goodwill amounts are deductible for tax purposes:

APACHE Medical Systems	$	5,000,000
ADAC Healthcare Information Systems, Inc.	$	3,400,000

(g)  The Company will not recognize revenues related to the utilization of the $8.5 million in software credits as the Company considered the exchange of software credits for Zynx content as an exchange of similar productive assets, which will be accounted for at carrying value. In the event the software credits are not utilized over the next five years, the Company will make additional cash payments of up to $7.5 million depending on the level of the credits used. These additional payments, if made, will result in additional goodwill.

3 Receivables

Receivables consist of accounts receivable and contracts receivable. Accounts receivable represent recorded revenues that have been billed. Contracts receivable represent recorded revenues that are billable by the Company at future dates under the terms of a contract with a client. Billings and other consideration received on contracts in excess of related revenues recognized under the percentage-of-completion method are recorded as deferred revenue. A summary of receivables is as follows:

(In thousands)	2002		2001
Accounts receivable	$	188,614		139,491
Contracts receivable		84,054		80,714
Total receivables	$	272,668		220,205

Substantially all receivables are derived from sales and related support and maintenance of the Company’s clinical and financial information systems to healthcare providers located throughout the United States and in certain foreign countries. Included in receivables at the end of 2002 and 2001 are amounts due from healthcare providers located in foreign countries of $23,589,000, and $19,611,000, respectively. Consolidated revenues include foreign sales of $29,412,000, $22,350,000, and $25,815,000, during 2002, 2001 and 2000, respectively. Consolidated long-lived assets at the end of 2002, and 2001, include foreign long-lived assets of $1,120,000, and $776,000, respectively. Revenues and long-lived assets from any one foreign country are not material.

The Company provides an allowance for estimated uncollectible accounts based upon historical experience and management’s judgment. At the end of 2002, and 2001 the allowance for estimated uncollectible accounts was $8,746,000, and $6,880,000, respectively.

59

Notes to Consolidated Financial Statements

4 Property and Equipment

A summary of property, equipment, and leasehold improvements stated at cost, less accumulated depreciation and amortization, is as follows:

(In thousands)	2002		2001
Furniture and fixtures	$	30,197		27,339
Computer and communications equipment		120,939		96,855
Marketing equipment		2,649		2,381
Shop equipment		2,902		2,902
Leasehold improvements		41,467		26,578
Capital lease equipment		2,208		2,202
Land, buildings, and improvements		59,444		43,809
		259,806		202,066
Less accumulated depreciation and amortization		125,523		107,361
Total property and equipment, net	$	134,283		94,705

5 Investments

Investments consist of the following:

(In thousands)	2002			2001
Investments in available-for-sale equity securities, at cost	$	150			85,964
Plus unrealized holding gain (loss)		(62	)		18,816
Investment in available-for-sale equity securities, at fair value		88			104,780
Investments in non-marketable equity securities, at cost		876			18,212
Total investments, net	$	964			122,992

On February 13, 2000 CareInsite entered into an agreement to merge with WebMD. The merger of CareInsite and WebMD (“Merger”) closed on September 12, 2000. Prior to the merger, the carrying value of the CareInsite stock was $6.22 per share, and the market price of WebMD on September 12, 2000 was $15.00 per share. Upon the exchange of CareInsite stock for WebMD stock, the Company recorded an investment gain of $120,362,000, net of $68,292,000 of tax, as a result of the exchange.

On December 12, 2000, the Company sold 4,273,509 shares of WebMD for $25,641,000. Accordingly, the Company recorded an investment loss of $24,539,000, net of $13,923,000 of tax, as a result of the sale.

On June 18, 2001 the Company reached an agreement with WebMD regarding certain performance metrics related to specified levels of physician usage arising out of the original license transaction between the Company and CareInsite, which has been merged into WebMD. Under the agreement, the Company received 2,000,000 shares of WebMD stock, valued at $11,580,000, in exchange for $432,000 in cash and the cancellation of various obligations due to the Company by WebMD. As a result of this agreement, the Company recognized a gain of $4,836,000, net of $2,744,000 in tax, in gain on software license settlement in the accompanying consolidated statement of operations. The Company’s policy is to review declines in fair value of its marketable equity securities for declines that may be other than temporary. As a result of this policy, during the second quarter of 2001, the Company recorded a write-down of its investment in WebMD from $15.00 per share to $5.79 per share. Accordingly, the Company recognized a charge to earnings of $81,419,000, net of $46,197,000 in tax.

In the second quarter of 2002, the Company sold its remaining 14,820,527 shares of WebMD for $90,119,000. Accordingly, the Company recorded an investment gain of $2,736,000, net of

60

Notes to Consolidated Financial Statements

$1,572,000 in tax, as a result of the sale. Since the shares sold had a lower income tax basis, the sale resulted in the transfer of approximately $29,638,000 of deferred tax liabilities to income taxes payable in the second quarter of 2002. In the third quarter of 2002, the Company made a cash payment of tax in the amount of $31,200,000 related to the investment gain.

In December 2002, the Company exercised 1,048,783 warrants of WebMD with an exercise price of $3.08 and a cost basis and carrying value of $4,146,000. The warrants were scheduled to expire on January 26, 2003. In December 2002, the Company sold 1,048,783 shares of WebMD for $8,242,000. Accordingly, the Company recorded an investment gain of $527,000, net of $342,000 in tax, as a result of the exercise of the warrants and the sale of the shares.

The Company has certain other minority equity investments in non-publicly traded securities. These investments are generally carried at cost as the Company owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. The balance of these investments at December 28, 2002 and December 29, 2001 was $876,000 and $18,212,000, respectively. These investments are inherently high risk as the market for technologies and content by these companies are usually early stage at the time of the investment by the Company and such markets may never be significant. The Company could lose its entire investment in certain or all of these companies. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. Based on events occurring in the fourth quarter of 2002, the Company recorded a charge of $6,281,000, net of tax of $3,623,000, for the impairment of various investments of non-publicly traded securities. The charge is primarily related to a $3,464,000, net of tax, write down of the Company’s investment in Protocare, Inc, a non-publicly traded company.

6 Indebtedness

On December 20, 2002, the Company completed a $60,000,000 private placement of debt pursuant to a Note Agreement dated December 15, 2002. The Series A Senior Notes, with a $21,000,000 principal amount at 5.57%, are payable in three equal installments beginning in December 2006. The Series B Senior notes, with a $39,000,000 principal amount at 6.42%, are payable in 4 equal annual installments beginning December 2009. The proceeds were used to repay the outstanding amount under the credit facility and for general corporate purposes. The Note Agreement contains certain net worth and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets and pay dividends. The Company was in compliance with all covenants at December 28, 2002.

In June 2002, the Company expanded its credit facility by entering into an unsecured credit agreement with a group of banks led by US Bank. This new agreement provides for a current revolving line of credit for working capital purposes. The current revolving line of credit is unsecured and requires monthly payments of interest only. Interest is payable at the Company’s option at a rate based on prime (4.25% at December 28, 2002) or LIBOR (1.42% at December 28, 2002) plus 2%. The interest rate may be reduced by up to 1% if certain net worth ratios are maintained. At December 28, 2002, the Company no outstanding borrowings under this agreement and had $90,000,000 available for working capital purposes. The agreement contains certain net worth, current ratio, and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets, and pay dividends. A commitment fee of 1/2% or 3/10% is payable quarterly based on the usage of the revolving line of credit. The revolving line of credit matures on May 31, 2005.

On April 15, 1999, the Company completed a $100,000,000 private placement of debt pursuant to a Note Agreement dated April 1, 1999. The Series A Senior Notes, with a $60,000,000 principal amount at 7.14%, are payable in five equal annual installments beginning in April 2002. The Series B Senior Notes, with a $40,000,000 principal amount at 7.66%, are payable in six equal annual installments beginning April 2004. The proceeds were used to retire the Company’s existing $30,000,000 of debt, and the remaining funds will be used for capital improvements and

61

Notes to Consolidated Financial Statements

to strengthen the Company’s cash position. The note agreement contains certain net worth, current ratio, and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow, incur liens, sell assets, and pay dividends. The Company was in compliance with all covenants at December 28, 2002.

The Company also has capital lease obligations and other notes payable amounting to $838,000, payable over the next two years.

The aggregate maturities for the Company’s long-term debt is as follows (in thousands):

2003	$	12,202
2004		19,302
2005		18,667
2006		25,667
2007		13,667
2008 and thereafter		59,333
	$	148,838

The Company estimates the fair value of its long-term, fixed-rate debt using discounted cash flow analysis based on the Company’s current borrowing rates for debt with similar maturities. The fair value of the Company’s long-term debt was approximately $149,023,000 and $97,686,000 at December 28, 2002 and December 29, 2001, respectively.

7 Interest Income and Expense

A summary of interest income and expense is as follows:

(In thousands)	2002			2001			2000
Interest income	$	1,080			2,896			3,645
Interest expense		(6,635	)		(7,321	)		(7,316	)
Interest expense, net	$	(5,555	)		(4,425	)		(3,671	)

8 Stock Options, Warrants and Equity

At the end of 2002 and 2001, the Company had 1,000,000 shares of authorized but unissued preferred stock, $.01 par value.

At December 28, 2002, the Company had five fixed stock option plans. Under Stock Option Plan B, the Company could grant to associates options to purchase up to 5,600,000 shares of common stock through November 30, 1993. The options are exercisable at the fair market value on the date of grant for a period determined by the Board of Directors (not more than ten years from the date granted). The options contain restrictions as to transferability and exercisability after termination of employment.

Under Stock Option Plan C, the Company is authorized to grant to associates options to purchase up to 645,000 shares of common stock through May 18, 2003. The options are exercisable at the fair market value on the date of grant for a period determined by the Board of Directors (not more than ten years from the date granted). The options contain restrictions as to transferability and exercisability after termination of employment. The Company has committed not to issue any more stock options under Stock Option Plan C.

Initially, under Stock Option Plan D, the Company was authorized to grant to associates, directors, consultants or advisors to the Company options to purchase up to 50,000 shares of common stock through January 1, 2005. Additional shares which were approved by the Company’s shareholders on May 17, 1994, May 16, 1995 and May 22, 1998, increasing the total

62

Notes to Consolidated Financial Statements

authorized to grant to 4,600,000 shares. The options are exercisable at a price (not less than fair market value on the date of grant) and during a period determined by the Stock Option Committee. Options under this plan currently vest over periods of up to ten years and are exercisable for periods of up to 25 years.

Initially, under Stock Option Plan E, the Company was authorized to grant to associates (other than officers subject to the provisions of Section 16(a) of the Securities and Exchange Act of 1934), consultants, or advisors to the Company options to purchase up to 2,000,000 shares of common stock through January 1, 2005. Additional shares of 1,100,000 and 1,000,000 were approved by the Company’s Board of Directors on December 8, 2000 and March 9, 2001, respectively, increasing the total authorized to grant to 4,100,000 shares. The options are exercisable at a price (not less than fair market value on the date of grant) and during a period determined by the Stock Option Committee. Options under this plan currently vest over periods of up to ten years and are exercisable for periods of up to 25 years.

Under the 2001 Long-Term Incentive Plan F, the Company is authorized to grant to associates, directors and consultants 2,000,000 shares of common stock awards. Awards under this plan may consist of stock options, restricted stock and performance shares, as well as other awards such as stock appreciation rights, phantom stock and performance unit awards which may be payable in the form of common stock or cash. However, not more than 500,000 of such shares will be available to granting any types of grants other than options or stock appreciation rights.

The Company has also granted 504,507 other non-qualified stock options under separate agreements to employees and certain third parties. These options are exercisable at a price equal to or greater than the fair market value on the date of grant. These options vest over periods of up to six years and are exercisable for periods of up to ten years. The Company recognized expenses related to the non-qualified stock options of $90,000 and $215,000 for 2002 and 2001, respectively. In 2000, the Company granted an additional 350,000 stock option to a third party at an exercise price equal to the fair market value on the date of grant. The options are vested and become exercisable at the earlier of five years of when certain conditions are met. At December 28, 2002 all 350,000 options were vested.

A combined summary of the status of the Company’s five fixed stock option plans and other stock options at the end of 2002, 2001, and 2000, and changes during these years ended is presented below:

	2002					2001					2000
				Weighted-					Weighted-					Weighted-
	Number			average		Number			average		Number			average
	Of			exercise		Of			exercise		of			exercise
Fixed options	Shares			price		Shares			price		shares			price
Outstanding at beginning of year		7,244,224		$	28.79		6,300,265		$	22.50		5,529,995		$	19.79
Granted		1,501,729			43.50		1,483,998			47.37		1,684,144			31.50
Exercised		(167,092	)		19.40		(235,942	)		17.46		(455,706	)		17.23
Forfeited		(497,997	)		36.17		(304,097	)		26.04		(458,168	)		21.13
Outstanding at end of year		8,080,864		$	31.28		7,244,224		$	28.79		6,300,265		$	22.50
Options exercisable at year-end		2,512,357		$	24.94		1,825,150		$	24.29		1,458,001		$	20.97

63

Notes to Consolidated Financial Statements

The following table summarizes information about fixed and other stock options outstanding at December 28, 2002.

Options outstanding								Options exercisable
Range of		Number		Weighted-average				Number
Exercise		outstanding		remaining		Weighted-average		exercisable		Weighted-average
Prices		at 12/28/02		contractual life		exercise price		at 12/28/02		exercise price
	$5.90-20.50		2,275,365	14.00 years		$	15.85		1,104,817	$	16.07
	20.56-29.63		2,526,104		9.91		25.49		1,148,609		25.90
	29.88-46.23		2,036,394		8.91		42.33		182,626		38.05
	46.25-574.82		1,243,001		6.97		53.19		76,305		106.95
	5.90-574.82		8,080,864		10.36		31.28		2,512,357		24.94

The per share weighted-average fair value of stock options granted during 2002, 2001 and 2000 was $25.80, $25.93 and $18.96, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions:

	2002			2001			2000
Expected years until exercise		4.7			4.7			4.7
Risk-free interest rate		3.4	%		4.5	%		5.0	%
Expected stock volatility		68.7	%		71.3	%		72.1	%
Expected dividend yield		0	%		0	%		0	%

9 Associate Stock Purchase Plan

The Company established an Associate Stock Purchase Plan (ASPP) in 2001, which qualifies under Section 423 of the Internal Revenue Code. All full-time associates are eligible to participate. Participants may elect to make contributions from 1% to 20% of compensation to the ASPP, subject to annual limitations determined by the Internal Revenue Service. Participants may purchase Company Common Stock at a 15% discount on the last day of the purchase period. Under APB No. 25 the ASPP qualifies as a non-compensatory plan and no compensation expense has been recognized.

10 Foundations Retirement Plan

The Cerner Corporation Foundations Retirement Plan (the Plan) is established under Section 401(k) of the Internal Revenue Code. All full-time associates are eligible to participate. Participants may elect to make pretax contributions from 1% to 80% of compensation to the Plan, subject to annual limitations determined by the Internal Revenue Service. Participants may direct contributions into mutual funds, a money market fund, or a Company stock fund. The Company makes matching contributions to the Plan, on behalf of participants, in an amount equal to 33% of the first 6% of the participant’s contribution. The Company’s expense for the plan amounted to $4,347,000, $3,269,000, and $2,532,000 for 2002, 2001 and 2000, respectively.

     The Company added a discretionary match to the Plan in 2000. Contributions are based on attainment of established earnings per share goals for the year. Only participants in the Plan are eligible to receive the discretionary match contribution. For the year ended 2002, 2001, and 2000, the Company expensed $5,345,000, $3,688,000 and $1,100,000 for discretionary distributions, respectively.

64

Notes to Consolidated Financial Statements

11 Income Taxes

Income tax expense (benefit) before extraordinary item for the years ended 2002, 2001 and 2000, consists of the following:

(In thousands)	2002			2001			2000
Current:
Federal	$	49,384			20,129			175
State		5,699			2,862			(70	)
Foreign		(1,262	)		(740	)		(887	)
Total current		53,821			22,251			(782	)
Deferred:
Federal		(21,676	)		(41,307	)		63,524
State		(1,245	)		(1,451	)		4,482
Foreign		431			(441	)		(366	)
Total deferred		(22,490	)		(43,199	)		67,640
Total income tax expense (benefit)	$	31,331			(20,948	)		66,858

Income tax benefit attributable to the cumulative effect of a change in accounting principle for goodwill was $486,000 in 2002. Income tax expense (benefit) allocated to stockholders’ equity for unrealized holding gains (losses) on available-for-sale equity securities was ($6,824,000) and $39,846,000 for the years ended 2002 and 2001, respectively.

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to significant portions of deferred income taxes at the end of 2002 and 2001 relate to the following:

(In thousands)	2002			2001
Deferred Tax Assets
Accrued expenses	$	8,854			6,304
Separate return net operating losses		14,236			14,151
Other		6,729			2,726
Total deferred tax assets		29,819			23,181
Deferred Tax Liabilities
Unrealized gain on investments		—			(10,754	)
Software development costs		(47,594	)		(40,673	)
Contract and service revenues and costs		(21,915	)		(40,559	)
Depreciation and amortization		(8,497	)		(2,622	)
Other		(2,214	)		(1,464	)
Total deferred tax liabilities		(80,220	)		(96,072	)
Net deferred tax liability	$	(50,401	)		(72,891	)

Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, as well as the scheduled reversal of deferred tax liabilities, management believes it is more likely than not the Company will realize the benefit of these deductible differences. At December 28, 2002, the Company has net operating loss carryforwards subject to Section 382 of the Internal Revenue Code for Federal income tax purposes of $37.2 million which are available to offset future Federal taxable income, if any, through 2014.

65

Notes to Consolidated Financial Statements

The effective income tax rates for 2002, 2001, and 2000 were 39%, 33%, and 39%, respectively. These effective rates differ from the federal statutory rate of 35% as follows:

(In thousands)	2002		2001			2000
Tax expense (benefit) at statutory rates	$	27,774		(22,160	)		60,243
State income tax, net of federal benefit		2,579		43			2,972
Goodwill		364		705			4,225
Other, net		614		464			(582	)
Total income tax expense (benefit)	$	31,331		(20,948	)		66,858

Income taxes payable are reduced by the tax benefit resulting from disqualifying dispositions of stock acquired under the Company’s stock option plans. The 2002, 2001, and 2000 benefits of $1,561,000, $2,328,000, and $3,525,000, respectively, are treated as increases to additional paid-in capital.

12 Related Party Transactions

The Company loaned $165,000 in 2001, to the Company’s senior management under the terms of the Executive Stock Purchase Program (“Program”). The purpose of the Program is to advance the interests of the Company, the Company’s senior management, and the Company’s shareholders by offering the Company’s senior management an incentive to purchase shares of the Company’s stock on the open market. Pursuant to the Program, the Company provided Program loans to executives to help finance up to 50% of the total purchase price of the stock purchased. All Program loans have a term of five (5) years, at an interest rate of 5.5%. Principal and interest is not due until the end of the five-year loan term, unless the executive terminates employment. Executives may also elect to pay interest annually. If interest is not paid annually, it will compound annually. All Program loans are secured by the purchased shares and any pledged shares. The balance of these loans, including accrued interest, at December 28, 2002 and December 29, 2001 was $2,293,000 and $2,543,000, respectively.

The Company leases an airplane from a company owned by Mr. Neal L. Patterson and Mr. Clifford W. Illig. The airplane is leased on a per mile basis with no minimum usage guarantee. The lease rate is believed to approximate fair market value for this type of aircraft. During 2002 and 2001, respectively, the Company paid an aggregate of $543,000 and $548,000 for the rental of the airplane. The airplane is used principally by Mr. Patterson, Mr. Tobin, Mr. Black and Mr. Devanny to make client visits.

On July 1, 2001, the Company completed its purchase of certain assets and certain liabilities for cash of APACHE Medical Systems, Inc., a Delaware corporation (“APACHE”), as further described in note 2, Business Acquisitions. One of the Company’s directors, Gerald E. Bisbee, Jr., Ph.D., was at the time Chairman of the Board and a shareholder of APACHE.

66

Notes to Consolidated Financial Statements

13 Commitments

The Company leases space to unrelated parties in its North Kansas City headquarters complex under noncancelable operating leases. Included in other revenues is rental income of $87,000, $183,000, and $624,000 in 2002, 2001 and 2000, respectively.

The Company is committed under operating leases for office space through October 2006. Rent expense for office and warehouse space for the Company’s regional and global offices for 2002, 2001 and 2000 was $5,175,000, $2,718,000 and $1,735,000, respectively. Aggregate minimum future payments (in thousands) under these noncancelable operating leases are as follows:

	Aggregate
	Minimum
	future
Years	payments
2003	$	10,781
2004		6,052
2005		1,264
2006		425

At December 28, 2002, the Company was committed to spending approximately $63,000,000 under a construction contract for two new buildings at its North Kansas City headquarters complex. At December 28, 2002, the Company had spent $26,464,000.

67

Notes to Consolidated Financial Statements

14 Quarterly Results (unaudited)

Selected quarterly financial data for 2002 and 2001 is set forth below:

			Earnings (loss)
(In thousands, except per share data)			before income taxes						Basic
			and cumulative			Net			earnings			Diluted
			effect of a change in			earnings			(loss)			earnings (loss)
	Revenues		accounting principle			(loss)			per share			per share
2002 quarterly results:
March 30	$	175,280		17,171			10,404			.29			.28
June 29 (1)		180,573		23,828			14,692			.41			.39
September 28		190,331		22,716			13,768			.39			.37
December 28 (2) (3)		205,668		16,910			9,158			.28			.27
Total	$	751,852		80,625			48,022
2001 quarterly results:
March 31	$	120,901		10,428			6,328			.18			.17
June 30 (4) (5)		129,891		(107,470	)		(68,983	)		(1.98	)		(1.98	)
September 29		139,869		15,459			9,242			.26			.25
December 29		151,762		18,269			11,047			.32			.30
Total	$	542,423		(63,314	)		(42,366	)

(1)	Includes a gain on the sale of shares of WebMD common stock. The impact of this gain is a $2.9 million (net of tax) increase in net earnings and increase to diluted earnings per share of $.08 for the second quarter and for 2002.
(2)	Includes a gain on the sale of shares of WebMD common stock. The impact of this gain is a $.5 million (net of tax) increase in net earnings and an increase to diluted earnings per share of $.01 for the fourth quarter and for 2002.
(3)	Includes a charge on the impairment of investments. The impact of this charge is a $6.3 million (net of tax) decrease in net earnings and a decrease to diluted earnings per share of ($.17) for the fourth quarter and for 2002.
(4)	Includes a gain on the settlement of the WebMD performance warrants. The impact of this gain is a $4.8 million (net of tax) increase in net earnings and an increase to diluted earnings per share of $.13 for the second quarter and for 2001.
(5)	Includes a charge on the adjustment of the carrying value of the WebMD shares. The impact of this charge is an $81.4 million (net of tax) decrease in net earnings and a decrease to diluted earnings per share of ($2.23) for the second quarter and ($2.21) for 2001.

68

Cerner Corporation
Valuation and Qualifying Accounts Schedule II

			Additions
	Balance at		Charged to		Additions
	Beginning		Costs and		Through					Balance at
Description	of Period		Expenses		Acquisitions		Deductions			End of Period
For Year Ended December 30, 2000
Doubtful Accounts and Sale Allowances	$	4,759,000	$	0	$	1,341,000	$	(101,000	)	$	5,999,000

			Additions
	Balance at		Charged to		Additions
	Beginning		Costs and		Through					Balance at
Description	of Period		Expenses		Acquisitions		Deductions			End of Period
For Year Ended December 29, 2001
Doubtful Accounts and Sale Allowances	$	5,999,000	$	800,000	$	365,000	$	(284,000	)	$	6,880,000

			Additions
	Balance at		Charged to		Additions
	Beginning		Costs and		Through					Balance at
Description	of Period		Expenses		Acquisitions		Deductions			End of Period
For Year Ended December 28, 2002
Doubtful Accounts and Sale Allowances	$	6,880,000	$	2,060,000	$	597,000	$	(791,000	)	$	8,746,000

INDEPENDENT AUDITORS’ REPORT
ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors
Cerner Corporation:

Under date of January 23, 2003, we reported on the consolidated balance sheets of Cerner Corporation and subsidiaries as of December 28, 2002 and December 29, 2001 and the related consolidated statements of operations, changes in equity, and cash flows for each of the years in the three-year period ended December 28, 2002. These consolidated financial statements and our report thereon are included in the Company’s annual report on Form 10-K for the year 2002. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related consolidated financial statement schedule as listed under Item 15(a)(2). This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, this consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The audit report on the consolidated financial statements of Cerner Corporation and subsidiaries referred to above contains an explanatory paragraph that states that the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill and Intangible Assets December 30, 2001.

KPMG LLP

Kansas City, Missouri
January 23, 2003

EX-4.(D) 3 c75354exv4wxdy.txt EX-4(D) FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4(d) FIRST AMENDMENT TO CREDIT AGREEMENT This First Amendment to Credit Agreement (the "Amendment") is made as of July 22, 2002, by and among CERNER CORPORATION, a Delaware corporation (the "Borrower"); U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as Administrative Agent, Lead Arranger, Swingline Lender, Issuing Bank and a Bank; LASALLE BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as Documentation Agent and a Bank; COMMERCE BANK, N.A., a national banking association, in its capacity as a Bank; and UMB BANK, N.A., a national banking association, in its capacity as a Bank. Capitalized terms used and not defined hereunder have the meanings given to them in the Credit Agreement referred to below. Preliminary Statements (a) The Borrower and the Bank Parties are parties to a Credit Agreement dated as of May 31, 2002 (the "Credit Agreement"). (b) The Borrower has requested that, among other things, (1) Section 6.11 of the Credit Agreement be amended to permit the Borrower to redeem a portion of its stock from time to time, (2) Section 2.3 of the Credit Agreement be amended to address Foreign Currency Letters of Credit, and (3) in connection with a proposed Acquisition by the Borrower, the Bank Parties waive the Borrower's obligation to comply with certain provisions of Section 6.10(d)(3) of the Credit Agreement. The Bank Parties are willing to agree to the foregoing requests, subject, however, to the terms, conditions and agreements set forth below. NOW, THEREFORE, the parties agree as follows: 1. DEFINITIONS. Section 1.1 of the Credit Agreement is amended to add the following defined terms: "Bank Parties" shall mean U.S. Bank National Association, in its capacity as Administrative Agent, Lead Arranger, Issuing Bank, Swingline Lender and a Bank; LaSalle Bank National Association, in its capacity as Documentation Agent and a Bank; Commerce Bank, N.A., in its capacity as a Bank; and UMB Bank, N.A., in its capacity as a Bank. Use of the term "Bank Parties" in any of the Credit Documents is for convenience of reference only, and shall not impose or alter any requirement under any of the Credit Documents regarding which Persons must consent to which matters or in which capacity a Person must act in consenting to a matter or in taking any other action. "First Amendment" shall mean the First Amendment to Credit Agreement, dated as of July 22, 2002, among the Borrower and the Bank Parties. "Foreign Currency Letter of Credit" shall mean any Letter of Credit denominated in a currency other than Dollars. First Amendment to Credit Agreement -- Page 1 2. STOCK REDEMPTIONS. Section 6.11 of the Credit Agreement is deleted and is replaced with the following: 6.11. Dividends and Distributions. The Borrower shall not, nor shall it permit any of its Subsidiaries to, declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or otherwise, with respect to any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for any such purpose (the foregoing transactions being collectively called "Restricted Payments"); provided, however, that (a) the Borrower and its Subsidiaries may declare and pay dividends payable solely in shares of its common stock, (b) any Subsidiary of the Borrower may make Restricted Payments to the Borrower or to any Guarantor Subsidiary, and (c) the Borrower may declare and pay cash dividends, and/or redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for any such purpose, in each case if (1) no Default or Event of Default then exists or would result therefrom, and (2) the aggregate amount of such cash dividends paid during any fiscal quarter, together with the aggregate amount of all capital stock redeemed, purchased, retired or otherwise acquired during such fiscal quarter, does not exceed 50% of Consolidated Net Income for the four fiscal quarters most recently ended. 3. FOREIGN CURRENCY LETTERS OF CREDIT. A new Section 2.3(k) is added to the Credit Agreement which reads as follows: (k) The Borrower may request that Letters of Credit be issued as Foreign Currency Letters of Credit (meaning that such Letters of Credit are denominated in a currency other than Dollars). If the aggregate undrawn face amount of all Foreign Currency Letters of Credit exceeds $10,000,000 at any time, then the Borrower shall enter into one or more foreign currency hedging, swap or similar agreements (collectively, a "Foreign Currency Swap Agreement") with the Issuing Bank or other Person reasonably acceptable to the Issuing Bank (each, a "Counterparty"), in each case reasonably acceptable in form and content to the Administrative Agent, with respect to all Foreign Currency Letters of Credit then or thereafter outstanding, whereby, in return for the Borrower paying hedging, swap or similar fees to the Counterparty, the Counterparty assumes substantially all of the risk of any decline in the value of the Dollar relative to the applicable foreign currency for the duration of the term of such Foreign Currency Letters of Credit. The Borrower shall maintain such Foreign Currency Swap Agreement so long as the aggregate undrawn face amount of all Foreign Currency Letters of Credit outstanding exceeds $10,000,000. If the Borrower's foreign currency exposure with respect to Foreign Currency Letters of Credit is not fully hedged pursuant to a Foreign Currency Swap Agreement reasonably acceptable to the Administrative Agent, then (1) the Borrower agrees to reimburse the Issuing Bank, for the benefit of the Banks pursuant to their respective Pro-Rata Shares, for all currency fluctuation losses incurred by the Issuing Bank or any Bank in connection with any First Amendment to Credit Agreement -- Page 2 decline in the value of the Dollar relative to the applicable foreign currency at the time of any draw or other payment made under any Foreign Currency Letter of Credit, and (2) the Administrative Agent, acting in a commercially reasonable manner, shall have the right to periodically mark to market or otherwise adjust the LC Exposure of the Banks to reflect any such foreign currency fluctuation, and accordingly to reduce the amount of credit available to the Borrower under this Agreement because of such foreign currency fluctuation. The Administrative Agent, the Issuing Bank and the Banks shall have the rights set forth in the preceding sentence notwithstanding that the aggregate undrawn face amount of all Foreign Currency Letters of Credit outstanding is less than $10,000,000 at any time. 4. COVENANT WAIVER; SELECTED 2002 ACQUISITIONS. The Borrower has advised the Bank Parties that the Borrower intends to make an Acquisition, on or before October 31, 2002, of a foreign entity who is in the same line of business of the Borrower and that the aggregate amount of consideration payable by the Borrower at any time in respect of such Acquisition will not exceed $17,000,000 (the "Proposed Foreign 2002 Acquisition;" the Proposed Foreign 2002 Acquisition, together with the Borrower's earlier acquisition in 2002 of Zynx Health Incorporated, are collectively referred to herein as the "Combined 2002 Acquisitions"). Based upon the foregoing, the Bank Parties hereby waive any Default or Event of Default under Section 6.10(d)(3) of the Credit Agreement arising solely as a result of the aggregate amount of cash and all other consideration (including, without limitation, assumed or Guaranteed Indebtedness, but excluding equity securities of the Borrower) payable at any time in respect of the Combined 2002 Acquisitions exceeding 5% of the Consolidated Net Worth of the Borrower and its Subsidiaries (as reflected in the financial statements of such Persons, dated most recently prior to the consummation of the Proposed Foreign 2002 Acquisition, delivered to the Administrative Agent pursuant to Section 6.1 of the Credit Agreement); provided, however, that the foregoing waiver shall not be effective if (a) the aggregate amount of consideration payable by the Borrower at any time in respect of the Proposed Foreign 2002 Acquisition exceeds $17,000,000, or (b) the Proposed Foreign 2002 Acquisition is not consummated in all material respects on or before October 31, 2002. 5. CONDITIONS PRECEDENT TO AMENDMENT. Notwithstanding anything in this Amendment to the contrary, unless and to the extent the Administrative Agent waives the benefits of this sentence by giving written notice thereof to the Borrower, none of the Bank Parties shall have any duties under this Amendment, nor shall any waivers, releases or other concessions, if any, made or given by any of the Bank Parties under this Amendment be effective, in each case until the Administrative Agent has received fully executed originals of each of the following, each in form and substance satisfactory to the Administrative Agent: (a) AMENDMENT. This Amendment; (b) OTHER. Such other documents as the Administrative Agent may reasonably request in connection with the transactions contemplated hereby. 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Bank Parties as follows: (a) it is a duly organized and validly existing corporation and has full corporate power and authority to enter into this Amendment and any documents or transactions contemplated hereby and to pay and perform its obligations in respect of each of the foregoing; (b) the execution, delivery and performance by the Borrower of this Amendment and any documents contemplated hereby or any transactions contemplated hereby do not violate or conflict with, or require any consent under, (i) the Borrower's certificate of incorporation, by-laws, or any other agreement or document relating to the Borrower's existence or authority to act, (ii) any agreement or instrument to which the Borrower is a party or by which the Borrower or any of its properties is bound, (iii) any court order, judicial proceeding or any administrative or arbitral order or decree, First Amendment to Credit Agreement -- Page 3 or (iv) any applicable law, rule or regulation; and (c) no authorization, approval or consent of or by, and no notice to or filing or registration with, any governmental authority or any other Person is necessary for the Borrower to enter into this Amendment or any document contemplated hereby or any transaction contemplated hereby or to perform its obligations with respect to each of the foregoing. 7. REAFFIRMATION OF CREDIT DOCUMENTS. The Borrower reaffirms its obligations under the Credit Agreement and the other Credit Documents to which it is a party or by which it is bound, and represents, warrants and covenants to the Bank Parties, as a material inducement to the Bank Parties to enter into this Amendment and the transactions contemplated hereby, that (a) the Borrower has no (and, in any event, hereby waives any) defense, claim or right of setoff in respect of the Credit Agreement, any of the other Credit Documents or the actions or inactions of any of the Bank Parties; and (b) all representations and warranties made by the Borrower in the Credit Agreement and the other Credit Documents are true and complete on the date hereof as if made on the date hereof, except for any such representations or warranties which specifically and expressly relate to an earlier date, which representations and warranties were true and complete as of such earlier date. 8. NO OTHER AMENDMENTS. Except as amended hereby, the Credit Agreement and the other Credit Documents shall remain in full force and effect and be binding on the Borrower in accordance with their respective terms. 9. COUNTERPARTS; FAX SIGNATURES. This Amendment and any document contemplated hereby may be executed in one or more counterparts and by different parties thereto, all of which counterparts, when taken together, shall constitute but one agreement. This Amendment and any document contemplated hereby may be executed and delivered by facsimile or other electronic transmission, and any such execution or delivery shall be fully effective as if executed and delivered in person. 10. LEGAL FEES. The Borrower shall pay the reasonable legal fees and expenses incurred by the Administrative Agent in connection with the preparation and closing of this Amendment and any other documents referred to herein and the consummation of any transactions referred to herein. 11. MO.REV.STAT. SECTION 432.045 REQUIRED NOTICE. The following statement is given pursuant to Mo.Rev.Stat. Section 432.045: "ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT." All other Credit Documents are incorporated into this Amendment; provided, however, that, to the extent of any direct conflict between the terms and conditions of the other Credit Documents and this Amendment, the terms and conditions of this Amendment shall prevail and govern. 12. GOVERNING LAW. This Amendment shall be governed by the laws of the State of Missouri without regard to any choice of law rule thereof giving effect to the laws of any other jurisdiction. [signature page(s) to follow] First Amendment to Credit Agreement -- Page 4 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. CERNER CORPORATION COMMERCE BANK, N.A., as a Bank By: \s\ Marc G. Naughton By: \s\ Pamela T. Hill ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Pamela T. Hill Title: CFO/Senior Vice President Title: Vice President U.S. BANK NATIONAL ASSOCIATION, UMB BANK, NA., as a Bank as Administrative Agent, Lead Arranger, Issuing Bank, Swingline Lender and a Bank By: \s\ Mark R. Jorgenson By: \s\ Kevin E. Kramer ------------------------------------ --------------------------------- Name: Mark R. Jorgenson Name: Kevin E. Kramer Title: SVP Title: Senior Vice President LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent and a Bank By: \s\ James C. Binz ------------------------------------ Name: James C. Binz Title: First Vice President [Consent of Guarantors to follow] First Amendment to Credit Agreement -- Signature Page CONSENT OF GUARANTORS Reference is made to the Guaranty dated as of May 31, 2002, in favor of the Administrative Agent, on behalf of the Banks, the Swingline Lender and the Issuing Bank, to which the undersigned (each a "Guarantor") are parties, either as an original signatory thereto or pursuant to any subsequent assumption, joinder or other agreements, and any other guaranty executed by any Guarantor in favor of the Administrative Agent or any other Bank Party relating to any indebtedness of the Borrower under any of the Credit Documents (collectively, with respect to each Guarantor, such Guarantor's "Guaranty"). Capitalized terms used and not defined in this Consent of Guarantors have the meanings given to them in the Credit Agreement referred to in the above Amendment. To induce the Bank Parties to enter into the above Amendment, each Guarantor: (a) consents to the Borrower and the Bank Parties entering into the above Amendment; (b) agrees that the execution, delivery and performance of the above Amendment and any documents or transactions contemplated thereby shall not discharge, limit or otherwise impair the obligations of such Guarantor under such Guarantor's Guaranty; (c) agrees that such Guarantor's Guaranty is and remains in full force and effect and is enforceable against such Guarantor in accordance with its terms; (d) waives any defense, claim or right of setoff such Guarantor may have in respect of such Guarantor's Guaranty, the Credit Agreement, the other Credit Documents or the actions or inactions of any of the Bank Parties; and (e) agrees that none of the Bank Parties has any duty to give such Guarantor notice of or obtain such Guarantor's consent to the transactions described in the above Amendment, and that the Bank Parties' giving of notice to such Guarantor and obtainment of such Guarantor's consent in this instance shall not impose any similar or other duty upon any of the Bank Parties in any future matter or transaction. This Consent of Guarantors may be validly executed and delivered by fax or other electronic transmission and in multiple counterparts and by different parties thereto. CERNER PROPERTIES, INC., CERNER INTERNATIONAL, INC., a Delaware corporation a Delaware corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Vice President and Treasurer Title: Vice President and Treasurer CERNER MULTUM, INC., CERNER HEALTH CONNECTIONS, INC., a Delaware corporation a Delaware corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Treasurer Title: Vice President and Treasurer First Amendment to Credit Agreement -- Signature Page CERNER HEALTH FACTS, INC., CERNER CITATION, INC., a Delaware corporation a Delaware corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Vice President and Treasurer Title: Vice President and Treasurer CERNER INVESTMENT CORP., HEALTH NETWORK VENTURES, INC., a Nevada corporation a Missouri corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Vice President and Treasurer Title: Vice President and Treasurer CERNER CAMPUS REDEVELOPMENT CERNER RADIOLOGY CORPORATION, INFORMATION SYSTEMS, INC., a Missouri corporation a Texas corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Treasurer Title: ZYNX HEALTH INCORPORATED, CERNER DHT, INC., a California corporation a Delaware corporation By: \s\ Marc G. Naughton By: \s\ Marc G. Naughton ------------------------------------ --------------------------------- Name: Marc G. Naughton Name: Marc G. Naughton Title: Treasurer Title: Vice President and Treasurer First Amendment to Credit Agreement -- Signature Page EX-10.(X) 4 c75354exv10wxxy.txt EX-10(X) NOTE PURCHASE AGREEMENT ================================================================================ CERNER CORPORATION $21,000,000 5.57% Senior Notes, Series A due December 30, 2008 $39,000,000 6.42% Senior Notes, Series B due December 30, 2012 NOTE PURCHASE AGREEMENT Dated as of December 15, 2002 ================================================================================ Series A PPN: 15678# AD 7 Series B PPN: 15678# AE 5 TABLE OF CONTENTS

Section Page - ------- ---- 1. AUTHORIZATION OF NOTES..................................................................................1 2. SALE AND PURCHASE OF NOTES..............................................................................1 3. CLOSING.................................................................................................2 4. CONDITIONS TO CLOSING...................................................................................2 4.1. Representations and Warranties.................................................................2 4.2. Performance; No Default........................................................................2 4.3. Compliance Certificates........................................................................3 4.4. Opinions of Counsel............................................................................3 4.5. Purchase Permitted By Applicable Law, etc......................................................3 4.6. Sale of Other Notes............................................................................3 4.7. Payment of Special Counsel Fees................................................................3 4.8. Private Placement Number.......................................................................4 4.9. Changes in Corporate Structure.................................................................4 4.10. Subsidiary Guaranty............................................................................4 4.11. Proceedings and Documents......................................................................4 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................4 5.1. Organization; Power and Authority..............................................................4 5.2. Authorization, etc.............................................................................5 5.3. Disclosure.....................................................................................5 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates...............................6 5.5. Financial Statements...........................................................................6 5.6. Compliance with Laws, Other Instruments, etc...................................................7 5.7. Governmental Authorizations, etc...............................................................7 5.8. Litigation; Observance of Agreements, Statutes and Orders......................................7 5.9. Taxes..........................................................................................8 5.10. Title to Property; Leases......................................................................8 5.11. Licenses, Permits, etc.........................................................................8 5.12. Compliance with ERISA..........................................................................9 5.13. Private Offering by the Company................................................................9 5.14. Use of Proceeds; Margin Regulations...........................................................10 5.15. Existing Indebtedness; Future Liens...........................................................10 5.16. Foreign Assets Control Regulations, etc.......................................................10 5.17. Status under Certain Statutes.................................................................11

