Exhibit 10.2

 

SEVERANCE AND CHANGE IN CONTROL AGREEMENT

 

This Severance and Change in Control Agreement (“Agreement”) made and entered
into as of the 26th day of July, 2013, by and between AAR CORP., a Delaware
corporation (“Company”), and John Fortson (“Employee”).

 

WHEREAS, the Company currently employs Employee as an employee at will in the
capacity of Vice President-Chief Financial Officer and Treasurer; and

 

WHEREAS, the Company and Employee desire to enter into an Agreement as herein
set forth to reflect certain mutually agreed changes to the terms and conditions
thereof; and

 

NOW, THEREFORE, in consideration of the mutual agreements herein set forth and
other good and valuable consideration, the parties hereto agree as follows:

 

1.                                      Employment.  Employee will continue
employment with the Company as an at-will employee subject to the terms and
conditions hereinafter set forth.

 

2.                                      Duties.  During the continuation of
Employee’s employment, Employee shall:

 

(a)                                 well and faithfully serve the Company and do
and perform assigned duties and responsibilities in the ordinary course of
Employee’s employment and the business of the Company (within such limits as the
Company may from time to time prescribe), professionally, faithfully and
diligently.

 

(b)                                 devote Employee’s full time, energy and
skill to the business of the Company and Employee’s assigned duties and
responsibilities, and to the promotion of the best interests of the Company;
provided that Employee shall not (to the extent not inconsistent with Section 5
below) be prevented from (i) serving as a director of any corporation consented
to in advance in writing by the Company, (ii) engaging in charitable, religious,
civic or other non-profit community activities, or (iii) investing his personal
assets in such form or manner as will not require any substantial services on
Employee’s part in the operation or affairs of the business in which such
investments are made or which would detract from or interfere or cause a
conflict of interest with performance of Employee’s duties hereunder.

 

(c)                                  observe all policies and procedures of the
Company in effect from time to time applicable to employees of the Company
including, without limitation, policies with respect to employee loyalty and
prohibited conflicts of interest.

 

3.                                      Benefits.  Employee shall be entitled to
participate, according to the eligibility provisions of each, in such welfare
plans (including but not limited to medical, dental, life, accident and
disability insurance programs), vacation, retirement plans and other fringe
benefits as may be in effect from time to time and available to other officers
of the Company during Employee’s employment term.  Employee shall also be
entitled to participate in such additional executive fringe benefits as may be
authorized from time to time by the President and Chief Executive Officer of the
Company.  Employee shall be eligible to participate in

 

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the Company’s Supplemental Key Employee Retirement Plan as an executive level
participant.

 

4.                                      Confidential Information, Assignment of
Inventions.

 

(a)                                 Employee acknowledges that the trade
secrets, confidential information, secret processes and know-how developed and
acquired by AAR CORP. and its affiliates or subsidiaries (together the
“Affiliated Companies”) are among their most valuable assets and that the value
of such information may be destroyed by unauthorized disclosure.  All such trade
secrets, confidential information, secret processes and know-how imparted to or
learned by Employee in the course of his employment with respect to the business
of the Affiliated Companies (whether acquired before or after the date hereof)
will be deemed to be confidential and will not be used or disclosed by Employee,
except to the extent necessary to perform Employee’s duties and, in no event,
disclosed to anyone outside the employ of the Affiliated Companies and their
authorized consultants and advisors, unless (i) such information is or has been
made generally available to the public, (ii) disclosure of such information is
required by law in the opinion of Employee’s counsel (provided that written
notice thereof is given to the Company as soon as possible but not less than 24
hours prior to such disclosure), or (iii) express written authorization to use
or disclose such information has been given by the Company.  If Employee ceases
to be employed by the Company for any reason, Employee shall not take any
electronically stored data, documents or other papers containing or reflecting
trade secrets, confidential information, secret processes, know-how, or computer
software programs from the Company.  Employee acknowledges that Employee’s
employment hereunder will place Employee in a position of utmost confidence and
that Employee will have access to confidential information concerning the
operation of the business of the Affiliated Companies, including, but not
limited to, manufacturing methods, developments, secret processes, know-how,
computer software programs, costs, prices and pricing methods, sources of supply
and customer names and relations.  All such information is in the nature of a
trade secret and is the sole and exclusive property of the Affiliated Companies
and shall be deemed confidential information for the purposes of this paragraph.

