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Exhibit 10.18
OFFICER'S EMPLOYMENT AGREEMENT
Amended and Restated
THIS AGREEMENT, is made and entered into this 1st day of July, 1997, by
and between JLK DIRECT DISTRIBUTION INC., a corporation organized under the laws
of the Commonwealth of Pennsylvania, for and on behalf of itself and on behalf
of its subsidiary companies (hereinafter referred to as "JLK"), and XXXXXX X.
XXXXXXX, an individual (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employee acknowledges that by reason of employment by JLK, it
is anticipated that Employee will work with, add to, create, have access to and
be entrusted with trade secrets and confidential information belonging to JLK
which are of a technical nature or business nature or pertain to future
developments, the disclosure of which trade secrets or confidential information
would be highly detrimental to the interests of JLK; and
WHEREAS, in order to have the benefit of Employee's assistance, JLK is
desirous of employing or continuing the employment of Employee; and
WHEREAS, JLK and Employee have heretofore entered into and executed an
Officer Employment Agreement, as amended (the "Employment Agreement"); and
WHEREAS, JLK and Employee desire to amend and restate the Employment
Agreement on the terms and conditions hereinafter expressed.
NOW, THEREFORE, JLK and Employee, each intending to be legally bound
hereby, do mutually covenant and agree as follows:
1. (a) Subject to the terms and conditions set forth herein, JLK
hereby agrees to employ Employee as of the date hereof, and Employee
hereby accepts such employment and agrees to devote his full time and
attention to the business and affairs of JLK, in such capacity or
capacities and to perform to the best of his ability such services
as shall be determined from time to time by the Chief Executive Officer
and the Board of Directors of JLK until the termination of his
employment hereunder.
(b) Employee's base salary, the size of bonus awards, if any, granted
to him and other emoluments for his services, if any, shall be
determined by the Board of Directors or its Committee on Executive
Compensation, as appropriate, from time to time in their sole
discretion.
2. In addition to the compensation set forth or contemplated elsewhere
herein, Employee, subject to the terms and conditions of this
agreement, shall be entitled to participate in all group insurance
programs, retirement income (pension) plans, thrift plans and vacation
and holiday programs normally provided for other executives of
JLK. Nothing herein contained shall be deemed to limit or
prevent Employee, during his employment hereunder, from being
reimbursed by JLK for out-of-pocket expenditures incurred for travel,
lodging, meals, entertainment expenses or any other expenses in
accordance with the policies of JLK applicable to the executives of
JLK.
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3. Employee's employment may be terminated with or without any reason for
termination by either party hereto at any time by giving the other
party prior written notice thereof; provided, however, that any
termination on the part of JLK shall occur only if specifically
authorized by its Board of Directors; provided, further, that
termination by JLK for Cause (as hereinafter defined) shall be made by
written notice which states that it is a termination for Cause; and
provided, further, that termination by Employee, other than
termination for Good Reason (as hereafter defined) following a Change-
in-Control (as hereafter defined), shall be on not less than 30 days
prior written notice to JLK.
4. (a) In the event that Employee's employment is terminated by JLK prior
to a Change-in-Control (as hereinafter defined) and other than for
Cause, Employee will receive as severance pay, in addition to all
amounts due him at the Date of Termination (as hereinafter defined), an
amount, payable promptly after the Date of Termination, equal to three
months' base salary at the annual rate in effect on the Date of
Termination.
(b) In the event that Employee's employment is terminated by Employee
following a Change-in-Control (as hereafter defined) without good
reason (as such term in defined in paragraph 4(h)) or prior to a
Change-in-Control (as hereinafter defined), Employee will not be
entitled to receive any severance pay in addition to the amounts, if
any, due him at the Date of Termination (as hereinafter defined).
(c) In the event at or after a Change-in-Control and prior to the third
anniversary of the date of the Change-in-Control that Employee's
employment is terminated by Employee for Good Reason or by JLK other
than for Cause or Disability pursuant to paragraph 5, Employee will
receive as severance pay (in addition to all other amounts due him at
the Date of Termination) an amount equal to the product of
(i) the lesser of
(x) two and eight tenths (2.8),
(y) a number equal to the number of calendar months remaining
from the Date of Termination to the Employee's Retirement Date
(as such term is hereafter defined) divided by twelve (12), or
(z) a number equal to the product obtained by multiplying
thirty-six (36) less the number of completed months after the
date of the Change-in-Control during which the Employee was
employed and did not have Good Reason for termination times
one-twelfth (1/12);
times
(ii) the sum of
(x) Employee's base salary at the annual rate in effect on the
Date of Termination (or, at Employee's election, at the annual
rate in effect on the first day of the calendar month
immediately prior to the Change-in-Control), plus (y) the
average of any bonuses which Employee was entitled to or paid
during the three most recent fiscal years ending prior to the
Date of Termination.