5.18. Environmental Matters.........................................................................11 5.19. Anti-Terrorism Order..........................................................................11 5.20. Solvency of Subsidiary Guarantors.............................................................11 6. REPRESENTATIONS OF THE PURCHASER.......................................................................12 6.1. Purchase for Investment.......................................................................12 6.2. Source of Funds...............................................................................12 7. INFORMATION AS TO COMPANY..............................................................................14 7.1. Financial and Business Information............................................................14 7.2. Officer's Certificate.........................................................................17 7.3. Inspection....................................................................................17 8. PREPAYMENT OF THE NOTES................................................................................18 8.1. Required Prepayments..........................................................................18 8.2. Optional Prepayments with Make-Whole Amount...................................................18 8.3. Mandatory Offer to Prepay Upon Change of Control..............................................19 8.4. Allocation of Partial Prepayments.............................................................21 8.5. Maturity; Surrender, etc......................................................................21 8.6. Purchase of Notes.............................................................................21 8.7. Make-Whole Amount.............................................................................21 9. AFFIRMATIVE COVENANTS..................................................................................23 9.1. Compliance with Law...........................................................................23 9.2. Insurance.....................................................................................23 9.3. Maintenance of Properties.....................................................................23 9.4. Payment of Taxes and Claims...................................................................23 9.5. Corporate Existence, etc......................................................................24 10. NEGATIVE COVENANTS.....................................................................................24 10.1. Consolidated Tangible Net Worth...............................................................24 10.2. Fixed Charge Ratio............................................................................24 10.3. Indebtedness Ratios...........................................................................24 10.4. Limitations on Liens..........................................................................25 10.5. Restricted Payments...........................................................................26 10.6. Merger, Consolidation, etc....................................................................27 10.7. Sale of Assets................................................................................28 10.8. Disposition of Stock of Restricted Subsidiaries...............................................29 10.9. Designation of Unrestricted Subsidiaries......................................................29 10.10. Nature of Business............................................................................30 10.11. Transactions with Affiliates..................................................................30 10.12. Subsidiary Guaranties.........................................................................30 11. EVENTS OF DEFAULT......................................................................................30 12. REMEDIES ON DEFAULT, ETC...............................................................................33 ii 12.1. Acceleration..................................................................................33 12.2. Other Remedies................................................................................34 12.3. Rescission....................................................................................34 12.4. No Waivers or Election of Remedies, Expenses, etc.............................................34 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................................34 13.1. Registration of Notes.........................................................................34 13.2. Transfer and Exchange of Notes................................................................35 13.3. Replacement of Notes..........................................................................35 14. PAYMENTS ON NOTES......................................................................................36 14.1. Place of Payment..............................................................................36 14.2. Home Office Payment...........................................................................36 15. EXPENSES, ETC..........................................................................................36 15.1. Transaction Expenses..........................................................................36 15.2. Survival......................................................................................37 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........................................37 17. AMENDMENT AND WAIVER...................................................................................37 17.1. Requirements..................................................................................37 17.2. Solicitation of Holders of Notes..............................................................38 17.3. Binding Effect, etc...........................................................................38 17.4. Notes held by Company, etc....................................................................38 18. NOTICES................................................................................................39 19. REPRODUCTION OF DOCUMENTS..............................................................................39 20. CONFIDENTIAL INFORMATION...............................................................................39 21. SUBSTITUTION OF PURCHASER..............................................................................40 22. MISCELLANEOUS..........................................................................................41 22.1. Successors and Assigns........................................................................41 22.2. Payments Due on Non-Business Days.............................................................41 22.3. Severability..................................................................................41 22.4. Construction..................................................................................41 22.5. Counterparts..................................................................................41 22.6. Governing Law.................................................................................42 iii SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE B-1 -- Existing Investments SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries; Affiliates SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Litigation SCHEDULE 5.11 -- Permits, etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness; Future Liens SCHEDULE 10.4 -- Liens EXHIBIT 1(a) -- Form of Series A Senior Note EXHIBIT 1(b) -- Form of Series B Senior Note EXHIBIT 1(c) -- Form of Subsidiary Guaranty EXHIBIT 4.4(a) -- Form of Opinion of Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers EXHIBIT 7.2 -- Form of Compliance Certificate iv CERNER CORPORATION 2800 Rockcreek Parkway Kansas City, Missouri 64117 (816) 221-1024 Fax: (816) 474-1742 $21,000,000 5.57% Senior Notes, Series A, due December 30, 2008 $39,000,000 6.42% Senior Notes, Series B, due December 30, 2012 Dated as of December 15, 2002 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: CERNER CORPORATION, a Delaware corporation (the "Company"), agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Company has authorized the issuance and sale of $21,000,000 aggregate principal amount of its 5.57% Senior Notes, Series A, due December 30, 2008 (the "Series A Notes") and $39,000,000 aggregate principal amount of its 6.42% Senior Notes, Series B, due December 30, 2012 (the "Series B Notes" and, together with the Series A Notes, the "Notes", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement). The Notes will be substantially in the form set out in Exhibits 1(a) and 1(b), as appropriate, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. The Notes will be guaranteed by certain existing and future Subsidiaries (individually, a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors") pursuant to the guaranty in substantially the form of Exhibit 1(c) (the "Subsidiary Guaranty"). 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and each of the other purchasers named in Schedule A (the "Other Purchasers"), and you and the Other Purchasers agree to purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and series specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Your obligation hereunder and the obligations of the Other Purchasers are several and not joint obligations and you shall have no liability to any Person for the performance or non-performance by any Other Purchaser hereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610 at 9:00 a.m., Chicago time, at a closing (the "Closing") on December 20, 2002 or on such other Business Day thereafter on or prior to December 27, 2002 as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $250,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 5290000743 at U.S. Bank N.A. 6333 Long, Shawnee, KS 66216, ABA No. 101000187. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1 through 10.12 had such Sections applied since such date. 2 4.3. COMPLIANCE CERTIFICATES. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreement. 4.4. OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Randy D. Sims, Chief Legal Officer for the Company, and Lynn R. Marasco, Senior Corporate Counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company instructs its counsel to deliver such opinion to you) and (b) from Gardner, Carton & Douglas, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6. SALE OF OTHER NOTES. Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 3 4.8. PRIVATE PLACEMENT NUMBER. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each series of the Notes by Gardner, Carton & Douglas. 4.9. CHANGES IN CORPORATE STRUCTURE. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. SUBSIDIARY GUARANTY. Each Subsidiary Guarantor shall have executed and delivered the Subsidiary Guaranty. 4.11. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof. 4 5.2. AUTHORIZATION, ETC. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Subsidiary Guaranty has been duly authorized by all necessary corporate action on the part of each Subsidiary Guarantor and upon execution and delivery thereof will constitute the legal, valid and binding obligation of each Subsidiary Guarantor, enforceable against each such Subsidiary Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. DISCLOSURE. The Company, through its agent, SPP Capital Partners, LLC, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum dated November 2002 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 30, 2001, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name 5 thereof, the jurisdiction of its organization, whether such Subsidiary is a Restricted Subsidiary, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise permitted by Section 10.4). (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5. FINANCIAL STATEMENTS. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or 6 by-laws, or any other agreement or instrument by which the Company or any Subsidiary is bound or by which any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. The execution, delivery and performance by each Subsidiary Guarantor of the Subsidiary Guaranty will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Subsidiary Guarantor under any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument by which such Subsidiary is bound or by which any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Subsidiary. 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes or the execution, delivery or performance by each Subsidiary Guarantor of the Subsidiary Guaranty. 5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. TAXES. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such 7 returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended January 3, 1998. 5.10. TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11. LICENSES, PERMITS, ETC. Except as disclosed in Schedule 5.11: (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product of the Company infringes any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person, as a result of which infringement, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 8 5.12. COMPLIANCE WITH ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to the Company's Plans, and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than in each case such liabilities or Liens as would not be individually or in the aggregate Material. (b) None of the Company's Plans is subject to, nor has the Company contributed to any Plan that is subject to Title IV of ERISA (including, without limitation any Multiemployer Plan) and neither the Company nor any ERISA Affiliate has incurred any liability under Title IV of ERISA that remains unsatisfied. (c) The expected post-retirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material or is reflected in the most recent audited financial statements listed in Schedule 5.5. (d) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(d) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. 5.13. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than 36 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. 9 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 2.0% of the value of the consolidated assets of the Company and its Subsidiaries, and the Company does not have any present intention that margin stock will constitute more than 2.0% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. 5.15. EXISTING INDEBTEDNESS; FUTURE LIENS. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of November 23, 2002, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.4. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, 10 as amended, the ICC Termination Act of 1995, as amended, the Federal Power Act, as amended, or the USA Patriot Act. 5.18. ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 5.19. ANTI-TERRORISM ORDER. Neither the Company nor any Subsidiary is a Person or entity described in Section 1 of the Anti-Terrorism Order or described in the Department of the Treasury Rule, and, to the best knowledge and belief of the Company, neither it nor any of its Subsidiaries engages in any dealings or transactions, or is otherwise associated, with any such Persons or entities. 5.20. SOLVENCY OF SUBSIDIARY GUARANTORS. After giving effect to the transactions contemplated herein and after giving due consideration to any rights of contribution (i) each Subsidiary Guarantor has received fair consideration and reasonably equivalent value for the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair value of the assets of each Subsidiary Guarantor (at fair valuation) exceeds its liabilities, (iii) each Subsidiary Guarantor is able to and expects to be able 11 to pay its debts as they mature, and (iv) each Subsidiary Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. 6. REPRESENTATIONS OF THE PURCHASER. 6.1. PURCHASE FOR INVESTMENT. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" (as the term is defined in the United States Department of Labor's Prohibited Transaction Exemption ("PTE") 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC Annual Statement") for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or (b) the Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (c), no employee 12 benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of Part V of PTE 84-14 (the "QPAM Exemption") managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or (e) the Source constitutes assets of a "plan(s)" (within the meaning of Section IV of PTE 96-23 (the "INHAM Exemption") managed by an "in-house asset manager" or "INHAM" (within the meaning of Part IV of the INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of "control" in Section IV(h) of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this paragraph (e); or (f) the Source is a governmental plan; or (g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (g); or (h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 13 7. INFORMATION AS TO COMPANY. 7.1. FINANCIAL AND BUSINESS INFORMATION The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 45 days (or such other shorter period within which Quarterly Reports on Form 10-Q are required to be timely filed with the Securities and Exchange Commission, including any extension permitted by Rule 12b-25 of the Exchange Act) after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, (ii) consolidated statements of earnings of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and (iii) consolidated statements of cash flows for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- within 90 days (or such other shorter period within which Annual Reports on Form 10-K are required to be timely filed with the Securities and Exchange Commission, including any extension permitted by Rule 12b-25 of the Exchange Act) after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of earnings, retained earnings and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied 14 (A) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Restricted Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Restricted Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; 15 (e) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) Unrestricted Subsidiaries -- if, at the time of delivery of any financial statements pursuant to Section 7.1(a) or (b), Unrestricted Subsidiaries account for more than 15% of (i) the consolidated total assets of the Company and its Subsidiaries reflected in the balance sheet included in such financial statements or (ii) the consolidated revenues of the Company and its Subsidiaries reflected in the consolidated statement of income included in such financial statements, an unaudited balance sheet for all Unrestricted Subsidiaries taken as a whole as at the end of the fiscal period included in such financial statements and the related unaudited statements of income, retained earnings and cash flows for such Unrestricted Subsidiaries for such period, together with consolidating statements reflecting all eliminations or adjustments necessary to reconcile such group financial statements to the consolidated financial statements of the Company and its Subsidiaries together with the financial statements required pursuant to Sections 7.1(a) and 7.1(b); and (h) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or 16 properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2. OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Sections 7.1(a) or (b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.12, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Restricted Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Restricted Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company or such Restricted Subsidiary shall have taken or proposes to take with respect thereto. The certificate called for by this Section 7.2 will generally be in the form of the attached Exhibit 7.2. 7.3. INSPECTION. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each 17 Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. Each holder agrees to treat any information obtained in connection with any inspection pursuant to this Section 7 as Confidential Information subject to Section 20 so as to avoid any disclosure obligation on the Company under Regulation FD under the Exchange Act. 8. PREPAYMENT OF THE NOTES 8.1. REQUIRED PREPAYMENTS. The Series A Notes are subject to required prepayment on each of December 30, 2006 and 2007, on which dates the Company will prepay $7,000,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Series A Notes at 100% of the principal amount thereof and without payment of the Make-Whole Amount or any premium. The Series B Notes are subject to required prepayment on December 30, 2009, and on each December 30 thereafter to and including December 30, 2011, on which dates the Company will prepay $9,750,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Series B Notes at 100% of the principal amount thereof and without payment of the Make-Whole Amount or any premium. Upon any partial prepayment of the Notes pursuant to Sections 8.2, 8.3 or 10.7 or purchase of the Notes permitted by Section 8.6 the principal amount of each required prepayment of the Notes becoming due under this Section 8.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than $1,000,000 in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.4), and the interest to be paid on the 18 prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3. MANDATORY OFFER TO PREPAY UPON CHANGE OF CONTROL. (a) Notice of Change of Control or Control Event -- The Company will, within five Business Days after any Responsible Officer has knowledge of the occurrence of any Change of Control or Control Event, give notice of such Change of Control or Control Event to each holder of Notes unless notice in respect of such Change of Control (or the Change of Control contemplated by such Control Event) shall have been given pursuant to subparagraph (b) of this Section 8.3. If a Change of Control has occurred, such notice shall contain and constitute an offer to prepay Notes as described in paragraph (c) of this Section 8.3 and shall be accompanied by the certificate described in paragraph (g) of this Section 8.3. (b) Condition to Company Action -- The Company will not take any action that consummates or finalizes a Change of Control unless (i) at least 10 Business Days prior to such action it shall have given to each holder of Notes written notice containing and constituting an offer to prepay Notes accompanied by the certificate described in paragraph (g) of this Section 8.3, and (ii) subject to the provisions of paragraph (d) below, contemporaneously with such action, it prepays all Notes required to be prepaid in accordance with this Section 8.3. (c) Offer to Prepay Notes -- The offer to prepay Notes contemplated by paragraphs (a) and (b) of this Section 8.3 shall be an offer to prepay, in accordance with and subject to this Section 8.3, all, but not less than all, of the Notes held by each holder (in this case only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the "Proposed Prepayment Date"). If such Proposed Prepayment Date is in connection with an offer contemplated by subparagraph (a) of this Section 8.3, such date shall be not less than 30 days and not more than 45 days after the date of such offer. (d) Acceptance; Rejection -- A holder of Notes may accept the offer to prepay made pursuant to this Section 8.3 by causing a notice of such acceptance to be delivered to the Company on or before the date specified in the certificate described in paragraph (g) of this Section 8.3. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.3, or to accept an offer as to all of the Notes held by the holder, within such time period shall be deemed to constitute rejection of such offer by such holder. 19 (e) Prepayment -- Prepayment of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of the principal amount of such Notes, plus interest on such Notes accrued to the date of prepayment, plus either (i) 1.0% of the principal amount thereof if no Default or Event of Default exists immediately prior to or after such Change of Control or (ii) the Make-Whole Amount if a Default or Event of Default exists. Two Business Days preceding the date of prepayment, the Company shall deliver to each holder of Notes being prepaid a statement showing the Make-Whole Amount or the 1.0% premium, as appropriate, due in connection with such prepayment and setting forth the details of the computation of such amount. The prepayment shall be made on the Proposed Prepayment Date except as provided in paragraph (f) of this Section 8.3. (f) Deferral Pending Change of Control -- The obligation of the Company to prepay Notes pursuant to the offers required by paragraphs (a) and (b) and accepted in accordance with paragraph (d) of this Section 8.3 is subject to the occurrence of the Change of Control in respect of which such offers and acceptances shall have been made. In the event that such Change of Control does not occur on or prior to the Proposed Prepayment Date in respect thereof, the prepayment shall be deferred until and shall be made on the date on which such Change of Control occurs. The Company shall keep each holder of Notes reasonably and timely informed of (i) any such deferral of the date of prepayment, (ii) the date on which such Change of Control and the prepayment are expected to occur, and (iii) any determination by the Company that efforts to effect such Change of Control have ceased or been abandoned (in which case the offers and acceptances made pursuant to this Section 8.3 in respect of such Change of Control shall be deemed rescinded). Notwithstanding the foregoing, in the event that the prepayment has not been made within 90 days after such Proposed Prepayment Date by virtue of the deferral provided for in this Section 8.3(f), the Company shall make a new offer to prepay in accordance with paragraph (c) of this Section 8.3. (g) Officer's Certificate -- Each offer to prepay the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Proposed Prepayment Date, (ii) that such offer is made pursuant to this Section 8.3, (iii) the principal amount of each Note offered to be prepaid, (iv) whether a Default or Event of Default exists or would exist, (v) the estimated amount of the Make-Whole Amount or the 1.0% premium, as appropriate, due in connection with such prepayment (calculated as if the date of such notice were the date of prepayment), setting forth the details of such computation, (vi) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date, (vii) that the conditions of this Section 8.3 have been fulfilled, (viii) in reasonable detail, the nature and date or proposed date of the Change of Control and (ix) the date by which any holder of a Note that wishes to accept such offer must deliver notice thereof to the Company, which date shall not be earlier than three Business Days prior to the Proposed Prepayment Date or, in the case of a prepayment pursuant to Section 8.3(b), the date of the action referred to in Section 8.3(b)(i). Such certificate shall prominently state that "The failure by a holder to respond to this offer to prepay by the date specified herein shall constitute a rejection of such offer." 20 8.4. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes pursuant to Sections 8.1 or 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.5. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.6. PURCHASE OF NOTES. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.7. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or 8.3 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) based on the Reinvestment Yield with respect to such Called Principal. 21 "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% plus the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as the "PX Screen" on the Bloomberg Financial Market Service (or such other display as may replace the PX Screen on Bloomberg Financial Market Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2, 8.3 or 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or 8.3 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 22 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 9.1. COMPLIANCE WITH LAW. The Company will and will cause each Subsidiary to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. INSURANCE. The Company will and will cause each Restricted Subsidiary to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. The Company will and will cause each Restricted Subsidiary to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Restricted Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. PAYMENT OF TAXES AND CLAIMS. The Company will and will cause each Restricted Subsidiary to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Restricted Subsidiary, provided that neither the Company nor any Restricted Subsidiary need pay any such tax or assessment or claims if (i) the 23 amount, applicability or validity thereof is contested by the Company or such Restricted Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Restricted Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Restricted Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. CORPORATE EXISTENCE, ETC. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.6, 10.7 and 10.8, the Company will at all times preserve and keep in full force and effect the corporate existence of each Restricted Subsidiary (unless merged into the Company or a Restricted Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 10.1. CONSOLIDATED TANGIBLE NET WORTH. The Company will not permit its Consolidated Tangible Net Worth to be less than $250,000,000 plus the cumulative sum of 50% of Consolidated Net Income (but only if a positive number) for each fiscal quarter ending after September 28, 2002. 10.2. FIXED CHARGE RATIO. The Company will not permit the ratio of Consolidated Income Available for Fixed Charges to Fixed Charges for the Company's most recently completed four fiscal quarters to be less than 2.0 to 1.0. 10.3. INDEBTEDNESS RATIOS. The Company will not permit the ratio of Consolidated Indebtedness to Consolidated Total Capitalization (calculated as of the end of each fiscal quarter) to be more than .60 to 1.00; provided that for purposes of such calculation there shall be excluded from Consolidated Indebtedness not more than $30,000,000 aggregate principal amount of Indebtedness represented by Capital Leases. 10.4. LIMITATIONS ON LIENS. The Company will not, and will not permit any Restricted Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except: 24 (a) Liens existing on property or assets of the Company or any Restricted Subsidiary as of the Closing Date that are described in Schedule 10.4; (b) Liens for taxes, assessments or governmental charges not then due and delinquent or the nonpayment of which is permitted by Section 9.4; (c) any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; (d) Defects in title and Liens arising in the ordinary course of business and not incurred in connection with the borrowing of money, including encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property, landlord's and lessor's liens in the ordinary course of business, which in the aggregate do not materially interfere with the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole or materially impair the value of the property subject thereto for the purpose of such business; (e) Liens (i) existing on real property at the time of its acquisition by the Company or a Restricted Subsidiary and not created in contemplation thereof, whether or not the Indebtedness secured by such Lien is assumed by the Company or such Restricted Subsidiary or (ii) on property created substantially contemporaneously with the date of acquisition or completion of construction thereof to secure or provide for all or a portion of the purchase price or cost of construction of such property or (iii) existing on property of a corporation at the time such corporation is merged into or consolidated with or is acquired by, or substantially all of its assets are acquired by, the Company or a Restricted Subsidiary and not created in contemplation thereof; provided that such Liens do not extend to other property of the Company or any Subsidiary, that the aggregate principal amount of Indebtedness secured by each such Lien does not exceed 100% of the lesser of the cost or fair market value (at the time of acquisition or completion of construction) of the property subject thereto and that no Default or Event of Default exists immediately prior to or after such acquisition or incurrence; (f) Capital Leases in existence as of the date of this Agreement that are described in Schedule 10.4 and Capital Leases entered into after the date of this Agreement, provided that the Indebtedness evidenced by such Capital Leases is permitted under Section 10.3; (g) Pledges or deposits under worker's compensation or unemployment insurance laws and liens imposed by law, such as laborers' or other employees', carriers', warehousemen's, mechanics', materialmen's, vendors' and similar Liens or priorities, not securing Indebtedness and arising in the ordinary course of business or that are incidental to the construction, maintenance or operation of any property, which are either (i) not of record or (ii) of record but are being contested in good faith by appropriate proceedings and for which the Company has set aside on its books adequate reserves in accordance 25 with GAAP and which do not materially detract from the usefulness of the property to which they pertain in the business of the Company or the Restricted Subsidiary owning the same; (h) Liens not otherwise permitted by paragraphs (a) through (g) above incurred subsequent to the Closing Date to secure Indebtedness, provided that, at the time of creation, assumption or incurrence thereof and any time thereafter, Priority Debt does not exceed 20% of Consolidated Tangible Net Worth. Other than Liens to secure Indebtedness of a Restricted Subsidiary to the Company or another Wholly Owned Restricted Subsidiary, no such Liens permitted by this paragraph (h) shall be created to secure pre-existing Indebtedness or any extension, renewal or replacement of such Indebtedness or any Indebtedness (whether or not pre-existing Indebtedness) under any pre-existing agreement or under any extension, renewal or replacement of such an agreement; and (i) Liens resulting from extensions, renewals, refinancings and refundings of Indebtedness secured by Liens permitted by paragraph (a) above, provided there is no increase in the principal amount of Indebtedness secured thereby at the time of renewal, any new Lien attaches only to the same property theretofore subject to such earlier Lien, there exists no Default or Event of Default, and the Company would be in compliance with Sections 10.1 and 10.3, on a pro forma basis. 10.5. RESTRICTED PAYMENTS. The Company will not, except as hereinafter provided: (a) declare or pay any dividends, either in cash or property, on any shares of its capital stock of any class (except dividends or other distributions payable solely in shares of capital stock of the Company); (b) directly or indirectly, or through any Subsidiary, purchase, redeem or retire any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock; (c) make any other payment or distribution, either directly or indirectly or through any Subsidiary, in respect of its capital stock; or (d) make, or permit any Restricted Subsidiary to make, any Restricted Investment; (all such declarations, payments, purchases, redemptions, retirements, distributions and Investments described in clauses (a) through (d) being herein collectively called "Restricted Payments") if, after giving effect thereto, (1) the aggregate amount of Restricted Payments subsequent to September 28, 2002 to and including the date of the making of the Restricted Payment in question, would exceed the sum of (i) $80,000,000 plus, (ii) 50% of Consolidated Net Income (or less 100% of any net deficit) for each fiscal quarter of the Company ending after September 28, 2002, plus (iii) the net cash proceeds received by the Company after September 26 28, 2002 from the sale of shares of its common stock or evidences of Indebtedness which are subsequently converted into or exchanged for its common stock, or (2) a Default or an Event of Default would exist, or (3) the Company would no longer be in compliance with Section 10.1 or 10.3, on a pro forma basis. 10.6. MERGER, CONSOLIDATION, ETC. The Company will not, and will not permit any Restricted Subsidiary to, consolidate with or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that: (a) the Company may consolidate or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person, provided that: (i) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, sale or lease all or substantially all of the assets of the Company as an entirety, as the case may be, is a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if the Company is not such corporation, such corporation (y) shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes and (z) shall have caused to be delivered to each holder of any Notes an opinion of independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles, and comply with the terms hereof; (ii) immediately after giving effect to such transaction, the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, sale or lease all or substantially all of the assets of the Company as an entirety, as the case may be, would be in compliance with Sections 10.1 and 10.3 on a pro forma basis; and (iii) immediately after giving effect to such transaction, no Default or Event of Default shall exist; and (b) Any Restricted Subsidiary may (x) merge into the Company (provided that the Company is the surviving corporation) or another Wholly Owned Restricted Subsidiary or (y) sell, transfer or lease all or any part of its assets to the Company or another Wholly Owned Restricted Subsidiary, or (z) merge or consolidate with, or sell, transfer or lease all or substantially all of its assets to, any Person in a transaction that is 27 permitted by Section 10.7 or, as a result of which, such Person becomes a Restricted Subsidiary; provided in each instance set forth in clauses (x) through (z) that, immediately before and after giving effect thereto, there shall exist no Default or Event of Default; No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 10.6 from its liability under this Agreement or the Notes. 10.7. SALE OF ASSETS. The Company will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of, including by way of merger (collectively a "Disposition"), any assets, including capital stock of Restricted Subsidiaries, in one or a series of transactions, to any Person, other than Dispositions in the ordinary course of business and Dispositions by a Restricted Subsidiary to the Company or another Wholly Owned Restricted Subsidiary, if: (a) during the twelve calendar months immediately preceding such Disposition, after giving effect to such Disposition the aggregate book value of all assets subject to Dispositions during such twelve month period other than Dispositions in the ordinary course of business and Dispositions by a Restricted Subsidiary to the Company or another Wholly Owned Restricted Subsidiary, would exceed 10% of Consolidated Total Assets as of the end of the immediately preceding fiscal quarter, or the Consolidated Net Income attributable to the assets included in such Dispositions during such twelve month period would exceed 10% of Consolidated Net Income for the twelve months ending as of the most recently completed fiscal quarter of the Company; or (b) the aggregate net book value of all assets subject to Dispositions other than Dispositions in the ordinary course of business and Dispositions by a Restricted Subsidiary to the Company or another Wholly Owned Restricted Subsidiary, since the Closing Date would exceed 20% of Consolidated Total Assets as of the end of the fiscal quarter immediately preceding such Disposition or the Consolidated Net Income attributable to the assets subject to Dispositions since the Closing Date would exceed 20% of Consolidated Net Income for such period; or (c) there exists or would exist a Default or Event of Default. Notwithstanding the foregoing, the assets subject to a Disposition shall not be subject to or included in the foregoing limitation and computation if, within 180 days of such Disposition, the net proceeds therefrom are either (i) reinvested in similar assets of the Company or its Restricted Subsidiaries or (ii) applied by the Company to the pro rata prepayment of Senior Indebtedness, including prepayment of the Notes pursuant to Section 8.2. Notwithstanding anything in the foregoing to the contrary, the Company will not, and will not permit any Restricted Subsidiary to, sell or discount any accounts receivable; provided that the Company and its Restricted 28 Subsidiaries may sell without recourse in any fiscal year accounts receivable that do not exceed in the aggregate 5% of Consolidated Net Worth as of the beginning of such fiscal year. 10.8. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES. The Company will not permit any Restricted Subsidiary to issue or sell the capital stock of a Restricted Subsidiary, or any warrants, rights or options to purchase, or securities convertible into or exchangeable for, such capital stock, to any Person other than the Company or another Wholly Owned Restricted Subsidiary. The Company will not, and will not permit any Restricted Subsidiary to, sell, transfer or otherwise dispose of (other than to the Company or another Wholly Owned Restricted Subsidiary) any capital stock (including any warrants, rights or options to purchase, or securities convertible into or exchangeable for, capital stock) or Indebtedness in each case of any Restricted Subsidiary unless: (a) simultaneously therewith all Investments in such Restricted Subsidiary owned by the Company and any other Restricted Subsidiary are simultaneously disposed of as an entirety; (b) the board of directors of the Company shall have determined that such sale, transfer or disposition is in the best interests of the Company; (c) such sale, transfer or other disposition is to a Person for a cash consideration and on terms reasonably deemed by the board of directors to be adequate and satisfactory; (d) such Restricted Subsidiary does not have any continuing Investment in the Company or any other Restricted Subsidiary not being simultaneously disposed of; and (e) such sale, transfer or other disposition is permitted by Section 10.7. 10.9. DESIGNATION OF UNRESTRICTED SUBSIDIARIES. The Company will not designate any Restricted Subsidiary as an Unrestricted Subsidiary unless immediately before and after such designation: (a) Such Subsidiary does not own any Investment in the Company or any Restricted Subsidiary; (b) There exists no Default or Event of Default; (c) The Company is in compliance with Sections 10.1 and 10.3 (on a pro forma basis giving effect to such designation); and (d) Such Subsidiary has not theretofore at any time been designated as an Unrestricted Subsidiary. 29 10.10. NATURE OF BUSINESS. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business if, as a result thereof, the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, would then be engaged, would be substantially changed from the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum. 10.11. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, enter into any transaction (including the furnishing of goods or services) with an Affiliate that, individually or in the aggregate, would be material, except in the ordinary course of business as presently conducted and on terms and conditions no less favorable to the Company or such Restricted Subsidiary than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. 10.12. SUBSIDIARY GUARANTIES. The Company will not let any Person become a Subsidiary unless, not later than five Business Days thereafter, the Company shall cause such Subsidiary to become a party to the Subsidiary Guaranty, provided that a Foreign Subsidiary need not become a party to the Subsidiary Guaranty, and the Company shall, and shall cause such Subsidiary to, furnish such certificates and other documentation as any Noteholder may require, including opinions of counsel to such Person (that shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation necessary to cause such Subsidiary to become a party to the Subsidiary Guaranty). The Company will not, and will not permit any Restricted Subsidiary to become or be liable in respect to any Guaranty of Indebtedness except Guaranties that are limited in amount to a stated maximum principal amount of dollar exposure. 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Section 7.1(d) or Sections 10.1 through 10.3; or 30 (d) the Company defaults in the performance of or compliance with any term contained in Sections 10.4 through 10.12 and such default is not remedied within 15 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (e) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b), (c) and (d) of this Section 11) and such default is not remedied within 20 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (f) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (g) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), the Company or any Restricted Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000; or (h) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or 31 (i) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Restricted Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Restricted Subsidiary, or any such petition shall be filed against the Company or any Restricted Subsidiary and such petition shall not be dismissed within 60 days; or (j) a final judgment or judgments for the payment of money aggregating in excess of $10,000,000 are rendered against one or more of the Company and its Restricted Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (k) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (l) any Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Subsidiary Guaranty or the Subsidiary Guaranty ceases to be in full force and effect or is declared to be null and void in whole or in part or the validity or enforceability thereof shall be contested by any of the Company or any Subsidiary Guarantor or any of them renounces any of the same or denies that it has any or further liability thereunder. As used in Section 11(k), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 32 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. (a) If an Event of Default with respect to the Company described in paragraph (h) or (i) of Section 11 (other than an Event of Default described in clause (i) of paragraph (h) or described in clause (vi) of paragraph (h) by virtue of the fact that such clause encompasses clause (i) of paragraph (h)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of at least 25% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 33 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of 66-2/3% or more in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, 34 duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) of the same series in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1(a) or 1(b), as appropriate. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $250,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $250,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representations set forth in Section 6.2. 13.3. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note that is an Institutional Investor, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois, at the principal office of Bank One, N.A. in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 35 14.2. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Subsidiary Guaranty or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Subsidiary Guaranty or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Subsidiary Guaranty or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 36 15.2. SURVIVAL. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2. SOLICITATION OF HOLDERS OF NOTES. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of 37 outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, 38 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Senior Financial Officer with a copy to the Chief Legal Officer or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement (including pursuant to Section 7.3) that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you, other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of 39 this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (provided that confidential treatment of such information is sought to be maintained) (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. MISCELLANEOUS. 22.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 40 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 22.3. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 22.4. CONSTRUCTION. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 22.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 22.6. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. * * * * * 41 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, CERNER CORPORATION By: /s/ Marc G. Naughton ------------------------------------ Name: Marc G. Naughton ---------------------------------- Title: Chief Financial Officer ---------------------------------- S-1 The foregoing is agreed to as of the date thereof. JOHN HANCOCK LIFE INSURANCE COMPANY By: /s/ Kathleen E. McDonough ----------------------------------------------- Name: Kathleen E. McDonough -------------------------------------------- Title: Director -------------------------------------------- JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By: /s/ Kathleen E. McDonough --------------------------------------------- Name: Kathleen E. McDonough -------------------------------------------- Title: Authorized Signatory -------------------------------------------- JOHN HANCOCK INSURANCE COMPANY OF VERMONT By: /s/ Kathleen E. McDonough --------------------------------------------- Name: Kathleen E. McDonough -------------------------------------------- Title: Authorized Signatory -------------------------------------------- SIGNATURE 5 L.P. By: John Hancock Life Insurance Company, as Portfolio Advisor By: /s/ Kathleen E. McDonough --------------------------------------------- Name: Kathleen E. McDonough -------------------------------------------- Title: Director -------------------------------------------- S-2 SUNAMERICA LIFE INSURANCE COMPANY By: AIG Global Investment Corp., investment adviser By: /s/ Gerald F. Herman -------------------------------------- Name: Gerald F. Herman Title: Vice President S-3 WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY By: /s/ James L. Mounce --------------------------------------------- Name: James L. Mounce --------------------------------------------- Title: President & Chief Executive Officer -------------------------------------------- By: /s/ Danny E. Cummins --------------------------------------------- Name: Danny E. Cummins ------------------------------------- Title: Executive Vice President/ Operations & Secretary ------------------------------------------- S-4 BENEFICIAL LIFE INSURANCE COMPANY By: /s/ Robert R. Dalley --------------------------------------------- Name: Robert R. Dalley ------------------------------------------- Title: Senior Vice President & CFO ------------------------------------------- S-5 SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- JOHN HANCOCK LIFE INSURANCE COMPANY $ 21,750,000 $ 3,500,000

Name in which Notes are to be registered: JOHN HANCOCK LIFE INSURANCE COMPANY (1) Wire Information Fleet Boston ABA No. 011000390 Boston, Massachusetts 02110 Account of: John Hancock Life Insurance Co. Private Placement Collection Acct. Account Number: 541-55417 On Order of: Cerner Corporation PPN 15678# AE 6.42% Senior Notes, Series B, due December 30, 2012 Wire Deadline 12 NOON, BOSTON TIME All payments on account of the Notes or other obligations in accordance with the provisions thereof shall be made by bank wire or transfer of immediately available funds for credit by 12 noon, Boston time. (2) All notices shall be sent via fax AND mail according to the instructions below: o Scheduled Payments John Hancock Life Insurance Company o Unscheduled Prepayments 200 Clarendon St. Boston, MA 02117 o Notice of Maturity Attn: Investment Accounting Division, B-3 Fax: (617) 572-0628 Schedule A AND John Hancock Life Insurance Company 200 Clarendon St. Boston, MA 02117 Attn: H. Paganis/K. Boyce, T-57 Fax: (617) 572-5495 Include: (a) full name, interest rate and maturity date of the Notes or other obligations (b) allocation of payment between principal and interest and any special payment (c) name and address of Bank (or Trustee) from which the wire transfer was sent o Financial Statements John Hancock Life Insurance Company o Certificates of Compliance 200 Clarendon St. with financial covenants Boston, MA 02117 Attn: Bond and Corporate Finance Group, T-57 Fax: (617) 572-1605 o Change in Issuer's name, John Hancock Life Insurance Company address or principal place 200 Clarendon St. of business Boston, MA 02117 o Change in location of collateral Attn: Investment Law Division, T-30 o Copy of legal opinions Fax: (617) 572-9269 (3) Delivery of Securities All securities are to be sent for receipt the day after the closing to: John Hancock Life Insurance Company 200 Clarendon St., T-30 Boston, MA 02117 Attn: Alan Seghezzi Tax I.D.#: 04-1414660 Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY $1,750,000

Name in which Notes are to be registered: JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY (1) Wire Information Fleet Boston ABA No. 011000390 Boston, Massachusetts 02110 Account of: John Hancock Life Insurance Co. Private Placement Collection Acct. Account Number: 541-55417 On Order of: Cerner Corporation PPN 15678# AE 5 6.42% Senior Notes, Series B, due December 30, 2012 Wire Deadline 12 NOON, BOSTON TIME All payments on account of the Notes or other obligations in accordance with the provisions thereof shall be made by bank wire or transfer of immediately available funds for credit by 12 noon, Boston time. (2) All notices shall be sent via fax AND mail according to the instructions below: o Scheduled Payments John Hancock Variable Life Insurance Company o Unscheduled Prepayments 200 Clarendon St. Boston, MA 02117 o Notice of Maturity Attn: Investment Accounting Division, B-3 Fax: (617) 572-0628 Schedule A AND John Hancock Life Insurance Company 200 Clarendon St. Boston, MA 02117 Attn: H. Paganis/K. Boyce, T-57 Fax: (617) 572-5495 Include: (a) full name, interest rate and maturity date of the Notes or other obligations (b) allocation of payment between principal and interest and any special payment (c) name and address of Bank (or Trustee) from which the wire transfer was sent o Financial Statements John Hancock Life Insurance Company o Certificates of Compliance 200 Clarendon St. with financial covenants Boston, MA 02117 Attn: Bond and Corporate Finance Group, T-57 Fax: (617) 572-1605 o Change in Issuer's name, John Hancock Life Insurance Company address or principal place 200 Clarendon St. of business Boston, MA 02117 o Change in location of collateral Attn: Investment Law Division, T-30 o Copy of legal opinions Fax: (617) 572-9269 (3) Delivery of Securities All securities are to be sent for receipt the day after the closing to: John Hancock Life Insurance Company 200 Clarendon St., T-30 Boston, MA 02117 Attn: Alan Seghezzi Tax I.D.#: 04-2664016 Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- JOHN HANCOCK INSURANCE COMPANY VERMONT $500,000

Name in which Notes are to be registered: JOHN HANCOCK INSURANCE COMPANY OF VERMONT (1) Wire Information Deutsche Bank Trust Company Americas New York, NY ABA No. 021001033 Account Number: 50270500 Account of: John Hancock Insurance Company of Vermont On Order of: Cerner Corporation PPN 15678# AE 5 6.42% Senior Notes, Series B, due December 30, 2012 Wire Deadline 12 NOON, BOSTON TIME All payments on account of the Notes or other obligations in accordance with the provisions thereof shall be made by bank wire or transfer of immediately available funds for credit by 12 noon, Boston time. (2) All notices shall be sent via fax AND mail according to the instructions below: o Scheduled Payments John Hancock Insurance Company of Vermont o Unscheduled Prepayments c/o John Hancock Life Insurance Company o Notice of Maturity 200 Clarendon St. Boston, MA 02117 Attn: Investment Accounting Division, B-3 Fax: (617) 572-0628 Schedule A AND John Hancock Life Insurance Company 200 Clarendon St. Boston, MA 02117 Attn: H. Paganis/K. Boyce, T-57 Fax: (617) 572-5495 Include: (a) full name, interest rate and maturity date of the Notes or other obligations (b) allocation of payment between principal and interest and any special payment (c) name and address of Bank (or Trustee) from which the wire transfer was sent o Financial Statements John Hancock Insurance Company of Vermont o Certificates of Compliance c/o John Hancock Life Insurance Company with financial covenants 200 Clarendon St. Boston, MA 02117 Attn: Bond and Corporate Finance Group, T-57 Fax: (617) 572-1605 o Change in Issuer's name, John Hancock Insurance Company of Vermont address or principal place c/o John Hancock Life Insurance Company of business 200 Clarendon St. o Change in location of collateral Boston, MA 02117 o Copy of legal opinions Attn: Investment Law Division, T-30 Fax: (617) 572-9269 (3) Delivery of Securities All securities are to be sent for receipt the day after the closing to: John Hancock Insurance Company of Vermont c/o John Hancock Life Insurance Company 200 Clarendon St., T-30 Boston, MA 02117 Attn: Alan Seghezzi Tax I.D.#: 03-0367897 Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- SIGNATURE 5 L.P. $2,500,000

Name in which Notes are to be registered: HARE & CO. (1) Wire Information HARE & CO. c/o The Bank of New York ABA No. 021000018 BNF: IOC566 FFC: Account No. 77634 On Order of: Cerner Corporation PPN 15678# AE 5 6.42% Senior Notes, Series B, due December 30, 2012 Wire Deadline 12 NOON, BOSTON TIME All payments on account of the Notes or other obligations in accordance with the provisions thereof shall be made by bank wire or transfer of immediately available funds for credit by 12 noon, Boston time. (2) All notices shall be sent via fax AND mail according to the instructions below: o Scheduled Payments Investors Bank & Trust Company o Unscheduled Prepayments 200 Clarendon St. Boston, MA 02116 o Notice of Maturity Attn: Jackie Argenzio Fax: (617) 927-8302 Schedule A AND HARE & CO. c/o The Bank of New York P.O. Box 19266 Newark, NJ 07195 Include: (a) full name, interest rate and maturity date of the Notes or other obligations (b) allocation of payment between principal and interest and any special payment (c) name and address of Bank (or Trustee) from which the wire transfer was sent o Financial Statements John Hancock Life Insurance Company o Certificates of Compliance 200 Clarendon St. with financial covenants Boston, MA 02117 Attn: Bond and Corporate Finance Group, T-57 Fax: (617) 572-1605 o Change in Issuer's name, John Hancock Life Insurance Company address or principal place 200 Clarendon St. of business Boston, MA 02117 o Change in location of collateral Attn: Investment Law Division, T-30 o Copy of legal opinions SFax: (617) 572-9269 (3) Delivery of Securities All securities are to be sent for receipt the day after the closing to: Bank of New York One Wall Street, Window A New York, NY 10286 A/C Name: Investors Bank & Trust Company Reference: 017001/Signature 5 L.P. 77634 Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- SUNAMERICA LIFE INSURANCE COMPANY $21,000,000