 

(b)                                 Employee hereby assigns to the Company all
rights that Employee may have as author, designer, inventor or otherwise as
creator of any written or graphic material, design, invention, improvement, or
any other idea or thing whatever that Employee may write, draw, design,
conceive, perfect, or reduce to practice during employment with the Company or
within 120 days after termination of such employment, whether done during or
outside of normal work hours, and whether done alone or in conjunction with
others (“Intellectual Property”), provided, however, that Employee reserves all
rights in anything done or developed entirely by Employee on Employee’s own
personal time and without the use of any Company equipment, supplies, facilities
or information, or the participation of any other Company employee, unless it
relates to the Company’s business or reasonably anticipated business, or grows
out of any work performed by Employee for the Company.

 

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Employee will promptly disclose all such Intellectual Property developed by
Employee to the Company, and fully cooperate at the Company’s request and
expense in any efforts by the Company or its assignees to secure protection for
such Intellectual Property by way of domestic or foreign patent, copyright,
trademark or service mark registration or otherwise, including executing
specific assignments or such other documents or taking such further action as
may be considered necessary to vest title in Company or its assignees and obtain
patents or copyrights in any and all countries.

 

5.                                      Non-Compete; Severance.

 

(a)                                 Employee agrees that during Employee’s
continuation of employment with the Company and for one (1) year thereafter so
long as the Company makes severance payments to Employee pursuant to subsections
5(b) or 5(c) below, Employee shall not, without the express written consent of
the Company, either alone or as a consultant to, or partner, employee, officer,
director, or stockholder of any organization, entity or business, (i) take or
convert for Employee’s personal gain or benefit or for the benefit of any third
party, any business opportunities which may be of interest to the Company or any
Affiliated Company which Employee becomes aware of during the term of his
employment; (ii) engage in direct or indirect competition with the Company or
any Affiliated Company within 100 miles of any location within the United States
of America or any other country where the Company or any Affiliated Company does
business from time to time during the term hereof; (iii) solicit in connection
with any activity which is competitive with any of the businesses of the Company
or any Affiliated Company, any customers of the Company or any Affiliated
Company; (iv) solicit for employment any sales, marketing or management employee
of the Company or any Affiliated Company or induce or attempt to induce any
customer or supplier of the Company or any Affiliated Company to terminate or
materially change such relationship.  The Company and Employee acknowledge the
reasonableness of the foregoing covenants not to compete and non-solicitation,
including but not limited to the geographic area and duration of time which are
a part hereof, and further, that the restrictions stated in this Section 5 are
reasonably necessary for the protection of Employer’s legitimate proprietary
interests.  This covenant not to compete may be enforced with respect to any
geographic area in which the Company or any Affiliated Company does business
during the term hereof.  Nothing herein shall prohibit Employee from being the
legal or equitable holder, solely for investment purposes, of less than 5% of
the capital stock of any publicly held corporation which may be in direct or
indirect competition with the Company or any Affiliated Company.

 

(b)                                 The Company will pay Employee, upon
termination of Employee’s employment by the Company prior to a Change in Control
(as defined in 7(c)(i) below) for any reason other than Cause (as defined in
7(c)(iv) below), severance each month for 12 months, in an amount (subject to
applicable withholding) equal to 1/12 of Employee’s base salary; and, further,
if the Company pays discretionary bonuses to its officers for the fiscal year in
which Employee’s employment is terminated,

 

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Employee will be paid a bonus in a lump sum at the time any such bonuses are
paid to other officers or at such time as the Severance Period is complete,
whichever is later (with interest at prime rate plus one percentage point from
the earlier of such dates), (i) for the completed fiscal year preceding
termination if such bonus has not been paid prior to termination, and (ii) for
the fiscal year in which employment is terminated, prorata for the period prior
to termination of employment based on Employee’s performance during such period;
provided, however, that (A) all such monthly payment obligations shall terminate
immediately upon Employee obtaining full time employment in a comparable
position in terms of salary level, and (B) all such payment obligations shall
terminate or lapse immediately upon any breach by Employee of Section 4 or
5(a) of this Agreement or if Employee shall commence any action or proceeding in
any court or before any regulatory agency arising out of or in connection with
termination of Employee’s employment.

 

(c)                                  If Employee terminates Employee’s
employment or Employee’s employment is terminated by the Company for Cause (as
defined below), the Company may elect (but is not required to), by written
notice thereof to Employee, within five (5) days of any such termination of
Employee’s employment with the Company prior to a Change in Control (as defined
below), to pay Employee severance as provided in and subject to the provisions
of subsection 5(b) above.