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Such severance pay shall be paid by delivery of a cashier's or
certified check to the Employee at JLK's executive offices on a date
which is no later than five business days following the Date of
Termination.
In addition to the severance payments provided for in this paragraph
4(c), Employee also will receive the same or equivalent medical,
dental, disability and group insurance benefits as were provided to the
Employee at the Date of Termination, which benefits shall be provided
to Employee for a three year period commencing on the Date of
Termination. The Employee shall also be deemed and shall be credited
for computing benefits, for vesting and for all other purposes under
any pension or retirement income plan of JLK and under the Supplemental
Executive Retirement Plan to have continuously remained in the
employment of JLK for the three year period (or, if clause (i)(y) or
clause (i)(z) above of this paragraph 4(c) is applicable to determine
the severance payments to be made, the lesser period measured in years
equal to clause (i)(y) or clause (i)(z) above, whichever is applicable)
following the Date of Termination at an annual compensation equal to
the sum of the base salary and bonus which were used to compute the
payment due the Employee under the first paragraph of this Paragraph
4(c).
(d) If for any reason, whether by law or provisions of JLK's employee
medical, dental or group insurance, pension or retirement plan or other
benefit plans, any benefits which the Employee would be entitled to
under the foregoing subparagraph (c) of this Paragraph 4 cannot be paid
pursuant to such employee benefit plans, then JLK hereby contractually
agrees to pay to the Employee the difference between the benefits which
the Employee would have received in accordance with the foregoing
subparagraphs of this paragraph 4 if the relevant employee medical,
dental or group insurance or pension or retirement plan or other
benefit plan could have paid such benefit and the amount of benefits,
if any, actually paid by such employee medical, dental or group
insurance or pension or retirement plan or other benefit plan. JLK
shall be required to fund its obligation to pay the foregoing
difference.
(e) In the event of a termination of employment under the circumstances
above described in Paragraph 4(c), Employee shall have no duty to seek
any other employment after termination of Employee's employment with
JLK and JLK hereby waives and agrees not to raise or use any defense
based on the position that Employee had a duty to mitigate or reduce
the amounts due him hereunder by seeking other employment whether
suitable or unsuitable and should Employee obtain other employment,
then the only effect of such on the obligations of JLK hereunder shall
be that JLK shall be entitled to credit against any payments which
would otherwise be made for medical, dental or group insurance or
similar benefits (excluding, however, any credit against JLK payments
relating to pension or retirement benefits or the Supplemental
Executive Retirement Plan) pursuant to the benefit provisions set forth
in the second paragraph of Paragraph 4(c) hereof, any comparable
payments to which Employee is entitled under the employee benefit plans
maintained by Employee's other employer or employers in connection with
services to such employer or employers after termination of his
employment with JLK.
(f) The term "Change-in-Control" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A promulgated under the Securities Exchange Act of 1934
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as in effect on the date hereof ("1934 Act"), or if Item 6(e) is no
longer in effect, any regulations issued by the Securities and Exchange
Commission pursuant to the 1934 Act which serve similar purposes;
provided that, without limitation, such a change in control shall be
deemed to have occurred if (A) JLK shall be merged or consolidated with
any corporation or other entity other than a merger or consolidation
with a corporation or other entity all of whose equity interests are
owned by JLK immediately prior to the merger or consolidation, or (B)
JLK shall sell all or substantially all of its operating properties and
assets to another person, group of associated persons or corporation,
or (C) any "person" (as such term is used in Sections 13(d) and 14(d)
of the 1934 Act), is or becomes a beneficial owner, directly or
indirectly, of securities of JLK representing 25% or more of the
combined voting power of JLK's then outstanding securities coupled with
or followed by the existence of a majority of the board of directors of
JLK consisting of persons other than persons who either were directors
of JLK immediately prior to or were nominated by those persons who were
directors of JLK immediately prior to such person becoming a beneficial
owner, directly or indirectly, of securities of JLK representing 25% or
more of the combined voting power of JLK's then outstanding securities.
(g) For purposes of this agreement "Date of Termination" shall mean:
(i) if Employee's employment is terminated due to his death or
retirement, the date of death or retirement, respectively; or
(ii) if Employee's employment is terminated for any other reason,
the date on which the termination becomes effective as stated in
the written notice of termination given to or by the Employee.