Name in which Notes are to be registered: OKGBD & CO. (1) All payments to be by wire transfer of immediately available funds, with sufficient information (including PPN #, interest rate, maturity date, interest amount, principal amount and premium amount, if applicable) to identify the source and application of such funds, to: ABA # 021-001-033 Bankers Trust Company New York, N.Y. Re: SunAmerica Life Insurance Company A/C: 99-911-145 FFC: A/C 099530 OBI=PPN # and Prin: $ Int: $ ------------ (2) Payment notices to: Deutsche Bank Attn: James Germain 648 Grassmere Business Park, MS 7204 Nashville, TN 37211 Telephone: (615) 835-2465 Fax: (615) 835-2493 (3) Duplicate payment notices and all other correspondences (including financial reports) to: AIG Global Investment Corporation 175 Water Street - 24th Floor Attn: Debt Private Placements New York, NY 10038 Tel: 212-458-2068 Fax: 212-458-2233 with copy to: AIG Global Investments Corporation Legal Department - Investment Management 2929 Allen Parkway, Suite A36-01 Houston, TX 77019-2155 Fax: (713) 831-2328 Schedule A (4) PHYSICAL DELIVERY INSTRUCTIONS: Bankers Trust Company Attn: Lorraine Squires Phone: (212) 618-2200 14 Wall Street 4th Floor, Window 43 New York, NY 10005 Reference: SunAmerica Life Insurance Company Account # 099530 (5) Depository Trust Company (DTC) Instructions: DTC Participant # 0903 Agent Bank ID # 20903 Institution ID # 26540 Ref: SunAmerica Life Insurance Company Account # 099530 Euroclear # 22650 Tax I.D.#: 13-3020293 (for OKGBD & Co.) Tax I.D.#: 52-0502540 (for SunAmerica Life Insurance Company) Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY $6,000,000

Name in which Notes are to be registered: WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY (1) All payments by wire transfer of immediately available funds to: U.S. Bank ABA No. 104000029 1700 Farnam Street Omaha, NE 68102 For the Account of WOW Account No. 1-487-477-7-0730 with sufficient information to identify the source and application of such funds, including name of issuer, PPN #, interest rate and maturity date and whether payment is of principal, premium, or interest (2) All notices of payments and written confirmations of such wire transfers: Woodmen of the World Life Insurance Society Attn: Securities Department 1700 Farnam Street Omaha, NE 68102 (3) Original Notes delivered to: Woodmen of the World Life Insurance Society Attn: Securities Department 1700 Farnam Street Omaha, NE 68102 Schedule A (4) All other communications: Woodmen of the World Life Insurance Society Attn: Securities Department 1700 Farnam Street Omaha, NE 68102 Tax I.D.#: 47-0339250 Schedule A SCHEDULE A INFORMATION RELATING TO PURCHASERS

Principal Amount of Notes to be Purchased ----------------------------------------- Name of Purchaser Series A Series B - ----------------- -------- -------- BENEFICIAL LIFE INSURANCE COMPANY $3,000,000

Name in which Notes are to be registered: TFINN (1) Payment on account of Note Method Federal Funds Wire Transfer Account Information JPMorgan Chase ABA # 021000021 A/C # 544755102 FFC: Zions First National Bank G70990 (2) Address/ Fax # for notices Beneficial Life Insurance Co. related to payments 36 South State Salt Lake City, UT 84136 Attn: Doug Hancock Fax: (801) 531-3314 (3) Address/ Fax # for all other Beneficial Life Insurance Co. notices 36 South State Salt Lake City, UT 84136 Attn: Sterling Russell (4) Instructions re: Delivery of Deseret Trust Co. Notes 10 East South Temple Salt Lake City, UT 84133 Attn: Annette Rohovit (801-363-2991 x3016) Tax I.D.#: 87-0115120 Schedule A SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "AFFILIATE" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or (c) any Person of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "ANTI-TERRORISM ORDER" means United States of America Executive Order No. 13,224 of September 23, 2001, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, 66 Fed. Reg. 49,049 (2001). "BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City or Chicago, Illinois are required or authorized to be closed. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CHANGE OF CONTROL" means: (a) the acquisition, through purchase or otherwise (including the agreement to act in concert), by any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) who is or becomes a "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act) of shares of Voting Stock of the Company representing more than 50% of the combined voting power of the Voting Stock of the Company; or (b) individuals constituting a majority of the board of directors of the Company immediately prior to (i) the entering into by the Company of any agreement Schedule B providing or contemplating an acquisition described in paragraph (a), or (ii) the commencement of a tender offer with the purpose of completing an acquisition described in clause (a), or (iii) the commencement of an election contest, cease to constitute such a majority. "CLOSING" is defined in Section 3. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COMPANY" means Cerner Corporation, a Delaware corporation. "CONFIDENTIAL INFORMATION" is defined in Section 20. "CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES" means, for any period, the sum of (i) Consolidated Net Income for such period, plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state, or other income taxes made by the Company and its Restricted Subsidiaries during such period plus (iii) Fixed Charges. "CONSOLIDATED INDEBTEDNESS" means, as of any date, Indebtedness of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, less the amount of any contingent reimbursement obligations under surety bonds. "CONSOLIDATED NET INCOME" means, for any period, the consolidated net income (or deficit) of the Company and its Restricted Subsidiaries after deducting, without duplication, all operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with GAAP and after deducting portions of income properly attributable to outstanding minority interests, if any, in Restricted Subsidiaries; provided, however, that there shall be excluded (i) any income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary or merges into or consolidates with the Company or a Restricted Subsidiary; (ii) the income (or deficit) of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has any ownership interest (except that any such income actually received by the Company or such Restricted Subsidiary in the form of cash dividends shall be included without limitation); (iii) any gains or losses, or other income, properly classified as extraordinary in accordance with GAAP; (iv) any gains or losses, or other income, characterized as non-recurring in the financial statements delivered pursuant to Section 7.1; (v) any gain or loss resulting from the sale of fixed or capital assets other than in the ordinary course of business; (vi) any portion of the net income of a Restricted Subsidiary which for any reason cannot be distributed as a cash dividend; (vii) any gain or loss resulting from the sale or other disposition of any Investment; (viii) other than depreciation or amortization, any expense or income attributable to goodwill write-offs and any non-cash charge relating to the issuance of stock, restricted stock, phantom stock, stock options or stock appreciation rights; (ix) proceeds of any life insurance policy; (x) any gain or loss resulting from the acquisition of any securities of the Company or any Restricted Subsidiary; 2 Schedule B and (xi) any reversal of any reserve, except to the extent that provision for such reserve shall have been made from income arising during the fiscal period in which such reversal occurs. "CONSOLIDATED NET WORTH" means, as of any date, the consolidated stockholders' equity of the Company and its Restricted Subsidiaries as of such date determined in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH" means Consolidated Net Worth, less the sum of all goodwill, trade names, trademarks, patents, organization expense, unamortized debt discount and expense and other similar intangibles properly classified as such in accordance with generally accepted accounting principles, which are incurred or booked subsequent to September 28, 2002, provided that there shall not be so excluded software development costs which are capitalized by the Company in accordance with GAAP on a basis consistent with that described in the Company's most recent audited financial statements listed on Schedule 5.5. "CONSOLIDATED TOTAL ASSETS" means, as of any date, the consolidated total assets of the Company and its Restricted Subsidiaries determined in accordance with GAAP less the sum of all goodwill, trade names, trademarks, patents, organization expense, unamortized debt discount and expense and other similar intangibles properly classified as such in accordance with GAAP, that are incurred or booked subsequent to September 28, 2002, provided that there shall not be so excluded software development costs that are capitalized by the Company in accordance with GAAP on a basis consistent with that described in the Company's most recent audited financial statements listed on Schedule 5.5. "CONSOLIDATED TOTAL CAPITALIZATION" means, as of any date, sum of Consolidated Tangible Net Worth and Consolidated Indebtedness. "CONTROL EVENT" means any event that may reasonably be expected to result in a Change of Control. "CREDIT AGREEMENT" means the Credit Agreement dated as of May 31, 2002 among the Company, U.S. Bank National Association, as administrative agent and lead arranger, LaSalle Bank National Association, as documentation agent, and each other lender who becomes a party thereto (as amended by that certain First Amendment to Credit Agreement dated as of July 22, 2002), as such agreement may be hereafter amended, restated, supplemented, refinanced, increased or reduced from time to time. "DEFAULT" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "DEFAULT RATE" means that rate of interest that is the greater of (i) 2.0% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2.0% over the rate of interest publicly announced by Bank One, N.A. in Chicago, Illinois as its "base" or "prime" rate. 3 Schedule B "DISPOSITION" is defined in Section 10.7. "ENVIRONMENTAL LAWS" means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FIXED CHARGES" means, for any period, the sum of (i) interest expense (including the interest component of Rentals under Capital Leases), amortization of debt discount and expense on Indebtedness of the Company and its Restricted Subsidiaries during such period and (ii) Rentals under all leases other than Capital Leases of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP. "FOREIGN SUBSIDIARY" means any Subsidiary that is not organized under the laws of any state of the United States of America or that has any permanent place of business outside the United States of America, and shall include Cerner Corporation PTY Limited, a corporation organized under the laws of Australia, Cerner FSC, Inc., a corporation organized under the laws of Barbados, Cerner Limited, a corporation organized under the laws of the United Kingdom, Cerner Deutschland GmbH, a corporation organized under the laws of Germany, Cerner Singapore Limited, a Delaware corporation, Cerner Canada Limited, a Delaware corporation, and Cerner (Malaysia) SDN BHD, a corporation organized under the laws of Malaysia, Cerner Belgium, Inc., a Delaware corporation, and Image Devices GmbH, a corporation organized under the laws of Germany. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "GOVERNMENTAL AUTHORITY" means (a) the government of 4 Schedule B (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "GUARANTY" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or (iii) otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the Indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polycholorinated biphenyls). 5 Schedule B "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "INDEBTEDNESS" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet as indebtedness in accordance with GAAP in respect of Capital Leases; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (e). Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (f) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "INHAM EXEMPTION" is defined in Section 6.2(e). "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note and any Affiliates thereof, and (b) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "INVESTMENTS" means all investments made, in cash or by delivery of property, directly or indirectly, in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, Guaranty, advance, capital contribution or otherwise. 6 Schedule B "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including, in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "MAKE-WHOLE AMOUNT" is defined in Section 8.7. "MATERIAL" means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the ability of any Subsidiary Guarantor to perform its obligations under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Notes or the Subsidiary Guaranty. "MEMORANDUM" is defined in Section 5.3. "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NAIC ANNUAL STATEMENT" is defined in Section 6.2(a). "NOTES" is defined in Section 1. "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "OTHER PURCHASERS" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by 7 Schedule B the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PRIORITY DEBT" means, as of any date, the sum, without duplication, of: (a) outstanding Indebtedness of the Company and its Restricted Subsidiaries secured by Liens not otherwise permitted by Sections 10.4(a) through (g) and 10.4(i) on such date; (b) other outstanding Indebtedness of Restricted Subsidiaries, other than: (i) Indebtedness of a Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; and (ii) any Guaranty by a Subsidiary Guarantor of Indebtedness owed under the Credit Agreement, the Notes, the Company's 7.14% Series A Senior Notes due April 15, 2006, or the Company's 7.66% Series B Senior Notes due April 15, 2009; and (c) outstanding preferred stock of Restricted Subsidiaries (other than preferred stock held by the Company or a Wholly Owned Restricted Subsidiary). "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "PTE" is defined in Section 6.2(a). "QPAM EXEMPTION" is defined in Section 6.2(d). "RENTALS" means, as of the date of any determination, all fixed payments (including all payments that the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes, assessments, amortization and similar charges. Fixed rents under any so-called "percentage leases" shall be computed on the basis of the minimum rents, if any, required to be paid by the lessee, regardless of sales volume or gross revenues. "REQUIRED HOLDERS" means, at any time, the holders of at least 66-2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). 8 Schedule B "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. "RESTRICTED INVESTMENT" means any Investment by the Company or a Restricted Subsidiary other than the following: (a) Investments in real property to be used or consumed in the ordinary course of business; (b) Investments in obligations issued or fully guaranteed by the U.S. government maturing within one year from date of acquisition; (c) Investments in certificates of deposit rated not less than A by Standard & Poor's Corporation or the equivalent by Moody's Investors Service, Inc. of banks having capital surplus of at least $250 million and maturing within one year from date of acquisition; (d) Investments in commercial paper rated not less than A1 or A2 by Standard & Poor's Corporation or P1 or P2 by Moody's Investors Service, Inc. and maturing within 270 days from the date of creation; (e) Investments in tax-exempt mutual funds which are restricted to investing in tax-exempt securities rated not less than A by Standard & Poor's Corporation or its equivalent by Moody's Investors Service, Inc.; (f) Investments in Restricted Subsidiaries; provided that such Restricted Subsidiary is a Wholly Owned Restricted Subsidiary, is a Guarantor, is organized under the laws of a state of the United States of America or the District of Columbia, has no Indebtedness and will have no Indebtedness while any Notes are outstanding under this Agreement, other than (i) Indebtedness owed to the Company or a Wholly Owned Restricted Subsidiary that is a Guarantor and (ii) Indebtedness described in subpart (b)(ii) of the definition of "Priority Debt"; (g) Investments in auction rate certificates, money market accounts and other variable rate instruments rated A or better by Standard & Poor's Corporation or A2 or better by Moody's Investors Services, Inc.; (h) Investments, as of the Closing date, by the Company and its Restricted Subsidiaries listed on Schedule B-1; (i) Investments in foreign government debt rated A- or better by Standard & Poor's Corporation or A3 or better by Moody's Investors Services, Inc.; 9 Schedule B (j) Investments in 49-day dividend instruments rated A- or better by Standard & Poor's Corporation or A3 or better by Moody's Investors Services, Inc.; (k) Investments in Missouri industrial training bonds rated BBB or better by Standard & Poor's or Baa2 or better by Moody's Investors Services, Inc.; and (l) Other investments not aggregating greater than 5% of Consolidated Tangible Net Worth. "RESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated in Schedule 5.4 as a Restricted Subsidiary, (ii) any other Subsidiary that is organized under the laws of the United States or any State thereof, that conducts substantially all of its business and has substantially all of its assets within the United States, and 100% of the Voting Stock of which is owned by the Company and/or one or more Wholly Owned Restricted Subsidiaries, and (iii) any other Subsidiary designated by the board of directors of the Company as a Restricted Subsidiary after not less than 10 days prior notice to holders of the Notes, provided that, at the time of and after giving effect to such designation, (A) no Default or Event of Default shall have occurred and (B) the Company, on a pro forma basis, would be in compliance with Sections 10.1 and 10.3. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or controller of the Company. "SENIOR INDEBTEDNESS" means any Indebtedness of the Company and its Restricted Subsidiaries other than Indebtedness that by its terms is expressly subordinate in right of payment to the payment of the Notes. "SERIES A NOTES" is defined in Section 1. "SERIES B NOTES" is defined in Section 1. "SOURCE" is defined in Section 6.2. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership, limited liability company or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries (unless such partnership, limited liability company or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). 10 Schedule B Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "SUBSIDIARY GUARANTOR" is defined in Section 1 and includes Cerner Properties, Inc., Cerner International, Inc., Cerner Citation, Inc., Cerner Investment Corp., Cerner Campus Redevelopment Corporation, Cerner Radiology Information Systems, Inc., Cerner DHT, Inc., Zynx Health Incorporated, Cerner Multum, Inc., Cerner Health Connections, Inc. and Cerner Health Facts, Inc. "SUBSIDIARY GUARANTY" is defined in Section 1. "THIS AGREEMENT" OR "THE AGREEMENT" is defined in Section 17.3. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is not, or has not been designated by the board of directors of the Company or in Schedule 5.4 as, a Restricted Subsidiary. "USA PATRIOT ACT" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 of the United States of America. "VOTING STOCK" shall mean the capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors of such corporation, or person performing similar functions (irrespective of whether or not at the time stock of any of the class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). "WHOLLY OWNED SUBSIDIARY" or "WHOLLY OWNED RESTRICTED SUBSIDIARY" mean, at any time, any Subsidiary, or Restricted Subsidiary, as the case may be, 100% of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly Owned Subsidiaries or Wholly Owned Restricted Subsidiaries, as the case may be, at such time. 11 Schedule B EXHIBIT 1(a) [FORM OF NOTE] CERNER CORPORATION 5.57% SENIOR NOTE, SERIES A DUE DECEMBER 30, 2008 No. AR-[_____] [Date] $[_______] PPN: 15678# AD 7 FOR VALUE RECEIVED, the undersigned, CERNER CORPORATION (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of [ ] DOLLARS on December 30, 2008 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 5.57% per annum from the date hereof, payable semiannually, on the June 30 and December 30 in each year, commencing with the June 30 or December 30 next succeeding the date hereof [(except that no interest payment shall be made on December 30, 2002)] until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 7.57% or (ii) 2.0% over the rate of interest publicly announced by Bank One, N.A. from time to time in Chicago, Illinois as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank One, N.A. in Chicago or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of the Senior Notes (herein called the "Notes") issued pursuant to the Note Purchase Agreement, dated as of December 15, 2002 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations set forth in Section 6.2 of the Note Purchase Agreement. Exhibit 1(a) This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Subsidiary Guaranty dated as of December 15, 2002 of certain Subsidiaries of the Company. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. CERNER CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: --------------------------------- 2 Exhibit 1(a) EXHIBIT 1(b) [FORM OF NOTE] CERNER CORPORATION 6.42% SENIOR NOTE, SERIES B DUE DECEMBER 30, 2012 No. BR-[_____] [Date] $[_______] PPN: 15678# AE 5 FOR VALUE RECEIVED, the undersigned, CERNER CORPORATION (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of [ ] DOLLARS on December 30, 2012 with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.42% per annum from the date hereof, payable semiannually, on the June 30 and December 30 in each year, commencing with the June 30 or December 30 next succeeding the date hereof [(except that no interest payment shall be made on December 30, 2002)] until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.42% or (ii) 2.0% over the rate of interest publicly announced by Bank One, N.A. from time to time in Chicago, Illinois as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank One, N.A. in Chicago or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note is one of the Senior Notes (herein called the "Notes") issued pursuant to the Note Purchase Agreement, dated as of December 15, 2002 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations set forth in Section 6.2 of the Note Purchase Agreement. Exhibit 1(b) This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Subsidiary Guaranty dated as of December 15, 2002 of certain Subsidiaries of the Company. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. CERNER CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 2 Exhibit 1(b) EXHIBIT 1(c) SUBSIDIARY GUARANTY THIS SUBSIDIARY GUARANTY (this "Guaranty") dated as of December 15, 2002 is made by Cerner Properties, Inc., Cerner International, Inc., Cerner Multum, Inc., Cerner Health Connections, Inc., Cerner Citation, Inc., Cerner Investment Corp., Cerner Campus Redevelopment Corporation, Cerner Radiology Information Systems, Inc., Cerner DHT, Inc., Zynx Health Incorporated and Cerner Health Facts, Inc. (each individually a "Guarantor" and collectively the "Guarantors"), in favor of the holders from time to time of the Notes hereinafter referred to, including each purchaser listed on Schedule A to the Note Agreement hereinafter referred to, and their respective successors and assigns (collectively, the "Holders" and each individually, a "Holder"). WITNESSETH: WHEREAS, Cerner Corporation, a Delaware corporation (the "Company"), and the Purchasers listed on Schedule A thereto entered into a Note Purchase Agreement dated as of December 15, 2002 (as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms and in effect, the "Note Agreement"); WHEREAS, the Company owns, directly or indirectly, all of the issued and outstanding capital stock of the Guarantors and, by virtue of such ownership and otherwise, the Guarantors will derive substantial benefits as a result of the purchase of the Company's Notes (as defined in the Note Agreement) by the Purchasers; WHEREAS, it is a condition precedent to the obligation of the Purchasers to purchase the Company's Notes that the Guarantors shall have executed and delivered this Guaranty to the Holders; and WHEREAS, the Board of Directors of each Guarantor has determined that the execution, delivery, and performance of this Guaranty is necessary and convenient to the conduct, promotion and attainment of such Guarantor's business and each of the Guarantors desires to execute this Guaranty to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the premises and other benefits to the Guarantors, and of the purchase of the Company's Notes by the Holders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantors make this Guaranty as follows: SECTION 1. Definitions. Any capitalized terms not otherwise herein defined, when used herein in capitalized form, shall have the respective meanings attributed to them in the Note Agreement. Exhibit 1(c) SECTION 2. Guaranty. (a) The Guarantors, jointly and severally, hereby unconditionally and irrevocably guarantee to the Holders the due, prompt and complete payment by the Company of the principal of, Make-Whole Amount, if any, and interest on, and each other amount due under, the Notes and the Note Agreement, when and as the same shall become due and payable (whether at stated maturity or by required or optional prepayment or by declaration or otherwise) in accordance with the terms of the Notes and the Note Agreement (the Notes and the Note Agreement being collectively hereinafter referred to as the "Note Documents", and the amounts payable by the Company under any of the Note Documents, and all other obligations of the Company thereunder (including any attorneys' fees and expenses), being sometimes collectively hereinafter referred to as the "Obligations"). This guaranty is a guaranty of payment, performance and compliance and not just of collectibility and is in no way conditioned or contingent upon any attempt to collect from or enforce performance or compliance by the Company or upon any other event, contingency or circumstance whatsoever. If for any reason whatsoever the Company shall fail or be unable duly, punctually and fully to pay such amounts as and when the same shall become due and payable or to perform or comply with any such obligation, covenant, term, condition or undertaking, whether or not such failure or inability shall constitute a "Default" or an "Event of Default" under any Note Document, the Guarantors, without demand, presentment, protest or notice of any kind, will forthwith pay or cause to be paid such amounts to the Holders under the terms of such Note Document, in lawful money of the United States, at the place specified in the Note Agreement, or perform or comply with the same or cause the same to be performed or complied with, together with interest (to the extent provided for under such Note Document) on any amount due and owing from the Company. The Guarantors, jointly and severally, promptly after demand, will pay to the Holders the reasonable costs and expenses of collecting such amounts or otherwise enforcing this Guaranty, including, without limitation, the reasonable fees and expenses of counsel. Notwithstanding the foregoing, the right of recovery against each of the Guarantors under this Guaranty is limited to the extent it is judicially determined with respect to such Guarantor that entering into this Guaranty would violate section 548 of the United States Bankruptcy Code or any comparable provisions of any state law, in which case such Guarantor shall be liable under this Guaranty only for amounts aggregating up to the largest amount that would not render such Guarantor's obligations hereunder subject to avoidance under section 548 of the United States Bankruptcy Code or any comparable provisions of any state law. (b) Each Guarantor hereby agrees that to the extent a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 6 hereof. The provisions of this paragraph (b) shall in no respect limit the obligations and liabilities of any Guarantor to the Holders, and each Guarantor shall remain liable to the Holders for the full amount guaranteed by such Guarantor hereunder. SECTION 3. Guarantor's Obligations Absolute and Unconditional. The obligations of each Guarantor under this Guaranty shall be primary, absolute and unconditional 2 Exhibit 1(c) obligations of such Guarantor, shall not be subject to any counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense based upon any claim such Guarantor or any other Person may have against the Company or any other Person, and to the full extent permitted by applicable law shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not any Guarantor or the Company shall have any knowledge or notice thereof), including, without limitation: (a) any termination, amendment or modification of or deletion from or addition or supplement to or other change in any of the Note Documents or any other instrument or agreement applicable to any of the parties to any of the Note Documents; (b) any furnishing or acceptance of any security, or any release of any security, for the Obligations, or the failure of any security or the failure of any Person to perfect any interest in any collateral; (c) any failure, omission or delay on the part of the Company to conform or comply with any term of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above, including, without limitation, failure to give notice to any Guarantor of the occurrence of a "Default" or an "Event of Default" under any Note Document; (d) any waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in any Note Document, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other action or inaction under or in respect of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above or any obligation or liability of the Company, or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of any such instrument or agreement or any such obligation or liability; (e) any failure, omission or delay on the part of any Holder to enforce, assert or exercise any right, power or remedy conferred on such Holder in this Guaranty, or any such failure, omission or delay on the part of such Holder in connection with any Note Document, or any other action on the part of such Holder; (f) any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, conservatorship, custodianship, liquidation, marshalling of assets and liabilities or similar proceedings with respect to the Company, any Guarantor or to any other Person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; 3 Exhibit 1(c) (g) any limitation on the liability or obligations of the Company or any other Person under any of the Note Documents, or any discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of the Note Documents or any other agreement or instrument referred to in paragraph (a) above or any term hereof; (h) any merger or consolidation of the Company or any Guarantor into or with any other corporation, or any sale, lease or transfer of any of the assets of the Company or any Guarantor to any other Person; (i) any change in the ownership of any shares of capital stock of the Company or any change in the corporate relationship between the Company and any Guarantor, or any termination of such relationship; (j) any release or discharge, by operation of law, of any Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty; (k) any lack of corporate power of the Company or any other Person at any time liable for part or all of the Obligations; (l) the existence of any claim, defense, set-off, or other rights which the Company or any Guarantor may have at any time against any Holder, the Company or any Guarantor, or any other Person, whether in connection with this Guaranty, the Note Documents, the transactions contemplated thereby, or any other transaction; (m) any failure of a Holder to notify any Guarantor of any renewal, extension, or assignment of the Obligations or any part thereof, or the release of any security, or if any action taken or refrained from being taken by a Holder, it being understood that a Holder shall not be required to give any Guarantor any notice of any kind under any circumstance whatsoever with respect to or in connection with the Obligations; or (n) any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which might otherwise limit recourse against any Guarantor. SECTION 4. Full Recourse Obligations. The obligations of each of the Guarantors set forth herein constitute the full recourse obligations of such Guarantor enforceable against it to the full extent of all its assets and properties. SECTION 5. Waiver. Each of the Guarantors unconditionally waives, to the extent permitted by applicable law, (a) notice of any of the matters referred to in Section 3, 4 Exhibit 1(c) (b) notice to the Guarantor of the incurrence of any of the Obligations, notice to the Guarantor or the Company of any breach or default by the Company with respect to any of the Obligations or any other notice that may be required, by statute, rule of law or otherwise, to preserve any rights of the Holders against the Guarantor, (c) presentment to or demand of payment from the Company or the Guarantor with respect to any amount due under any Note Document or protest for nonpayment or dishonor, (d) any right to the enforcement, assertion or exercise by any Holder of any right, power, privilege or remedy conferred in the Note Agreement or any other Note Document or otherwise, (e) any requirement of diligence on the part of any Holder, (f) any requirement to exhaust any remedies or to mitigate the damages resulting from any default under any Note Document, (g) any notice of any sale, transfer or other disposition by a Holder of any right, title to or interest in the Note Agreement or in any other Note Document, (h) any right to assert against any Holder as a counterclaim, set-off or cross-claim, any counterclaim, set-off or claim which it may now or hereafter have against the Company or other Person liable on the Obligations, and (i) any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety or which might otherwise limit recourse against the Guarantor. SECTION 6. No Subrogation, Contribution, Reimbursement or Indemnity. Notwithstanding anything to the contrary in this Guaranty and the other Note Documents, each of the Guarantors hereby irrevocably waives any and all claims or other rights which may have arisen in connection with this Guaranty to be subrogated to any of the rights (whether contractual, under the United States Bankruptcy Code, as amended, including Section 509 thereof, under common law or otherwise) of any Holder against the Company or against any collateral security or guaranty or right of offset held by the Holders for the payment of the Obligations until indefeasible payment in full of the Obligations. Each of the Guarantors hereby further irrevocably waives all contractual, common law, statutory or other rights of reimbursement, contribution, exoneration or indemnity (or any similar right) from or against the Company which may have arisen in connection with this Guaranty, whether or not such remedy or right arises in equity, or under contract, statute or common law until indefeasible payment in full of the Obligations. So long as the Obligations remain, if any amount shall be paid by or on behalf of the Company to any of the Guarantors on account of any of the rights waived in this paragraph, such amount shall be held by the Guarantor in trust for the benefit of the Holders, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Holders (duly indorsed by such Guarantor to the Holders, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Holders may determine. The provisions of this paragraph shall survive the term of this Guaranty and the payment in full of the Obligations. Each Guarantor acknowledges that it will receive direct and indirect benefits from the sale of the Notes by the Company and that the waiver set forth in this Section 6 is knowingly made in contemplation of such benefits. SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the sums due to any Holder pursuant to the terms of the Note Agreement or any other Note Document is rescinded or must otherwise be restored or 5 Exhibit 1(c) returned by such Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other Person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Company or other Person or any substantial part of its property, or otherwise, all as though such payment had not been made. If an event permitting the acceleration of the maturity of the principal amount of the Notes shall at any time have occurred and be continuing, and such acceleration shall at such time be prevented by reason of the pendency against the Company or any other Person of a case or proceeding under a bankruptcy or insolvency law, each of the Guarantors agrees that, for purposes of this Guaranty and its obligations hereunder, the maturity of the principal amount of the Notes and all other Obligations shall be deemed to have been accelerated with the same effect as if a Holder had accelerated the same in accordance with the terms of the Note Agreement or other applicable Note Document, and the Guarantors shall forthwith pay such principal amount, Make-Whole Amount, if any, and interest thereon and any other amounts guaranteed hereunder without further notice or demand. SECTION 8. Term of Agreement. This Guaranty and all guaranties, covenants and agreements of the Guarantors contained herein shall continue in full force and effect and shall not be discharged until such time as all of the Obligations shall be indefeasibly paid and performed in full and all of the agreements of the Guarantors hereunder shall be duly paid and performed in full. SECTION 9. Representations and Warranties. Each Guarantor represents and warrants to each Holder that: (a) such Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged; (b) such Guarantor has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guaranty; (c) this Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law); (d) the execution, delivery and performance of this Guaranty will not violate any provision of any material requirement of law or material contractual obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on 6 Exhibit 1(c) any of the properties, revenues or assets of such Guarantor pursuant to the provisions of any material contractual obligation of such Guarantor or any requirement of law; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty; (f) no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or any of its properties or revenues (i) with respect to this Guaranty or any of the transactions contemplated hereby or (ii) which could reasonably be expected to have a material adverse effect upon the business, operations or financial condition of such Guarantor and its Subsidiaries taken as a whole; (g) the execution, delivery and performance of this Guaranty will not violate any provision of any order, judgment, writ, award or decree of any court, arbitrator or Governmental Authority, domestic or foreign, or of the charter or by-laws of such Guarantor or of any securities issued by such Guarantor; and (h) such Guarantor (after giving due consideration to any rights of contribution) has received fair consideration and reasonably equivalent value for the incurrence of its obligations hereunder or as contemplated hereby and after giving effect to the transactions contemplated herein, (i) the fair value of the assets of such Guarantor exceeds its liabilities, (ii) such Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. SECTION 10. Notices. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (a) if to the Company or a Holder at the addresses set forth in the Note Agreement or (b) if to any of the Guarantors, at: Cerner Corporation 2800 Rockcreek Parkway Kansas City, Missouri 64117 Attention: Senior Financial Officer With copy to: Chief Legal Officer or at such other address as the Guarantors shall from time to time designate in writing to the Holders. Notices under this Section 10 will be deemed given only when actually received. 7 Exhibit 1(c) SECTION 11. Survival. All warranties, representations and covenants made by the Guarantors herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by the Holders and shall survive the execution and delivery of this Guaranty, regardless of any investigation made by any Holder. All statements in any such certificate or other instrument shall constitute warranties and representations by the Guarantors hereunder. SECTION 12. Miscellaneous. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, each of the Guarantors hereby waives any provision of law that renders any provisions hereof prohibited or unenforceable in any respect. The terms of this Guaranty shall be binding upon, and inure to the benefit of, the Guarantors and the Holders and their respective successors and assigns. No term or provision of this Guaranty may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Guarantors and the Holders. The Section and paragraph headings in this Guaranty are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof, and all references herein to numbered Sections, unless otherwise indicated, are to Sections in this Guaranty. SECTION 13. Information. Each Guarantor acknowledges and agrees that it shall have the sole responsibility for obtaining from the Company such information concerning the Company's financial condition or business operations as such Guarantor may require, and that the Holders do not have any duty at any time to disclose to any Guarantor any information relating to the business operations or financial conditions of the Company. SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, EACH GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF ILLINOIS LOCATED IN CHICAGO, ILLINOIS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH. SECTION 15. WAIVER OF JURY TRIAL. EACH GUARANTOR AND EACH HOLDER HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH HOLDER ENTERING INTO THE NOTE AGREEMENT. 8 Exhibit 1(c) IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be duly executed as of the day and year first above written. CERNER PROPERTIES, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER INTERNATIONAL, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER MULTUM, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER HEALTH CONNECTIONS, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER HEALTH FACTS, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER CITATION, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- 9 Exhibit 1(c) CERNER CAMPUS REDEVELOPMENT CORPORATION By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER INVESTMENT CORP. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER RADIOLOGY INFORMATION SYSTEMS, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CERNER DHT, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- ZYNX HEALTH INCORPORATED By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- 10 Exhibit 1(c) FORM OF JOINDER TO SUBSIDIARY GUARANTY The undersigned (the "Guarantor"), joins in the Subsidiary Guaranty dated as of December 15, 2002 from the Guarantors named therein in favor of the Holders, as defined therein, and agrees to be bound by all of the terms thereof and represents and warrants to the Holders that: (a) the Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged; (b) the Guarantor has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guaranty; (c) this Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law); (d) the execution, delivery and performance of this Guaranty will not violate any provision of any material requirement of law or material contractual obligation of the Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties, revenues or assets of the Guarantor pursuant to the provisions of any material contractual obligation of the Guarantor or any requirement of law; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty; (f) no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Guarantor, threatened by or against the Guarantor or any of its properties or revenues (i) with respect to this Guaranty or any of the transactions contemplated hereby or (ii) which could reasonably be expected to have a material adverse effect upon the business, operations or financial condition of the Guarantor and its Subsidiaries taken as a whole; 11 Exhibit 1(c) (g) the execution, delivery and performance of this Guaranty will not violate any provision of any order, judgment, writ, award or decree of any court, arbitrator or Governmental Authority, domestic or foreign, or of the charter or by-laws of the Guarantor or of any securities issued by the Guarantor; and (h) the Guarantor (after giving due consideration to any rights of contribution) has received fair consideration and reasonably equivalent value for the incurrence of its obligations hereunder or as contemplated hereby and after giving effect to the transactions contemplated herein, (i) the fair value of the assets of the Guarantor exceeds its liabilities, (ii) the Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) the Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. Capitalized terms used but not defined herein have the meanings ascribed thereto in the Subsidiary Guaranty. IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary Guaranty to be duly executed as of __________, ____. [Name of Guarantor] 12 Exhibit 1(c) EXHIBIT 4.4(a) FORM OF OPINION OF COUNSEL FOR THE COMPANY AND THE SUBSIDIARY GUARANTORS The opinion of Randy D. Sims, Chief Legal Officer for the Company, and Lynn R. Marasco, Senior Corporate Counsel for the Company, shall be to the effect that: 1. Each of the Company and each Guarantor is a corporation duly organized and validly existing in good standing under the laws of its jurisdiction of incorporation, and each has all requisite corporate power and authority to carry on the business now being conducted by it, to own its property and, in the case of the Company, to enter into and perform the Agreement and to issue and sell the Notes and, in the case of the Guarantors, to enter into and perform the Subsidiary Guaranty. 2. The Agreement, the Notes and the Subsidiary Guaranty have been duly authorized by proper corporate action on the part of the Company and each of the Guarantors to the extent a party thereto, have been duly executed and delivered by an authorized officer thereof, and constitute the legal, valid and binding agreements of the Company and each of the Guarantors to the extent a party thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law. 3. The offering, sale and delivery of the Notes and the delivery of the Subsidiary Guaranty do not require the registration of the Notes under the Securities Act of 1933, as amended, nor the qualification of an indenture under the Trust Indenture Act of 1939, as amended. 4. No authorization, approval or consent of any governmental or regulatory body is necessary or required in connection with the execution and delivery by the Company of the Agreement, the execution and delivery by the Guarantors of the Subsidiary Guaranty, the offering, issuance and sale by the Company of the Notes or the issuance of the Subsidiary Guaranty by the Guarantors, and no designation, filing, declaration, registration and/or qualification with any governmental authority is required in connection with the offer, issuance and sale of the Notes by the Company or the issuance of the Subsidiary Guaranty by the Guarantors. 5. The issuance and sale of the Notes by the Company and compliance with the terms and provisions of the Notes and the Agreement by the Company and compliance with the terms and provisions of the Subsidiary Guaranty by each of the Guarantors will not conflict with, or result in any breach or violation of any of the provisions of, or constitute a default under, or Exhibit 4.4(a) result in the creation or imposition of any Lien upon the property of the Company or any Subsidiary pursuant to the provisions of (i) the Certificate of Incorporation (or other charter document) or By-Laws of the Company or any Subsidiary or any loan agreement under which the Company or any Subsidiary is bound, or other agreement or instrument known to such counsel under which the Company or any Subsidiary is a party or by which any of them or their property is bound or may be affected or (ii) any law (including usury laws) or regulation, order, writ, injunction or decree of any court or governmental authority applicable to the Company or any Subsidiary. 6. There are no actions, suits or proceedings pending, or to such counsel's knowledge, threatened against, or affecting the Company or any Subsidiary, at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which are likely to result, either individually or in the aggregate, in a Material Adverse Effect. 7. Neither the Company nor any Subsidiary is: (i) a "public utility company" or a "holding company," or an "affiliate" or a "subsidiary company" of a "holding company," or an "affiliate" of such a "subsidiary company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) a "public utility" as defined in the Federal Power Act, as amended, or (iii) an "investment company" or an "affiliated person" thereof, as such terms are defined in the Investment Company Act of 1940, as amended. 8. The issuance of the Notes and the use of the proceeds of the sale of the Notes to repay Indebtedness of the Company to banks do not violate or conflict with Regulation T, U or X of the Board of Governors of the Federal Reserve System (12 C.F.R., Chapter II). The opinion of Randy D. Sims and Lynn R. Marasco shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company and with respect to matters governed by the laws of any jurisdiction other than the United States of America and the States of Delaware and Missouri, such counsel may rely upon the opinions of counsel deemed (and stated in their opinion to be deemed) by them to be competent and reliable. 2 Exhibit 4.4(a) EXHIBIT 4.4(b) FORM OF OPINION OF SPECIAL COUNSEL TO THE PURCHASERS The opinion of Gardner, Carton & Douglas, special counsel for the Purchasers, shall be to the effect that: 1. The Company is a corporation validly existing in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to enter into the Agreement and to issue and sell the Notes. 2. The Agreement and the Notes have been duly authorized by proper corporate action on the part of the Company, have been duly executed and delivered by an authorized officer of the Company, and constitute the legal, valid and binding agreements of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law. 3. The Subsidiary Guaranty is enforceable against each Subsidiary Guarantor in accordance with its terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law. 4. Based upon the representations set forth in the Agreement, the offering, sale and delivery of the Notes and the execution of the Subsidiary Guaranty do not require the registration of the Notes or the Subsidiary Guaranty under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. 5. The issuance and sale of the Notes and compliance with the terms and provisions of the Notes and the Agreement will not conflict with or result in any breach of any of the provisions of the Certificate of Incorporation and By-Laws of the Company. 6. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Agreement or the Notes or the execution and delivery of the Subsidiary Guaranty. The opinion of Gardner, Carton & Douglas also shall state that the legal opinion of Randy D. Sims, Chief Legal Officer for the Company, and Lynn R. Marasco, Senior Corporate Counsel for Exhibit 4.4(b) the Company, delivered to you pursuant to the Agreement, is satisfactory in form and scope to it, and, in its opinion, the Purchasers and it are justified in relying thereon and shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. 2 Exhibit 4.4(b) EXHIBIT 7.2 COMPLIANCE CERTIFICATE I, ___________________________, am the Treasurer and Chief Financial Officer of _______________________________ (the "Company"). This certificate is being delivered pursuant to Section 7.2 of the Note Purchase Agreement dated as of December 15, 2002, between the Company and the Purchasers named in Schedule I thereto. I hereby certify as follows: 1. Included is the Company's Form [10-Q] [10-K] for the fiscal period ended ____________, _____, in which are set forth the financial statements required to be provided by the Company pursuant to Section [7.1(a)] [7.1(b)] of the Note Purchase Agreement. These financial statements are complete and correct and have been prepared in accordance with generally accepted accounting principles (GAAP). 2. I have reviewed the provisions of the Note Purchase Agreement, and have included in the Covenant Analysis the information and computations required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through 10.12 at the end of the period covered by the financial statements being furnished. 3. As of the date of the financial statements being furnished and as of the date of this certificate or at any time during the period covered by such financial statements, there existed or exists no Default or Event of Default. - ------------------------ ----------------------------- Date Treasurer and Chief Financial Officer Exhibit 7.2 COVENANT ANALYSIS FOR FISCAL PERIOD ENDED __________________ $60 million Note Purchase Agreement (all dollar amounts in 000's) Summary Information:

Section Description Requirement Actual Comments - ------- ----------- ----------- ------ -------- 10.1 Minimum Consolidated Tangible Net Worth $ $ ---------- -------- 10.2 Fixed Charge Ratio 2.00 -------- 10.3 Ratio of Consolidated Indebtedness to 0.60 Consolidated Total Capitalization -------- 10.4(i) Maximum Limitation on Liens $ $ ---------- -------- 10.5 Maximum Restricted Payments $ $ ---------- -------- 10.6 Mergers or Consolidations [During the period of this analysis, no transactions subject to the limitations of Sec. 10.6 were completed.] 10.7 Sale of Assets [During the period of this analysis, no transactions subject to the limitations of Sec. 10.7 were completed.] 10.8 Disposition of Stock of Restricted Subsidiaries [During the period of the analysis, no transactions subject to the limitations of Sec. 10.8 were completed.]