 

(d)                                 Employee may terminate this Severance and
Change in Control Agreement effective immediately upon notice thereof in writing
to Company at any time while still employed within a sixty (60) calendar day
period immediately following the effective date of any reduction by Company in
(i) Employee’s level of responsibility or position from that held by Employee on
the effective date of this Agreement, or (ii) Employee’s level of compensation,
including retirement benefits in effect immediately prior to any such change.

 

(e)                                  The Employee acknowledges and agrees that
the Company would be irreparably harmed by violations of Section 4 or
Section 5(a) above, and in recognition thereof, the Company shall be entitled to
an injunction or other decree of specific performance with respect to any
violation thereof (without any bond or other security being required) in
addition to other available legal and equitable remedies.

 

6.                                      Termination of Employment.

 

(a)                                 Upon and after termination of employment
howsoever arising, Employee shall, upon request by the Company:

 

(i)                                     immediately return to the Company all
correspondence, documents, business calendars/diaries, or other property
belonging to the Company which is in Employee’s possession,

 

(ii)                                  immediately resign from any office
Employee holds with the Company or any Affiliated Company; and

 

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(iii)                               cooperate fully and in good faith with the
Company in the resolution of all matters Employee worked on or was involved in
during Employee’s employment with the Company.  Employee’s cooperation will
include reasonable consultation by telephone.  Further, in connection therewith,
Employee will, at the Company’s request upon reasonable advance notice and
subject to Employee’s availability, make Employee available to the Company in
person at the Company’s premises, for testimony in court, or elsewhere;
provided, however, that in such event, the Company shall reimburse all
Employee’s reasonable expenses and pay Employee a reasonable per diem or hourly
stipend.

 

7.                                      Change in Control.

 

(a)                                 In the event (i) a Change in Control of AAR
CORP. occurs and (ii) (A) at any time during the 18 month period commencing on
the date of the Change in Control the Company terminates Employee’s employment
for other than Cause or Disability, or Employee terminates Employee’s employment
for Good Reason, in either case by written notice to the other party (including
the particulars thereof), and having given the other party the opportunity to be
heard with respect thereto, or (B) Employee’s employment with the Company
terminates for any reason other than Disability or death during the 30 day
period commencing on the expiration of the aforementioned 18 month period, then:

 

(1)                                 The Company shall, within 30 days following
such termination of employment, pay to Employee, in a lump sum, a cash payment
in an amount equal to the sum of (A) all base salary earned through the date of
termination, (B) any annual cash bonus earned by Employee for the fiscal year of
the Company most recently ended prior to the date of termination to the extend
unpaid on the date of termination, (C) a prorata portion of the annual cash
bonus, including the value of any restricted stock grant in lieu of annual cash
bonus, Employee would have earned had Employee been employed by the Company on
the last day of the fiscal year in which the date of termination occurs (as if
all performance targets have been met or, in the event the bonus is of the
“discretionary” type, the bonus shall be based on a percentage of base salary
which is not less than percentage of base salary received as bonus for the
preceding fiscal year) that is applicable to the period commencing on the first
day of such fiscal year and ending on the date of termination, and (D) any and
all other benefits and amounts earned by Employee prior to the date of
termination to the extent unpaid, all subject to applicable withholding.

 

(2)                                 The Company shall, within 30 days following
such termination of employment, pay to Employee in a lump sum, a cash payment in
an amount equal to two times Employee’s total compensation (base salary plus
annual cash bonus) for either the fiscal year of the Company most recently ended
prior to the date of termination, or the preceding fiscal year, whichever is the
highest total compensation, subject to applicable withholding.

 

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(3)                                 Employee and Employee’s dependents shall
continue to be covered by, and receive employee welfare and executive fringe
benefits (including but not limited to medical, dental, life, accident and
disability insurance available to officers of the Company and additional
executive retirement and other fringe benefits approved by the President and CEO
of the Company) in accordance with the terms of the Company’s benefit plans and
executive fringe benefit programs, for two years following the date of
termination, and at no less than the levels Employee and Employee’s dependents
were receiving immediately prior to the Change in Control.  Employee’s
dependents shall be entitled to continued benefits coverage pursuant to the
preceding sentence for the balance of such two year period in the event of
Employee’s death during such period.  The period during which Employee and
Employee’s dependents are entitled to continuation of group health plan coverage
pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and
Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as
amended, shall commence on the date next following the expiration of the
aforementioned two year period.