(h) The term "Good Reason" for termination by the Employee shall mean
the occurrence of any of the following at or after a Change-in-Control:
(i) without the Employee's express written consent, the assignment
to the Employee of any duties materially and substantially
inconsistent with his positions, duties, responsibilities and
status with JLK immediately prior to a Change-in-Control, or a
material change in his reporting responsibilities, titles or
offices as in effect immediately prior to a Change-in-Control, or
any removal of the Employee from or any failure to re-elect the
Employee to any of such positions, except in connection with the
termination of the Employee's employment due to Cause (as
hereinafter defined) or as a result of the Employee's death;
(ii) a reduction by JLK in the Employee's base salary as in effect
immediately prior to any Change-in-Control;
(iii) a failure by JLK to continue to provide incentive
compensation, under the rules by which incentives are provided,
comparable to that provided by JLK immediately prior to any
Change-in-Control;
(iv) the failure by JLK to continue in effect any benefit or
compensation plan, stock option plan, pension plan, life insurance
plan, health and accident plan or disability plan in which Employee
is participating immediately prior to a Change-in-Control
(provided, however, that there shall not be deemed to be any such
failure if JLK substitutes for the
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discontinued plan, a plan providing Employee with substantially
similar benefits) or the taking of any action by JLK which would
adversely affect Employee's participation in or materially reduce
Employee's benefits under any of such plans or deprive Employee of
any material fringe benefit enjoyed by Employee immediately prior
to a Change-in-Control;
(v) the failure of JLK to obtain the assumption of this Agreement
by any successor as contemplated in paragraph 11 hereof;
(viii) the relocation of the Executive to a facility or a location
more than 50 miles from the Executive's then present location,
without the Executive's prior written consent; or
(ix) any purported termination of the employment of Employee by JLK
which is not for Cause as provided in paragraph 5.
5. In the event that Employee (a) shall be guilty of malfeasance, willful
misconduct or gross negligence in the performance of the services
contemplated by this Agreement, or (b) shall not make his services
available to JLK on a full time basis in accordance with paragraph 1
hereof for any reason (including Disability) other than arising from
Employee's incapacity due to physical or mental illness or injury which
does not constitute Disability and other than by reason of the fact
Employee's employment has been terminated under the circumstances
described in paragraph 4(a), or (c) shall breach the provisions of
paragraph 8 hereof (the matters described in subparagraphs (a), (b) and
(c) are collectively referred to as "Cause"), JLK shall have the right,
exercised by resolution adopted by a majority of its Board of
Directors, to terminate Employee's employment for Cause by giving prior
written notice to Employee of its election so to do. In that event,
Employee's employment shall be deemed terminated for Cause, Employee
shall not be entitled to the benefits set forth in paragraph 4 which
shall not be paid or payable and JLK only shall have the obligation to
pay Employee the unpaid portion of Employee's base salary for the
period from the last period from which Employee was paid to the Date of
Termination; provided, however, that if Employee's employment is
terminated as a result of the Disability of Employee, the benefits set
forth in paragraph 4 shall not be paid or payable but Employee shall be
entitled to receive the annual supplement under the Supplemental
Executive Retirement Plan and Employee's employment by JLK shall not be
deemed terminated for purposes of the Long-Term Disability Plan,
Retirement Income Plan for U.S. Salaried Employees or any other benefit
plan which so provides. For purposes of this agreement "Disability"
shall mean such incapacity due to physical or mental illness or injury
which results in the Employee's being absent from his principal office
at JLK's offices for the entire portion of 180 consecutive business
days. Prior to a Change-in-Control, a decision by the Board of
Directors of JLK that "Cause" exists shall be in the discretion of the
Board of Directors and shall be final and binding upon the Employee and
his rights hereunder. After a Change-in-Control, "Cause" shall not be
deemed to include opposition by Employee to such a Change-in-Control or
any matter incidental thereto and any determination by the Board of
Directors that "Cause" existed shall not be final or binding upon the
Employee or his rights hereunder or entitled to any deference in any
court or other tribunal.
6. Employee understands and agrees that, except to the extent Employee is
entitled to the benefits provided in paragraph 4(c) hereof, in the
event Employee resigns or his employment is terminated for any reason
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other than death or Disability prior to his "Retirement Date" (as
hereinafter defined), he will forfeit any interest he may have in any
JLK retirement income plan (except to the extent vested
by actual service to date of separation as per the plan provisions),
and all other benefits dependent upon continuing service. The term
"Retirement Date" shall mean the first day of the month following the
day on which Employee attains his sixty-fifth birthday, or at
Employee's request, any other day that JLK's Board of Directors may
approve in writing.