2 Exhibit 7.2 10.9 Designation of Unrestricted Subsidiaries [During the period of the analysis, the Company did not designate any Restricted Subsidiary as an Unrestricted Subsidiary.] 10.10 Nature of Business [During the period of this analysis, no activities subject to the restrictions of Sec. 10.10 were engaged in.] 10.11 Transactions with Affiliates [During the period of this analysis, no transactions violating the restrictions of Sec. 10.11 were completed.] 10.12 Subsidiary Guaranties [During the period of this analysis, no Subsidiaries were required to become a Subsidiary Guarantor.] 3 Exhibit 7.2 COVENANT ANALYSIS FOR FISCAL QUARTER ENDED ______________ $100 million Note Agreement (all dollar amounts in 000's) SECTION SUPPORTING CALCULATIONS 10.1 CONSOLIDATED TANGIBLE NET WORTH MINIMUM (CTNWM): Requirement: The consolidated tangible net worth must be greater than the defined minimum allowable amount. CTNWM = $250,000,000 + 50% of Consolidated Net Income after 9/28/02 Consolidated Net Income after 9/28/02 $ ----------- CTNWM = $ ------------- Consolidated Tangible Net Worth ACTUAL (CTNWA): $ ----------- CTNWM = Stockholder's Equity - Intangibles Stockholder's Equity $ Intangibles $ ----------- CTNWA = $ =========== Minimum (CTNWM) $ ----------- Actual (CTNWA) $ ----------- Results: Consolidated Tangible Net Worth (CTNWA) is greater than the minimum requirement. 4 Exhibit 7.2 10.2 FIXED CHARGE RATIO Requirement: The Fixed Charge Ratio must be greater than 2.00 Consolidated Income Available for Fixed Charges $ ----------- Fixed Charges $ ----------- Fixed Charge Ratio = ----------- Results: Cerner's Fixed Charge Ratio is greater than 2.00. 10.3 LIMITATIONS ON DEBT Requirement: Cerner cannot exceed certain debt limitations as defined below using Consolidated Total Capitalization (CTC) CTC = CTNWA + Total Debt ST Debt ----------- Curr LT Debt ----------- LT Debt =========== Total Debt ----------- Consolidated Senior Debt ----------- Consolidated Debt ----------- CTC = $ ----------- 10.3 CONSOLIDATED DEBT LIMITATION = < 60% OF CTC 60% of CTC = ----------- Total Debt = ----------- Results: Consolidated Debt is below limitation 5 Exhibit 7.2 10.4 LIMITATION ON LIENS Requirement: Cerner cannot exceed lien limitations defined as 20% of CTNWA Liens $ ----------- Indebtedness of Restricted Subsidiaries $ ----------- Preferred Stock of Restricted Subsidiaries $ ----------- 20% of CNWA $ ----------- Liens + RS Debt + RS Preferred $ ----------- Results: Liens are below limitation 10.5 LIMITATION ON RESTRICTED PAYMENTS Requirement: Cerner cannot exceed limitations on restricted payments defined below as = $80,000,000 + 50% of Consolidated Net Income after 9/28/02 (CNI) + the net proceeds received after 9/28/02 from the sale of common stock or debt which is subsequently converted to common stock. Consolidated Net Income after 9/28/02 (CNI) $ ----------- Sale of Common Stock after 9/28/02 $ ----------- Restricted Payments after 9/28/02 $ ----------- $80,000,000 + 50% of CNI + stock $ proceeds ----------- Restricted Payments after 9/28/02 $ ----------- Results: Restricted Payments are below limitations 6 Exhibit 7.2 EX-10.(Y) 5 c75354exv10wxyy.txt EX-10(Y) EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10(y) CERNER CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN ARTICLE I ESTABLISHMENT AND PURPOSE OF PLAN 1.1 PLAN ESTABLISHMENT. Cerner Corporation, a Delaware corporation, hereby establishes the Cerner Corporation Executive Deferred Compensation Plan effective August 1, 1999. 1.2 PURPOSE OF PLAN. The purpose of the Cerner Corporation Executive Deferred Compensation Plan is to provide deferred compensation benefits to certain Associates of Cerner Corporation who are members of a select group of management or highly compensated Associates. ARTICLE II DEFINITIONS 2.01 ACCOUNT shall mean a memorandum account maintained by the Company for bookkeeping purposes only, to which is credited or debited, as appropriate, the amount of an Executive's Deferral Contributions, Company Contributions (if any), Investment Return, forfeitures, and distributions. 2.02 ASSOCIATE shall mean an Associate of the Company. 2.03 CODE shall mean the Internal Revenue Code of 1986 as from time to time amended. 2.04 COMMITTEE shall mean the Committee selected by the Company to be responsible for administering and interpreting the Plan as provided in Article X. 2.05 COMPANY shall mean Cerner Corporation. 2.06 COMPANY CONTRIBUTIONS shall mean Performance Contributions (if any), Discretionary Contributions (if any) and Matching Contributions (if any). 2.07 COMPENSATION shall mean the total salary, bonus and commissions payable to an Executive by the Company in a given Year. Compensation shall include Deferral Contributions under the Plan and shall include salary deferral contributions made to a retirement plan of the Employer intended to qualify under Section 401(k) of the Code. 2.08 DEFERRAL CONTRIBUTION shall mean the amount credited to an Executive's Account for a particular Year pursuant to the voluntary deferral election of the Executive. 2.09 DESIGNATED BENEFICIARY shall mean the individual, individuals, trust or estate identified by an Executive to receive any benefits payable hereunder on account of the death of the Executive. Each such designation shall revoke any prior designation executed by the Executive. If no beneficiary is effectively designated, then the Designated Beneficiary shall be the Executive's surviving spouse, but if there is no surviving spouse then the Designated Beneficiary shall be the personal representatives of the Executive's estate. 2.10 DISCRETIONARY CONTRIBUTION shall mean the amount, if any, allocated by the Company to an Executive's Account pursuant to Section 5.2. 2.11 ERISA shall mean the Employee Retirement Income Security Act of 1974 as from time to time amended. 2.12 EXECUTIVE shall mean an Associate who satisfies the requirements for participation in the Plan under Article III and for whom an Account is maintained. 2.13 INVESTMENT ELECTION shall mean the election made by the Executive from time to time as provided in Article VI which shall be used for purposes of the crediting or debiting, as applicable, of the Investment Return to the Executive's Account. 2.14 INVESTMENT RETURN shall mean the hypothetical investment return, which may include earnings and losses, on the amounts credited to an Executive's Account as determined under Article VI. 2.15 MATCHING CONTRIBUTIONS shall mean the amount allocated to an Executive's Account pursuant to Section 5.1. 2.16 PARTICIPATION AGREEMENT shall mean an agreement executed by an Executive by which the Executive acknowledges acceptance of the terms and conditions of the Plan. 2.17 PERFORMANCE CONTRIBUTION shall mean the amount, if any, allocated to an Executive's Account pursuant to Section 5.3. 2.18 PERMANENT DISABILITY shall mean an Executive's inability to perform or engage in the primary functions of his or her position with the Company by reason of any medically determinable physical or mental impairment that the Committee determines is likely to be permanent. 2.19 PLAN shall mean the Cerner Corporation Executive Deferred Compensation Plan as contained herein and as from time to time amended. 2.20 UNFORESEEABLE EMERGENCY shall mean a severe financial hardship to the Executive resulting from a sudden and unexpected illness or accident of the Executive or a dependent (as defined in Section 152 of the code) of the Executive, loss of the Executive's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. 2.21 YEAR shall mean the calendar year; provided, however, that the initial Year of the Plan shall be a period which begins upon the effective date of the Plan and ends the next following December 31. ARTICLE III PARTICIPATION 3.1 DESIGNATION BY COMPANY. Prior to the first day of each Year the Company shall designate certain Associates as eligible Executives to make Deferral Contributions hereunder for such Year; provided, however, that if an Associate becomes employed by the Company after the first day of a Year or receives a promotion after the first day of the year such that the Associate meets the criteria set forth in Section 3.2, then the Company may designate such Associate as an Executive eligible to make Deferral Contributions hereunder at any time during such Year. In addition, at any time the Company determines to make Company Contributions hereunder, the Company shall designate certain Associates as Executives eligible for allocations of specific types of such Company Contributions. 3.2 CRITERIA FOR DESIGNATION. An Associate must be a member of a select group of management or highly compensated Associates within the meaning of ERISA as determined by the Company in order to be designated by the Company as an Executive eligible to make Deferral Contributions under the Plan or as an Executive eligible for allocation of any Company Contributions under the Plan. ARTICLE IV DEFERRAL CONTRIBUTIONS 4.1 TIME OF ELECTION. An Executive's election to make Deferral Contributions with respect to services performed in a particular Year must be made prior to the first day of such Year; provided, however, that if an Associate not previously eligible to make Deferral Contributions is designated during a Year as eligible to make Deferral Contributions for such Year then such Associate's election to make Deferral Contributions must be made within 30 days after the Associate is designated as an eligible Executive by the Company. An eligible Executive must make a new election with respect to each Year for which the Executive elects to make Deferral Contributions. 4.2 METHOD OF ELECTION. An election by an Executive to make Deferral Contributions hereunder shall be made in writing on a form furnished by the Committee and shall be delivered to the Committee prior to the first day of the Year for which the election is made, or, in the case of an Executive who becomes eligible to make Deferral Contributions during the Year, prior to the day such election is first effective. 4.3 CHANGE OR TERMINATION OF ELECTION. Once an election for Deferral Contributions is made hereunder for a particular Year, the Executive cannot change the election to a greater or lesser amount during such Year nor can the Executive terminate the election for a particular Year at any time during such Year; provided, however, the Committee may permit the Executive to terminate during a Year the Executive's election to make Deferral Contributions if the Committee determines that the Executive has an Unforeseeable Emergency resulting in a financial need that can be met by the termination of Deferral Contributions. 4.4 MANDATORY TERMINATION OF DEFERRAL CONTRIBUTIONS. If a distribution is made to an Executive on account of an Unforeseeable Emergency as provided in Section 8.3, then the Executive's current election (if any) to make Deferral Contributions shall terminate at the time of such distribution, and the Executive may make no Deferral Contributions for the duration of the Year in which such distribution is made. ARTICLE V COMPANY CONTRIBUTIONS 5.1 COMPANY MATCHING CONTRIBUTION. The Company may in its sole and absolute discretion direct the Committee to allocate a contribution from time to time to the Accounts of those Executives who have made Deferral Contributions during the applicable period. The amount of any such Matching Contribution, and the applicable period for which it is allocated, shall be determined by the Company in its sole and absolute discretion. 5.2 COMPANY DISCRETIONARY CONTRIBUTION. The Company may in its sole and absolute discretion direct the Committee to allocate a contribution from time to time in any amount or amounts it determines to the Account of any Executive. The amount of any such Discretionary Contribution allocated to the Account of any particular Executive, and the Executive or Executives to whose accounts such allocations are made, shall be determined by the Company in its sole and absolute discretion, and need not be uniform for all Executives. 5.3 COMPANY PERFORMANCE CONTRIBUTION . The Company may in its sole and absolute discretion direct the Committee to allocate a Performance Contribution in such amount as the Company determines in its sole and absolute discretion to the Account of any Executive. ARTICLE VI INVESTMENT RETURN 6.1 ADJUSTMENTS TO ACCOUNT. An Executive's Account shall be adjusted as of the last day of each Year to reflect the Investment Return applicable to the Executive's Account for such Year as determined by the Company. Such adjustment may be a net credit to the Executive's Account, in the case of net investment gain, or a net debit to the Executive's Account, in the case of net investment loss. In addition to the annual adjustment hereunder, the Executive's Account shall be adjusted at such other time or times as the Company may determine. 6.2 DETERMINATION OF INVESTMENT RETURN. The amount of the applicable Investment Return shall be determined based upon the Executive's Investment Election; provided, however, that the Investment Return applicable to Company Contributions (if any) shall be determined as if all Company Contributions are invested in common stock of the Company. 6.3 INVESTMENT ELECTION. An Executive's Investment Election shall be an election by the Executive among certain investment options designated from time to time by the Company which investment options shall include common stock of the Company. The Executive's Investment Election will be used solely for purposes of determining the Investment Return applicable to the Executive's Account and does not give the Executive any right to receive any particular asset. The Executive's Investment Election shall be in whole percentages among one or more of the investment options, and shall be made on a form furnished by the Committee. An Executive may complete a new Investment Election form at any time. The Executive's Investment Election form shall be effective prospectively only and only after it is received by the Committee. ARTICLE VII VESTING 7.1 DEFERRAL CONTRIBUTIONS. An Executive shall be fully vested at all times in the amount of Deferral Contributions credited to the Executive's Account subject to any adjustments for Investment Return. 7.2 MATCHING CONTRIBUTIONS AND DISCRETIONARY CONTRIBUTIONS. Subject to the provisions of Section 7.4 and Section 7.5, the Matching Contribution, if any, allocated to an Executive's Account in a given Year, and the Discretionary Contribution, if any, allocated to an Executive's Account in a given Year, as adjusted for Investment Return applicable to each such particular contribution for a particular Year shall vest from the initial date of allocation to the Executive's Account in accordance with the following schedule:

NUMBER OF FULL YEARS AFTER YEAR OF ALLOCATION CUMULATIVE PERCENTAGE VESTED 1 20% 2 40% 3 60% 4 80% 5 100%

7.3 PERFORMANCE CONTRIBUTIONS. Subject to the provisions of Section 7.4 and Section 7.5, the Performance Contribution, if any, allocated to an Executive's Account in a given Year, as adjusted for Investment Return applicable thereto, shall vest from the initial date of allocation to the Executive's Account in accordance with the following schedule:

NUMBER OF FULL YEARS AFTER YEAR OF ALLOCATION CUMULATIVE PERCENTAGE VESTED 1 0% 2 0% 3 100%

7.4 FORFEITURE UPON BREACH OF AGREEMENT. Notwithstanding the provisions of Section 7.2 and Section 7.3, if the Committee determines that an Executive has breached the provisions of the employment agreement between the Executive and the Company (including, but not limited to, provisions regarding confidentiality, non-competition and non-solicitation), then all Company Contributions allocated to the Executive's Account and the Investment Return applicable to such Company Contributions shall be forfeited in full immediately upon such determination of breach effective as of the date of such breach. 7.5 FULL VESTING UPON DEATH. Notwithstanding the provisions of Section 7.2 and Section 7.3, if an Executive dies while employed by the Company then the entire amount of the Executive's Account at the time of the Executive's death and thereafter shall be fully vested. ARTICLE VIII DISTRIBUTIONS 8.1 METHOD OF PAYMENT. The method of payment to an Executive shall be either a lump sum cash distribution or 10 annual installments. The Executive shall elect a method of payment upon commencement of participation in the Plan. The Executive may change such election at the time the Executive makes a new voluntary deferral election, but any such change shall apply only to Deferral Contributions and Company Contributions thereafter made and the Investment Return applicable to such contributions. 8.2 TIME OF PAYMENT. Payment of an Executive's benefit with respect to the Executive's Deferral Contributions and the Investment Return applicable to such contributions shall be made (in the case of a lump sum payment) or shall commence (in the case of installment payments) at the time elected by the Executive at the time the Executive elects to make such Deferral Contributions; provided, however, in no event shall such payment with respect to any Deferral Contributions and the Investment Return applicable to such contributions be made or commence earlier than the first to occur of (a) three years after the date of the Executive's election to make such Deferral Contributions, or (b) the Executive's termination of employment with the Company. Payment of an Executive's vested benefit with respect to Company Contributions (if any) and the Investment Return applicable to such contributions shall be made (in the case of a lump sum payment) or shall commence (in the case of installment payments) as soon as practicable after the last day of the Year which is the second Year following the Year of the Executive's termination of employment. Notwithstanding the preceding provisions of this Section 8.2, if an Executive terminates employment with the Company on account of death or Permanent Disability, then payment of the Executive's vested benefit shall be made (in the case of a lump sum payment) or shall commence (in the case of installment payments) as soon as practicable following the Company's determination of the Executive's disability or death. 8.3 DISTRIBUTION ON ACCOUNT OF UNFORESEEABLE EMERGENCY. Notwithstanding the preceding provisions of this Article VIII, if the Committee determines that the Executive has an Unforeseeable Emergency, then upon the Executive's request the Committee may determine that such percentage of the Executive's vested benefit as the Committee determines is necessary to satisfy such Unforeseeable Emergency shall be distributed to the Executive. ARTICLE IX DEATH OF EXECUTIVE In the event of the Executive's death prior to distribution to the Executive of the Executive's benefits hereunder, or prior to the completion of the distribution of such benefits to the Executive if distribution has commenced but has not been completed as of the date of the Executive's death, then the amount to be distributed to the Executive, or the remaining amount to be distributed to the Executive if distribution to the Executive has commenced, shall instead be distributed in a lump sum to the Executive's Designated Beneficiary. ARTICLE X ADMINISTRATION 10.1 COMMITTEE AUTHORITY. The Committee shall have the sole and absolute discretion to interpret the Plan and administer the Plan in accordance with such interpretations and any such interpretations shall be binding upon all interested persons. The Committee shall be authorized to establish rules and procedures as it deems advisable or necessary for the administration of the Plan. All decisions of the Committee shall be final, conclusive, and binding upon all persons having any interest in the Plan. In the administration of the Plan, the Committee may, from time to time, (i) delegate its duties, (ii) employ agents and delegate to them such duties as it sees fit, and (iii) consult with legal counsel, who may be legal counsel to the Company. 10.2 CLAIMS PROCEDURE. If an Executive believes that the Executive is being denied a benefit which the Executive is entitled under the Plan, the Executive may file a written request for such benefit with the Committee (in care of the Company at its principal place of business) setting forth the Executive's claim. Upon receipt of a claim, the Committee shall advise the Executive that a reply will be forthcoming within ninety (90) days and shall deliver such reply within such period, unless the Committee extends the reply period for an additional ninety (90) days for reasonable cause. If the claim is denied in whole or in part, the Committee shall so advise the Executive in writing setting forth: (i) the specific reason or reasons for such denial; (ii) the specific reference to pertinent provisions of the Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Executive to perfect the claim and an explanation why such material or such information is necessary; and (iv) appropriate information as to the steps to be taken if the Executive wishes to submit the claim for review. Any request for review must be submitted in writing by the Executive to the Committee (in care of the Company at its principal place of business) within sixty (60) days after the receipt by the Executive of the denial of the Executive's claim. The Executive or the Executive's duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Executive does not request a review of the Committee's determination within such sixty (60) day period, the Executive shall be barred and estopped from challenging the Committee's determination. Within sixty (60) days after the Committee's receipt of a request for review, it will review the determination. After considering all materials presented by the Executive, the Committee will render a written opinion, written in a manner calculated to be understood by the Executive, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the sixty (60) day time period be extended, the Committee will so notify the Executive and will render the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review. ARTICLE XI MISCELLANEOUS 11.1 STATUS OF EXECUTIVES. Executives have the status of general unsecured creditors of the Company and the Plan constitutes only a promise by the Company to make benefit payments in the future. Each Executive shall be required to sign the Participation Agreement consenting to the provisions of the Plan. 11.2 NON-ALIENATION OF EXECUTIVE'S BENEFITS. Except as required by law, no benefit under this Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, nor shall any benefit under this Plan be subject in any manner to the debts or liabilities of any person, and any attempt to so alienate or subject any such benefit at any time shall be void. 11.3 EMPLOYMENT. The adoption of the Plan does not give any person any right to be retained in the employ of the Company, and no rights granted under the Plan shall be construed as creating a contract of employment. The right and power of the Company to dismiss or discharge any person is expressly reserved. 11.4 NO TRUST RELATIONSHIP. Nothing contained herein and no actions taken pursuant to the Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between the Company and any Executive. Neither the Company nor the Committee shall be considered a trustee by reason of the Plan. 11.5 AMENDMENT AND TERMINATION. The Company can amend or terminate the Plan at any time in its sole discretion; provided, however, no amendment or termination of the Plan shall affect the rights of any Executive to benefits accrued under the Plan at the time of such amendment or termination (though unless otherwise provided all such benefits shall continue to be subject to the provisions of Article VII). 11.6 CONSTRUCTION OF PLAN. The Plan shall be construed so that an Executive shall not be deemed to be in constructive receipt or have any economic benefit with respect to any Compensation deferred under the Plan until such Compensation is paid to the Executive and this Plan shall not be deemed to be funded within the meaning of ERISA. 11.7 WITHHOLDING OF TAXES. The Company shall cause taxes to be withheld with respect to Compensation deferred hereunder as required by law and the Company shall cause taxes to be withheld from amounts distributed hereunder as required by law. 11.8 INDEMNITY OF COMPANY. The Company indemnifies and holds harmless each member of the Committee from and against any and all losses resulting from such member's actions in such member's official capacity in the administration of the Plan. 11.9 GOVERNING LAW. The provisions of the Plan, except where otherwise required by law, shall be governed, construed, enforced, and administered in accordance with the laws of the State of Missouri. 11.10 HEADINGS. The headings in the Plan have been inserted for convenience only and shall not affect the meaning or interpretation of the Plan. IN WITNESS WHEREOF, this Plan is hereby executed as of the ____ day of __________, 1999, by a duly authorized officer of the Company. CERNER CORPORATION By: ------------------------------------ Title: ------------------------------ ATTEST: Title: ----------------------- EX-22 6 c75354exv22.txt EX-22 SUBSIDIARIES OF REGISTRANT . . . EXHIBIT 22 SUBSIDIARIES OF REGISTRANT

NAME STATE OF INCORPORATION ---- ---------------------- Cerner Corporation Pty Limited New South Wales (Australia) Cerner Deutschland GmbH Germany Cerner FSC, Inc. Barbados Cerner Health Connections, Inc. Delaware Cerner Health Facts, Inc. Delaware Cerner Belgium, Inc. Delaware Cerner International, Inc. Delaware Cerner Limited United Kingdom Cerner Citation, Inc. Delaware Cerner Properties, Inc. Delaware Cerner Singapore Limited Delaware Cerner (Malaysia) Sdn Bnd Malaysia Cerner Canada Limited Delaware Cerner Multum, Inc. Delaware Cerner Investment Corp. Nevada Cerner Campus Redevelopment Corporation Missouri Cerner Radiology Information Systems, Inc. Texas Cerner DHT, Inc. Delaware Zynx Health Incorporated California Image Devices GmbH Germany

EX-23 7 c75354exv23.txt EX-23 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors Cerner Corporation: We consent to incorporation by reference in the Registration Statements (No. 333-77029, No. 333-93379, No. 33-63226, No. 333-24899, No. 333-24909, No. 333-40156, No. 333-75308, No. 333-70170, No. 33-56868, No. 33-55082, No. 33-41580, No. 33-39777, No. 33-39776, No. 33-20155, and No. 33-15156) on Form S-8, Registration Statement No. 33-72756 on Form S-3, and Registration Statement No. 333-72024 on Form S-4 of Cerner Corporation of our reports, dated January 23, 2003, relating to the consolidated balance sheets of Cerner Corporation as of December 28, 2002 and December 29, 2001 and the related consolidated statements of operations, changes in equity, and cash flows and the related schedule for each of the years in the three-year period ended December 28, 2002, which reports are included herein. Our reports dated January 23, 2003 refer to the Company's adoption on December 30, 2001 of Statement of Financial Accounting Standard No. 142 Goodwill and Intangible Assets. KPMG LLP Kansas City, Missouri March 11, 2003 EX-99.1 8 c75354exv99w1.txt EX-99.1 CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended December 28, 2002 (the Report) by Cerner Corporation (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Neal L. Patterson Neal L. Patterson, Chairman of the Board and Chief Executive Officer March 11, 2003 EX-99.2 9 c75354exv99w2.txt EX-99.2 CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Annual Report on Form 10-K for the fiscal quarter ended December 28, 2002 (the Report) by Cerner Corporation (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Marc G. Naughton ---------------------------------------- Marc G. Naughton, Senior Vice President, Treasurer and Chief Financial Officer March 11, 2003 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.(D)

                                                                    EXHIBIT 4(d)



                       FIRST AMENDMENT TO CREDIT AGREEMENT


         This First Amendment to Credit Agreement (the "Amendment") is made as
of July 22, 2002, by and among CERNER CORPORATION, a Delaware corporation (the
"Borrower"); U.S. BANK NATIONAL ASSOCIATION, a national banking association, in
its capacity as Administrative Agent, Lead Arranger, Swingline Lender, Issuing
Bank and a Bank; LASALLE BANK NATIONAL ASSOCIATION, a national banking
association, in its capacity as Documentation Agent and a Bank; COMMERCE BANK,
N.A., a national banking association, in its capacity as a Bank; and UMB BANK,
N.A., a national banking association, in its capacity as a Bank. Capitalized
terms used and not defined hereunder have the meanings given to them in the
Credit Agreement referred to below.

                             Preliminary Statements

         (a) The Borrower and the Bank Parties are parties to a Credit Agreement
dated as of May 31, 2002 (the "Credit Agreement").

         (b) The Borrower has requested that, among other things, (1) Section
6.11 of the Credit Agreement be amended to permit the Borrower to redeem a
portion of its stock from time to time, (2) Section 2.3 of the Credit Agreement
be amended to address Foreign Currency Letters of Credit, and (3) in connection
with a proposed Acquisition by the Borrower, the Bank Parties waive the
Borrower's obligation to comply with certain provisions of Section 6.10(d)(3) of
the Credit Agreement. The Bank Parties are willing to agree to the foregoing
requests, subject, however, to the terms, conditions and agreements set forth
below.

         NOW, THEREFORE, the parties agree as follows:

         1. DEFINITIONS. Section 1.1 of the Credit Agreement is amended to add
the following defined terms:

                  "Bank Parties" shall mean U.S. Bank National Association, in
         its capacity as Administrative Agent, Lead Arranger, Issuing Bank,
         Swingline Lender and a Bank; LaSalle Bank National Association, in its
         capacity as Documentation Agent and a Bank; Commerce Bank, N.A., in its
         capacity as a Bank; and UMB Bank, N.A., in its capacity as a Bank. Use
         of the term "Bank Parties" in any of the Credit Documents is for
         convenience of reference only, and shall not impose or alter any
         requirement under any of the Credit Documents regarding which Persons
         must consent to which matters or in which capacity a Person must act in
         consenting to a matter or in taking any other action.

                  "First Amendment" shall mean the First Amendment to Credit
         Agreement, dated as of July 22, 2002, among the Borrower and the Bank
         Parties.

                  "Foreign Currency Letter of Credit" shall mean any Letter of
         Credit denominated in a currency other than Dollars.




                  First Amendment to Credit Agreement -- Page 1





         2. STOCK REDEMPTIONS. Section 6.11 of the Credit Agreement is deleted
and is replaced with the following:

                  6.11. Dividends and Distributions. The Borrower shall not, nor
         shall it permit any of its Subsidiaries to, declare or pay, directly or
         indirectly, any dividend or make any other distribution (by reduction
         of capital or otherwise), whether in cash, property, securities or
         otherwise, with respect to any shares of its capital stock or directly
         or indirectly redeem, purchase, retire or otherwise acquire for value
         any shares of any class of its capital stock or set aside any amount
         for any such purpose (the foregoing transactions being collectively
         called "Restricted Payments"); provided, however, that (a) the Borrower
         and its Subsidiaries may declare and pay dividends payable solely in
         shares of its common stock, (b) any Subsidiary of the Borrower may make
         Restricted Payments to the Borrower or to any Guarantor Subsidiary, and
         (c) the Borrower may declare and pay cash dividends, and/or redeem,
         purchase, retire or otherwise acquire for value any shares of any class
         of its capital stock or set aside any amount for any such purpose, in
         each case if (1) no Default or Event of Default then exists or would
         result therefrom, and (2) the aggregate amount of such cash dividends
         paid during any fiscal quarter, together with the aggregate amount of
         all capital stock redeemed, purchased, retired or otherwise acquired
         during such fiscal quarter, does not exceed 50% of Consolidated Net
         Income for the four fiscal quarters most recently ended.

         3. FOREIGN CURRENCY LETTERS OF CREDIT. A new Section 2.3(k) is added to
the Credit Agreement which reads as follows:

                  (k) The Borrower may request that Letters of Credit be issued
         as Foreign Currency Letters of Credit (meaning that such Letters of
         Credit are denominated in a currency other than Dollars). If the
         aggregate undrawn face amount of all Foreign Currency Letters of Credit
         exceeds $10,000,000 at any time, then the Borrower shall enter into one
         or more foreign currency hedging, swap or similar agreements
         (collectively, a "Foreign Currency Swap Agreement") with the Issuing
         Bank or other Person reasonably acceptable to the Issuing Bank (each, a
         "Counterparty"), in each case reasonably acceptable in form and content
         to the Administrative Agent, with respect to all Foreign Currency
         Letters of Credit then or thereafter outstanding, whereby, in return
         for the Borrower paying hedging, swap or similar fees to the
         Counterparty, the Counterparty assumes substantially all of the risk of
         any decline in the value of the Dollar relative to the applicable
         foreign currency for the duration of the term of such Foreign Currency
         Letters of Credit. The Borrower shall maintain such Foreign Currency
         Swap Agreement so long as the aggregate undrawn face amount of all
         Foreign Currency Letters of Credit outstanding exceeds $10,000,000. If
         the Borrower's foreign currency exposure with respect to Foreign
         Currency Letters of Credit is not fully hedged pursuant to a Foreign
         Currency Swap Agreement reasonably acceptable to the Administrative
         Agent, then (1) the Borrower agrees to reimburse the Issuing Bank, for
         the benefit of the Banks pursuant to their respective Pro-Rata Shares,
         for all currency fluctuation losses incurred by the Issuing Bank or any
         Bank in connection with any


                  First Amendment to Credit Agreement -- Page 2



         decline in the value of the Dollar relative to the applicable foreign
         currency at the time of any draw or other payment made under any
         Foreign Currency Letter of Credit, and (2) the Administrative Agent,
         acting in a commercially reasonable manner, shall have the right to
         periodically mark to market or otherwise adjust the LC Exposure of the
         Banks to reflect any such foreign currency fluctuation, and accordingly
         to reduce the amount of credit available to the Borrower under this
         Agreement because of such foreign currency fluctuation. The
         Administrative Agent, the Issuing Bank and the Banks shall have the
         rights set forth in the preceding sentence notwithstanding that the
         aggregate undrawn face amount of all Foreign Currency Letters of Credit
         outstanding is less than $10,000,000 at any time.

         4. COVENANT WAIVER; SELECTED 2002 ACQUISITIONS. The Borrower has
advised the Bank Parties that the Borrower intends to make an Acquisition, on or
before October 31, 2002, of a foreign entity who is in the same line of business
of the Borrower and that the aggregate amount of consideration payable by the
Borrower at any time in respect of such Acquisition will not exceed $17,000,000
(the "Proposed Foreign 2002 Acquisition;" the Proposed Foreign 2002 Acquisition,
together with the Borrower's earlier acquisition in 2002 of Zynx Health
Incorporated, are collectively referred to herein as the "Combined 2002
Acquisitions"). Based upon the foregoing, the Bank Parties hereby waive any
Default or Event of Default under Section 6.10(d)(3) of the Credit Agreement
arising solely as a result of the aggregate amount of cash and all other
consideration (including, without limitation, assumed or Guaranteed
Indebtedness, but excluding equity securities of the Borrower) payable at any
time in respect of the Combined 2002 Acquisitions exceeding 5% of the
Consolidated Net Worth of the Borrower and its Subsidiaries (as reflected in the
financial statements of such Persons, dated most recently prior to the
consummation of the Proposed Foreign 2002 Acquisition, delivered to the
Administrative Agent pursuant to Section 6.1 of the Credit Agreement); provided,
however, that the foregoing waiver shall not be effective if (a) the aggregate
amount of consideration payable by the Borrower at any time in respect of the
Proposed Foreign 2002 Acquisition exceeds $17,000,000, or (b) the Proposed
Foreign 2002 Acquisition is not consummated in all material respects on or
before October 31, 2002.

         5. CONDITIONS PRECEDENT TO AMENDMENT. Notwithstanding anything in this
Amendment to the contrary, unless and to the extent the Administrative Agent
waives the benefits of this sentence by giving written notice thereof to the
Borrower, none of the Bank Parties shall have any duties under this Amendment,
nor shall any waivers, releases or other concessions, if any, made or given by
any of the Bank Parties under this Amendment be effective, in each case until
the Administrative Agent has received fully executed originals of each of the
following, each in form and substance satisfactory to the Administrative Agent:

                  (a) AMENDMENT. This Amendment;

                  (b) OTHER. Such other documents as the Administrative Agent
         may reasonably request in connection with the transactions contemplated
         hereby.

         6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank Parties as follows: (a) it is a duly organized and validly existing
corporation and has full corporate power and authority to enter into this
Amendment and any documents or transactions contemplated hereby and to pay and
perform its obligations in respect of each of the foregoing; (b) the execution,
delivery and performance by the Borrower of this Amendment and any documents
contemplated hereby or any transactions contemplated hereby do not violate or
conflict with, or require any consent under, (i) the Borrower's certificate of
incorporation, by-laws, or any other agreement or document relating to the
Borrower's existence or authority to act, (ii) any agreement or instrument to
which the Borrower is a party or by which the Borrower or any of its properties
is bound, (iii) any court order, judicial proceeding or any administrative or
arbitral order or decree,



                  First Amendment to Credit Agreement -- Page 3



or (iv) any applicable law, rule or regulation; and (c) no authorization,
approval or consent of or by, and no notice to or filing or registration with,
any governmental authority or any other Person is necessary for the Borrower to
enter into this Amendment or any document contemplated hereby or any transaction
contemplated hereby or to perform its obligations with respect to each of the
foregoing.

         7. REAFFIRMATION OF CREDIT DOCUMENTS. The Borrower reaffirms its
obligations under the Credit Agreement and the other Credit Documents to which
it is a party or by which it is bound, and represents, warrants and covenants to
the Bank Parties, as a material inducement to the Bank Parties to enter into
this Amendment and the transactions contemplated hereby, that (a) the Borrower
has no (and, in any event, hereby waives any) defense, claim or right of setoff
in respect of the Credit Agreement, any of the other Credit Documents or the
actions or inactions of any of the Bank Parties; and (b) all representations and
warranties made by the Borrower in the Credit Agreement and the other Credit
Documents are true and complete on the date hereof as if made on the date
hereof, except for any such representations or warranties which specifically and
expressly relate to an earlier date, which representations and warranties were
true and complete as of such earlier date.

         8. NO OTHER AMENDMENTS. Except as amended hereby, the Credit Agreement
and the other Credit Documents shall remain in full force and effect and be
binding on the Borrower in accordance with their respective terms.

         9. COUNTERPARTS; FAX SIGNATURES. This Amendment and any document
contemplated hereby may be executed in one or more counterparts and by different
parties thereto, all of which counterparts, when taken together, shall
constitute but one agreement. This Amendment and any document contemplated
hereby may be executed and delivered by facsimile or other electronic
transmission, and any such execution or delivery shall be fully effective as if
executed and delivered in person.

         10. LEGAL FEES. The Borrower shall pay the reasonable legal fees and
expenses incurred by the Administrative Agent in connection with the preparation
and closing of this Amendment and any other documents referred to herein and the
consummation of any transactions referred to herein.

         11. MO.REV.STAT. SECTION 432.045 REQUIRED NOTICE. The following
statement is given pursuant to Mo.Rev.Stat. Section 432.045: "ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.
TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN
THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT." All other
Credit Documents are incorporated into this Amendment; provided, however, that,
to the extent of any direct conflict between the terms and conditions of the
other Credit Documents and this Amendment, the terms and conditions of this
Amendment shall prevail and govern.

         12. GOVERNING LAW. This Amendment shall be governed by the laws of the
State of Missouri without regard to any choice of law rule thereof giving effect
to the laws of any other jurisdiction.



                          [signature page(s) to follow]



                  First Amendment to Credit Agreement -- Page 4





         IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the date first above written.


                                                
CERNER CORPORATION                                 COMMERCE BANK, N.A., as a Bank



By: \s\ Marc G. Naughton                           By: \s\ Pamela T. Hill
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Pamela T. Hill
   Title:  CFO/Senior Vice President                  Title:  Vice President


U.S. BANK NATIONAL ASSOCIATION,                      UMB BANK, NA., as a Bank
as Administrative Agent, Lead Arranger,
Issuing Bank, Swingline Lender and a Bank



By: \s\ Mark R. Jorgenson                          By: \s\ Kevin E. Kramer
   ------------------------------------               ---------------------------------
   Name:  Mark R. Jorgenson                           Name:  Kevin E. Kramer
   Title:  SVP                                        Title:  Senior Vice President


LASALLE BANK NATIONAL ASSOCIATION,
as Documentation Agent and a Bank



By: \s\ James C. Binz
   ------------------------------------
   Name:  James C. Binz
   Title:  First Vice President





                        [Consent of Guarantors to follow]



              First Amendment to Credit Agreement -- Signature Page






                              CONSENT OF GUARANTORS


         Reference is made to the Guaranty dated as of May 31, 2002, in favor of
the Administrative Agent, on behalf of the Banks, the Swingline Lender and the
Issuing Bank, to which the undersigned (each a "Guarantor") are parties, either
as an original signatory thereto or pursuant to any subsequent assumption,
joinder or other agreements, and any other guaranty executed by any Guarantor in
favor of the Administrative Agent or any other Bank Party relating to any
indebtedness of the Borrower under any of the Credit Documents (collectively,
with respect to each Guarantor, such Guarantor's "Guaranty"). Capitalized terms
used and not defined in this Consent of Guarantors have the meanings given to
them in the Credit Agreement referred to in the above Amendment. To induce the
Bank Parties to enter into the above Amendment, each Guarantor: (a) consents to
the Borrower and the Bank Parties entering into the above Amendment; (b) agrees
that the execution, delivery and performance of the above Amendment and any
documents or transactions contemplated thereby shall not discharge, limit or
otherwise impair the obligations of such Guarantor under such Guarantor's
Guaranty; (c) agrees that such Guarantor's Guaranty is and remains in full force
and effect and is enforceable against such Guarantor in accordance with its
terms; (d) waives any defense, claim or right of setoff such Guarantor may have
in respect of such Guarantor's Guaranty, the Credit Agreement, the other Credit
Documents or the actions or inactions of any of the Bank Parties; and (e) agrees
that none of the Bank Parties has any duty to give such Guarantor notice of or
obtain such Guarantor's consent to the transactions described in the above
Amendment, and that the Bank Parties' giving of notice to such Guarantor and
obtainment of such Guarantor's consent in this instance shall not impose any
similar or other duty upon any of the Bank Parties in any future matter or
transaction. This Consent of Guarantors may be validly executed and delivered by
fax or other electronic transmission and in multiple counterparts and by
different parties thereto.