 

(4)                                 The Company, at its expense, shall provide
Employee with outplacement services of a nationally recognized outplacement firm
of the Employee’s choosing until the earlier of (a) the Employee’s attainment of
employment, or (b) the date eighteen (18) months from the date of Employee’s
termination of employment; provided, however, that the cost of such outplacement
services shall not exceed 3.5% of the cash payment due to Employee pursuant to
subsection 7(a)(2) above.

 

(5)                                 The amounts paid to Employee under this
Change in Control provision applicable to Employee shall be considered severance
pay in consideration of past service Employee has rendered to the Company and in
consideration of Employee’s continued service from the date hereof to
entitlement of those payments.

 

(b)                                 In the event that a Change in Control
occurs, whether or not such Change in Control has the prior written approval of
a majority of the Continuing Directors (as defined in the AAR CORP. Stock
Benefit Plan), and notwithstanding any conditions or restrictions related to any
Award granted to Employee under the Plan, all Options or Limited Rights, or
both, granted to Employee under the Plan will become immediately exercisable and
remain exercisable for the full remaining life of the option whether or not
Employee’s employment continues, and all restrictions on Restricted Stock
granted to Employee under the Plan will immediately lapse.

 

(c)                                  For purposes of this Agreement:

 

(i)                                     “Change in Control” means the earliest
of:

 

(A)                               any person (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended (“Exchange
Act”), has acquired (other than directly from the Company) beneficial

 

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ownership (as that term is defined in Rule 13d-3 under the Exchange Act), of
more than 20% of the outstanding capital stock of the Company entitled to vote
for the election of directors; or

 

(B)                               the effective time of (1) a merger or
consolidation or other business combination of the Company with one or more
other corporations as a result of which the holders of the outstanding voting
stock of the Company immediately prior to such business combination hold less
than 60% of the voting stock of the surviving or resulting corporation, or (2) a
transfer of substantially all of the assets of the Company other than to an
entity of which the Company owns at least 80% of the voting stock; or

 

(C)                               the election over any period of time to the
Board of Directors of the Company without the recommendation or approval of the
incumbent Board of Directors of the Company, of the lesser of (1) three
directors, or (2) directors constituting a majority of the number of directors
of the Company then in office.

 

(ii)                                  “Good Reason” means:

 

(A)                               A material reduction in the nature or scope of
Employee’s duties, responsibilities, authority, power or functions from those
enjoyed by Employee immediately prior to the Change in Control, or a material
reduction in Employee’s compensation (including benefits), occurring at any time
during the two-year period immediately after the Change in Control; or

 

(B)                               if the incumbent in the position of CEO of the
Company on August 8, 1997 is not CEO of the Company at the time of termination,
a good faith determination by Employee that as the result of a Change in Control
and a material change in employment circumstances at any time during the
immediate two year period after the Change in Control, Employee is unable to
carry out Employee’s assigned duties and responsibilities in a manner consistent
with the practices, standards, values or philosophy of the Company immediately
prior to the Change in Control; or

 

(C)                               a relocation of the primary place of
employment of at least 100 miles.

 

(iii)                               “Disability” means a physical or mental
condition which has prevented Employee from substantially performing Employee’s
assigned duties for a period of 180 consecutive days and which is expected to
continue to render Employee unable to substantially perform Employee’s duties on
a full-time basis and otherwise meets the benefit eligibility requirements of
the Company’s Long Term Disability Welfare Benefit Plan or any executive program
in which Employee was a participant at the time of a

 

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Change in Control.  The Company will make reasonable accommodation for any
handicap of Employee as may be required by applicable law.

 

In the event of termination by the Company for Disability after a Change in
Control, a good faith determination of the existence of a Disability shall be
made by resolution of the Compensation Committee of the Board of Directors of
the Company, in its sole discretion, setting forth the particulars of the
Disability which shall be final and binding upon the Employee.  The Company may
require the submission of such medical evidence as to the condition of the
Employee as it may deem necessary in order to arrive at its determination of the
occurrence of a Disability, and Employee will cooperate in providing any such
information.  Employee will be provided with reasonable opportunity to present
additional medical evidence as to the medical condition of Employee for
consideration prior to the Board making its determination of the occurrence of a
Disability.

 

Upon termination of Employment by the Company for Disability after a Change in
Control, Employee will receive Disability payments pursuant to the Company’s
short and long term Disability welfare benefit plans then in effect according to
the terms of such plans and continue to be eligible to participate in the
Company’s medical, dental and life insurance programs then in effect and
available to officers of the Company in accordance with their terms for a period
of 3 years from the date of such termination of this Agreement.