                                                
CERNER PROPERTIES, INC.,                           CERNER INTERNATIONAL, INC.,
a Delaware corporation                             a Delaware corporation


By: \s\ Marc G. Naughton                           By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:  Vice President and Treasurer               Title:  Vice President and Treasurer

CERNER MULTUM, INC.,                                 CERNER HEALTH CONNECTIONS, INC.,
a Delaware corporation                                        a Delaware corporation


By: \s\ Marc G. Naughton                              By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:  Treasurer                                  Title:  Vice President and Treasurer






              First Amendment to Credit Agreement -- Signature Page




                                                
CERNER HEALTH FACTS, INC.,                         CERNER CITATION, INC.,
a Delaware corporation                             a Delaware corporation


By: \s\ Marc G. Naughton                           By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:  Vice President and Treasurer               Title:  Vice President and Treasurer

CERNER INVESTMENT CORP.,                           HEALTH NETWORK VENTURES, INC.,
a Nevada corporation                               a Missouri corporation


By: \s\ Marc G. Naughton                           By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:  Vice President and Treasurer               Title:  Vice President and Treasurer


CERNER CAMPUS REDEVELOPMENT                        CERNER RADIOLOGY
CORPORATION,                                       INFORMATION SYSTEMS, INC.,
a Missouri corporation                             a Texas corporation


By: \s\ Marc G. Naughton                           By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:   Treasurer                                 Title:

ZYNX HEALTH INCORPORATED,                          CERNER DHT, INC.,
a California corporation                           a Delaware corporation


By: \s\ Marc G. Naughton                           By: \s\ Marc G. Naughton
   ------------------------------------               ---------------------------------
   Name:  Marc G. Naughton                            Name:  Marc G. Naughton
   Title:  Treasurer                                  Title:  Vice President and Treasurer






              First Amendment to Credit Agreement -- Signature Page

EX-10.(X)

================================================================================






                               CERNER CORPORATION


                                   $21,000,000
                          5.57% Senior Notes, Series A
                              due December 30, 2008

                                   $39,000,000
                          6.42% Senior Notes, Series B
                              due December 30, 2012




                             NOTE PURCHASE AGREEMENT





                          Dated as of December 15, 2002




================================================================================

                                                      Series A PPN:  15678# AD 7
                                                      Series B PPN:  15678# AE 5














                                TABLE OF CONTENTS




Section                                                                                                       Page
- -------                                                                                                       ----
                                                                                                       
1.       AUTHORIZATION OF NOTES..................................................................................1

2.       SALE AND PURCHASE OF NOTES..............................................................................1

3.       CLOSING.................................................................................................2

4.       CONDITIONS TO CLOSING...................................................................................2
         4.1.     Representations and Warranties.................................................................2
         4.2.     Performance; No Default........................................................................2
         4.3.     Compliance Certificates........................................................................3
         4.4.     Opinions of Counsel............................................................................3
         4.5.     Purchase Permitted By Applicable Law, etc......................................................3
         4.6.     Sale of Other Notes............................................................................3
         4.7.     Payment of Special Counsel Fees................................................................3
         4.8.     Private Placement Number.......................................................................4
         4.9.     Changes in Corporate Structure.................................................................4
         4.10.    Subsidiary Guaranty............................................................................4
         4.11.    Proceedings and Documents......................................................................4

5.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................4
         5.1.     Organization; Power and Authority..............................................................4
         5.2.     Authorization, etc.............................................................................5
         5.3.     Disclosure.....................................................................................5
         5.4.     Organization and Ownership of Shares of Subsidiaries; Affiliates...............................6
         5.5.     Financial Statements...........................................................................6
         5.6.     Compliance with Laws, Other Instruments, etc...................................................7
         5.7.     Governmental Authorizations, etc...............................................................7
         5.8.     Litigation; Observance of Agreements, Statutes and Orders......................................7
         5.9.     Taxes..........................................................................................8
         5.10.    Title to Property; Leases......................................................................8
         5.11.    Licenses, Permits, etc.........................................................................8
         5.12.    Compliance with ERISA..........................................................................9
         5.13.    Private Offering by the Company................................................................9
         5.14.    Use of Proceeds; Margin Regulations...........................................................10
         5.15.    Existing Indebtedness; Future Liens...........................................................10
         5.16.    Foreign Assets Control Regulations, etc.......................................................10
         5.17.    Status under Certain Statutes.................................................................11




                                                                                                    
         5.18.    Environmental Matters.........................................................................11
         5.19.    Anti-Terrorism Order..........................................................................11
         5.20.    Solvency of Subsidiary Guarantors.............................................................11

6.       REPRESENTATIONS OF THE PURCHASER.......................................................................12
         6.1.     Purchase for Investment.......................................................................12
         6.2.     Source of Funds...............................................................................12

7.       INFORMATION AS TO COMPANY..............................................................................14
         7.1.     Financial and Business Information............................................................14
         7.2.     Officer's Certificate.........................................................................17
         7.3.     Inspection....................................................................................17

8.       PREPAYMENT OF THE NOTES................................................................................18
         8.1.     Required Prepayments..........................................................................18
         8.2.     Optional Prepayments with Make-Whole Amount...................................................18
         8.3.     Mandatory Offer to Prepay Upon Change of Control..............................................19
         8.4.     Allocation of Partial Prepayments.............................................................21
         8.5.     Maturity; Surrender, etc......................................................................21
         8.6.     Purchase of Notes.............................................................................21
         8.7.     Make-Whole Amount.............................................................................21

9.       AFFIRMATIVE COVENANTS..................................................................................23
         9.1.     Compliance with Law...........................................................................23
         9.2.     Insurance.....................................................................................23
         9.3.     Maintenance of Properties.....................................................................23
         9.4.     Payment of Taxes and Claims...................................................................23
         9.5.     Corporate Existence, etc......................................................................24

10.      NEGATIVE COVENANTS.....................................................................................24
         10.1.    Consolidated Tangible Net Worth...............................................................24
         10.2.    Fixed Charge Ratio............................................................................24
         10.3.    Indebtedness Ratios...........................................................................24
         10.4.    Limitations on Liens..........................................................................25
         10.5.    Restricted Payments...........................................................................26
         10.6.    Merger, Consolidation, etc....................................................................27
         10.7.    Sale of Assets................................................................................28
         10.8.    Disposition of Stock of Restricted Subsidiaries...............................................29
         10.9.    Designation of Unrestricted Subsidiaries......................................................29
         10.10.   Nature of Business............................................................................30
         10.11.   Transactions with Affiliates..................................................................30
         10.12.   Subsidiary Guaranties.........................................................................30

11.      EVENTS OF DEFAULT......................................................................................30

12.      REMEDIES ON DEFAULT, ETC...............................................................................33




                                       ii


                                                                                                     
         12.1.    Acceleration..................................................................................33
         12.2.    Other Remedies................................................................................34
         12.3.    Rescission....................................................................................34
         12.4.    No Waivers or Election of Remedies, Expenses, etc.............................................34

13.      REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................................34
         13.1.    Registration of Notes.........................................................................34
         13.2.    Transfer and Exchange of Notes................................................................35
         13.3.    Replacement of Notes..........................................................................35

14.      PAYMENTS ON NOTES......................................................................................36
         14.1.    Place of Payment..............................................................................36
         14.2.    Home Office Payment...........................................................................36

15.      EXPENSES, ETC..........................................................................................36
         15.1.    Transaction Expenses..........................................................................36
         15.2.    Survival......................................................................................37

16.      SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........................................37

17.      AMENDMENT AND WAIVER...................................................................................37
         17.1.    Requirements..................................................................................37
         17.2.    Solicitation of Holders of Notes..............................................................38
         17.3.    Binding Effect, etc...........................................................................38
         17.4.    Notes held by Company, etc....................................................................38

18.      NOTICES................................................................................................39

19.      REPRODUCTION OF DOCUMENTS..............................................................................39

20.      CONFIDENTIAL INFORMATION...............................................................................39

21.      SUBSTITUTION OF PURCHASER..............................................................................40

22.      MISCELLANEOUS..........................................................................................41
         22.1.    Successors and Assigns........................................................................41
         22.2.    Payments Due on Non-Business Days.............................................................41
         22.3.    Severability..................................................................................41
         22.4.    Construction..................................................................................41
         22.5.    Counterparts..................................................................................41
         22.6.    Governing Law.................................................................................42





                                      iii


                        
SCHEDULE A           --       Information Relating to Purchasers
SCHEDULE B           --       Defined Terms
SCHEDULE B-1         --       Existing Investments

SCHEDULE 4.9                 --         Changes in Corporate Structure
SCHEDULE 5.3                 --         Disclosure Materials
SCHEDULE 5.4                 --         Subsidiaries; Affiliates
SCHEDULE 5.5                 --         Financial Statements
SCHEDULE 5.8                 --         Litigation
SCHEDULE 5.11                --         Permits, etc.
SCHEDULE 5.14                --         Use of Proceeds
SCHEDULE 5.15                --         Existing Indebtedness; Future Liens
SCHEDULE 10.4                --         Liens

EXHIBIT 1(a)                 --         Form of Series A Senior Note
EXHIBIT 1(b)                 --         Form of Series B Senior Note
EXHIBIT 1(c)                 --         Form of Subsidiary Guaranty
EXHIBIT 4.4(a)               --         Form of Opinion of Counsel for the Company
EXHIBIT 4.4(b)               --         Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 7.2                  --         Form of Compliance Certificate





                                       iv





                               CERNER CORPORATION
                             2800 Rockcreek Parkway
                           Kansas City, Missouri 64117
                                 (816) 221-1024
                               Fax: (816) 474-1742



         $21,000,000 5.57% Senior Notes, Series A, due December 30, 2008
         $39,000,000 6.42% Senior Notes, Series B, due December 30, 2012


                                                  Dated as of December 15, 2002


TO EACH OF THE PURCHASERS LISTED IN
     THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

         CERNER CORPORATION, a Delaware corporation (the "Company"), agrees with
you as follows:

1. AUTHORIZATION OF NOTES.

               The Company has authorized the issuance and sale of $21,000,000
aggregate principal amount of its 5.57% Senior Notes, Series A, due December 30,
2008 (the "Series A Notes") and $39,000,000 aggregate principal amount of its
6.42% Senior Notes, Series B, due December 30, 2012 (the "Series B Notes" and,
together with the Series A Notes, the "Notes", such term to include any such
notes issued in substitution therefor pursuant to Section 13 of this Agreement).
The Notes will be substantially in the form set out in Exhibits 1(a) and 1(b),
as appropriate, with such changes therefrom, if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement. The Notes
will be guaranteed by certain existing and future Subsidiaries (individually, a
"Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors") pursuant
to the guaranty in substantially the form of Exhibit 1(c) (the "Subsidiary
Guaranty").

2. SALE AND PURCHASE OF NOTES.

               Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and each of the other purchasers named in
Schedule A (the "Other Purchasers"), and you and the Other Purchasers agree to
purchase from the Company, at the Closing provided for in Section 3, Notes in
the principal amount and series specified opposite your name in Schedule A at
the purchase price of 100% of the principal amount thereof. Your obligation
hereunder and the obligations of the Other Purchasers are several and not joint
obligations and





you shall have no liability to any Person for the performance or non-performance
by any Other Purchaser hereunder.

3. CLOSING.

               The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker
Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610 at 9:00 a.m.,
Chicago time, at a closing (the "Closing") on December 20, 2002 or on such other
Business Day thereafter on or prior to December 27, 2002 as may be agreed upon
by the Company and you and the Other Purchasers. At the Closing the Company will
deliver to you the Notes to be purchased by you in the form of a single Note (or
such greater number of Notes in denominations of at least $250,000 as you may
request) dated the date of the Closing and registered in your name (or in the
name of your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 5290000743 at U.S. Bank N.A. 6333 Long, Shawnee, KS 66216, ABA
No. 101000187. If at the Closing the Company shall fail to tender such Notes to
you as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.

4. CONDITIONS TO CLOSING.

               Your obligation to purchase and pay for the Notes to be sold to
you at the Closing is subject to the fulfillment to your satisfaction, prior to
or at the Closing, of the following conditions:

4.1. REPRESENTATIONS AND WARRANTIES.

               The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.

4.2. PERFORMANCE; NO DEFAULT.

               The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Sections 10.1 through 10.12 had such Sections applied since such date.


                                       2


4.3. COMPLIANCE CERTIFICATES.

                  (a) Officer's Certificate. The Company shall have delivered to
         you an Officer's Certificate, dated the date of the Closing, certifying
         that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
         fulfilled.

                  (b) Secretary's Certificate. The Company shall have delivered
         to you a certificate certifying as to the resolutions attached thereto
         and other corporate proceedings relating to the authorization,
         execution and delivery of the Notes and the Agreement.

4.4. OPINIONS OF COUNSEL.

               You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Randy D. Sims, Chief
Legal Officer for the Company, and Lynn R. Marasco, Senior Corporate Counsel for
the Company, covering the matters set forth in Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company instructs its counsel to deliver
such opinion to you) and (b) from Gardner, Carton & Douglas, your special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.

4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

               On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.

4.6. SALE OF OTHER NOTES.

               Contemporaneously with the Closing the Company shall sell to the
Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at the Closing as specified in Schedule A.

4.7. PAYMENT OF SPECIAL COUNSEL FEES.

               Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the extent
reflected in a statement of such counsel rendered to the Company at least one
Business Day prior to the Closing.



                                       3


4.8. PRIVATE PLACEMENT NUMBER.

               A Private Placement Number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
each series of the Notes by Gardner, Carton & Douglas.

4.9. CHANGES IN CORPORATE STRUCTURE.

               Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.

4.10. SUBSIDIARY GUARANTY.

               Each Subsidiary Guarantor shall have executed and delivered the
Subsidiary Guaranty.

4.11. PROCEEDINGS AND DOCUMENTS.

               All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

               The Company represents and warrants to you that:

5.1. ORGANIZATION; POWER AND AUTHORITY.

               The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.



                                        4


5.2. AUTHORIZATION, ETC.

               This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

               The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of each Subsidiary Guarantor and upon execution and
delivery thereof will constitute the legal, valid and binding obligation of each
Subsidiary Guarantor, enforceable against each such Subsidiary Guarantor in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

5.3. DISCLOSURE.

               The Company, through its agent, SPP Capital Partners, LLC, has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum dated November 2002 (the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 30, 2001, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.

5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

                  (a) Schedule 5.4 contains (except as noted therein) complete
         and correct lists (i) of the Company's Subsidiaries, showing, as to
         each Subsidiary, the correct name


                                       5


         thereof, the jurisdiction of its organization, whether such Subsidiary
         is a Restricted Subsidiary, and the percentage of shares of each class
         of its capital stock or similar equity interests outstanding owned by
         the Company and each other Subsidiary, (ii) of the Company's
         Affiliates, other than Subsidiaries, and (iii) of the Company's
         directors and senior officers.

                  (b) All of the outstanding shares of capital stock or similar
         equity interests of each Subsidiary shown in Schedule 5.4 as being
         owned by the Company and its Subsidiaries have been validly issued, are
         fully paid and nonassessable and are owned by the Company or another
         Subsidiary free and clear of any Lien (except as otherwise permitted by
         Section 10.4).

                  (c) Each Subsidiary identified in Schedule 5.4 is a
         corporation or other legal entity duly organized, validly existing and
         in good standing under the laws of its jurisdiction of organization,
         and is duly qualified as a foreign corporation or other legal entity
         and is in good standing in each jurisdiction in which such
         qualification is required by law, other than those jurisdictions as to
         which the failure to be so qualified or in good standing could not,
         individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect. Each such Subsidiary has the corporate or
         other power and authority to own or hold under lease the properties it
         purports to own or hold under lease and to transact the business it
         transacts and proposes to transact.

                  (d) No Subsidiary is a party to, or otherwise subject to any
         legal restriction or any agreement (other than this Agreement, the
         agreements listed on Schedule 5.4 and customary limitations imposed by
         corporate law statutes) restricting the ability of such Subsidiary to
         pay dividends out of profits or make any other similar distributions of
         profits to the Company or any of its Subsidiaries that owns outstanding
         shares of capital stock or similar equity interests of such Subsidiary.

5.5. FINANCIAL STATEMENTS.

               The Company has delivered to each Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).

5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

               The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or



                                       6


by-laws, or any other agreement or instrument by which the Company or any
Subsidiary is bound or by which any of their respective properties may be bound
or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.

               The execution, delivery and performance by each Subsidiary
Guarantor of the Subsidiary Guaranty will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien
in respect of any property of such Subsidiary Guarantor under any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument by which such
Subsidiary is bound or by which any of its properties may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to such Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to such Subsidiary.

5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.

               No consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of this Agreement or the
Notes or the execution, delivery or performance by each Subsidiary Guarantor of
the Subsidiary Guaranty.

5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.

                  (a) Except as disclosed in Schedule 5.8, there are no actions,
         suits or proceedings pending or, to the knowledge of the Company,
         threatened against or affecting the Company or any Subsidiary or any
         property of the Company or any Subsidiary in any court or before any
         arbitrator of any kind or before or by any Governmental Authority that,
         individually or in the aggregate, could reasonably be expected to have
         a Material Adverse Effect.

                  (b) Neither the Company nor any Subsidiary is in default under
         any term of any agreement or instrument to which it is a party or by
         which it is bound, or any order, judgment, decree or ruling of any
         court, arbitrator or Governmental Authority or is in violation of any
         applicable law, ordinance, rule or regulation (including without
         limitation Environmental Laws) of any Governmental Authority, which
         default or violation, individually or in the aggregate, could
         reasonably be expected to have a Material Adverse Effect.

5.9. TAXES.

               The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such


                                       7



returns and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal periods are adequate. The Federal income tax liabilities of the
Company and its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year ended
January 3, 1998.

5.10. TITLE TO PROPERTY; LEASES.

               The Company and its Subsidiaries have good and sufficient title
to their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired by
the Company or any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case free and clear of
Liens prohibited by this Agreement. All leases that individually or in the
aggregate are Material are valid and subsisting and are in full force and effect
in all material respects.

5.11. LICENSES, PERMITS, ETC.

                  Except as disclosed in Schedule 5.11:

                  (a) the Company and its Subsidiaries own or possess all
         licenses, permits, franchises, authorizations, patents, copyrights,
         service marks, trademarks and trade names, or rights thereto, that
         individually or in the aggregate are Material, without known conflict
         with the rights of others;

                  (b) to the best knowledge of the Company, no product of the
         Company infringes any license, permit, franchise, authorization,
         patent, copyright, service mark, trademark, trade name or other right
         owned by any other Person, as a result of which infringement,
         individually or in the aggregate, could reasonably be expected to have
         a Material Adverse Effect; and

                  (c) to the best knowledge of the Company, there is no Material
         violation by any Person of any right of the Company or any of its
         Subsidiaries with respect to any patent, copyright, service mark,
         trademark, trade name or other right owned or used by the Company or
         any of its Subsidiaries.



                                       8



5.12. COMPLIANCE WITH ERISA.

                  (a) The Company and each ERISA Affiliate have operated and
         administered each Plan in compliance with all applicable laws except
         for such instances of noncompliance as have not resulted in and could
         not reasonably be expected to result in a Material Adverse Effect.
         Neither the Company nor any ERISA Affiliate has incurred any liability
         pursuant to Title I or IV of ERISA or the penalty or excise tax
         provisions of the Code relating to the Company's Plans, and no event,
         transaction or condition has occurred or exists that could reasonably
         be expected to result in the incurrence of any such liability by the
         Company or any ERISA Affiliate, or in the imposition of any Lien on any
         of the rights, properties or assets of the Company or any ERISA
         Affiliate, in either case pursuant to Title I or IV of ERISA or to such
         penalty or excise tax provisions or to section 401(a)(29) or 412 of the
         Code, other than in each case such liabilities or Liens as would not be
         individually or in the aggregate Material.

                  (b) None of the Company's Plans is subject to, nor has the
         Company contributed to any Plan that is subject to Title IV of ERISA
         (including, without limitation any Multiemployer Plan) and neither the
         Company nor any ERISA Affiliate has incurred any liability under Title
         IV of ERISA that remains unsatisfied.

                  (c) The expected post-retirement benefit obligation
         (determined as of the last day of the Company's most recently ended
         fiscal year in accordance with Financial Accounting Standards Board
         Statement No. 106, without regard to liabilities attributable to
         continuation coverage mandated by section 4980B of the Code) of the
         Company and its Subsidiaries is not Material or is reflected in the
         most recent audited financial statements listed in Schedule 5.5.

                  (d) The execution and delivery of this Agreement and the
         issuance and sale of the Notes hereunder will not involve any
         transaction that is subject to the prohibitions of section 406 of ERISA
         or in connection with which a tax could be imposed pursuant to section
         4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
         first sentence of this Section 5.12(d) is made in reliance upon and
         subject to the accuracy of your representation in Section 6.2 as to the
         sources of the funds used to pay the purchase price of the Notes to be
         purchased by you.

5.13. PRIVATE OFFERING BY THE COMPANY.

               Neither the Company nor anyone acting on its behalf has offered
the Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than you, the Other Purchasers and not more than 36 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.




                                        9


5.14. USE OF PROCEEDS; MARGIN REGULATIONS.

               The Company will apply the proceeds of the sale of the Notes as
set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 2.0% of the value of the
consolidated assets of the Company and its Subsidiaries, and the Company does
not have any present intention that margin stock will constitute more than 2.0%
of the value of such assets. As used in this Section, the terms "margin stock"
and "purpose of buying or carrying" shall have the meanings assigned to them in
said Regulation U.

5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.

                  (a) Except as described therein, Schedule 5.15 sets forth a
         complete and correct list of all outstanding Indebtedness of the
         Company and its Subsidiaries as of November 23, 2002, since which date
         there has been no Material change in the amounts, interest rates,
         sinking funds, installment payments or maturities of the Indebtedness
         of the Company or its Subsidiaries. Neither the Company nor any
         Subsidiary is in default and no waiver of default is currently in
         effect, in the payment of any principal or interest on any Indebtedness
         of the Company or such Subsidiary and no event or condition exists with
         respect to any Indebtedness of the Company or any Subsidiary that would
         permit (or that with notice or the lapse of time, or both, would
         permit) one or more Persons to cause such Indebtedness to become due
         and payable before its stated maturity or before its regularly
         scheduled dates of payment.

                  (b) Except as disclosed in Schedule 5.15, neither the Company
         nor any Subsidiary has agreed or consented to cause or permit in the
         future (upon the happening of a contingency or otherwise) any of its
         property, whether now owned or hereafter acquired, to be subject to a
         Lien not permitted by Section 10.4.

5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.

               Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

5.17. STATUS UNDER CERTAIN STATUTES.

               Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935,




                                       10


as amended, the ICC Termination Act of 1995, as amended, the Federal Power Act,
as amended, or the USA Patriot Act.

5.18. ENVIRONMENTAL MATTERS.

               Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,

                  (a) neither the Company nor any Subsidiary has knowledge of
         any facts which would give rise to any claim, public or private, of
         violation of Environmental Laws or damage to the environment emanating
         from, occurring on or in any way related to real properties now or
         formerly owned, leased or operated by any of them or to other assets or
         their use, except, in each case, such as could not reasonably be
         expected to result in a Material Adverse Effect;

                  (b) neither the Company nor any of its Subsidiaries has stored
         any Hazardous Materials on real properties now or formerly owned,
         leased or operated by any of them and has not disposed of any Hazardous
         Materials in a manner contrary to any Environmental Laws in each case
         in any manner that could reasonably be expected to result in a Material
         Adverse Effect; and

                  (c) all buildings on all real properties now owned, leased or
         operated by the Company or any of its Subsidiaries are in compliance
         with applicable Environmental Laws, except where failure to comply
         could not reasonably be expected to result in a Material Adverse
         Effect.

5.19. ANTI-TERRORISM ORDER.

               Neither the Company nor any Subsidiary is a Person or entity
described in Section 1 of the Anti-Terrorism Order or described in the
Department of the Treasury Rule, and, to the best knowledge and belief of the
Company, neither it nor any of its Subsidiaries engages in any dealings or
transactions, or is otherwise associated, with any such Persons or entities.

5.20. SOLVENCY OF SUBSIDIARY GUARANTORS.

               After giving effect to the transactions contemplated herein and
after giving due consideration to any rights of contribution (i) each Subsidiary
Guarantor has received fair consideration and reasonably equivalent value for
the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair
value of the assets of each Subsidiary Guarantor (at fair valuation) exceeds its
liabilities, (iii) each Subsidiary Guarantor is able to and expects to be able


                                       11


to pay its debts as they mature, and (iv) each Subsidiary Guarantor has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.

6. REPRESENTATIONS OF THE PURCHASER.

6.1. PURCHASE FOR INVESTMENT.

               You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.

6.2. SOURCE OF FUNDS.

               You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:

                  (a) the Source is an "insurance company general account" (as
         the term is defined in the United States Department of Labor's
         Prohibited Transaction Exemption ("PTE") 95-60) in respect of which the
         reserves and liabilities (as defined by the annual statement for life
         insurance companies approved by the National Association of Insurance
         Commissioners (the "NAIC Annual Statement") for the general account
         contract(s) held by or on behalf of any employee benefit plan together
         with the amount of the reserves and liabilities for the general account
         contract(s) held by or on behalf of any other employee benefit plans
         maintained by the same employer (or affiliate thereof as defined in PTE
         95-60) or by the same employee organization in the general account do
         not exceed 10% of the total reserves and liabilities of the general
         account (exclusive of separate account liabilities) plus surplus as set
         forth in the NAIC Annual Statement filed with such Purchaser's state of
         domicile; or

                  (b) the Source is a separate account that is maintained solely
         in connection with such Purchaser's fixed contractual obligations under
         which the amounts payable, or credited, to any employee benefit plan
         (or its related trust) that has any interest in such separate account
         (or to any participant or beneficiary of such plan (including any
         annuitant)) are not affected in any manner by the investment
         performance of the separate account; or

                  (c) the Source is either (i) an insurance company pooled
         separate account, within the meaning of PTE 90-1 (issued January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to
         the Company in writing pursuant to this paragraph (c), no employee



                                       12


         benefit plan or group of plans maintained by the same employer or
         employee organization beneficially owns more than 10% of all assets
         allocated to such pooled separate account or collective investment
         fund; or

                  (d) the Source constitutes assets of an "investment fund"
         (within the meaning of Part V of PTE 84-14 (the "QPAM Exemption")
         managed by a "qualified professional asset manager" or "QPAM" (within
         the meaning of Part V of the QPAM Exemption), no employee benefit
         plan's assets that are included in such investment fund, when combined
         with the assets of all other employee benefit plans established or
         maintained by the same employer or by an affiliate (within the meaning
         of Section V(c)(1) of the QPAM Exemption) of such employer or by the
         same employee organization and managed by such QPAM, exceed 20% of the
         total client assets managed by such QPAM, the conditions of Part I(c)
         and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
         person controlling or controlled by the QPAM (applying the definition
         of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more
         interest in the Company and (i) the identity of such QPAM and (ii) the
         names of all employee benefit plans whose assets are included in such
         investment fund have been disclosed to the Company in writing pursuant
         to this paragraph (d); or

                  (e) the Source constitutes assets of a "plan(s)" (within the
         meaning of Section IV of PTE 96-23 (the "INHAM Exemption") managed by
         an "in-house asset manager" or "INHAM" (within the meaning of Part IV
         of the INHAM exemption), the conditions of Part I(a), (g) and (h) of
         the INHAM Exemption are satisfied, neither the INHAM nor a person
         controlling or controlled by the INHAM (applying the definition of
         "control" in Section IV(h) of the INHAM Exemption) owns a 5% or more
         interest in the Company and (i) the identity of such INHAM and (ii) the
         name(s) of the employee benefit plan(s) whose assets constitute the
         Source have been disclosed to the Company in writing pursuant to this
         paragraph (e); or

                  (f) the Source is a governmental plan; or

                  (g) the Source is one or more employee benefit plans, or a
         separate account or trust fund comprised of one or more employee
         benefit plans, each of which has been identified to the Company in
         writing pursuant to this paragraph (g); or

                  (h) the Source does not include assets of any employee benefit
         plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.




                                       13


7. INFORMATION AS TO COMPANY.

7.1. FINANCIAL AND BUSINESS INFORMATION

               The Company shall deliver to each holder of Notes that is an
Institutional Investor:

                  (a) Quarterly Statements -- within 45 days (or such other
         shorter period within which Quarterly Reports on Form 10-Q are required
         to be timely filed with the Securities and Exchange Commission,
         including any extension permitted by Rule 12b-25 of the Exchange Act)
         after the end of each quarterly fiscal period in each fiscal year of
         the Company (other than the last quarterly fiscal period of each such
         fiscal year), duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries as at the end of such quarter,

                           (ii) consolidated statements of earnings of the
                  Company and its Subsidiaries for such quarter and (in the case
                  of the second and third quarters) for the portion of the
                  fiscal year ending with such quarter, and

                           (iii) consolidated statements of cash flows for the
                  portion of the fiscal year ending with such quarter,

         setting forth in each case in comparative form the figures for the
         corresponding periods in the previous fiscal year, all in reasonable
         detail, prepared in accordance with GAAP applicable to quarterly
         financial statements generally, and certified by a Senior Financial
         Officer as fairly presenting, in all material respects, the financial
         position of the companies being reported on and their results of
         operations and cash flows, subject to changes resulting from year-end
         adjustments, provided that delivery within the time period specified
         above of copies of the Company's Quarterly Report on Form 10-Q prepared
         in compliance with the requirements therefor and filed with the
         Securities and Exchange Commission shall be deemed to satisfy the
         requirements of this Section 7.1(a);

                  (b) Annual Statements -- within 90 days (or such other shorter
         period within which Annual Reports on Form 10-K are required to be
         timely filed with the Securities and Exchange Commission, including any
         extension permitted by Rule 12b-25 of the Exchange Act) after the end
         of each fiscal year of the Company, duplicate copies of,

                           (i) a consolidated balance sheet of the Company and
                  its Subsidiaries, as at the end of such year, and

                           (ii) consolidated statements of earnings, retained
                  earnings and cash flows of the Company and its Subsidiaries,
                  for such year,

         setting forth in each case in comparative form the figures for the
         previous fiscal year, all in reasonable detail, prepared in accordance
         with GAAP, and accompanied



                                       14


                           (A) by an opinion thereon of independent certified
                  public accountants of recognized national standing, which
                  opinion shall state that such financial statements present
                  fairly, in all material respects, the financial position of
                  the companies being reported upon and their results of
                  operations and cash flows and have been prepared in conformity
                  with GAAP, and that the examination of such accountants in
                  connection with such financial statements has been made in
                  accordance with generally accepted auditing standards, and
                  that such audit provides a reasonable basis for such opinion
                  in the circumstances, and

                           (B) a certificate of such accountants stating that
                  they have reviewed this Agreement and stating further whether,
                  in making their audit, they have become aware of any condition
                  or event that then constitutes a Default or an Event of
                  Default, and, if they are aware that any such condition or
                  event then exists, specifying the nature and period of the
                  existence thereof (it being understood that such accountants
                  shall not be liable, directly or indirectly, for any failure
                  to obtain knowledge of any Default or Event of Default unless
                  such accountants should have obtained knowledge thereof in
                  making an audit in accordance with generally accepted auditing
                  standards or did not make such an audit),

         provided that the delivery within the time period specified above of
         the Company's Annual Report on Form 10-K for such fiscal year (together
         with the Company's annual report to shareholders, if any, prepared
         pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
         with the requirements therefor and filed with the Securities and
         Exchange Commission, together with the accountant's certificate
         described in clause (B) above, shall be deemed to satisfy the
         requirements of this Section 7.1(b);

                  (c) SEC and Other Reports -- promptly upon their becoming
         available, one copy of (i) each financial statement, report, notice or
         proxy statement sent by the Company or any Restricted Subsidiary to
         public securities holders generally, and (ii) each regular or periodic
         report, each registration statement (without exhibits except as
         expressly requested by such holder), and each prospectus and all
         amendments thereto filed by the Company or any Restricted Subsidiary
         with the Securities and Exchange Commission and of all press releases
         and other statements made available generally by the Company or any
         Restricted Subsidiary to the public concerning developments that are
         Material;

                  (d) Notice of Default or Event of Default -- promptly, and in
         any event within five days after a Responsible Officer becoming aware
         of the existence of any Default or Event of Default or that any Person
         has given any notice or taken any action with respect to a claimed
         default hereunder or that any Person has given any notice or taken any
         action with respect to a claimed default of the type referred to in
         Section 11(f), a written notice specifying the nature and period of
         existence thereof and what action the Company is taking or proposes to
         take with respect thereto;



                                       15


                  (e) ERISA Matters -- promptly, and in any event within five
         days after a Responsible Officer becoming aware of any of the
         following, a written notice setting forth the nature thereof and the
         action, if any, that the Company or an ERISA Affiliate proposes to take
         with respect thereto:

                           (i) with respect to any Plan, any reportable event,
                  as defined in section 4043(b) of ERISA and the regulations
                  thereunder, for which notice thereof has not been waived
                  pursuant to such regulations as in effect on the date hereof;
                  or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under section 4042 of ERISA for the termination of, or the
                  appointment of a trustee to administer, any Plan, or the
                  receipt by the Company or any ERISA Affiliate of a notice from
                  a Multiemployer Plan that such action has been taken by the
                  PBGC with respect to such Multiemployer Plan; or

                           (iii) any event, transaction or condition that could
                  result in the incurrence of any liability by the Company or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or the
                  penalty or excise tax provisions of the Code relating to
                  employee benefit plans, or in the imposition of any Lien on
                  any of the rights, properties or assets of the Company or any
                  ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax provisions, if such liability or Lien,
                  taken together with any other such liabilities or Liens then
                  existing, could reasonably be expected to have a Material
                  Adverse Effect;

                  (f) Notices from Governmental Authority -- promptly, and in
         any event within 30 days of receipt thereof, copies of any notice to
         the Company or any Subsidiary from any Federal or state Governmental
         Authority relating to any order, ruling, statute or other law or
         regulation that could reasonably be expected to have a Material Adverse
         Effect;

                  (g) Unrestricted Subsidiaries -- if, at the time of delivery
         of any financial statements pursuant to Section 7.1(a) or (b),
         Unrestricted Subsidiaries account for more than 15% of (i) the
         consolidated total assets of the Company and its Subsidiaries reflected
         in the balance sheet included in such financial statements or (ii) the
         consolidated revenues of the Company and its Subsidiaries reflected in
         the consolidated statement of income included in such financial
         statements, an unaudited balance sheet for all Unrestricted
         Subsidiaries taken as a whole as at the end of the fiscal period
         included in such financial statements and the related unaudited
         statements of income, retained earnings and cash flows for such
         Unrestricted Subsidiaries for such period, together with consolidating
         statements reflecting all eliminations or adjustments necessary to
         reconcile such group financial statements to the consolidated financial
         statements of the Company and its Subsidiaries together with the
         financial statements required pursuant to Sections 7.1(a) and 7.1(b);
         and

                  (h) Requested Information -- with reasonable promptness, such
         other data and information relating to the business, operations,
         affairs, financial condition, assets or




                                       16


         properties of the Company or any of its Subsidiaries or relating to the
         ability of the Company to perform its obligations hereunder and under
         the Notes as from time to time may be reasonably requested by any such
         holder of Notes.

7.2. OFFICER'S CERTIFICATE.

               Each set of financial statements delivered to a holder of Notes
pursuant to Sections 7.1(a) or (b) hereof shall be accompanied by a certificate
of a Senior Financial Officer setting forth:

                  (a) Covenant Compliance -- the information (including detailed
         calculations) required in order to establish whether the Company was in
         compliance with the requirements of Section 10.1 through Section 10.12,
         inclusive, during the quarterly or annual period covered by the
         statements then being furnished (including with respect to each such
         Section, where applicable, the calculations of the maximum or minimum
         amount, ratio or percentage, as the case may be, permissible under the
         terms of such Sections, and the calculation of the amount, ratio or
         percentage then in existence); and

                  (b) Event of Default -- a statement that such officer has
         reviewed the relevant terms hereof and has made, or caused to be made,
         under his or her supervision, a review of the transactions and
         conditions of the Company and its Restricted Subsidiaries from the
         beginning of the quarterly or annual period covered by the statements
         then being furnished to the date of the certificate and that such
         review shall not have disclosed the existence during such period of any
         condition or event that constitutes a Default or an Event of Default
         or, if any such condition or event existed or exists (including,
         without limitation, any such event or condition resulting from the
         failure of the Company or any Restricted Subsidiary to comply with any
         Environmental Law), specifying the nature and period of existence
         thereof and what action the Company or such Restricted Subsidiary shall
         have taken or proposes to take with respect thereto.

The certificate called for by this Section 7.2 will generally be in the form of
the attached Exhibit 7.2.

7.3. INSPECTION.

               The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:

                  (a) No Default -- if no Default or Event of Default then
         exists, at the expense of such holder and upon reasonable prior notice
         to the Company, to visit the principal executive office of the Company,
         to discuss the affairs, finances and accounts of the Company and its
         Subsidiaries with the Company's officers, and (with the consent of the
         Company, which consent will not be unreasonably withheld) its
         independent public accountants, and (with the consent of the Company,
         which consent will not be unreasonably withheld) to visit the other
         offices and properties of the Company and each



                                       17


         Subsidiary, all at such reasonable times and as often as may be
         reasonably requested in writing; and

                  (b) Default -- if a Default or Event of Default then exists,
         at the expense of the Company to visit and inspect any of the offices
         or properties of the Company or any Subsidiary, to examine all their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,
         finances and accounts with their respective officers and independent
         public accountants (and by this provision the Company authorizes said
         accountants to discuss the affairs, finances and accounts of the
         Company and its Subsidiaries), all at such times and as often as may be
         requested.

Each holder agrees to treat any information obtained in connection with any
inspection pursuant to this Section 7 as Confidential Information subject to
Section 20 so as to avoid any disclosure obligation on the Company under
Regulation FD under the Exchange Act.

8. PREPAYMENT OF THE NOTES

8.1. REQUIRED PREPAYMENTS.

               The Series A Notes are subject to required prepayment on each of
December 30, 2006 and 2007, on which dates the Company will prepay $7,000,000
principal amount (or such lesser principal amount as shall then be outstanding)
of the Series A Notes at 100% of the principal amount thereof and without
payment of the Make-Whole Amount or any premium. The Series B Notes are subject
to required prepayment on December 30, 2009, and on each December 30 thereafter
to and including December 30, 2011, on which dates the Company will prepay
$9,750,000 principal amount (or such lesser principal amount as shall then be
outstanding) of the Series B Notes at 100% of the principal amount thereof and
without payment of the Make-Whole Amount or any premium. Upon any partial
prepayment of the Notes pursuant to Sections 8.2, 8.3 or 10.7 or purchase of the
Notes permitted by Section 8.6 the principal amount of each required prepayment
of the Notes becoming due under this Section 8.1 on and after the date of such
prepayment or purchase shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Notes is reduced as a result of such prepayment
or purchase.

8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.

               The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than $1,000,000 in the case of a partial prepayment, at 100% of
the principal amount so prepaid, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.4), and the interest to be paid on the




                                       18


prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.

8.3. MANDATORY OFFER TO PREPAY UPON CHANGE OF CONTROL.

                  (a) Notice of Change of Control or Control Event -- The
         Company will, within five Business Days after any Responsible Officer
         has knowledge of the occurrence of any Change of Control or Control
         Event, give notice of such Change of Control or Control Event to each
         holder of Notes unless notice in respect of such Change of Control (or
         the Change of Control contemplated by such Control Event) shall have
         been given pursuant to subparagraph (b) of this Section 8.3. If a
         Change of Control has occurred, such notice shall contain and
         constitute an offer to prepay Notes as described in paragraph (c) of
         this Section 8.3 and shall be accompanied by the certificate described
         in paragraph (g) of this Section 8.3.

                  (b) Condition to Company Action -- The Company will not take
         any action that consummates or finalizes a Change of Control unless (i)
         at least 10 Business Days prior to such action it shall have given to
         each holder of Notes written notice containing and constituting an
         offer to prepay Notes accompanied by the certificate described in
         paragraph (g) of this Section 8.3, and (ii) subject to the provisions
         of paragraph (d) below, contemporaneously with such action, it prepays
         all Notes required to be prepaid in accordance with this Section 8.3.

                  (c) Offer to Prepay Notes -- The offer to prepay Notes
         contemplated by paragraphs (a) and (b) of this Section 8.3 shall be an
         offer to prepay, in accordance with and subject to this Section 8.3,
         all, but not less than all, of the Notes held by each holder (in this
         case only, "holder" in respect of any Note registered in the name of a
         nominee for a disclosed beneficial owner shall mean such beneficial
         owner) on a date specified in such offer (the "Proposed Prepayment
         Date"). If such Proposed Prepayment Date is in connection with an offer
         contemplated by subparagraph (a) of this Section 8.3, such date shall
         be not less than 30 days and not more than 45 days after the date of
         such offer.

                  (d) Acceptance; Rejection -- A holder of Notes may accept the
         offer to prepay made pursuant to this Section 8.3 by causing a notice
         of such acceptance to be delivered to the Company on or before the date
         specified in the certificate described in paragraph (g) of this Section
         8.3. A failure by a holder of Notes to respond to an offer to prepay
         made pursuant to this Section 8.3, or to accept an offer as to all of
         the Notes held by the holder, within such time period shall be deemed
         to constitute rejection of such offer by such holder.



                                       19


                  (e) Prepayment -- Prepayment of the Notes to be prepaid
         pursuant to this Section 8.3 shall be at 100% of the principal amount
         of such Notes, plus interest on such Notes accrued to the date of
         prepayment, plus either (i) 1.0% of the principal amount thereof if no
         Default or Event of Default exists immediately prior to or after such
         Change of Control or (ii) the Make-Whole Amount if a Default or Event
         of Default exists. Two Business Days preceding the date of prepayment,
         the Company shall deliver to each holder of Notes being prepaid a
         statement showing the Make-Whole Amount or the 1.0% premium, as
         appropriate, due in connection with such prepayment and setting forth
         the details of the computation of such amount. The prepayment shall be
         made on the Proposed Prepayment Date except as provided in paragraph
         (f) of this Section 8.3.

                  (f) Deferral Pending Change of Control -- The obligation of
         the Company to prepay Notes pursuant to the offers required by
         paragraphs (a) and (b) and accepted in accordance with paragraph (d) of
         this Section 8.3 is subject to the occurrence of the Change of Control
         in respect of which such offers and acceptances shall have been made.
         In the event that such Change of Control does not occur on or prior to
         the Proposed Prepayment Date in respect thereof, the prepayment shall
         be deferred until and shall be made on the date on which such Change of
         Control occurs. The Company shall keep each holder of Notes reasonably
         and timely informed of (i) any such deferral of the date of prepayment,
         (ii) the date on which such Change of Control and the prepayment are
         expected to occur, and (iii) any determination by the Company that
         efforts to effect such Change of Control have ceased or been abandoned
         (in which case the offers and acceptances made pursuant to this Section
         8.3 in respect of such Change of Control shall be deemed rescinded).
         Notwithstanding the foregoing, in the event that the prepayment has not
         been made within 90 days after such Proposed Prepayment Date by virtue
         of the deferral provided for in this Section 8.3(f), the Company shall
         make a new offer to prepay in accordance with paragraph (c) of this
         Section 8.3.

                  (g) Officer's Certificate -- Each offer to prepay the Notes
         pursuant to this Section 8.3 shall be accompanied by a certificate,
         executed by a Senior Financial Officer of the Company and dated the
         date of such offer, specifying: (i) the Proposed Prepayment Date, (ii)
         that such offer is made pursuant to this Section 8.3, (iii) the
         principal amount of each Note offered to be prepaid, (iv) whether a
         Default or Event of Default exists or would exist, (v) the estimated
         amount of the Make-Whole Amount or the 1.0% premium, as appropriate,
         due in connection with such prepayment (calculated as if the date of
         such notice were the date of prepayment), setting forth the details of
         such computation, (vi) the interest that would be due on each Note
         offered to be prepaid, accrued to the Proposed Prepayment Date, (vii)
         that the conditions of this Section 8.3 have been fulfilled, (viii) in
         reasonable detail, the nature and date or proposed date of the Change
         of Control and (ix) the date by which any holder of a Note that wishes
         to accept such offer must deliver notice thereof to the Company, which
         date shall not be earlier than three Business Days prior to the
         Proposed Prepayment Date or, in the case of a prepayment pursuant to
         Section 8.3(b), the date of the action referred to in Section
         8.3(b)(i). Such certificate shall prominently state that "The failure
         by a holder to respond to this offer to prepay by the date specified
         herein shall constitute a rejection of such offer."



                                       20


8.4. ALLOCATION OF PARTIAL PREPAYMENTS.

               In the case of each partial prepayment of the Notes pursuant to
Sections 8.1 or 8.2, the principal amount of the Notes to be prepaid shall be
allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.

8.5. MATURITY; SURRENDER, ETC.

               In the case of each prepayment of Notes pursuant to this Section
8, the principal amount of each Note to be prepaid shall mature and become due
and payable on the date fixed for such prepayment, together with interest on
such principal amount accrued to such date and the applicable Make-Whole Amount,
if any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

8.6. PURCHASE OF NOTES.

               The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.

8.7. MAKE-WHOLE AMOUNT.

               The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:

                  "CALLED PRINCIPAL" means, with respect to any Note, the
         principal of such Note that is to be prepaid pursuant to Section 8.2 or
         8.3 or has become or is declared to be immediately due and payable
         pursuant to Section 12.1, as the context requires.

                  "DISCOUNTED VALUE" means, with respect to the Called Principal
         of any Note, the amount obtained by discounting all Remaining Scheduled
         Payments with respect to such Called Principal from their respective
         scheduled due dates to the Settlement Date with respect to such Called
         Principal, in accordance with accepted financial practice and at a
         discount factor (applied on the same periodic basis as that on which
         interest on the Notes is payable) based on the Reinvestment Yield with
         respect to such Called Principal.



                                       21


                  "REINVESTMENT YIELD" means, with respect to the Called
         Principal of any Note, 0.50% plus the yield to maturity implied by (i)
         the yields reported, as of 10:00 A.M. (New York City time) on the
         second Business Day preceding the Settlement Date with respect to such
         Called Principal, on the display designated as the "PX Screen" on the
         Bloomberg Financial Market Service (or such other display as may
         replace the PX Screen on Bloomberg Financial Market Service) for
         actively traded U.S. Treasury securities having a maturity equal to the
         Remaining Average Life of such Called Principal as of such Settlement
         Date, or (ii) if such yields are not reported as of such time or the
         yields reported as of such time are not ascertainable, the Treasury
         Constant Maturity Series Yields reported, for the latest day for which
         such yields have been so reported as of the second Business Day
         preceding the Settlement Date with respect to such Called Principal, in
         Federal Reserve Statistical Release H.15 (519) (or any comparable
         successor publication) for actively traded U.S. Treasury securities
         having a constant maturity equal to the Remaining Average Life of such
         Called Principal as of such Settlement Date. Such implied yield will be
         determined, if necessary, by (a) converting U.S. Treasury bill
         quotations to bond-equivalent yields in accordance with accepted
         financial practice and (b) interpolating linearly between (1) the
         actively traded U.S. Treasury security with the maturity closest to and
         greater than the Remaining Average Life and (2) the actively traded
         U.S. Treasury security with the maturity closest to and less than the
         Remaining Average Life.

                  "REMAINING AVERAGE LIFE" means, with respect to any Called
         Principal, the number of years (calculated to the nearest one-twelfth
         year) obtained by dividing (i) such Called Principal into (ii) the sum
         of the products obtained by multiplying (a) the principal component of
         each Remaining Scheduled Payment with respect to such Called Principal
         by (b) the number of years (calculated to the nearest one-twelfth year)
         that will elapse between the Settlement Date with respect to such
         Called Principal and the scheduled due date of such Remaining Scheduled
         Payment.

                  "REMAINING SCHEDULED PAYMENTS" means, with respect to the
         Called Principal of any Note, all payments of such Called Principal and
         interest thereon that would be due after the Settlement Date with
         respect to such Called Principal if no payment of such Called Principal
         were made prior to its scheduled due date, provided that if such
         Settlement Date is not a date on which interest payments are due to be
         made under the terms of the Notes, then the amount of the next
         succeeding scheduled interest payment will be reduced by the amount of
         interest accrued to such Settlement Date and required to be paid on
         such Settlement Date pursuant to Section 8.2, 8.3 or 12.1.

                  "SETTLEMENT DATE" means, with respect to the Called Principal
         of any Note, the date on which such Called Principal is to be prepaid
         pursuant to Section 8.2 or 8.3 or has become or is declared to be
         immediately due and payable pursuant to Section 12.1, as the context
         requires.




                                       22


9. AFFIRMATIVE COVENANTS.

               The Company covenants that so long as any of the Notes are
outstanding:

9.1. COMPLIANCE WITH LAW.

               The Company will and will cause each Subsidiary to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, including, without limitation, Environmental Laws, and will obtain
and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

9.2. INSURANCE.

               The Company will and will cause each Restricted Subsidiary to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

9.3. MAINTENANCE OF PROPERTIES.

               The Company will and will cause each Restricted Subsidiary to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

9.4. PAYMENT OF TAXES AND CLAIMS.

               The Company will and will cause each Restricted Subsidiary to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Restricted
Subsidiary, provided that neither the Company nor any Restricted Subsidiary need
pay any such tax or assessment or claims if (i) the



                                       23


amount, applicability or validity thereof is contested by the Company or such
Restricted Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or a Restricted Subsidiary has established adequate
reserves therefor in accordance with GAAP on the books of the Company or such
Restricted Subsidiary or (ii) the nonpayment of all such taxes and assessments
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.

9.5. CORPORATE EXISTENCE, ETC.

               The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.6, 10.7 and 10.8, the
Company will at all times preserve and keep in full force and effect the
corporate existence of each Restricted Subsidiary (unless merged into the
Company or a Restricted Subsidiary) and all rights and franchises of the Company
and its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.

10. NEGATIVE COVENANTS.

               The Company covenants that so long as any of the Notes are
outstanding:

10.1. CONSOLIDATED TANGIBLE NET WORTH.

               The Company will not permit its Consolidated Tangible Net Worth
to be less than $250,000,000 plus the cumulative sum of 50% of Consolidated Net
Income (but only if a positive number) for each fiscal quarter ending after
September 28, 2002.

10.2. FIXED CHARGE RATIO.

               The Company will not permit the ratio of Consolidated Income
Available for Fixed Charges to Fixed Charges for the Company's most recently
completed four fiscal quarters to be less than 2.0 to 1.0.

10.3. INDEBTEDNESS RATIOS.

               The Company will not permit the ratio of Consolidated
Indebtedness to Consolidated Total Capitalization (calculated as of the end of
each fiscal quarter) to be more than .60 to 1.00; provided that for purposes of
such calculation there shall be excluded from Consolidated Indebtedness not more
than $30,000,000 aggregate principal amount of Indebtedness represented by
Capital Leases.

10.4. LIMITATIONS ON LIENS.

               The Company will not, and will not permit any Restricted
Subsidiary to, permit to exist, create, assume or incur, directly or indirectly,
any Lien on its properties or assets, whether now owned or hereafter acquired,
except:



                                       24


                  (a) Liens existing on property or assets of the Company or any
         Restricted Subsidiary as of the Closing Date that are described in
         Schedule 10.4;

                  (b) Liens for taxes, assessments or governmental charges not
         then due and delinquent or the nonpayment of which is permitted by
         Section 9.4;

                  (c) any attachment or judgment Lien, unless the judgment it
         secures shall not, within 60 days after the entry thereof, have been
         discharged or execution thereof stayed pending appeal, or shall not
         have been discharged within 60 days after the expiration of any such
         stay;

                  (d) Defects in title and Liens arising in the ordinary course
         of business and not incurred in connection with the borrowing of money,
         including encumbrances in the nature of zoning restrictions, easements,
         rights and restrictions of record on the use of real property,
         landlord's and lessor's liens in the ordinary course of business, which
         in the aggregate do not materially interfere with the conduct of the
         business of the Company and its Restricted Subsidiaries taken as a
         whole or materially impair the value of the property subject thereto
         for the purpose of such business;

                  (e) Liens (i) existing on real property at the time of its
         acquisition by the Company or a Restricted Subsidiary and not created
         in contemplation thereof, whether or not the Indebtedness secured by
         such Lien is assumed by the Company or such Restricted Subsidiary or
         (ii) on property created substantially contemporaneously with the date
         of acquisition or completion of construction thereof to secure or
         provide for all or a portion of the purchase price or cost of
         construction of such property or (iii) existing on property of a
         corporation at the time such corporation is merged into or consolidated
         with or is acquired by, or substantially all of its assets are acquired
         by, the Company or a Restricted Subsidiary and not created in
         contemplation thereof; provided that such Liens do not extend to other
         property of the Company or any Subsidiary, that the aggregate principal
         amount of Indebtedness secured by each such Lien does not exceed 100%
         of the lesser of the cost or fair market value (at the time of
         acquisition or completion of construction) of the property subject
         thereto and that no Default or Event of Default exists immediately
         prior to or after such acquisition or incurrence;

                  (f) Capital Leases in existence as of the date of this
         Agreement that are described in Schedule 10.4 and Capital Leases
         entered into after the date of this Agreement, provided that the
         Indebtedness evidenced by such Capital Leases is permitted under
         Section 10.3;

                  (g) Pledges or deposits under worker's compensation or
         unemployment insurance laws and liens imposed by law, such as laborers'
         or other employees', carriers', warehousemen's, mechanics',
         materialmen's, vendors' and similar Liens or priorities, not securing
         Indebtedness and arising in the ordinary course of business or that are
         incidental to the construction, maintenance or operation of any
         property, which are either (i) not of record or (ii) of record but are
         being contested in good faith by appropriate proceedings and for which
         the Company has set aside on its books adequate reserves in accordance



                                       25


         with GAAP and which do not materially detract from the usefulness of
         the property to which they pertain in the business of the Company or
         the Restricted Subsidiary owning the same;

                  (h) Liens not otherwise permitted by paragraphs (a) through
         (g) above incurred subsequent to the Closing Date to secure
         Indebtedness, provided that, at the time of creation, assumption or
         incurrence thereof and any time thereafter, Priority Debt does not
         exceed 20% of Consolidated Tangible Net Worth. Other than Liens to
         secure Indebtedness of a Restricted Subsidiary to the Company or
         another Wholly Owned Restricted Subsidiary, no such Liens permitted by
         this paragraph (h) shall be created to secure pre-existing Indebtedness
         or any extension, renewal or replacement of such Indebtedness or any
         Indebtedness (whether or not pre-existing Indebtedness) under any
         pre-existing agreement or under any extension, renewal or replacement
         of such an agreement; and

                  (i) Liens resulting from extensions, renewals, refinancings
         and refundings of Indebtedness secured by Liens permitted by paragraph
         (a) above, provided there is no increase in the principal amount of
         Indebtedness secured thereby at the time of renewal, any new Lien
         attaches only to the same property theretofore subject to such earlier
         Lien, there exists no Default or Event of Default, and the Company
         would be in compliance with Sections 10.1 and 10.3, on a pro forma
         basis.

10.5. RESTRICTED PAYMENTS.

               The Company will not, except as hereinafter provided:

                  (a) declare or pay any dividends, either in cash or property,
         on any shares of its capital stock of any class (except dividends or
         other distributions payable solely in shares of capital stock of the
         Company);

                  (b) directly or indirectly, or through any Subsidiary,
         purchase, redeem or retire any shares of its capital stock of any class
         or any warrants, rights or options to purchase or acquire any shares of
         its capital stock;

                  (c) make any other payment or distribution, either directly or
         indirectly or through any Subsidiary, in respect of its capital stock;
         or

                  (d) make, or permit any Restricted Subsidiary to make, any
         Restricted Investment;

(all such declarations, payments, purchases, redemptions, retirements,
distributions and Investments described in clauses (a) through (d) being herein
collectively called "Restricted Payments") if, after giving effect thereto, (1)
the aggregate amount of Restricted Payments subsequent to September 28, 2002 to
and including the date of the making of the Restricted Payment in question,
would exceed the sum of (i) $80,000,000 plus, (ii) 50% of Consolidated Net
Income (or less 100% of any net deficit) for each fiscal quarter of the Company
ending after September 28, 2002, plus (iii) the net cash proceeds received by
the Company after September




                                       26


28, 2002 from the sale of shares of its common stock or evidences of
Indebtedness which are subsequently converted into or exchanged for its common
stock, or (2) a Default or an Event of Default would exist, or (3) the Company
would no longer be in compliance with Section 10.1 or 10.3, on a pro forma
basis.

10.6. MERGER, CONSOLIDATION, ETC.

               The Company will not, and will not permit any Restricted
Subsidiary to, consolidate with or merge with any other Person or convey,
transfer, sell or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person except that:

                  (a) the Company may consolidate or merge with any other Person
         or convey, transfer, sell or lease all or substantially all of its
         assets in a single transaction or series of transactions to any Person,
         provided that:

                           (i) the successor formed by such consolidation or the
                  survivor of such merger or the Person that acquires by
                  conveyance, transfer, sale or lease all or substantially all
                  of the assets of the Company as an entirety, as the case may
                  be, is a solvent corporation organized and existing under the
                  laws of the United States or any State thereof (including the
                  District of Columbia), and, if the Company is not such
                  corporation, such corporation (y) shall have executed and
                  delivered to each holder of any Notes its assumption of the
                  due and punctual performance and observance of each covenant
                  and condition of this Agreement and the Notes and (z) shall
                  have caused to be delivered to each holder of any Notes an
                  opinion of independent counsel reasonably satisfactory to the
                  Required Holders, to the effect that all agreements or
                  instruments effecting such assumption are enforceable in
                  accordance with their terms, except as enforcement of such
                  terms may be limited by bankruptcy, insolvency,
                  reorganization, moratorium, fraudulent conveyance and similar
                  laws affecting the enforcement of creditors' rights generally
                  and by general equitable principles, and comply with the terms
                  hereof;

                           (ii) immediately after giving effect to such
                  transaction, the successor formed by such consolidation or the
                  survivor of such merger or the Person that acquires by
                  conveyance, transfer, sale or lease all or substantially all
                  of the assets of the Company as an entirety, as the case may
                  be, would be in compliance with Sections 10.1 and 10.3 on a
                  pro forma basis; and

                           (iii) immediately after giving effect to such
                  transaction, no Default or Event of Default shall exist; and

                  (b) Any Restricted Subsidiary may (x) merge into the Company
         (provided that the Company is the surviving corporation) or another
         Wholly Owned Restricted Subsidiary or (y) sell, transfer or lease all
         or any part of its assets to the Company or another Wholly Owned
         Restricted Subsidiary, or (z) merge or consolidate with, or sell,
         transfer or lease all or substantially all of its assets to, any Person
         in a transaction that is




                                       27


         permitted by Section 10.7 or, as a result of which, such Person becomes
         a Restricted Subsidiary; provided in each instance set forth in clauses
         (x) through (z) that, immediately before and after giving effect
         thereto, there shall exist no Default or Event of Default;

No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.6 from its liability under this Agreement or the Notes.

10.7. SALE OF ASSETS.

               The Company will not, and will not permit any Restricted
Subsidiary to, sell, lease, transfer or otherwise dispose of, including by way
of merger (collectively a "Disposition"), any assets, including capital stock of
Restricted Subsidiaries, in one or a series of transactions, to any Person,
other than Dispositions in the ordinary course of business and Dispositions by a
Restricted Subsidiary to the Company or another Wholly Owned Restricted
Subsidiary, if:

                  (a) during the twelve calendar months immediately preceding
         such Disposition, after giving effect to such Disposition the aggregate
         book value of all assets subject to Dispositions during such twelve
         month period other than Dispositions in the ordinary course of business
         and Dispositions by a Restricted Subsidiary to the Company or another
         Wholly Owned Restricted Subsidiary, would exceed 10% of Consolidated
         Total Assets as of the end of the immediately preceding fiscal quarter,
         or the Consolidated Net Income attributable to the assets included in
         such Dispositions during such twelve month period would exceed 10% of
         Consolidated Net Income for the twelve months ending as of the most
         recently completed fiscal quarter of the Company; or

                  (b) the aggregate net book value of all assets subject to
         Dispositions other than Dispositions in the ordinary course of business
         and Dispositions by a Restricted Subsidiary to the Company or another
         Wholly Owned Restricted Subsidiary, since the Closing Date would exceed
         20% of Consolidated Total Assets as of the end of the fiscal quarter
         immediately preceding such Disposition or the Consolidated Net Income
         attributable to the assets subject to Dispositions since the Closing
         Date would exceed 20% of Consolidated Net Income for such period; or

                  (c) there exists or would exist a Default or Event of Default.

Notwithstanding the foregoing, the assets subject to a Disposition shall not be
subject to or included in the foregoing limitation and computation if, within
180 days of such Disposition, the net proceeds therefrom are either (i)
reinvested in similar assets of the Company or its Restricted Subsidiaries or
(ii) applied by the Company to the pro rata prepayment of Senior Indebtedness,
including prepayment of the Notes pursuant to Section 8.2. Notwithstanding
anything in the foregoing to the contrary, the Company will not, and will not
permit any Restricted Subsidiary to, sell or discount any accounts receivable;
provided that the Company and its Restricted




                                       28


Subsidiaries may sell without recourse in any fiscal year accounts receivable
that do not exceed in the aggregate 5% of Consolidated Net Worth as of the
beginning of such fiscal year.

10.8. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES.

               The Company will not permit any Restricted Subsidiary to issue or
sell the capital stock of a Restricted Subsidiary, or any warrants, rights or
options to purchase, or securities convertible into or exchangeable for, such
capital stock, to any Person other than the Company or another Wholly Owned
Restricted Subsidiary. The Company will not, and will not permit any Restricted
Subsidiary to, sell, transfer or otherwise dispose of (other than to the Company
or another Wholly Owned Restricted Subsidiary) any capital stock (including any
warrants, rights or options to purchase, or securities convertible into or
exchangeable for, capital stock) or Indebtedness in each case of any Restricted
Subsidiary unless:

                  (a) simultaneously therewith all Investments in such
         Restricted Subsidiary owned by the Company and any other Restricted
         Subsidiary are simultaneously disposed of as an entirety;

                  (b) the board of directors of the Company shall have
         determined that such sale, transfer or disposition is in the best
         interests of the Company;

                  (c) such sale, transfer or other disposition is to a Person
         for a cash consideration and on terms reasonably deemed by the board of
         directors to be adequate and satisfactory;

                  (d) such Restricted Subsidiary does not have any continuing
         Investment in the Company or any other Restricted Subsidiary not being
         simultaneously disposed of; and

                  (e) such sale, transfer or other disposition is permitted by
         Section 10.7.

10.9. DESIGNATION OF UNRESTRICTED SUBSIDIARIES.

               The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary unless immediately before and after such designation:

                  (a) Such Subsidiary does not own any Investment in the Company
         or any Restricted Subsidiary;

                  (b) There exists no Default or Event of Default;

                  (c) The Company is in compliance with Sections 10.1 and 10.3
         (on a pro forma basis giving effect to such designation); and

                  (d) Such Subsidiary has not theretofore at any time been
         designated as an Unrestricted Subsidiary.




                                       29


10.10. NATURE OF BUSINESS.

               The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business if, as a result thereof, the general
nature of the business in which the Company and its Restricted Subsidiaries,
taken as a whole, would then be engaged, would be substantially changed from the
general nature of the business in which the Company and its Restricted
Subsidiaries, taken as a whole, are engaged on the date of this Agreement as
described in the Memorandum.

10.11. TRANSACTIONS WITH AFFILIATES.

               The Company will not, and will not permit any Restricted
Subsidiary to, enter into any transaction (including the furnishing of goods or
services) with an Affiliate that, individually or in the aggregate, would be
material, except in the ordinary course of business as presently conducted and
on terms and conditions no less favorable to the Company or such Restricted
Subsidiary than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate.

10.12. SUBSIDIARY GUARANTIES.

               The Company will not let any Person become a Subsidiary unless,
not later than five Business Days thereafter, the Company shall cause such
Subsidiary to become a party to the Subsidiary Guaranty, provided that a Foreign
Subsidiary need not become a party to the Subsidiary Guaranty, and the Company
shall, and shall cause such Subsidiary to, furnish such certificates and other
documentation as any Noteholder may require, including opinions of counsel to
such Person (that shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation necessary to cause such
Subsidiary to become a party to the Subsidiary Guaranty). The Company will not,
and will not permit any Restricted Subsidiary to become or be liable in respect
to any Guaranty of Indebtedness except Guaranties that are limited in amount to
a stated maximum principal amount of dollar exposure.

11. EVENTS OF DEFAULT.

               An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:

                  (a) the Company defaults in the payment of any principal or
         Make-Whole Amount, if any, on any Note when the same becomes due and
         payable, whether at maturity or at a date fixed for prepayment or by
         declaration or otherwise; or

                  (b) the Company defaults in the payment of any interest on any
         Note for more than five Business Days after the same becomes due and
         payable; or

                  (c) the Company defaults in the performance of or compliance
         with any term contained in Section 7.1(d) or Sections 10.1 through
         10.3; or


                                       30


                  (d) the Company defaults in the performance of or compliance
         with any term contained in Sections 10.4 through 10.12 and such default
         is not remedied within 15 days after the earlier of (i) a Responsible
         Officer obtaining actual knowledge of such default and (ii) the Company
         receiving written notice of such default from any holder of a Note; or

                  (e) the Company defaults in the performance of or compliance
         with any term contained herein (other than those referred to in
         paragraphs (a), (b), (c) and (d) of this Section 11) and such default
         is not remedied within 20 days after the earlier of (i) a Responsible
         Officer obtaining actual knowledge of such default and (ii) the Company
         receiving written notice of such default from any holder of a Note; or

                  (f) any representation or warranty made in writing by or on
         behalf of the Company or by any officer of the Company in this
         Agreement or in any writing furnished in connection with the
         transactions contemplated hereby proves to have been false or incorrect
         in any material respect on the date as of which made; or

                  (g) (i) the Company or any Restricted Subsidiary is in default
         (as principal or as guarantor or other surety) in the payment of any
         principal of or premium or make-whole amount or interest on any
         Indebtedness that is outstanding in an aggregate principal amount of at
         least $5,000,000 beyond any period of grace provided with respect
         thereto, or (ii) the Company or any Restricted Subsidiary is in default
         in the performance of or compliance with any term of any evidence of
         any Indebtedness in an aggregate outstanding principal amount of at
         least $5,000,000 or of any mortgage, indenture or other agreement
         relating thereto or any other condition exists, and as a consequence of
         such default or condition such Indebtedness has become, or has been
         declared, due and payable before its stated maturity or before its
         regularly scheduled dates of payment, or (iii) as a consequence of the
         occurrence or continuation of any event or condition (other than the
         passage of time or the right of the holder of Indebtedness to convert
         such Indebtedness into equity interests), the Company or any Restricted
         Subsidiary has become obligated to purchase or repay Indebtedness
         before its regular maturity or before its regularly scheduled dates of
         payment in an aggregate outstanding principal amount of at least
         $5,000,000; or

                  (h) the Company or any Restricted Subsidiary (i) is generally
         not paying, or admits in writing its inability to pay, its debts as
         they become due, (ii) files, or consents by answer or otherwise to the
         filing against it of, a petition for relief or reorganization or
         arrangement or any other petition in bankruptcy, for liquidation or to
         take advantage of any bankruptcy, insolvency, reorganization,
         moratorium or other similar law of any jurisdiction, (iii) makes an
         assignment for the benefit of its creditors, (iv) consents to the
         appointment of a custodian, receiver, trustee or other officer with
         similar powers with respect to it or with respect to any substantial
         part of its property, (v) is adjudicated as insolvent or to be
         liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or



                                       31


                  (i) a court or governmental authority of competent
         jurisdiction enters an order appointing, without consent by the Company
         or any Restricted Subsidiary, a custodian, receiver, trustee or other
         officer with similar powers with respect to it or with respect to any
         substantial part of its property, or constituting an order for relief
         or approving a petition for relief or reorganization or any other
         petition in bankruptcy or for liquidation or to take advantage of any
         bankruptcy or insolvency law of any jurisdiction, or ordering the
         dissolution, winding-up or liquidation of the Company or any Restricted
         Subsidiary, or any such petition shall be filed against the Company or
         any Restricted Subsidiary and such petition shall not be dismissed
         within 60 days; or

                  (j) a final judgment or judgments for the payment of money
         aggregating in excess of $10,000,000 are rendered against one or more
         of the Company and its Restricted Subsidiaries and which judgments are
         not, within 60 days after entry thereof, bonded, discharged or stayed
         pending appeal, or are not discharged within 60 days after the
         expiration of such stay; or

                  (k) if (i) any Plan shall fail to satisfy the minimum funding
         standards of ERISA or the Code for any plan year or part thereof or a
         waiver of such standards or extension of any amortization period is
         sought or granted under section 412 of the Code, (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under ERISA section 4042 to terminate or appoint a trustee to
         administer any Plan or the PBGC shall have notified the Company or any
         ERISA Affiliate that a Plan may become a subject of any such
         proceedings, (iii) the aggregate "amount of unfunded benefit
         liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
         all Plans, determined in accordance with Title IV of ERISA, shall
         exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have
         incurred or is reasonably expected to incur any liability pursuant to
         Title I or IV of ERISA or the penalty or excise tax provisions of the
         Code relating to employee benefit plans, (v) the Company or any ERISA
         Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
         any Subsidiary establishes or amends any employee welfare benefit plan
         that provides post-employment welfare benefits in a manner that would
         increase the liability of the Company or any Subsidiary thereunder; and
         any such event or events described in clauses (i) through (vi) above,
         either individually or together with any other such event or events,
         could reasonably be expected to have a Material Adverse Effect; or

                  (l) any Subsidiary Guarantor defaults in the performance of or
         compliance with any term contained in the Subsidiary Guaranty or the
         Subsidiary Guaranty ceases to be in full force and effect or is
         declared to be null and void in whole or in part or the validity or
         enforceability thereof shall be contested by any of the Company or any
         Subsidiary Guarantor or any of them renounces any of the same or denies
         that it has any or further liability thereunder.

As used in Section 11(k), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.



                                       32


12. REMEDIES ON DEFAULT, ETC.

12.1. ACCELERATION.

                  (a) If an Event of Default with respect to the Company
         described in paragraph (h) or (i) of Section 11 (other than an Event of
         Default described in clause (i) of paragraph (h) or described in clause
         (vi) of paragraph (h) by virtue of the fact that such clause
         encompasses clause (i) of paragraph (h)) has occurred, all the Notes
         then outstanding shall automatically become immediately due and
         payable.

                  (b) If any other Event of Default has occurred and is
         continuing, any holder or holders of at least 25% in principal amount
         of the Notes at the time outstanding may at any time at its or their
         option, by notice or notices to the Company, declare all the Notes then
         outstanding to be immediately due and payable.

                  (c) If any Event of Default described in paragraph (a) or (b)
         of Section 11 has occurred and is continuing, any holder or holders of
         Notes at the time outstanding affected by such Event of Default may at
         any time, at its or their option, by notice or notices to the Company,
         declare all the Notes held by it or them to be immediately due and
         payable.

               Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

12.2. OTHER REMEDIES.

               If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.


                                       33


12.3. RESCISSION.

               At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of 66-2/3% or more in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.

12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

               No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.

13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1. REGISTRATION OF NOTES.

               The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.

13.2. TRANSFER AND EXCHANGE OF NOTES.

               Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer,



                                       34


duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of such Note or his attorney duly authorized in writing
and accompanied by the address for notices of each transferee of such Note or
part thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) of the same series in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1(a) or 1(b), as appropriate. Each such new
Note shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may require payment of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer of Notes. Notes shall not be transferred in denominations
of less than $250,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $250,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representations set forth in Section 6.2.

13.3. REPLACEMENT OF NOTES.

               Upon receipt by the Company of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and

                  (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (provided that if the holder of such Note
         is, or is a nominee for, an original Purchaser or another holder of a
         Note that is an Institutional Investor, such Person's own unsecured
         agreement of indemnity shall be deemed to be satisfactory), or

                  (b) in the case of mutilation, upon surrender and cancellation
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.

14. PAYMENTS ON NOTES.

14.1. PLACE OF PAYMENT.

               Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
in Chicago, Illinois, at the principal office of Bank One, N.A. in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.



                                       35


14.2. HOME OFFICE PAYMENT.

               So long as you or your nominee shall be the holder of any Note,
and notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.

15. EXPENSES, ETC.

15.1. TRANSACTION EXPENSES.

               Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement, the Subsidiary Guaranty or
the Notes (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Subsidiary Guaranty or the Notes or in responding to
any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the Subsidiary Guaranty or the Notes, or by
reason of being a holder of any Note, and (b) the costs and expenses, including
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).



                                       36


15.2. SURVIVAL.

               The obligations of the Company under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

               All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.

17. AMENDMENT AND WAIVER.

17.1. REQUIREMENTS.

               This Agreement and the Notes may be amended, and the observance
of any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.

17.2. SOLICITATION OF HOLDERS OF NOTES.

                  (a) Solicitation. The Company will provide each holder of the
         Notes (irrespective of the amount of Notes then owned by it) with
         sufficient information, sufficiently far in advance of the date a
         decision is required, to enable such holder to make an informed and
         considered decision with respect to any proposed amendment, waiver or
         consent in respect of any of the provisions hereof or of the Notes. The
         Company will deliver executed or true and correct copies of each
         amendment, waiver or consent effected pursuant to the provisions of
         this Section 17 to each holder of




                                       37


         outstanding Notes promptly following the date on which it is executed
         and delivered by, or receives the consent or approval of, the requisite
         holders of Notes.

                  (b) Payment. The Company will not directly or indirectly pay
         or cause to be paid any remuneration, whether by way of supplemental or
         additional interest, fee or otherwise, or grant any security, to any
         holder of Notes as consideration for or as an inducement to the
         entering into by any holder of Notes of any waiver or amendment of any
         of the terms and provisions hereof unless such remuneration is
         concurrently paid, or security is concurrently granted, on the same
         terms, ratably to each holder of Notes then outstanding even if such
         holder did not consent to such waiver or amendment.

17.3. BINDING EFFECT, ETC.

               Any amendment or waiver consented to as provided in this Section
17 applies equally to all holders of Notes and is binding upon them and upon
each future holder of any Note and upon the Company without regard to whether
such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.

17.4. NOTES HELD BY COMPANY, ETC.

               Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

18. NOTICES.

               All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

                           (i) if to you or your nominee, to you or it at the
                  address specified for such communications in Schedule A, or at
                  such other address as you or it shall have specified to the
                  Company in writing,



                                       38


                           (ii) if to any other holder of any Note, to such
                  holder at such address as such other holder shall have
                  specified to the Company in writing, or

                           (iii) if to the Company, to the Company at its
                  address set forth at the beginning hereof to the attention of
                  the Senior Financial Officer with a copy to the Chief Legal
                  Officer or at such other address as the Company shall have
                  specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19. REPRODUCTION OF DOCUMENTS.

               This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

20. CONFIDENTIAL INFORMATION.

               For the purposes of this Section 20, "Confidential Information"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement (including pursuant to Section 7.3) that is
proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by you as being confidential information of
the Company or such Subsidiary, provided that such term does not include
information that (a) was publicly known or otherwise known to you prior to the
time of such disclosure, (b) subsequently becomes publicly known through no act
or omission by you or any person acting on your behalf, (c) otherwise becomes
known to you, other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to you under Section 7.1 that are
otherwise publicly available. You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by you in good
faith to protect confidential information of third parties delivered to you,
provided that you may deliver or disclose Confidential Information to (i) your
directors, trustees, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of



                                       39


this Section 20, (iii) any other holder of any Note, (iv) any Institutional
Investor to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (provided that confidential treatment
of such information is sought to be maintained) (w) to effect compliance with
any law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.

21. SUBSTITUTION OF PURCHASER.

               You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

22. MISCELLANEOUS.

22.1. SUCCESSORS AND ASSIGNS.

               All covenants and other agreements contained in this Agreement by
or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.



                                       40


22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.

               Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.

22.3. SEVERABILITY.

               Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

22.4. CONSTRUCTION.

               Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

22.5. COUNTERPARTS.

               This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.

22.6. GOVERNING LAW.

               This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of Illinois excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.


                                   * * * * *



                                       41







               If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.

                                       Very truly yours,

                                       CERNER CORPORATION


                                       By:    /s/ Marc G. Naughton
                                           ------------------------------------
                                       Name:  Marc G. Naughton
                                             ----------------------------------
                                       Title: Chief Financial Officer
                                             ----------------------------------



                                       S-1

The foregoing is agreed to
as of the date thereof.

JOHN HANCOCK LIFE INSURANCE COMPANY

By:      /s/ Kathleen E. McDonough
   -----------------------------------------------
Name:    Kathleen E. McDonough
      --------------------------------------------
Title:   Director
      --------------------------------------------


JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

By:      /s/ Kathleen E. McDonough
     ---------------------------------------------
Name:    Kathleen E. McDonough
      --------------------------------------------
Title:   Authorized Signatory
      --------------------------------------------




JOHN HANCOCK INSURANCE COMPANY OF VERMONT

By:      /s/ Kathleen E. McDonough
     ---------------------------------------------
Name:    Kathleen E. McDonough
      --------------------------------------------
Title:   Authorized Signatory
      --------------------------------------------


SIGNATURE 5 L.P.
By:      John Hancock Life Insurance Company, as
         Portfolio Advisor

By:      /s/ Kathleen E. McDonough
     ---------------------------------------------
Name:    Kathleen E. McDonough
      --------------------------------------------
Title:   Director
      --------------------------------------------



                                       S-2





SUNAMERICA LIFE INSURANCE COMPANY

By:    AIG Global Investment Corp., investment
       adviser

       By:  /s/ Gerald F. Herman
            --------------------------------------
       Name:  Gerald F. Herman
       Title:  Vice President




                                      S-3



WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY

By:      /s/ James L. Mounce
     ---------------------------------------------
Name:    James L. Mounce
     ---------------------------------------------
Title:   President & Chief Executive Officer
      --------------------------------------------

By:      /s/ Danny E. Cummins
     ---------------------------------------------
Name:    Danny E. Cummins
       -------------------------------------
Title:   Executive Vice President/ Operations &
         Secretary
       -------------------------------------------



                                       S-4



BENEFICIAL LIFE INSURANCE COMPANY

By:      /s/ Robert R. Dalley
     ---------------------------------------------
Name:    Robert R. Dalley
       -------------------------------------------
Title:   Senior Vice President & CFO
       -------------------------------------------




                                      S-5

                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS




                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A                  Series B
- -----------------                                                            --------                  --------
                                                                                             
JOHN HANCOCK LIFE INSURANCE COMPANY                                                                $ 21,750,000
                                                                                                   $  3,500,000


Name in which Notes are to be registered: JOHN HANCOCK LIFE INSURANCE COMPANY

                                        
  (1)    Wire Information                          Fleet Boston
                                                   ABA No. 011000390
                                                   Boston, Massachusetts 02110
                                                   Account of: John Hancock Life Insurance Co.
                                                   Private Placement Collection Acct.
                                                   Account Number: 541-55417
                                                   On Order of: Cerner Corporation PPN 15678# AE
                                                   6.42% Senior Notes, Series B,
                                                   due December 30, 2012

         Wire Deadline                             12 NOON, BOSTON TIME

                                                   All payments on account of the Notes or other
                                                   obligations in accordance with the provisions thereof
                                                   shall be made by bank wire or transfer of immediately
                                                   available funds for credit by 12 noon, Boston time.

  (2)    All notices shall be sent via fax AND mail according to the
         instructions below:

         o  Scheduled Payments                     John Hancock Life Insurance Company
         o  Unscheduled Prepayments                200 Clarendon St.
                                                   Boston, MA 02117
         o  Notice of Maturity                     Attn:  Investment Accounting Division, B-3
                                                   Fax:  (617) 572-0628






                                   Schedule A



                                        
                                                   AND

                                                   John Hancock Life Insurance Company
                                                   200 Clarendon St.
                                                   Boston, MA 02117
                                                   Attn: H. Paganis/K. Boyce, T-57
                                                   Fax: (617) 572-5495

         Include:

         (a) full name, interest rate and maturity date of the Notes or other
             obligations

         (b) allocation of payment between principal and interest and any
             special payment

         (c) name and address of Bank (or Trustee) from which the wire transfer
             was sent

         o  Financial Statements                   John Hancock Life Insurance Company
         o  Certificates of Compliance             200 Clarendon St.
                with financial covenants           Boston, MA 02117
                                                   Attn:  Bond and Corporate Finance Group, T-57
                                                   Fax:  (617) 572-1605

         o  Change in Issuer's name,               John Hancock Life Insurance Company
               address or principal place          200 Clarendon St.
               of business                         Boston, MA 02117

         o  Change in location of collateral       Attn:  Investment Law Division, T-30

         o  Copy of legal opinions                 Fax: (617) 572-9269

   (3)   Delivery of Securities                    All securities are to be sent for receipt the day after
                                                   the closing to:

                                                   John Hancock Life Insurance Company
                                                   200 Clarendon St., T-30
                                                   Boston, MA 02117
                                                   Attn:  Alan Seghezzi




Tax I.D.#:  04-1414660



                                   Schedule A

                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS




                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A                  Series B
- -----------------                                                            --------                  --------
                                                                                             
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY                                                        $1,750,000


Name in which Notes are to be registered: JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY

                                                  
  (1)    Wire Information                            Fleet Boston
                                                     ABA No. 011000390
                                                     Boston, Massachusetts 02110
                                                     Account of: John Hancock Life Insurance Co.
                                                     Private Placement Collection Acct.
                                                     Account Number: 541-55417
                                                     On Order of: Cerner Corporation PPN 15678# AE 5
                                                     6.42% Senior Notes, Series B,
                                                     due December 30, 2012

         Wire Deadline                               12 NOON, BOSTON TIME

                                                     All payments on account of the Notes or other
                                                     obligations in accordance with the provisions thereof
                                                     shall be made by bank wire or transfer of immediately
                                                     available funds for credit by 12 noon, Boston time.

  (2)    All notices shall be sent via fax AND mail according to the instructions below:

         o  Scheduled Payments                       John Hancock Variable Life Insurance Company
         o  Unscheduled Prepayments                  200 Clarendon St.
                                                     Boston, MA 02117
         o  Notice of Maturity                       Attn: Investment Accounting Division, B-3
                                                     Fax:  (617) 572-0628






                                   Schedule A

                                                
                                                     AND

                                                     John Hancock Life Insurance Company
                                                     200 Clarendon St.
                                                     Boston, MA 02117
                                                     Attn: H. Paganis/K. Boyce, T-57
                                                     Fax: (617) 572-5495

         Include:

         (a) full name, interest rate and maturity date of the Notes or other
             obligations

         (b) allocation of payment between principal and interest and any
             special payment

         (c) name and address of Bank (or Trustee) from which the wire transfer
             was sent

         o  Financial Statements                     John Hancock Life Insurance Company
         o  Certificates of Compliance               200 Clarendon St.
               with financial covenants              Boston, MA 02117
                                                     Attn:  Bond and Corporate Finance Group, T-57
                                                     Fax:  (617) 572-1605

         o  Change in Issuer's name,                 John Hancock Life Insurance Company
               address or principal place            200 Clarendon St.
               of business                           Boston, MA 02117
         o  Change in location of collateral         Attn:  Investment Law Division, T-30
         o  Copy of legal opinions                   Fax: (617) 572-9269

         (3) Delivery of Securities                  All securities are to be sent for receipt
                                                     the day after the closing to:

                                                     John Hancock Life Insurance Company
                                                     200 Clarendon St., T-30
                                                     Boston, MA 02117
                                                     Attn:  Alan Seghezzi




Tax I.D.#:  04-2664016


                                   Schedule A

                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS



                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A                  Series B
- -----------------                                                            --------                  --------
                                                                                            
JOHN HANCOCK INSURANCE COMPANY VERMONT                                                                 $500,000


Name in which Notes are to be registered: JOHN HANCOCK INSURANCE COMPANY OF
VERMONT

                                                  
  (1)    Wire Information                            Deutsche Bank Trust Company Americas
                                                     New York, NY
                                                     ABA No. 021001033
                                                     Account Number: 50270500
                                                     Account of: John Hancock Insurance Company of Vermont
                                                     On Order of: Cerner Corporation PPN 15678# AE 5
                                                     6.42% Senior Notes, Series B,
                                                     due December 30, 2012

         Wire Deadline                               12 NOON, BOSTON TIME

                                                     All payments on account of the Notes or other
                                                     obligations in accordance with the provisions thereof
                                                     shall be made by bank wire or transfer of immediately
                                                     available funds for credit by 12 noon, Boston time.

  (2)    All notices shall be sent via fax AND mail according to the instructions below:

         o  Scheduled Payments                       John Hancock Insurance Company of Vermont
         o  Unscheduled Prepayments                  c/o John Hancock Life Insurance Company
         o  Notice of Maturity                       200 Clarendon St.
                                                     Boston, MA 02117
                                                     Attn:  Investment Accounting Division, B-3
                                                     Fax:  (617) 572-0628





                                   Schedule A

                                                  
                                                     AND

                                                     John Hancock Life Insurance Company
                                                     200 Clarendon St.
                                                     Boston, MA 02117
                                                     Attn: H. Paganis/K. Boyce, T-57
                                                     Fax: (617) 572-5495

         Include:

         (a) full name, interest rate and maturity date of the Notes or other
             obligations

         (b) allocation of payment between principal and interest and any
             special payment

         (c) name and address of Bank (or Trustee) from which the wire transfer
             was sent

         o  Financial Statements                     John Hancock Insurance Company of Vermont
         o  Certificates of Compliance               c/o John Hancock Life Insurance Company
               with financial covenants              200 Clarendon St.
                                                     Boston, MA 02117
                                                     Attn:  Bond and Corporate Finance Group, T-57
                                                     Fax:  (617) 572-1605

         o  Change in Issuer's name,                 John Hancock Insurance Company of Vermont
               address or principal place            c/o John Hancock Life Insurance Company
               of business                           200 Clarendon St.
         o  Change in location of collateral         Boston, MA 02117
         o  Copy of legal opinions                   Attn:  Investment Law Division, T-30
                                                     Fax: (617) 572-9269

  (3)    Delivery of Securities                      All securities are to be sent for receipt the day after
                                                     the closing to:

                                                     John Hancock Insurance Company of Vermont
                                                     c/o John Hancock Life Insurance Company
                                                     200 Clarendon St., T-30
                                                     Boston, MA 02117
                                                     Attn:  Alan Seghezzi





Tax I.D.#:  03-0367897



                                   Schedule A



                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS



                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A                  Series B
- -----------------                                                            --------                  --------
                                                                                              
SIGNATURE 5 L.P.                                                                                     $2,500,000


Name in which Notes are to be registered:  HARE & CO.

                                               
  (1)    Wire Information                            HARE & CO.
                                                     c/o The Bank of New York
                                                     ABA No. 021000018
                                                     BNF: IOC566
                                                     FFC: Account No. 77634
                                                     On Order of: Cerner Corporation PPN 15678# AE 5
                                                     6.42% Senior Notes, Series B,
                                                     due December 30, 2012

         Wire Deadline                               12 NOON, BOSTON TIME

                                                     All payments on account of the Notes or other
                                                     obligations in accordance with the provisions thereof
                                                     shall be made by bank wire or transfer of immediately
                                                     available funds for credit by 12 noon, Boston time.