 

(iv)                              “Cause” means:

 

(A)                               Employee engages, during the performance of
Employee’s duties hereunder, in acts or omissions constituting dishonesty,
intentional breach of fiduciary obligation or intentional wrongdoing or
malfeasance;

 

(B)                               Employee intentionally disobeys or disregards
a lawful and proper direction of the Board or the Company; or

 

(C)                               Employee materially breaches the Agreement and
such breach by its nature, is incapable of being cured, or such breach remains
uncured for more than 10 days following receipt by Employee of written notice
from the Company specifying the nature of the breach and demanding the cure
thereof.  For purposes of this clause (C), a material breach of the Agreement
that involves inattention by Employee to Employee’s duties under the Agreement
shall be deemed a breach capable of cure.

 

Without limiting the generality of the foregoing, the following shall not
constitute Cause for the termination of employment of Employee or the
modification or diminution of any of Employee’s authority hereunder:

 

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(1)                                 any personal or policy disagreement between
Employee and the Company or any member of the Board; or

 

(2)                                 any action taken by Employee in connection
with Employee’s duties hereunder, or any failure to act, if Employee acted or
failed to act in good faith and in a manner Employee reasonably believed to be
in and not opposed to the best interest of the Company and Employee had no
reasonable cause to believe Employee’s conduct was unlawful; or

 

(3)                                 termination of Employee’s employment for
overall unsatisfactory performance (including, but not limited to, failure to
meet financial goals).

 

Termination for Cause shall be limited to a good faith finding by resolution of
the Compensation Committee of the Board,. setting forth the particulars
thereof.  Any such action shall be taken at a regular or specially called
meeting of the Compensation Committee of the Board, after a minimum 10 days’
notice thereof to Employee, with termination of Employee’s employment with the
Company for Cause listed as an agenda item.  Employee will be given a reasonable
opportunity to be heard at such meeting with counsel present if Employee
desires.  Any such resolution shall be final and binding.

 

Upon termination of employment by the Company for Cause, no further compensation
or benefits shall accrue or be payable to Employee by the Company, except for
any compensation, bonus or other benefits which have accrued to Employee prior
to the date of any such termination.

 

Nothing herein shall be construed to prevent the Company from terminating
Employee’s employment at any time for any reason or for no reason.

 

(d)                                 The Company will pay reasonable
legal/attorney’s fees (including court costs and other costs of litigation)
incurred by Employee in connection with enforcement of any right or benefit
under this Agreement.

 

(e)                                  The Company will continue to provide SKERP
retirement benefits to Employee and Employee’s spouse at no less than the level
they are receiving or entitled to receive under the SKERP as it was in effect
immediately prior to the Change in Control.

 

8.                                      Changes in Business.  The Company,
acting through its Board of Directors, will at all times have complete control
over the Company’s business and retirement and other employee health and welfare
benefit plans (“Plans”).  Without limiting the generality of the foregoing, the
Company may at any time or times change or discontinue any or all of its present
or future operations or Plans (subject to their terms), may close or move any
one or more of its divisions or offices, may undertake any new servicing or
sales operation, may sell any one or more of its divisions or offices to any
company not controlled, directly or indirectly, by the Company or may take any
and all other steps which its Board of Directors, in its

 

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exclusive judgment, shall deem desirable, and Employee shall have no claim or
recourse against the Company, its officers, directors or employees by reason of
such action except for enforcement of the provisions of Sections 5 and 7 of this
Agreement.

 

9.                                      Severance Payment as Sole Obligation. 
Except as expressly provided in Sections 5 and 7 above, no further compensation,
payments, liabilities or benefits shall accrue or be payable to Employee upon or
as a result of termination of Employee’s employment for any reason whatsoever
except for any compensation, bonus or other benefits which accrued to Employee
prior to the date of employment termination.

 

The amounts paid to the Employee under Section 5 and 7 of this Agreement shall
be considered severance pay in consideration of past services Employee has
rendered to the Company and in consideration of Employee’s continued service
from the date hereof to entitlement to those payments.

 

10.                               Notices.  Any notice or other instrument or
thing required or permitted to be given, served or delivered to any of the
parties hereto shall be delivered personally or deposited in the United States
mail, with proper postage prepaid, telegram, teletype, cable or facsimile
transmission to the addresses listed below:

 

(a)                                 If to the Company, to:

 

AAR CORP.

1100 N. Wood Dale Road

WoodDale, Illinois  60191

Attention:  Chairman

 

With a copy to:

 

AAR CORP.