  (2)    All notices shall be sent via fax AND mail according to the instructions below:

         o  Scheduled Payments                       Investors Bank & Trust Company
         o  Unscheduled Prepayments                  200 Clarendon St.
                                                     Boston, MA 02116
         o  Notice of Maturity                       Attn:  Jackie Argenzio
                                                     Fax:  (617) 927-8302






                                   Schedule A

                                               
                                                     AND

                                                     HARE & CO.
                                                     c/o The Bank of New York
                                                     P.O. Box 19266
                                                     Newark, NJ 07195

         Include:

         (a) full name, interest rate and maturity date of the Notes or other
             obligations

         (b) allocation of payment between principal and interest and any
             special payment

         (c) name and address of Bank (or Trustee) from which the wire transfer
             was sent

         o  Financial Statements                     John Hancock Life Insurance Company
         o  Certificates of Compliance               200 Clarendon St.
               with financial covenants              Boston, MA 02117
                                                     Attn:  Bond and Corporate Finance Group, T-57
                                                     Fax:  (617) 572-1605

         o  Change in Issuer's name,                 John Hancock Life Insurance Company
               address or principal place            200 Clarendon St.
               of business                           Boston, MA 02117
         o  Change in location of collateral         Attn:  Investment Law Division, T-30
         o  Copy of legal opinions                   SFax: (617) 572-9269

   (3)   Delivery of Securities                      All securities are to be sent for receipt the day after
                                                     the closing to:

                                                     Bank of New York
                                                     One Wall Street, Window A
                                                     New York, NY 10286
                                                     A/C Name: Investors Bank & Trust Company
                                                     Reference: 017001/Signature 5 L.P. 77634





                                   Schedule A

                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS




                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                       Series A                       Series B
- -----------------                                                       --------                       --------
                                                                                                
SUNAMERICA LIFE INSURANCE COMPANY                                        $21,000,000


Name in which Notes are to be registered:  OKGBD & CO.

(1)      All payments to be by wire transfer of immediately available funds,
         with sufficient information (including PPN #, interest rate, maturity
         date, interest amount, principal amount and premium amount, if
         applicable) to identify the source and application of such funds, to:

                  ABA # 021-001-033
                  Bankers Trust Company
                  New York, N.Y.
                  Re: SunAmerica Life Insurance Company
                  A/C: 99-911-145
                  FFC: A/C 099530
                  OBI=PPN # and Prin: $                Int: $
                                       ------------

(2)      Payment notices to:

                  Deutsche Bank
                  Attn:  James Germain
                  648 Grassmere Business Park, MS 7204
                  Nashville, TN 37211
                  Telephone:  (615) 835-2465
                  Fax: (615) 835-2493

(3)      Duplicate payment notices and all other correspondences (including
         financial reports) to:

                  AIG Global Investment Corporation
                  175 Water Street - 24th Floor
                  Attn: Debt Private Placements
                  New York, NY  10038
                  Tel: 212-458-2068
                  Fax: 212-458-2233

with copy to:     AIG Global Investments Corporation
                  Legal Department - Investment Management
                  2929 Allen Parkway, Suite A36-01
                  Houston, TX  77019-2155
                  Fax: (713) 831-2328



                                   Schedule A


(4)      PHYSICAL DELIVERY INSTRUCTIONS:

                  Bankers Trust Company
                  Attn: Lorraine Squires
                  Phone: (212) 618-2200
                  14 Wall Street
                  4th Floor, Window 43
                  New York, NY 10005
                  Reference: SunAmerica Life Insurance Company
                  Account # 099530

(5)      Depository Trust Company (DTC) Instructions:

                  DTC Participant # 0903
                  Agent Bank ID # 20903
                  Institution ID # 26540
                  Ref:  SunAmerica Life Insurance Company
                  Account # 099530
                  Euroclear # 22650

Tax I.D.#:  13-3020293 (for OKGBD & Co.)
Tax I.D.#:  52-0502540 (for SunAmerica Life Insurance Company)


                                   Schedule A

                                                                      SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS



                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A               Series B
- -----------------                                                            --------               --------
                                                                                              
WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY                                                         $6,000,000


Name in which Notes are to be registered: WOODMEN OF THE WORLD LIFE INSURANCE
SOCIETY

(1)      All payments by wire transfer of immediately available funds to:

                  U.S. Bank
                  ABA No. 104000029
                  1700 Farnam Street
                  Omaha, NE 68102
                  For the Account of WOW
                  Account No. 1-487-477-7-0730

                  with sufficient information to identify the source and
                  application of such funds, including name of issuer, PPN #,
                  interest rate and maturity date and whether payment is of
                  principal, premium, or interest

(2)      All notices of payments and written confirmations of such wire
         transfers:

                  Woodmen of the World Life Insurance Society
                  Attn: Securities Department
                  1700 Farnam Street
                  Omaha, NE 68102

(3)      Original Notes delivered to:

                  Woodmen of the World Life Insurance Society
                  Attn: Securities Department
                  1700 Farnam Street
                  Omaha, NE 68102



                                   Schedule A



(4)      All other communications:

                  Woodmen of the World Life Insurance Society
                  Attn: Securities Department
                  1700 Farnam Street
                  Omaha, NE 68102

Tax I.D.#:  47-0339250



                                   Schedule A



                                                                     SCHEDULE A


                       INFORMATION RELATING TO PURCHASERS




                                                                        Principal Amount of Notes to be Purchased
                                                                        -----------------------------------------
Name of Purchaser                                                            Series A                  Series B
- -----------------                                                            --------                  --------
                                                                                               
BENEFICIAL LIFE INSURANCE COMPANY                                                                     $3,000,000



Name in which Notes are to be registered:  TFINN
                                              
(1)      Payment on account of Note

         Method                                      Federal Funds Wire Transfer

         Account Information                         JPMorgan Chase
                                                     ABA # 021000021
                                                     A/C # 544755102
                                                     FFC:  Zions First National Bank G70990

(2)      Address/ Fax # for notices                  Beneficial Life Insurance Co.
         related to payments                         36 South State
                                                     Salt Lake City, UT  84136
                                                     Attn:  Doug Hancock
                                                     Fax: (801) 531-3314

(3)      Address/ Fax # for all other                Beneficial Life Insurance Co.
         notices                                     36 South State
                                                     Salt Lake City, UT  84136
                                                     Attn:  Sterling Russell

(4)      Instructions re:  Delivery of               Deseret Trust Co.
         Notes                                       10 East South Temple
                                                     Salt Lake City, UT  84133
                                                     Attn:  Annette Rohovit (801-363-2991 x3016)





Tax I.D.#:  87-0115120


                                   Schedule A



                                                                      SCHEDULE B


                                  DEFINED TERMS

               As used herein, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:

               "AFFILIATE" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity interests
of the Company or any Subsidiary or (c) any Person of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

               "ANTI-TERRORISM ORDER" means United States of America Executive
Order No. 13,224 of September 23, 2001, Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism,
66 Fed. Reg. 49,049 (2001).

               "BUSINESS DAY" means (a) for the purposes of Section 8.6 only,
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York City are required or authorized to be closed, and (b) for the purposes
of any other provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City or Chicago, Illinois
are required or authorized to be closed.

               "CAPITAL LEASE" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.

               "CHANGE OF CONTROL" means:

                  (a) the acquisition, through purchase or otherwise (including
         the agreement to act in concert), by any "person" (as such term is used
         in Sections 13(d) and 14(d)(2) of the Exchange Act) who is or becomes a
         "beneficial owner" (as such term is defined in Rule 13d-3 under the
         Exchange Act) of shares of Voting Stock of the Company representing
         more than 50% of the combined voting power of the Voting Stock of the
         Company; or

                  (b) individuals constituting a majority of the board of
         directors of the Company immediately prior to (i) the entering into by
         the Company of any agreement


                                   Schedule B


         providing or contemplating an acquisition described in paragraph (a),
         or (ii) the commencement of a tender offer with the purpose of
         completing an acquisition described in clause (a), or (iii) the
         commencement of an election contest, cease to constitute such a
         majority.

               "CLOSING" is defined in Section 3.

               "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time to
time.

               "COMPANY" means Cerner Corporation, a Delaware corporation.

               "CONFIDENTIAL INFORMATION" is defined in Section 20.

               "CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES" means, for any
period, the sum of (i) Consolidated Net Income for such period, plus (to the
extent deducted in determining Consolidated Net Income), (ii) all provisions for
any Federal, state, or other income taxes made by the Company and its Restricted
Subsidiaries during such period plus (iii) Fixed Charges.

               "CONSOLIDATED INDEBTEDNESS" means, as of any date, Indebtedness
of the Company and its Restricted Subsidiaries, determined on a consolidated
basis in accordance with GAAP, less the amount of any contingent reimbursement
obligations under surety bonds.

               "CONSOLIDATED NET INCOME" means, for any period, the consolidated
net income (or deficit) of the Company and its Restricted Subsidiaries after
deducting, without duplication, all operating expenses, provisions for all taxes
and reserves (including reserves for deferred income taxes) and all other proper
deductions, all determined in accordance with GAAP and after deducting portions
of income properly attributable to outstanding minority interests, if any, in
Restricted Subsidiaries; provided, however, that there shall be excluded (i) any
income (or deficit) of any Person accrued prior to the date it becomes a
Restricted Subsidiary or merges into or consolidates with the Company or a
Restricted Subsidiary; (ii) the income (or deficit) of any Person (other than a
Restricted Subsidiary) in which the Company or any Restricted Subsidiary has any
ownership interest (except that any such income actually received by the Company
or such Restricted Subsidiary in the form of cash dividends shall be included
without limitation); (iii) any gains or losses, or other income, properly
classified as extraordinary in accordance with GAAP; (iv) any gains or losses,
or other income, characterized as non-recurring in the financial statements
delivered pursuant to Section 7.1; (v) any gain or loss resulting from the sale
of fixed or capital assets other than in the ordinary course of business; (vi)
any portion of the net income of a Restricted Subsidiary which for any reason
cannot be distributed as a cash dividend; (vii) any gain or loss resulting from
the sale or other disposition of any Investment; (viii) other than depreciation
or amortization, any expense or income attributable to goodwill write-offs and
any non-cash charge relating to the issuance of stock, restricted stock, phantom
stock, stock options or stock appreciation rights; (ix) proceeds of any life
insurance policy; (x) any gain or loss resulting from the acquisition of any
securities of the Company or any Restricted Subsidiary;


                                       2

                                   Schedule B


and (xi) any reversal of any reserve, except to the extent that provision for
such reserve shall have been made from income arising during the fiscal period
in which such reversal occurs.

               "CONSOLIDATED NET WORTH" means, as of any date, the consolidated
stockholders' equity of the Company and its Restricted Subsidiaries as of such
date determined in accordance with GAAP.

               "CONSOLIDATED TANGIBLE NET WORTH" means Consolidated Net Worth,
less the sum of all goodwill, trade names, trademarks, patents, organization
expense, unamortized debt discount and expense and other similar intangibles
properly classified as such in accordance with generally accepted accounting
principles, which are incurred or booked subsequent to September 28, 2002,
provided that there shall not be so excluded software development costs which
are capitalized by the Company in accordance with GAAP on a basis consistent
with that described in the Company's most recent audited financial statements
listed on Schedule 5.5.

               "CONSOLIDATED TOTAL ASSETS" means, as of any date, the
consolidated total assets of the Company and its Restricted Subsidiaries
determined in accordance with GAAP less the sum of all goodwill, trade names,
trademarks, patents, organization expense, unamortized debt discount and expense
and other similar intangibles properly classified as such in accordance with
GAAP, that are incurred or booked subsequent to September 28, 2002, provided
that there shall not be so excluded software development costs that are
capitalized by the Company in accordance with GAAP on a basis consistent with
that described in the Company's most recent audited financial statements listed
on Schedule 5.5.

               "CONSOLIDATED TOTAL CAPITALIZATION" means, as of any date, sum of
Consolidated Tangible Net Worth and Consolidated Indebtedness.

               "CONTROL EVENT" means any event that may reasonably be expected
to result in a Change of Control.

               "CREDIT AGREEMENT" means the Credit Agreement dated as of May 31,
2002 among the Company, U.S. Bank National Association, as administrative agent
and lead arranger, LaSalle Bank National Association, as documentation agent,
and each other lender who becomes a party thereto (as amended by that certain
First Amendment to Credit Agreement dated as of July 22, 2002), as such
agreement may be hereafter amended, restated, supplemented, refinanced,
increased or reduced from time to time.

               "DEFAULT" means an event or condition the occurrence or existence
of which would, with the lapse of time or the giving of notice or both, become
an Event of Default.

               "DEFAULT RATE" means that rate of interest that is the greater of
(i) 2.0% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2.0% over the rate of interest publicly announced
by Bank One, N.A. in Chicago, Illinois as its "base" or "prime" rate.


                                       3

                                   Schedule B


               "DISPOSITION" is defined in Section 10.7.

               "ENVIRONMENTAL LAWS" means any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

               "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.

               "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.

               "EVENT OF DEFAULT" is defined in Section 11.

               "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

               "FIXED CHARGES" means, for any period, the sum of (i) interest
expense (including the interest component of Rentals under Capital Leases),
amortization of debt discount and expense on Indebtedness of the Company and its
Restricted Subsidiaries during such period and (ii) Rentals under all leases
other than Capital Leases of the Company and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP.

               "FOREIGN SUBSIDIARY" means any Subsidiary that is not organized
under the laws of any state of the United States of America or that has any
permanent place of business outside the United States of America, and shall
include Cerner Corporation PTY Limited, a corporation organized under the laws
of Australia, Cerner FSC, Inc., a corporation organized under the laws of
Barbados, Cerner Limited, a corporation organized under the laws of the United
Kingdom, Cerner Deutschland GmbH, a corporation organized under the laws of
Germany, Cerner Singapore Limited, a Delaware corporation, Cerner Canada
Limited, a Delaware corporation, and Cerner (Malaysia) SDN BHD, a corporation
organized under the laws of Malaysia, Cerner Belgium, Inc., a Delaware
corporation, and Image Devices GmbH, a corporation organized under the laws of
Germany.

               "GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.

               "GOVERNMENTAL AUTHORITY" means

               (a) the government of


                                       4

                                   Schedule B


                           (i) the United States of America or any State or
                  other political subdivision thereof, or

                           (ii) any jurisdiction in which the Company or any
                  Subsidiary conducts all or any part of its business, or which
                  asserts jurisdiction over any properties of the Company or any
                  Subsidiary, or

                  (b) any entity exercising executive, legislative, judicial,
         regulatory or administrative functions of, or pertaining to, any such
         government.

               "GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:

                  (a) to purchase such Indebtedness or obligation or any
         property constituting security therefor;

                  (b) to advance or supply funds (i) for the purchase or payment
         of such Indebtedness or obligation, or (ii) to maintain any working
         capital or other balance sheet condition or any income statement
         condition of any other Person or (iii) otherwise to advance or make
         available funds for the purchase or payment of such Indebtedness or
         obligation;

                  (c) to lease properties or to purchase properties or services
         primarily for the purpose of assuring the owner of such Indebtedness or
         obligation of the ability of any other Person to make payment of the
         Indebtedness or obligation; or

                  (d) otherwise to assure the owner of such Indebtedness or
         obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

               "HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).



                                       5

                                   Schedule B



               "HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company pursuant
to Section 13.1.

               "INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,

                  (a) its liabilities for borrowed money and its redemption
         obligations in respect of mandatorily redeemable Preferred Stock;

                  (b) its liabilities for the deferred purchase price of
         property acquired by such Person (excluding accounts payable arising in
         the ordinary course of business but including all liabilities created
         or arising under any conditional sale or other title retention
         agreement with respect to any such property);

                  (c) all liabilities appearing on its balance sheet as
         indebtedness in accordance with GAAP in respect of Capital Leases;

                  (d) all liabilities for borrowed money secured by any Lien
         with respect to any property owned by such Person (whether or not it
         has assumed or otherwise become liable for such liabilities);

                  (e) all its liabilities in respect of letters of credit or
         instruments serving a similar function issued or accepted for its
         account by banks and other financial institutions (whether or not
         representing obligations for borrowed money);

                  (f) any Guaranty of such Person with respect to liabilities of
         a type described in any of clauses (a) through (e).

Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (f) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.

               "INHAM EXEMPTION" is defined in Section 6.2(e).

               "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note and any Affiliates thereof, and (b) any bank, trust company, savings and
loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.

               "INVESTMENTS" means all investments made, in cash or by delivery
of property, directly or indirectly, in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or securities or by
loan, Guaranty, advance, capital contribution or otherwise.


                                       6

                                   Schedule B



               "LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including, in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).

               "MAKE-WHOLE AMOUNT" is defined in Section 8.7.

               "MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets or properties of the Company
and its Restricted Subsidiaries taken as a whole.

               "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, affairs, financial condition, assets or properties of
the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability
of the Company to perform its obligations under this Agreement and the Notes, or
(c) the ability of any Subsidiary Guarantor to perform its obligations under the
Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement,
the Notes or the Subsidiary Guaranty.

               "MEMORANDUM" is defined in Section 5.3.

               "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).

               "NAIC ANNUAL STATEMENT" is defined in Section 6.2(a).

               "NOTES" is defined in Section 1.

               "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

               "OTHER PURCHASERS" is defined in Section 2.

               "PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.

               "PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

               "PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by



                                        7

                                   Schedule B



the Company or any ERISA Affiliate or with respect to which the Company or any
ERISA Affiliate may have any liability.

               "PRIORITY DEBT" means, as of any date, the sum, without
duplication, of:

                  (a) outstanding Indebtedness of the Company and its Restricted
         Subsidiaries secured by Liens not otherwise permitted by Sections
         10.4(a) through (g) and 10.4(i) on such date;

                  (b) other outstanding Indebtedness of Restricted Subsidiaries,
         other than:

                           (i) Indebtedness of a Restricted Subsidiary to the
                  Company or a Wholly Owned Restricted Subsidiary; and

                           (ii) any Guaranty by a Subsidiary Guarantor of
                  Indebtedness owed under the Credit Agreement, the Notes, the
                  Company's 7.14% Series A Senior Notes due April 15, 2006, or
                  the Company's 7.66% Series B Senior Notes due April 15, 2009;
                  and

                  (c) outstanding preferred stock of Restricted Subsidiaries
         (other than preferred stock held by the Company or a Wholly Owned
         Restricted Subsidiary).

               "PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

               "PTE" is defined in Section 6.2(a).

               "QPAM EXEMPTION" is defined in Section 6.2(d).

               "RENTALS" means, as of the date of any determination, all fixed
payments (including all payments that the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real
or personal property, but exclusive of any amounts required to be paid by the
Company or a Restricted Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes,
assessments, amortization and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed on the basis of the minimum rents, if any,
required to be paid by the lessee, regardless of sales volume or gross revenues.

               "REQUIRED HOLDERS" means, at any time, the holders of at least
66-2/3% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).


                                        8

                                   Schedule B



               "RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.

               "RESTRICTED INVESTMENT" means any Investment by the Company or a
Restricted Subsidiary other than the following:

                  (a) Investments in real property to be used or consumed in the
         ordinary course of business;

                  (b) Investments in obligations issued or fully guaranteed by
         the U.S. government maturing within one year from date of acquisition;

                  (c) Investments in certificates of deposit rated not less than
         A by Standard & Poor's Corporation or the equivalent by Moody's
         Investors Service, Inc. of banks having capital surplus of at least
         $250 million and maturing within one year from date of acquisition;

                  (d) Investments in commercial paper rated not less than A1 or
         A2 by Standard & Poor's Corporation or P1 or P2 by Moody's Investors
         Service, Inc. and maturing within 270 days from the date of creation;

                  (e) Investments in tax-exempt mutual funds which are
         restricted to investing in tax-exempt securities rated not less than A
         by Standard & Poor's Corporation or its equivalent by Moody's Investors
         Service, Inc.;

                  (f) Investments in Restricted Subsidiaries; provided that such
         Restricted Subsidiary is a Wholly Owned Restricted Subsidiary, is a
         Guarantor, is organized under the laws of a state of the United States
         of America or the District of Columbia, has no Indebtedness and will
         have no Indebtedness while any Notes are outstanding under this
         Agreement, other than (i) Indebtedness owed to the Company or a Wholly
         Owned Restricted Subsidiary that is a Guarantor and (ii) Indebtedness
         described in subpart (b)(ii) of the definition of "Priority Debt";

                  (g) Investments in auction rate certificates, money market
         accounts and other variable rate instruments rated A or better by
         Standard & Poor's Corporation or A2 or better by Moody's Investors
         Services, Inc.;

                  (h) Investments, as of the Closing date, by the Company and
         its Restricted Subsidiaries listed on Schedule B-1;

                  (i) Investments in foreign government debt rated A- or better
         by Standard & Poor's Corporation or A3 or better by Moody's Investors
         Services, Inc.;


                                        9

                                   Schedule B



                  (j) Investments in 49-day dividend instruments rated A- or
         better by Standard & Poor's Corporation or A3 or better by Moody's
         Investors Services, Inc.;

                  (k) Investments in Missouri industrial training bonds rated
         BBB or better by Standard & Poor's or Baa2 or better by Moody's
         Investors Services, Inc.; and

                  (l) Other investments not aggregating greater than 5% of
         Consolidated Tangible Net Worth.

               "RESTRICTED SUBSIDIARY" means (i) any Subsidiary that is
designated in Schedule 5.4 as a Restricted Subsidiary, (ii) any other Subsidiary
that is organized under the laws of the United States or any State thereof, that
conducts substantially all of its business and has substantially all of its
assets within the United States, and 100% of the Voting Stock of which is owned
by the Company and/or one or more Wholly Owned Restricted Subsidiaries, and
(iii) any other Subsidiary designated by the board of directors of the Company
as a Restricted Subsidiary after not less than 10 days prior notice to holders
of the Notes, provided that, at the time of and after giving effect to such
designation, (A) no Default or Event of Default shall have occurred and (B) the
Company, on a pro forma basis, would be in compliance with Sections 10.1 and
10.3.

               "SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.

               "SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.

               "SENIOR INDEBTEDNESS" means any Indebtedness of the Company and
its Restricted Subsidiaries other than Indebtedness that by its terms is
expressly subordinate in right of payment to the payment of the Notes.

               "SERIES A NOTES" is defined in Section 1.

               "SERIES B NOTES" is defined in Section 1.

               "SOURCE" is defined in Section 6.2.

               "SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership, limited
liability company or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries (unless such partnership,
limited liability company or joint venture can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).



                                       10

                                   Schedule B


Unless the context otherwise clearly requires, any reference to a "Subsidiary"
is a reference to a Subsidiary of the Company.

               "SUBSIDIARY GUARANTOR" is defined in Section 1 and includes
Cerner Properties, Inc., Cerner International, Inc., Cerner Citation, Inc.,
Cerner Investment Corp., Cerner Campus Redevelopment Corporation, Cerner
Radiology Information Systems, Inc., Cerner DHT, Inc., Zynx Health Incorporated,
Cerner Multum, Inc., Cerner Health Connections, Inc. and Cerner Health Facts,
Inc.

               "SUBSIDIARY GUARANTY" is defined in Section 1.

               "THIS AGREEMENT" OR "THE AGREEMENT" is defined in Section 17.3.

               "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is not, or
has not been designated by the board of directors of the Company or in Schedule
5.4 as, a Restricted Subsidiary.

               "USA PATRIOT ACT" means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT ACT) Act of 2001 of the United States of America.

               "VOTING STOCK" shall mean the capital stock of any class or
classes of a corporation having power under ordinary circumstances to vote for
the election of members of the board of directors of such corporation, or person
performing similar functions (irrespective of whether or not at the time stock
of any of the class or classes shall have or might have special voting power or
rights by reason of the happening of any contingency).

               "WHOLLY OWNED SUBSIDIARY" or "WHOLLY OWNED RESTRICTED SUBSIDIARY"
mean, at any time, any Subsidiary, or Restricted Subsidiary, as the case may be,
100% of all of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company's other Wholly Owned Subsidiaries or Wholly Owned Restricted
Subsidiaries, as the case may be, at such time.



                                       11

                                   Schedule B






                                                                    EXHIBIT 1(a)


                                 [FORM OF NOTE]


                               CERNER CORPORATION

                           5.57% SENIOR NOTE, SERIES A
                              DUE DECEMBER 30, 2008

No. AR-[_____]                                                           [Date]
$[_______]                                                     PPN: 15678# AD 7


               FOR VALUE RECEIVED, the undersigned, CERNER CORPORATION (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Delaware, promises to pay to [ ], or registered assigns, the
principal sum of [ ] DOLLARS on December 30, 2008 with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 5.57% per annum from the date hereof, payable
semiannually, on the June 30 and December 30 in each year, commencing with the
June 30 or December 30 next succeeding the date hereof [(except that no interest
payment shall be made on December 30, 2002)] until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 7.57% or (ii) 2.0%
over the rate of interest publicly announced by Bank One, N.A. from time to time
in Chicago, Illinois as its "base" or "prime" rate.

               Payments of principal of, interest on and any Make-Whole Amount
with respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank One, N.A. in Chicago or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreement referred to below.

               This Note is one of the Senior Notes (herein called the "Notes")
issued pursuant to the Note Purchase Agreement, dated as of December 15, 2002
(as from time to time amended, the "Note Purchase Agreement"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representations set forth in Section 6.2 of the Note Purchase Agreement.


                                  Exhibit 1(a)




               This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

               The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreement. This Note is
also subject to prepayment, in whole or from time to time in part, at the times
and on the terms specified in the Note Purchase Agreement, but not otherwise.

               If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

               Payment of the principal of, and interest and Make-Whole Amount,
if any, on this Note, and all other amounts due under the Note Purchase
Agreement, is guaranteed pursuant to the terms of a Subsidiary Guaranty dated as
of December 15, 2002 of certain Subsidiaries of the Company.

               This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                        CERNER CORPORATION


                                        By:
                                             ----------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------


                                       2

                                  Exhibit 1(a)





                                                                    EXHIBIT 1(b)


                                 [FORM OF NOTE]


                               CERNER CORPORATION

                           6.42% SENIOR NOTE, SERIES B
                              DUE DECEMBER 30, 2012

No. BR-[_____]                                                           [Date]
$[_______]                                                    PPN:  15678# AE 5

               FOR VALUE RECEIVED, the undersigned, CERNER CORPORATION (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Delaware, promises to pay to [ ], or registered assigns, the
principal sum of [ ] DOLLARS on December 30, 2012 with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.42% per annum from the date hereof, payable
semiannually, on the June 30 and December 30 in each year, commencing with the
June 30 or December 30 next succeeding the date hereof [(except that no interest
payment shall be made on December 30, 2002)] until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.42% or (ii) 2.0%
over the rate of interest publicly announced by Bank One, N.A. from time to time
in Chicago, Illinois as its "base" or "prime" rate.

               Payments of principal of, interest on and any Make-Whole Amount
with respect to this Note are to be made in lawful money of the United States of
America at the principal office of Bank One, N.A. in Chicago or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreement referred to below.

               This Note is one of the Senior Notes (herein called the "Notes")
issued pursuant to the Note Purchase Agreement, dated as of December 15, 2002
(as from time to time amended, the "Note Purchase Agreement"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representations set forth in Section 6.2 of the Note Purchase Agreement.


                                  Exhibit 1(b)





               This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                  The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreement. This Note is
also subject to prepayment, in whole or from time to time in part, at the times
and on the terms specified in the Note Purchase Agreement, but not otherwise.

                  If an Event of Default, as defined in the Note Purchase
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

                  Payment of the principal of, and interest and Make-Whole
Amount, if any, on this Note, and all other amounts due under the Note Purchase
Agreement, is guaranteed pursuant to the terms of a Subsidiary Guaranty dated as
of December 15, 2002 of certain Subsidiaries of the Company.

                  This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
Illinois excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.

                                        CERNER CORPORATION


                                        By:
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------


                                       2

                                  Exhibit 1(b)









                                                                    EXHIBIT 1(c)

                               SUBSIDIARY GUARANTY

               THIS SUBSIDIARY GUARANTY (this "Guaranty") dated as of December
15, 2002 is made by Cerner Properties, Inc., Cerner International, Inc., Cerner
Multum, Inc., Cerner Health Connections, Inc., Cerner Citation, Inc., Cerner
Investment Corp., Cerner Campus Redevelopment Corporation, Cerner Radiology
Information Systems, Inc., Cerner DHT, Inc., Zynx Health Incorporated and Cerner
Health Facts, Inc. (each individually a "Guarantor" and collectively the
"Guarantors"), in favor of the holders from time to time of the Notes
hereinafter referred to, including each purchaser listed on Schedule A to the
Note Agreement hereinafter referred to, and their respective successors and
assigns (collectively, the "Holders" and each individually, a "Holder").

                                   WITNESSETH:

               WHEREAS, Cerner Corporation, a Delaware corporation (the
"Company"), and the Purchasers listed on Schedule A thereto entered into a Note
Purchase Agreement dated as of December 15, 2002 (as amended, supplemented,
restated or otherwise modified from time to time in accordance with its terms
and in effect, the "Note Agreement");

               WHEREAS, the Company owns, directly or indirectly, all of the
issued and outstanding capital stock of the Guarantors and, by virtue of such
ownership and otherwise, the Guarantors will derive substantial benefits as a
result of the purchase of the Company's Notes (as defined in the Note Agreement)
by the Purchasers;

               WHEREAS, it is a condition precedent to the obligation of the
Purchasers to purchase the Company's Notes that the Guarantors shall have
executed and delivered this Guaranty to the Holders; and

               WHEREAS, the Board of Directors of each Guarantor has determined
that the execution, delivery, and performance of this Guaranty is necessary and
convenient to the conduct, promotion and attainment of such Guarantor's business
and each of the Guarantors desires to execute this Guaranty to satisfy the
condition described in the preceding paragraph;

               NOW, THEREFORE, in consideration of the premises and other
benefits to the Guarantors, and of the purchase of the Company's Notes by the
Holders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantors make this Guaranty
as follows:

               SECTION 1. Definitions. Any capitalized terms not otherwise
herein defined, when used herein in capitalized form, shall have the respective
meanings attributed to them in the Note Agreement.



                                  Exhibit 1(c)


               SECTION 2. Guaranty. (a) The Guarantors, jointly and severally,
hereby unconditionally and irrevocably guarantee to the Holders the due, prompt
and complete payment by the Company of the principal of, Make-Whole Amount, if
any, and interest on, and each other amount due under, the Notes and the Note
Agreement, when and as the same shall become due and payable (whether at stated
maturity or by required or optional prepayment or by declaration or otherwise)
in accordance with the terms of the Notes and the Note Agreement (the Notes and
the Note Agreement being collectively hereinafter referred to as the "Note
Documents", and the amounts payable by the Company under any of the Note
Documents, and all other obligations of the Company thereunder (including any
attorneys' fees and expenses), being sometimes collectively hereinafter referred
to as the "Obligations"). This guaranty is a guaranty of payment, performance
and compliance and not just of collectibility and is in no way conditioned or
contingent upon any attempt to collect from or enforce performance or compliance
by the Company or upon any other event, contingency or circumstance whatsoever.
If for any reason whatsoever the Company shall fail or be unable duly,
punctually and fully to pay such amounts as and when the same shall become due
and payable or to perform or comply with any such obligation, covenant, term,
condition or undertaking, whether or not such failure or inability shall
constitute a "Default" or an "Event of Default" under any Note Document, the
Guarantors, without demand, presentment, protest or notice of any kind, will
forthwith pay or cause to be paid such amounts to the Holders under the terms of
such Note Document, in lawful money of the United States, at the place specified
in the Note Agreement, or perform or comply with the same or cause the same to
be performed or complied with, together with interest (to the extent provided
for under such Note Document) on any amount due and owing from the Company. The
Guarantors, jointly and severally, promptly after demand, will pay to the
Holders the reasonable costs and expenses of collecting such amounts or
otherwise enforcing this Guaranty, including, without limitation, the reasonable
fees and expenses of counsel. Notwithstanding the foregoing, the right of
recovery against each of the Guarantors under this Guaranty is limited to the
extent it is judicially determined with respect to such Guarantor that entering
into this Guaranty would violate section 548 of the United States Bankruptcy
Code or any comparable provisions of any state law, in which case such Guarantor
shall be liable under this Guaranty only for amounts aggregating up to the
largest amount that would not render such Guarantor's obligations hereunder
subject to avoidance under section 548 of the United States Bankruptcy Code or
any comparable provisions of any state law.

               (b) Each Guarantor hereby agrees that to the extent a Guarantor
shall have paid more than its proportionate share of any payment made hereunder,
such Guarantor shall be entitled to seek and receive contribution from and
against any other Guarantor hereunder who has not paid its proportionate share
of such payment. Each Guarantor's right of contribution shall be subject to the
terms and conditions of Section 6 hereof. The provisions of this paragraph (b)
shall in no respect limit the obligations and liabilities of any Guarantor to
the Holders, and each Guarantor shall remain liable to the Holders for the full
amount guaranteed by such Guarantor hereunder.

               SECTION 3. Guarantor's Obligations Absolute and Unconditional.
The obligations of each Guarantor under this Guaranty shall be primary, absolute
and unconditional


                                       2

                                  Exhibit 1(c)



obligations of such Guarantor, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense based upon any claim such Guarantor or any other Person may
have against the Company or any other Person, and to the full extent permitted
by applicable law shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance or
condition whatsoever (whether or not any Guarantor or the Company shall have any
knowledge or notice thereof), including, without limitation:

                  (a) any termination, amendment or modification of or deletion
         from or addition or supplement to or other change in any of the Note
         Documents or any other instrument or agreement applicable to any of the
         parties to any of the Note Documents;

                  (b) any furnishing or acceptance of any security, or any
         release of any security, for the Obligations, or the failure of any
         security or the failure of any Person to perfect any interest in any
         collateral;

                  (c) any failure, omission or delay on the part of the Company
         to conform or comply with any term of any of the Note Documents or any
         other instrument or agreement referred to in paragraph (a) above,
         including, without limitation, failure to give notice to any Guarantor
         of the occurrence of a "Default" or an "Event of Default" under any
         Note Document;

                  (d) any waiver of the payment, performance or observance of
         any of the obligations, conditions, covenants or agreements contained
         in any Note Document, or any other waiver, consent, extension,
         indulgence, compromise, settlement, release or other action or inaction
         under or in respect of any of the Note Documents or any other
         instrument or agreement referred to in paragraph (a) above or any
         obligation or liability of the Company, or any exercise or non-exercise
         of any right, remedy, power or privilege under or in respect of any
         such instrument or agreement or any such obligation or liability;

                  (e) any failure, omission or delay on the part of any Holder
         to enforce, assert or exercise any right, power or remedy conferred on
         such Holder in this Guaranty, or any such failure, omission or delay on
         the part of such Holder in connection with any Note Document, or any
         other action on the part of such Holder;

                  (f) any voluntary or involuntary bankruptcy, insolvency,
         reorganization, arrangement, readjustment, assignment for the benefit
         of creditors, composition, receivership, conservatorship,
         custodianship, liquidation, marshalling of assets and liabilities or
         similar proceedings with respect to the Company, any Guarantor or to
         any other Person or any of their respective properties or creditors, or
         any action taken by any trustee or receiver or by any court in any such
         proceeding;


                                       3

                                  Exhibit 1(c)


                  (g) any limitation on the liability or obligations of the
         Company or any other Person under any of the Note Documents, or any
         discharge, termination, cancellation, frustration, irregularity,
         invalidity or unenforceability, in whole or in part, of any of the Note
         Documents or any other agreement or instrument referred to in paragraph
         (a) above or any term hereof;

                  (h) any merger or consolidation of the Company or any
         Guarantor into or with any other corporation, or any sale, lease or
         transfer of any of the assets of the Company or any Guarantor to any
         other Person;

                  (i) any change in the ownership of any shares of capital stock
         of the Company or any change in the corporate relationship between the
         Company and any Guarantor, or any termination of such relationship;

                  (j) any release or discharge, by operation of law, of any
         Guarantor from the performance or observance of any obligation,
         covenant or agreement contained in this Guaranty;

                  (k) any lack of corporate power of the Company or any other
         Person at any time liable for part or all of the Obligations;

                  (l) the existence of any claim, defense, set-off, or other
         rights which the Company or any Guarantor may have at any time against
         any Holder, the Company or any Guarantor, or any other Person, whether
         in connection with this Guaranty, the Note Documents, the transactions
         contemplated thereby, or any other transaction;

                  (m) any failure of a Holder to notify any Guarantor of any
         renewal, extension, or assignment of the Obligations or any part
         thereof, or the release of any security, or if any action taken or
         refrained from being taken by a Holder, it being understood that a
         Holder shall not be required to give any Guarantor any notice of any
         kind under any circumstance whatsoever with respect to or in connection
         with the Obligations; or

                  (n) any other occurrence, circumstance, happening or event
         whatsoever, whether similar or dissimilar to the foregoing, whether
         foreseen or unforeseen, and any other circumstance which might
         otherwise constitute a legal or equitable defense or discharge of the
         liabilities of a guarantor or surety or which might otherwise limit
         recourse against any Guarantor.

               SECTION 4. Full Recourse Obligations. The obligations of each of
the Guarantors set forth herein constitute the full recourse obligations of such
Guarantor enforceable against it to the full extent of all its assets and
properties.

               SECTION 5. Waiver. Each of the Guarantors unconditionally waives,
to the extent permitted by applicable law, (a) notice of any of the matters
referred to in Section 3,


                                       4

                                  Exhibit 1(c)


(b) notice to the Guarantor of the incurrence of any of the Obligations, notice
to the Guarantor or the Company of any breach or default by the Company with
respect to any of the Obligations or any other notice that may be required, by
statute, rule of law or otherwise, to preserve any rights of the Holders against
the Guarantor, (c) presentment to or demand of payment from the Company or the
Guarantor with respect to any amount due under any Note Document or protest for
nonpayment or dishonor, (d) any right to the enforcement, assertion or exercise
by any Holder of any right, power, privilege or remedy conferred in the Note
Agreement or any other Note Document or otherwise, (e) any requirement of
diligence on the part of any Holder, (f) any requirement to exhaust any remedies
or to mitigate the damages resulting from any default under any Note Document,
(g) any notice of any sale, transfer or other disposition by a Holder of any
right, title to or interest in the Note Agreement or in any other Note Document,
(h) any right to assert against any Holder as a counterclaim, set-off or
cross-claim, any counterclaim, set-off or claim which it may now or hereafter
have against the Company or other Person liable on the Obligations, and (i) any
other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge, release or defense of a guarantor or surety or which might
otherwise limit recourse against the Guarantor.

               SECTION 6. No Subrogation, Contribution, Reimbursement or
Indemnity. Notwithstanding anything to the contrary in this Guaranty and the
other Note Documents, each of the Guarantors hereby irrevocably waives any and
all claims or other rights which may have arisen in connection with this
Guaranty to be subrogated to any of the rights (whether contractual, under the
United States Bankruptcy Code, as amended, including Section 509 thereof, under
common law or otherwise) of any Holder against the Company or against any
collateral security or guaranty or right of offset held by the Holders for the
payment of the Obligations until indefeasible payment in full of the
Obligations. Each of the Guarantors hereby further irrevocably waives all
contractual, common law, statutory or other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
the Company which may have arisen in connection with this Guaranty, whether or
not such remedy or right arises in equity, or under contract, statute or common
law until indefeasible payment in full of the Obligations. So long as the
Obligations remain, if any amount shall be paid by or on behalf of the Company
to any of the Guarantors on account of any of the rights waived in this
paragraph, such amount shall be held by the Guarantor in trust for the benefit
of the Holders, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the Holders (duly
indorsed by such Guarantor to the Holders, if required), to be applied against
the Obligations, whether matured or unmatured, in such order as the Holders may
determine. The provisions of this paragraph shall survive the term of this
Guaranty and the payment in full of the Obligations. Each Guarantor acknowledges
that it will receive direct and indirect benefits from the sale of the Notes by
the Company and that the waiver set forth in this Section 6 is knowingly made in
contemplation of such benefits.

               SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty
shall continue to be effective or be automatically reinstated, as the case may
be, if at any time payment, in whole or in part, of any of the sums due to any
Holder pursuant to the terms of the Note Agreement or any other Note Document is
rescinded or must otherwise be restored or



                                       5

                                  Exhibit 1(c)


returned by such Holder upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any other Person, or upon or as
a result of the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to the Company or other Person or any
substantial part of its property, or otherwise, all as though such payment had
not been made. If an event permitting the acceleration of the maturity of the
principal amount of the Notes shall at any time have occurred and be continuing,
and such acceleration shall at such time be prevented by reason of the pendency
against the Company or any other Person of a case or proceeding under a
bankruptcy or insolvency law, each of the Guarantors agrees that, for purposes
of this Guaranty and its obligations hereunder, the maturity of the principal
amount of the Notes and all other Obligations shall be deemed to have been
accelerated with the same effect as if a Holder had accelerated the same in
accordance with the terms of the Note Agreement or other applicable Note
Document, and the Guarantors shall forthwith pay such principal amount,
Make-Whole Amount, if any, and interest thereon and any other amounts guaranteed
hereunder without further notice or demand.

               SECTION 8. Term of Agreement. This Guaranty and all guaranties,
covenants and agreements of the Guarantors contained herein shall continue in
full force and effect and shall not be discharged until such time as all of the
Obligations shall be indefeasibly paid and performed in full and all of the
agreements of the Guarantors hereunder shall be duly paid and performed in full.

               SECTION 9. Representations and Warranties. Each Guarantor
represents and warrants to each Holder that:

                  (a) such Guarantor is a corporation duly organized, validly
         existing and in good standing under the laws of its jurisdiction of
         organization and has the corporate power and authority to own and
         operate its property, to lease the property it operates as lessee and
         to conduct the business in which it is currently engaged;

                  (b) such Guarantor has the corporate power and authority and
         the legal right to execute and deliver, and to perform its obligations
         under, this Guaranty, and has taken all necessary corporate action to
         authorize its execution, delivery and performance of this Guaranty;

                  (c) this Guaranty constitutes a legal, valid and binding
         obligation of such Guarantor enforceable in accordance with its terms,
         except as enforceability may be limited by bankruptcy, insolvency,
         reorganization, moratorium, fraudulent conveyance or similar laws
         affecting the enforcement of creditors' rights generally and by general
         equitable principles (regardless of whether such enforceability is
         considered in a proceeding in equity or at law);

                  (d) the execution, delivery and performance of this Guaranty
         will not violate any provision of any material requirement of law or
         material contractual obligation of such Guarantor and will not result
         in or require the creation or imposition of any Lien on


                                       6

                                  Exhibit 1(c)



         any of the properties, revenues or assets of such Guarantor pursuant to
         the provisions of any material contractual obligation of such Guarantor
         or any requirement of law;

                  (e) no consent or authorization of, filing with, or other act
         by or in respect of, any arbitrator or governmental authority is
         required in connection with the execution, delivery, performance,
         validity or enforceability of this Guaranty;

                  (f) no litigation, investigation or proceeding of or before
         any arbitrator or governmental authority is pending or, to the
         knowledge of such Guarantor, threatened by or against such Guarantor or
         any of its properties or revenues (i) with respect to this Guaranty or
         any of the transactions contemplated hereby or (ii) which could
         reasonably be expected to have a material adverse effect upon the
         business, operations or financial condition of such Guarantor and its
         Subsidiaries taken as a whole;

                  (g) the execution, delivery and performance of this Guaranty
         will not violate any provision of any order, judgment, writ, award or
         decree of any court, arbitrator or Governmental Authority, domestic or
         foreign, or of the charter or by-laws of such Guarantor or of any
         securities issued by such Guarantor; and

                  (h) such Guarantor (after giving due consideration to any
         rights of contribution) has received fair consideration and reasonably
         equivalent value for the incurrence of its obligations hereunder or as
         contemplated hereby and after giving effect to the transactions
         contemplated herein, (i) the fair value of the assets of such Guarantor
         exceeds its liabilities, (ii) such Guarantor is able to and expects to
         be able to pay its debts as they mature, and (iii) such Guarantor has
         capital sufficient to carry on its business as conducted and as
         proposed to be conducted.

               SECTION 10. Notices. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: (a) if to the
Company or a Holder at the addresses set forth in the Note Agreement or (b) if
to any of the Guarantors, at:

                       Cerner Corporation
                       2800 Rockcreek Parkway
                       Kansas City, Missouri 64117
                       Attention: Senior Financial Officer
                       With copy to:  Chief Legal Officer

or at such other address as the Guarantors shall from time to time designate in
writing to the Holders. Notices under this Section 10 will be deemed given only
when actually received.


                                       7

                                  Exhibit 1(c)



               SECTION 11. Survival. All warranties, representations and
covenants made by the Guarantors herein or in any certificate or other
instrument delivered by it or on its behalf hereunder shall be considered to
have been relied upon by the Holders and shall survive the execution and
delivery of this Guaranty, regardless of any investigation made by any Holder.
All statements in any such certificate or other instrument shall constitute
warranties and representations by the Guarantors hereunder.

               SECTION 12. Miscellaneous. Any provision of this Guaranty which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, each of the Guarantors hereby waives any provision
of law that renders any provisions hereof prohibited or unenforceable in any
respect. The terms of this Guaranty shall be binding upon, and inure to the
benefit of, the Guarantors and the Holders and their respective successors and
assigns. No term or provision of this Guaranty may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Guarantors and the Holders. The Section and paragraph headings in this
Guaranty are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof, and all references herein
to numbered Sections, unless otherwise indicated, are to Sections in this
Guaranty.

               SECTION 13. Information. Each Guarantor acknowledges and agrees
that it shall have the sole responsibility for obtaining from the Company such
information concerning the Company's financial condition or business operations
as such Guarantor may require, and that the Holders do not have any duty at any
time to disclose to any Guarantor any information relating to the business
operations or financial conditions of the Company.

               SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE
UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, EACH
GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF ILLINOIS LOCATED IN
CHICAGO, ILLINOIS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
HEREWITH.

               SECTION 15. WAIVER OF JURY TRIAL. EACH GUARANTOR AND EACH HOLDER
HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO EACH HOLDER ENTERING INTO THE NOTE AGREEMENT.


                                       8

                                  Exhibit 1(c)



               IN WITNESS WHEREOF, each of the Guarantors has caused this
Guaranty to be duly executed as of the day and year first above written.


                                   CERNER PROPERTIES, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                   CERNER INTERNATIONAL, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                   CERNER MULTUM, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                   CERNER HEALTH CONNECTIONS, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                   CERNER HEALTH FACTS, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   CERNER CITATION, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                       9

                                  Exhibit 1(c)



                                   CERNER CAMPUS REDEVELOPMENT CORPORATION

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   CERNER INVESTMENT CORP.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   CERNER RADIOLOGY INFORMATION SYSTEMS, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   CERNER DHT, INC.

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------


                                   ZYNX HEALTH INCORPORATED

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------



                                       10

                                  Exhibit 1(c)







                     FORM OF JOINDER TO SUBSIDIARY GUARANTY


          The undersigned (the "Guarantor"), joins in the Subsidiary Guaranty
dated as of December 15, 2002 from the Guarantors named therein in favor of the
Holders, as defined therein, and agrees to be bound by all of the terms thereof
and represents and warrants to the Holders that:

                  (a) the Guarantor is a corporation duly organized, validly
         existing and in good standing under the laws of its jurisdiction of
         organization and has the corporate power and authority to own and
         operate its property, to lease the property it operates as lessee and
         to conduct the business in which it is currently engaged;

                  (b) the Guarantor has the corporate power and authority and
         the legal right to execute and deliver, and to perform its obligations
         under, this Guaranty, and has taken all necessary corporate action to
         authorize its execution, delivery and performance of this Guaranty;

                  (c) this Guaranty constitutes a legal, valid and binding
         obligation of the Guarantor enforceable in accordance with its terms,
         except as enforceability may be limited by bankruptcy, insolvency,
         reorganization, moratorium, fraudulent conveyance or similar laws
         affecting the enforcement of creditors' rights generally and by general
         equitable principles (regardless of whether such enforceability is
         considered in a proceeding in equity or at law);

                  (d) the execution, delivery and performance of this Guaranty
         will not violate any provision of any material requirement of law or
         material contractual obligation of the Guarantor and will not result in
         or require the creation or imposition of any Lien on any of the
         properties, revenues or assets of the Guarantor pursuant to the
         provisions of any material contractual obligation of the Guarantor or
         any requirement of law;

                  (e) no consent or authorization of, filing with, or other act
         by or in respect of, any arbitrator or governmental authority is
         required in connection with the execution, delivery, performance,
         validity or enforceability of this Guaranty;

                  (f) no litigation, investigation or proceeding of or before
         any arbitrator or governmental authority is pending or, to the
         knowledge of the Guarantor, threatened by or against the Guarantor or
         any of its properties or revenues (i) with respect to this Guaranty or
         any of the transactions contemplated hereby or (ii) which could
         reasonably be expected to have a material adverse effect upon the
         business, operations or financial condition of the Guarantor and its
         Subsidiaries taken as a whole;



                                       11

                                  Exhibit 1(c)



                  (g) the execution, delivery and performance of this Guaranty
         will not violate any provision of any order, judgment, writ, award or
         decree of any court, arbitrator or Governmental Authority, domestic or
         foreign, or of the charter or by-laws of the Guarantor or of any
         securities issued by the Guarantor; and

                  (h) the Guarantor (after giving due consideration to any
         rights of contribution) has received fair consideration and reasonably
         equivalent value for the incurrence of its obligations hereunder or as
         contemplated hereby and after giving effect to the transactions
         contemplated herein, (i) the fair value of the assets of the Guarantor
         exceeds its liabilities, (ii) the Guarantor is able to and expects to
         be able to pay its debts as they mature, and (iii) the Guarantor has
         capital sufficient to carry on its business as conducted and as
         proposed to be conducted.

Capitalized terms used but not defined herein have the meanings ascribed thereto
in the Subsidiary Guaranty.

          IN WITNESS WHEREOF, the undersigned has caused this Joinder to
Subsidiary Guaranty to be duly executed as of __________, ____.


                                       [Name of Guarantor]




                                       12

                                  Exhibit 1(c)






                                                                  EXHIBIT 4.4(a)


                           FORM OF OPINION OF COUNSEL
                  FOR THE COMPANY AND THE SUBSIDIARY GUARANTORS


         The opinion of Randy D. Sims, Chief Legal Officer for the Company, and
Lynn R. Marasco, Senior Corporate Counsel for the Company, shall be to the
effect that:

         1. Each of the Company and each Guarantor is a corporation duly
organized and validly existing in good standing under the laws of its
jurisdiction of incorporation, and each has all requisite corporate power and
authority to carry on the business now being conducted by it, to own its
property and, in the case of the Company, to enter into and perform the
Agreement and to issue and sell the Notes and, in the case of the Guarantors, to
enter into and perform the Subsidiary Guaranty.

         2. The Agreement, the Notes and the Subsidiary Guaranty have been duly
authorized by proper corporate action on the part of the Company and each of the
Guarantors to the extent a party thereto, have been duly executed and delivered
by an authorized officer thereof, and constitute the legal, valid and binding
agreements of the Company and each of the Guarantors to the extent a party
thereto, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in a proceeding in equity or at law.

         3. The offering, sale and delivery of the Notes and the delivery of the
Subsidiary Guaranty do not require the registration of the Notes under the
Securities Act of 1933, as amended, nor the qualification of an indenture under
the Trust Indenture Act of 1939, as amended.

         4. No authorization, approval or consent of any governmental or
regulatory body is necessary or required in connection with the execution and
delivery by the Company of the Agreement, the execution and delivery by the
Guarantors of the Subsidiary Guaranty, the offering, issuance and sale by the
Company of the Notes or the issuance of the Subsidiary Guaranty by the
Guarantors, and no designation, filing, declaration, registration and/or
qualification with any governmental authority is required in connection with the
offer, issuance and sale of the Notes by the Company or the issuance of the
Subsidiary Guaranty by the Guarantors.

         5. The issuance and sale of the Notes by the Company and compliance
with the terms and provisions of the Notes and the Agreement by the Company and
compliance with the terms and provisions of the Subsidiary Guaranty by each of
the Guarantors will not conflict with, or result in any breach or violation of
any of the provisions of, or constitute a default under, or



                                 Exhibit 4.4(a)




result in the creation or imposition of any Lien upon the property of the
Company or any Subsidiary pursuant to the provisions of (i) the Certificate of
Incorporation (or other charter document) or By-Laws of the Company or any
Subsidiary or any loan agreement under which the Company or any Subsidiary is
bound, or other agreement or instrument known to such counsel under which the
Company or any Subsidiary is a party or by which any of them or their property
is bound or may be affected or (ii) any law (including usury laws) or
regulation, order, writ, injunction or decree of any court or governmental
authority applicable to the Company or any Subsidiary.

          6. There are no actions, suits or proceedings pending, or to such
counsel's knowledge, threatened against, or affecting the Company or any
Subsidiary, at law or in equity or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which are likely to result, either
individually or in the aggregate, in a Material Adverse Effect.

          7. Neither the Company nor any Subsidiary is: (i) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
or (ii) a "public utility" as defined in the Federal Power Act, as amended, or
(iii) an "investment company" or an "affiliated person" thereof, as such terms
are defined in the Investment Company Act of 1940, as amended.

          8. The issuance of the Notes and the use of the proceeds of the sale
of the Notes to repay Indebtedness of the Company to banks do not violate or
conflict with Regulation T, U or X of the Board of Governors of the Federal
Reserve System (12 C.F.R., Chapter II).

The opinion of Randy D. Sims and Lynn R. Marasco shall cover such other matters
relating to the sale of the Notes as the Purchasers may reasonably request. With
respect to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company and with respect to matters governed by the laws of any jurisdiction
other than the United States of America and the States of Delaware and Missouri,
such counsel may rely upon the opinions of counsel deemed (and stated in their
opinion to be deemed) by them to be competent and reliable.


                                       2

                                 Exhibit 4.4(a)




                                                                  EXHIBIT 4.4(b)


                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS


          The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:

          1. The Company is a corporation validly existing in good standing
under the laws of the State of Delaware, with all requisite corporate power and
authority to enter into the Agreement and to issue and sell the Notes.

          2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.

          3. The Subsidiary Guaranty is enforceable against each Subsidiary
Guarantor in accordance with its terms, except to the extent that enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless of
whether enforcement is sought in a proceeding in equity or at law.

          4. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes and the execution of the Subsidiary
Guaranty do not require the registration of the Notes or the Subsidiary Guaranty
under the Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.

          5. The issuance and sale of the Notes and compliance with the terms
and provisions of the Notes and the Agreement will not conflict with or result
in any breach of any of the provisions of the Certificate of Incorporation and
By-Laws of the Company.

          6. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the
Agreement or the Notes or the execution and delivery of the Subsidiary Guaranty.

The opinion of Gardner, Carton & Douglas also shall state that the legal opinion
of Randy D. Sims, Chief Legal Officer for the Company, and Lynn R. Marasco,
Senior Corporate Counsel for



                                 Exhibit 4.4(b)




the Company, delivered to you pursuant to the Agreement, is satisfactory in form
and scope to it, and, in its opinion, the Purchasers and it are justified in
relying thereon and shall cover such other matters relating to the sale of the
Notes as the Purchasers may reasonably request.



                                        2

                                 Exhibit 4.4(b)





                                                                    EXHIBIT 7.2


                             COMPLIANCE CERTIFICATE


          I, ___________________________, am the Treasurer and Chief Financial
Officer of _______________________________ (the "Company"). This certificate is
being delivered pursuant to Section 7.2 of the Note Purchase Agreement dated as
of December 15, 2002, between the Company and the Purchasers named in Schedule I
thereto.

          I hereby certify as follows:

         1.       Included is the Company's Form [10-Q] [10-K] for the fiscal
                  period ended ____________, _____, in which are set forth the
                  financial statements required to be provided by the Company
                  pursuant to Section [7.1(a)] [7.1(b)] of the Note Purchase
                  Agreement. These financial statements are complete and correct
                  and have been prepared in accordance with generally accepted
                  accounting principles (GAAP).

         2.       I have reviewed the provisions of the Note Purchase Agreement,
                  and have included in the Covenant Analysis the information and
                  computations required in order to establish whether the
                  Company was in compliance with the requirements of Section
                  10.1 through 10.12 at the end of the period covered by the
                  financial statements being furnished.

         3.       As of the date of the financial statements being furnished and
                  as of the date of this certificate or at any time during the
                  period covered by such financial statements, there existed or
                  exists no Default or Event of Default.


- ------------------------                          -----------------------------
Date                                              Treasurer and
                                                  Chief Financial Officer





                                   Exhibit 7.2



                                COVENANT ANALYSIS
                   FOR FISCAL PERIOD ENDED __________________


$60 million Note Purchase Agreement
(all dollar amounts in 000's)

Summary Information:



Section             Description                                   Requirement          Actual           Comments
- -------             -----------                                   -----------          ------           --------
                                                                                            
10.1                Minimum Consolidated Tangible Net Worth       $                    $
                                                                   ----------           --------

10.2                Fixed Charge Ratio                            2.00
                                                                                        --------

10.3                Ratio of Consolidated Indebtedness to         0.60
                    Consolidated Total Capitalization                                   --------

10.4(i)             Maximum Limitation on Liens                   $                    $
                                                                   ----------           --------

10.5                Maximum Restricted Payments                   $                    $
                                                                   ----------           --------

10.6                Mergers or Consolidations [During the
                    period of this analysis, no transactions
                    subject to the limitations of Sec. 10.6
                    were completed.]

10.7                Sale of Assets [During the period of this
                    analysis, no transactions subject to the
                    limitations of Sec. 10.7 were completed.]

10.8                Disposition of Stock of Restricted
                    Subsidiaries [During the period of the
                    analysis, no transactions subject to the
                    limitations of Sec. 10.8 were completed.]




                                        2

                                   Exhibit 7.2




                 
10.9                Designation of Unrestricted Subsidiaries
                    [During the period of the analysis, the
                    Company did not designate any Restricted
                    Subsidiary as an Unrestricted Subsidiary.]

10.10               Nature of Business [During the period of
                    this analysis, no activities subject to the
                    restrictions of Sec. 10.10 were engaged in.]

10.11               Transactions with Affiliates [During the
                    period of this analysis, no transactions
                    violating the restrictions of Sec. 10.11
                    were completed.]

10.12               Subsidiary Guaranties [During the period of
                    this analysis, no Subsidiaries were
                    required to become a Subsidiary Guarantor.]





                                       3

                                   Exhibit 7.2




                                COVENANT ANALYSIS
                     FOR FISCAL QUARTER ENDED ______________

$100 million Note Agreement
(all dollar amounts in 000's)

SECTION                    SUPPORTING CALCULATIONS

10.1     CONSOLIDATED TANGIBLE NET WORTH MINIMUM (CTNWM):

         Requirement:      The consolidated tangible net worth must be greater
                           than the defined minimum allowable amount.

                           CTNWM = $250,000,000 + 50% of Consolidated Net Income
                           after 9/28/02


                           Consolidated Net Income after 9/28/02   $
                                                                    -----------
                           CTNWM =              $
                                                 -------------

                           Consolidated Tangible Net Worth ACTUAL
                           (CTNWA):                                $
                                                                    -----------

                           CTNWM = Stockholder's Equity - Intangibles


                           Stockholder's Equity                    $

                           Intangibles                             $
                                                                    -----------

                           CTNWA =                                 $
                                                                    ===========

                           Minimum (CTNWM)                         $
                                                                    -----------

                           Actual (CTNWA)                          $
                                                                    -----------

         Results:          Consolidated Tangible Net Worth (CTNWA) is greater
                           than the minimum requirement.



                                       4

                                   Exhibit 7.2




10.2     FIXED CHARGE RATIO

         Requirement:   The Fixed Charge Ratio must be greater than 2.00


                        Consolidated Income Available for Fixed
                        Charges                                     $
                                                                    -----------

                           Fixed Charges                           $
                                                                    -----------

                           Fixed Charge Ratio =
                                                                    -----------

         Results:       Cerner's Fixed Charge Ratio is greater than 2.00.

10.3     LIMITATIONS ON DEBT

         Requirement:   Cerner cannot exceed certain debt limitations as
                        defined below using Consolidated Total Capitalization
                        (CTC)

                        CTC = CTNWA + Total Debt


                        ST Debt
                                               -----------

                           Curr LT Debt
                                               -----------

                           LT Debt
                                               ===========


                                    Total Debt
                                                                    -----------

                                    Consolidated Senior Debt
                                                                    -----------

                                    Consolidated Debt
                                                                    -----------
                             CTC = $
                                    -----------

10.3       CONSOLIDATED DEBT LIMITATION = < 60% OF CTC

                           60% of CTC =
                                                                    -----------

                           Total Debt    =
                                                                    -----------

         Results:  Consolidated Debt is below limitation



                                       5

                                   Exhibit 7.2






10.4     LIMITATION ON LIENS

         Requirement:  Cerner cannot exceed lien limitations defined as 20% of
                       CTNWA


                       Liens                                       $
                                                                    -----------

                       Indebtedness of Restricted
                           Subsidiaries                            $
                                                                    -----------

                       Preferred Stock of
                           Restricted Subsidiaries                 $
                                                                    -----------

                       20% of CNWA                                 $
                                                                    -----------

                       Liens + RS Debt +
                           RS Preferred                            $
                                                                    -----------

         Results:      Liens are below limitation

10.5     LIMITATION ON RESTRICTED PAYMENTS

         Requirement:  Cerner cannot exceed limitations on restricted
                       payments defined below as = $80,000,000 + 50% of
                       Consolidated Net Income after 9/28/02 (CNI) + the net
                       proceeds received after 9/28/02 from the sale of
                       common stock or debt which is subsequently converted
                       to common stock.


                       Consolidated Net Income after 9/28/02 (CNI) $
                                                                    -----------

                       Sale of Common Stock after 9/28/02          $
                                                                    -----------

                       Restricted Payments after 9/28/02           $
                                                                    -----------

                       $80,000,000 + 50% of CNI + stock            $
                       proceeds                                     -----------

                       Restricted Payments after 9/28/02           $
                                                                    -----------

         Results:      Restricted Payments are below limitations



                                       6

                                   Exhibit 7.2

EX-10.(Y)

                                                                   EXHIBIT 10(y)

                      CERNER CORPORATION EXECUTIVE DEFERRED
                                COMPENSATION PLAN


                                    ARTICLE I

                        ESTABLISHMENT AND PURPOSE OF PLAN

          1.1 PLAN ESTABLISHMENT. Cerner Corporation, a Delaware corporation,
hereby establishes the Cerner Corporation Executive Deferred Compensation Plan
effective August 1, 1999.


          1.2 PURPOSE OF PLAN. The purpose of the Cerner Corporation Executive
Deferred Compensation Plan is to provide deferred compensation benefits to
certain Associates of Cerner Corporation who are members of a select group of
management or highly compensated Associates.

                                   ARTICLE II

                                   DEFINITIONS

          2.01 ACCOUNT shall mean a memorandum account maintained by the Company
for bookkeeping purposes only, to which is credited or debited, as appropriate,
the amount of an Executive's Deferral Contributions, Company Contributions (if
any), Investment Return, forfeitures, and distributions.

          2.02 ASSOCIATE shall mean an Associate of the Company.

          2.03 CODE shall mean the Internal Revenue Code of 1986 as from time to
time amended.

          2.04 COMMITTEE shall mean the Committee selected by the Company to be
responsible for administering and interpreting the Plan as provided in Article
X.

          2.05 COMPANY shall mean Cerner Corporation.

          2.06 COMPANY CONTRIBUTIONS shall mean Performance Contributions (if
any), Discretionary Contributions (if any) and Matching Contributions (if any).

          2.07 COMPENSATION shall mean the total salary, bonus and commissions
payable to an Executive by the Company in a given Year. Compensation shall
include Deferral Contributions under the Plan and shall include salary deferral
contributions made to a retirement plan of the Employer intended to qualify
under Section 401(k) of the Code.




          2.08 DEFERRAL CONTRIBUTION shall mean the amount credited to an
Executive's Account for a particular Year pursuant to the voluntary deferral
election of the Executive.

          2.09 DESIGNATED BENEFICIARY shall mean the individual, individuals,
trust or estate identified by an Executive to receive any benefits payable
hereunder on account of the death of the Executive. Each such designation shall
revoke any prior designation executed by the Executive. If no beneficiary is
effectively designated, then the Designated Beneficiary shall be the Executive's
surviving spouse, but if there is no surviving spouse then the Designated
Beneficiary shall be the personal representatives of the Executive's estate.

          2.10 DISCRETIONARY CONTRIBUTION shall mean the amount, if any,
allocated by the Company to an Executive's Account pursuant to Section 5.2.

          2.11 ERISA shall mean the Employee Retirement Income Security Act of
1974 as from time to time amended.

          2.12 EXECUTIVE shall mean an Associate who satisfies the requirements
for participation in the Plan under Article III and for whom an Account is
maintained.

          2.13 INVESTMENT ELECTION shall mean the election made by the Executive
from time to time as provided in Article VI which shall be used for purposes of
the crediting or debiting, as applicable, of the Investment Return to the
Executive's Account.

          2.14 INVESTMENT RETURN shall mean the hypothetical investment return,
which may include earnings and losses, on the amounts credited to an Executive's
Account as determined under Article VI.

          2.15 MATCHING CONTRIBUTIONS shall mean the amount allocated to an
Executive's Account pursuant to Section 5.1.

          2.16 PARTICIPATION AGREEMENT shall mean an agreement executed by an
Executive by which the Executive acknowledges acceptance of the terms and
conditions of the Plan.

          2.17 PERFORMANCE CONTRIBUTION shall mean the amount, if any, allocated
to an Executive's Account pursuant to Section 5.3.

          2.18 PERMANENT DISABILITY shall mean an Executive's inability to
perform or engage in the primary functions of his or her position with the
Company by reason of any medically determinable physical or mental impairment
that the Committee determines is likely to be permanent.

          2.19 PLAN shall mean the Cerner Corporation Executive Deferred
Compensation Plan as contained herein and as from time to time amended.




          2.20 UNFORESEEABLE EMERGENCY shall mean a severe financial hardship to
the Executive resulting from a sudden and unexpected illness or accident of the
Executive or a dependent (as defined in Section 152 of the code) of the
Executive, loss of the Executive's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Executive.

          2.21 YEAR shall mean the calendar year; provided, however, that the
initial Year of the Plan shall be a period which begins upon the effective date
of the Plan and ends the next following December 31.

                                  ARTICLE III

                                 PARTICIPATION

          3.1 DESIGNATION BY COMPANY. Prior to the first day of each Year the
Company shall designate certain Associates as eligible Executives to make
Deferral Contributions hereunder for such Year; provided, however, that if an
Associate becomes employed by the Company after the first day of a Year or
receives a promotion after the first day of the year such that the Associate
meets the criteria set forth in Section 3.2, then the Company may designate such
Associate as an Executive eligible to make Deferral Contributions hereunder at
any time during such Year. In addition, at any time the Company determines to
make Company Contributions hereunder, the Company shall designate certain
Associates as Executives eligible for allocations of specific types of such
Company Contributions.

          3.2 CRITERIA FOR DESIGNATION. An Associate must be a member of a
select group of management or highly compensated Associates within the meaning
of ERISA as determined by the Company in order to be designated by the Company
as an Executive eligible to make Deferral Contributions under the Plan or as an
Executive eligible for allocation of any Company Contributions under the Plan.

                                   ARTICLE IV

                             DEFERRAL CONTRIBUTIONS

          4.1 TIME OF ELECTION. An Executive's election to make Deferral
Contributions with respect to services performed in a particular Year must be
made prior to the first day of such Year; provided, however, that if an
Associate not previously eligible to make Deferral Contributions is designated
during a Year as eligible to make Deferral Contributions for such Year then such
Associate's election to make Deferral Contributions must be made within 30 days
after the Associate is designated as an eligible Executive by the Company. An
eligible Executive must make a new election with respect to each Year for which
the Executive elects to make Deferral Contributions.

          4.2 METHOD OF ELECTION. An election by an Executive to make Deferral
Contributions hereunder shall be made in writing on a form furnished by the
Committee and




shall be delivered to the Committee prior to the first day of the Year for which
the election is made, or, in the case of an Executive who becomes eligible to
make Deferral Contributions during the Year, prior to the day such election is
first effective.

          4.3 CHANGE OR TERMINATION OF ELECTION. Once an election for Deferral
Contributions is made hereunder for a particular Year, the Executive cannot
change the election to a greater or lesser amount during such Year nor can the
Executive terminate the election for a particular Year at any time during such
Year; provided, however, the Committee may permit the Executive to terminate
during a Year the Executive's election to make Deferral Contributions if the
Committee determines that the Executive has an Unforeseeable Emergency resulting
in a financial need that can be met by the termination of Deferral
Contributions.

          4.4 MANDATORY TERMINATION OF DEFERRAL CONTRIBUTIONS. If a distribution
is made to an Executive on account of an Unforeseeable Emergency as provided in
Section 8.3, then the Executive's current election (if any) to make Deferral
Contributions shall terminate at the time of such distribution, and the
Executive may make no Deferral Contributions for the duration of the Year in
which such distribution is made.

                                    ARTICLE V

                              COMPANY CONTRIBUTIONS

          5.1 COMPANY MATCHING CONTRIBUTION. The Company may in its sole and
absolute discretion direct the Committee to allocate a contribution from time to
time to the Accounts of those Executives who have made Deferral Contributions
during the applicable period. The amount of any such Matching Contribution, and
the applicable period for which it is allocated, shall be determined by the
Company in its sole and absolute discretion.

          5.2 COMPANY DISCRETIONARY CONTRIBUTION. The Company may in its sole
and absolute discretion direct the Committee to allocate a contribution from
time to time in any amount or amounts it determines to the Account of any
Executive. The amount of any such Discretionary Contribution allocated to the
Account of any particular Executive, and the Executive or Executives to whose
accounts such allocations are made, shall be determined by the Company in its
sole and absolute discretion, and need not be uniform for all Executives.

          5.3 COMPANY PERFORMANCE CONTRIBUTION . The Company may in its sole and
absolute discretion direct the Committee to allocate a Performance Contribution
in such amount as the Company determines in its sole and absolute discretion to
the Account of any Executive.




                                   ARTICLE VI

                                INVESTMENT RETURN

          6.1 ADJUSTMENTS TO ACCOUNT. An Executive's Account shall be adjusted
as of the last day of each Year to reflect the Investment Return applicable to
the Executive's Account for such Year as determined by the Company. Such
adjustment may be a net credit to the Executive's Account, in the case of net
investment gain, or a net debit to the Executive's Account, in the case of net
investment loss. In addition to the annual adjustment hereunder, the Executive's
Account shall be adjusted at such other time or times as the Company may
determine.

          6.2 DETERMINATION OF INVESTMENT RETURN. The amount of the applicable
Investment Return shall be determined based upon the Executive's Investment
Election; provided, however, that the Investment Return applicable to Company
Contributions (if any) shall be determined as if all Company Contributions are
invested in common stock of the Company.

          6.3 INVESTMENT ELECTION. An Executive's Investment Election shall be
an election by the Executive among certain investment options designated from
time to time by the Company which investment options shall include common stock
of the Company. The Executive's Investment Election will be used solely for
purposes of determining the Investment Return applicable to the Executive's
Account and does not give the Executive any right to receive any particular
asset. The Executive's Investment Election shall be in whole percentages among
one or more of the investment options, and shall be made on a form furnished by
the Committee. An Executive may complete a new Investment Election form at any
time. The Executive's Investment Election form shall be effective prospectively
only and only after it is received by the Committee.



                                   ARTICLE VII

                                     VESTING

          7.1 DEFERRAL CONTRIBUTIONS. An Executive shall be fully vested at all
times in the amount of Deferral Contributions credited to the Executive's
Account subject to any adjustments for Investment Return.

          7.2 MATCHING CONTRIBUTIONS AND DISCRETIONARY CONTRIBUTIONS. Subject to
the provisions of Section 7.4 and Section 7.5, the Matching Contribution, if
any, allocated to an Executive's Account in a given Year, and the Discretionary
Contribution, if any, allocated to an Executive's Account in a given Year, as
adjusted for Investment Return applicable to each such particular contribution
for a particular Year shall vest from the initial date of allocation to the
Executive's Account in accordance with the following schedule:



       NUMBER OF FULL YEARS AFTER YEAR OF ALLOCATION                      CUMULATIVE PERCENTAGE VESTED
                                                                       
                           1                                                            20%
                           2                                                            40%
                           3                                                            60%
                           4                                                            80%
                           5                                                           100%





          7.3 PERFORMANCE CONTRIBUTIONS. Subject to the provisions of Section
7.4 and Section 7.5, the Performance Contribution, if any, allocated to an
Executive's Account in a given Year, as adjusted for Investment Return
applicable thereto, shall vest from the initial date of allocation to the
Executive's Account in accordance with the following schedule:




NUMBER OF FULL YEARS AFTER YEAR OF ALLOCATION                             CUMULATIVE PERCENTAGE VESTED
                                                                       
                           1                                                             0%
                           2                                                             0%
                           3                                                           100%


          7.4 FORFEITURE UPON BREACH OF AGREEMENT. Notwithstanding the
provisions of Section 7.2 and Section 7.3, if the Committee determines that an
Executive has breached the provisions of the employment agreement between the
Executive and the Company (including, but not limited to, provisions regarding
confidentiality, non-competition and non-solicitation), then all Company
Contributions allocated to the Executive's Account and the Investment Return
applicable to such Company Contributions shall be forfeited in full immediately
upon such determination of breach effective as of the date of such breach.

          7.5 FULL VESTING UPON DEATH. Notwithstanding the provisions of Section
7.2 and Section 7.3, if an Executive dies while employed by the Company then the
entire amount of the Executive's Account at the time of the Executive's death
and thereafter shall be fully vested.

                                  ARTICLE VIII

                                  DISTRIBUTIONS

          8.1 METHOD OF PAYMENT. The method of payment to an Executive shall be
either a lump sum cash distribution or 10 annual installments. The Executive
shall elect a method of payment upon commencement of participation in the Plan.
The Executive may change such election at the time the Executive makes a new
voluntary deferral election, but any such change shall apply only to Deferral
Contributions and Company Contributions thereafter made and the Investment
Return applicable to such contributions.

          8.2 TIME OF PAYMENT. Payment of an Executive's benefit with respect to
the Executive's Deferral Contributions and the Investment Return applicable to
such contributions shall be made (in the case of a lump sum payment) or shall
commence (in the case of installment payments) at the time elected by the
Executive at the time the Executive elects to make such Deferral Contributions;
provided, however, in no event shall such payment with respect to any Deferral
Contributions and the Investment Return applicable to such contributions be made
or commence earlier than the first to occur of (a) three years after the date of
the Executive's election to make such Deferral Contributions, or (b) the
Executive's termination of employment with the Company. Payment of an
Executive's vested benefit with respect to Company Contributions (if any) and
the Investment Return applicable to such contributions shall be made





(in the case of a lump sum payment) or shall commence (in the case of
installment payments) as soon as practicable after the last day of the Year
which is the second Year following the Year of the Executive's termination of
employment. Notwithstanding the preceding provisions of this Section 8.2, if an
Executive terminates employment with the Company on account of death or
Permanent Disability, then payment of the Executive's vested benefit shall be
made (in the case of a lump sum payment) or shall commence (in the case of
installment payments) as soon as practicable following the Company's
determination of the Executive's disability or death.

          8.3 DISTRIBUTION ON ACCOUNT OF UNFORESEEABLE EMERGENCY.
Notwithstanding the preceding provisions of this Article VIII, if the Committee
determines that the Executive has an Unforeseeable Emergency, then upon the
Executive's request the Committee may determine that such percentage of the
Executive's vested benefit as the Committee determines is necessary to satisfy
such Unforeseeable Emergency shall be distributed to the Executive.

                                   ARTICLE IX

                               DEATH OF EXECUTIVE

          In the event of the Executive's death prior to distribution to the
Executive of the Executive's benefits hereunder, or prior to the completion of
the distribution of such benefits to the Executive if distribution has commenced
but has not been completed as of the date of the Executive's death, then the
amount to be distributed to the Executive, or the remaining amount to be
distributed to the Executive if distribution to the Executive has commenced,
shall instead be distributed in a lump sum to the Executive's Designated
Beneficiary.

                                    ARTICLE X

                                 ADMINISTRATION

          10.1 COMMITTEE AUTHORITY. The Committee shall have the sole and
absolute discretion to interpret the Plan and administer the Plan in accordance
with such interpretations and any such interpretations shall be binding upon all
interested persons. The Committee shall be authorized to establish rules and
procedures as it deems advisable or necessary for the administration of the
Plan. All decisions of the Committee shall be final, conclusive, and binding
upon all persons having any interest in the Plan. In the administration of the
Plan, the Committee may, from time to time, (i) delegate its duties, (ii) employ
agents and delegate to them such duties as it sees fit, and (iii) consult with
legal counsel, who may be legal counsel to the Company.

          10.2 CLAIMS PROCEDURE. If an Executive believes that the Executive is
being denied a benefit which the Executive is entitled under the Plan, the
Executive may file a written request for such benefit with the Committee (in
care of the Company at its principal place of business) setting forth the
Executive's claim. Upon receipt of a claim, the Committee shall advise the
Executive that a reply will be forthcoming within ninety (90) days and shall
deliver





such reply within such period, unless the Committee extends the reply period for
an additional ninety (90) days for reasonable cause. If the claim is denied in
whole or in part, the Committee shall so advise the Executive in writing setting
forth: (i) the specific reason or reasons for such denial; (ii) the specific
reference to pertinent provisions of the Plan on which such denial is based;
(iii) a description of any additional material or information necessary for the
Executive to perfect the claim and an explanation why such material or such
information is necessary; and (iv) appropriate information as to the steps to be
taken if the Executive wishes to submit the claim for review. Any request for
review must be submitted in writing by the Executive to the Committee (in care
of the Company at its principal place of business) within sixty (60) days after
the receipt by the Executive of the denial of the Executive's claim. The
Executive or the Executive's duly authorized representative may, but need not,
review the pertinent documents and submit issues and comments in writing for
consideration by the Committee. If the Executive does not request a review of
the Committee's determination within such sixty (60) day period, the Executive
shall be barred and estopped from challenging the Committee's determination.
Within sixty (60) days after the Committee's receipt of a request for review, it
will review the determination. After considering all materials presented by the
Executive, the Committee will render a written opinion, written in a manner
calculated to be understood by the Executive, setting forth the specific reasons
for the decision and containing specific references to the pertinent provisions
of this Plan on which the decision is based. If special circumstances require
that the sixty (60) day time period be extended, the Committee will so notify
the Executive and will render the decision as soon as possible, but no later
than one hundred twenty (120) days after receipt of the request for review.

                                   ARTICLE XI

                                  MISCELLANEOUS

          11.1 STATUS OF EXECUTIVES. Executives have the status of general
unsecured creditors of the Company and the Plan constitutes only a promise by
the Company to make benefit payments in the future. Each Executive shall be
required to sign the Participation Agreement consenting to the provisions of the
Plan.

          11.2 NON-ALIENATION OF EXECUTIVE'S BENEFITS. Except as required by
law, no benefit under this Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge
or encumbrance of any kind, nor shall any benefit under this Plan be subject in
any manner to the debts or liabilities of any person, and any attempt to so
alienate or subject any such benefit at any time shall be void.

          11.3 EMPLOYMENT. The adoption of the Plan does not give any person any
right to be retained in the employ of the Company, and no rights granted under
the Plan shall be construed as creating a contract of employment. The right and
power of the Company to dismiss or discharge any person is expressly reserved.

          11.4 NO TRUST RELATIONSHIP. Nothing contained herein and no actions
taken pursuant to the Plan shall create or be construed to create a trust of any
kind or a fiduciary





relationship between the Company and any Executive. Neither the Company nor the
Committee shall be considered a trustee by reason of the Plan.

          11.5 AMENDMENT AND TERMINATION. The Company can amend or terminate the
Plan at any time in its sole discretion; provided, however, no amendment or
termination of the Plan shall affect the rights of any Executive to benefits
accrued under the Plan at the time of such amendment or termination (though
unless otherwise provided all such benefits shall continue to be subject to the
provisions of Article VII).

          11.6 CONSTRUCTION OF PLAN. The Plan shall be construed so that an
Executive shall not be deemed to be in constructive receipt or have any economic
benefit with respect to any Compensation deferred under the Plan until such
Compensation is paid to the Executive and this Plan shall not be deemed to be
funded within the meaning of ERISA.

          11.7 WITHHOLDING OF TAXES. The Company shall cause taxes to be
withheld with respect to Compensation deferred hereunder as required by law and
the Company shall cause taxes to be withheld from amounts distributed hereunder
as required by law.

          11.8 INDEMNITY OF COMPANY. The Company indemnifies and holds harmless
each member of the Committee from and against any and all losses resulting from
such member's actions in such member's official capacity in the administration
of the Plan.

          11.9 GOVERNING LAW. The provisions of the Plan, except where otherwise
required by law, shall be governed, construed, enforced, and administered in
accordance with the laws of the State of Missouri.

          11.10 HEADINGS. The headings in the Plan have been inserted for
convenience only and shall not affect the meaning or interpretation of the Plan.

          IN WITNESS WHEREOF, this Plan is hereby executed as of the ____ day of
__________, 1999, by a duly authorized officer of the Company.



                                        CERNER CORPORATION


                                        By:
                                           ------------------------------------
                                           Title:
                                                 ------------------------------


ATTEST:



Title:
      -----------------------

EX-22

                                                                               .
                                                                               .
                                                                               .
                                                                      EXHIBIT 22

                           SUBSIDIARIES OF REGISTRANT



                   NAME                                          STATE OF INCORPORATION
                   ----                                          ----------------------
                                                           
      Cerner Corporation Pty Limited                          New South Wales (Australia)

         Cerner Deutschland GmbH                                        Germany

             Cerner FSC, Inc.                                           Barbados

     Cerner Health Connections, Inc.                                    Delaware

         Cerner Health Facts, Inc.                                      Delaware

           Cerner Belgium, Inc.                                         Delaware

        Cerner International, Inc.                                      Delaware

              Cerner Limited                                         United Kingdom

          Cerner Citation, Inc.                                         Delaware

         Cerner Properties, Inc.                                        Delaware

         Cerner Singapore Limited                                       Delaware

        Cerner (Malaysia) Sdn Bnd                                       Malaysia

          Cerner Canada Limited                                         Delaware

           Cerner Multum, Inc.                                          Delaware

         Cerner Investment Corp.                                         Nevada

 Cerner Campus Redevelopment Corporation                                Missouri

Cerner Radiology Information Systems, Inc.                               Texas

             Cerner DHT, Inc.                                           Delaware

        Zynx Health Incorporated                                       California

            Image Devices GmbH                                          Germany

EX-23

                                                                      EXHIBIT 23



                          INDEPENDENT AUDITORS' CONSENT



The Board of Directors
Cerner Corporation:


We consent to incorporation by reference in the Registration Statements (No.
333-77029, No. 333-93379, No. 33-63226, No. 333-24899, No. 333-24909, No.
333-40156, No. 333-75308, No. 333-70170, No. 33-56868, No. 33-55082, No.
33-41580, No. 33-39777, No. 33-39776, No. 33-20155, and No. 33-15156) on Form
S-8, Registration Statement No. 33-72756 on Form S-3, and Registration Statement
No. 333-72024 on Form S-4 of Cerner Corporation of our reports, dated January
23, 2003, relating to the consolidated balance sheets of Cerner Corporation as
of December 28, 2002 and December 29, 2001 and the related consolidated
statements of operations, changes in equity, and cash flows and the related
schedule for each of the years in the three-year period ended December 28, 2002,
which reports are included herein.

Our reports dated January 23, 2003 refer to the Company's adoption on December
30, 2001 of Statement of Financial Accounting Standard No. 142 Goodwill and
Intangible Assets.



                                                   KPMG LLP

Kansas City, Missouri
March 11, 2003

EX-99.1

                                                                   EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K for the fiscal
year ended December 28, 2002 (the Report) by Cerner Corporation (the Company),
the undersigned, as the Chief Executive Officer of the Company, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                    /s/ Neal L. Patterson
                    Neal L. Patterson, Chairman of the Board
                    and Chief Executive Officer

                    March 11, 2003

EX-99.2

                                                                    EXHIBIT 99.2



                            CERTIFICATION PURSUANT TO
                 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the filing of the Annual Report on Form 10-K for the fiscal
quarter ended December 28, 2002 (the Report) by Cerner Corporation (the
Company), the undersigned, as the Chief Financial Officer of the Company, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                                    /s/ Marc G. Naughton
                                    ----------------------------------------
                                    Marc G. Naughton, Senior Vice President,
                                    Treasurer and Chief Financial Officer

                                    March 11, 2003