1100 N. Wood Dale Road

WoodDale, Illinois  60191

Attention:  General Counsel

 

(b)                                 If to Employee, to:

 

Mr. John Fortson

At the most recent address for Employee in the Company’s records

 

or to such other address as either party may from time to time designate by
notice to the other.  Each notice shall be effective when such notice and any
required copy are delivered to the applicable address.

 

11.                               Non-Assignment.

 

(a)                                 The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of
Employee, and any attempted unpermitted assignment shall be null and void and
without further effect; provided, however,

 

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that, upon the sale or transfer of all or substantially all of the assets of the
Company, or upon the merger by the Company into or the combination with another
corporation or other business entity, or upon the liquidation or dissolution of
the Company, this Agreement will inure to the benefit of and be binding upon the
person, firm or corporation purchasing such assets, or the corporation surviving
such merger or consolidation, or the shareholder effecting such liquidation or
dissolution, as the case may be.  After any such transaction, the term Company
in this Agreement shall refer to the entity which conducts the business now
conducted by the Company.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the estate and beneficiaries of Employee and
upon and to the benefit of the permitted successors and assigns of the parties
hereto.

 

(b)                                 The Employee agrees on behalf of Employee,
Employee’s heirs, executors and administrators, and any other person or person
claiming any benefit under Employee by virtue of this Agreement, that this
Agreement and all rights, interests and benefits hereunder shall not be
assigned, transferred, pledged or hypothecated in any way by the Employee or by
any beneficiary, heir, executor, administrator or other person claiming under
the Employee by virtue of this Agreement and shall not be subject to execution,
attachment or similar process.  Any attempted assigned, transfer, pledge or
hypothecation or any other disposition of this Agreement or of such rights,
interests and benefits contrary to the foregoing provisions or the levy or any
execution, attachment or similar process thereon shall be null and void and
without further effect.

 

12.                               Severability.  If any term, clause or
provision contained herein is declared or held invalid by any court of competent
jurisdiction, such declaration or holding shall not affect the validity of any
other term, clause or provision herein contained.

 

13.                               Construction.  Careful scrutiny has been given
to this Agreement by the Company, Employee, and their respective legal counsel. 
Accordingly, the rule of construction that the ambiguities of the contract shall
be resolved against the party which caused the contract to be drafted shall have
no application in the construction or interpretation of this Agreement or any
clause or provision hereof.

 

14.                               Entire Agreement.  This Agreement as amended
and restated herein and the other agreements referred to herein set forth the
entire understanding of the parties and supersede all prior agreements,
arrangements and communications, whether oral or written, pertaining to the
subject matter hereof.

 

15.                               Waiver.  No provision of this Agreement may be
amended, modified, waived or discharged unless such amendment, modification,
waiver or discharge is agreed to in writing signed by Employee and an authorized
officer of the Company.  No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

 

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16.                               Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without regard to
its conflicts of law principles.

 

17.                               Execution.  This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and which shall
constitute but one and the same Agreement.

 

18.                               Provisions Regarding Code Section 409A.

 

(a)                                 If at the time of the Employee’s termination
of employment for reasons other than death he is a “Key Employee” as determined
in accordance with the procedures set forth in Treas. Reg. §1.409A-1(i), any
amounts payable to the Employee pursuant to this Agreement that are subject to
Section 409A of the Internal Revenue Code shall not be paid or commence to be
paid until six months following the Employee’s termination of employment, or if
earlier, the Employee’s subsequent death.

 

(b)                                 Reimbursements or in-kind benefits provided
under this Agreement that are subject to Section 409A of the Internal Revenue
Code are subject to the following restrictions:  (1) the amount of expenses
eligible for reimbursements, or in-kind benefits provided, to the Employee
during a calendar year shall not affect the expenses eligible for reimbursement
or the in-kind benefits provided in any other calendar year, and
(2) reimbursement of an eligible expense shall be made as soon as practicable,
but in no event later than the last day of the calendar year following the
calendar year in which the expense was incurred.

 

(c)                                  The Employee’s right to receive installment
payments pursuant to this Agreement shall be treated as the right to receive a
series of separate and distinct payments.

 

WITNESS the due execution of this Agreement by the parties hereto as of the day
and year first above written.

 

Employer:

 

 

 

 

 

/s/ Timothy O. Skelly

 

Timothy O. Skelly

 

Vice President — Human Resources

 

 

 

Employee:

 

 

 

 

 

/s/ John Fortson

 

John Fortson

 

 

12

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