7. Nothing herein contained shall affect the right of Employee to
participate in and receive benefits under and in accordance with the
then current provisions of any retirement income, profit-sharing,
additional year-end or periodic remuneration or bonus, incentive
compensation, insurance or any other employee welfare plan or program
of JLK and all payments hereunder shall be in addition
to any benefits received thereunder (including long term disability
payments).
8. During the period of employment of Employee by JLK and for three years
thereafter, (provided, however, that this paragraph 8 shall not apply
to the Employee following a termination of Employee's employment (x)
if a Change-in-Control, shall have occurred prior to the Date of
Termination or (y) if Employee's employment is terminated by JLK other
than for Cause), he will not, in any geographic area in which JLK is
offering its services and products, without the prior written consent
of JLK:
(a) directly or indirectly engage in, or
(b) assist or have an active interest in (whether as proprietor,
partner, investor, shareholder, officer, director or any type of
principal whatsoever), or
(c) enter the employ of, or act as agent for, or advisor or
consultant to, any person, firm, partnership, association,
corporation or business organization, entity or enterprise which is
or is about to become directly or indirectly engage in, any business
which is competitive with any business of JLK or any subsidiary or
affiliate thereof in which Employee is or was engaged; provided,
however, that the foregoing provisions of this paragraph 8 are not
intended to prohibit and shall not prohibit Employee from
purchasing, for investment, not in excess of 1% of any class of
stock or other corporate security of any company which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
Employee acknowledges that the breach by him of the provisions of this
paragraph 8 would cause irreparable injury to JLK, acknowledges and
agrees that remedies at law for any such breach will be inadequate and
consents and agrees that JLK shall be entitled, without the necessity
of proof of actual damage, to injunctive relief in any proceedings
which may be brought to enforce the provisions of this paragraph 8.
Employee acknowledges and warrants that he will be fully able to earn
an adequate livelihood for himself and his dependents if this paragraph
8 should be specifically enforced against him and that such enforcement
will not impair his ability to obtain employment commensurate with his
abilities and fully acceptable to him.
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If the scope of any restriction contained in this paragraph 8 is too
broad to permit enforcement of such restriction to its full extent,
then such restriction shall be enforced to the maximum extent permitted
by law and Employee and JLK hereby consent and agree that such scope
may be judicially modified in any proceeding brought to enforce such
restriction.
9. (a) Employee acknowledges and agrees that in the course of his
employment by JLK, Employee may work with, add to, create or acquire
trade secrets and confidential information ("Confidential Information")
which could include, in whole or in part, information:
(i) of a technical nature such as, but not limited to, JLK's
manuals, methods, know-how, formulae, shapes, designs,
compositions, processes, applications, ideas, improvements,
discoveries, inventions, research and development projects,
equipment, apparatus, appliances, computer programs,
software, systems documentation, special hardware, software
development and similar items; or
(ii) of a business nature such as, but not limited to,
information about business plans, sources of supply, cost,
purchasing, profits, markets, sales, sales volume, sales
methods, sales proposals, identity of customers and
prospective customers, identity of customers' key purchasing
personnel, amount or kind of customers' purchases and other
information about customers; or
(iii) pertaining to future developments such as, but not
limited to, research and development or future marketing or
merchandising.
Employee further acknowledges and agrees that (i) all Confidential
Information is the property of JLK; (ii) the unauthorized use,
misappropriation or disclosure of any Confidential Information would
constitute a breach of trust and could cause irreparable injury to JLK;
and (iii) it is essential to the protection of JLK's goodwill and to
the maintenance of its competitive position that all Confidential
Information be kept secret and that Employee not disclose any
Confidential Information to others or use any Confidential Information
to the detriment of JLK.
Employee agrees to hold and safeguard all Confidential Information in
trust for JLK, its successors and assigns and Employee shall not
(except as required in the performance of Employee's duties), use or
disclose or make available to anyone for use outside JLK's organization
at any time, either during employment with JLK or subsequent thereto,
any of the Confidential Information, whether or not developed by
Employee, without the prior written consent of JLK.
(b) Employee agrees that:
(i) he will promptly and fully disclose to JLK or such
officer or other agent as may be designated by JLK any and
all inventions made or conceived by Employee (whether made
solely by Employee or jointly with others) during employment
with JLK (1) which are along the line of the business, work
or investigations of JLK, or (2) which result from or are
suggested by any work which Employee may do for or on behalf
of JLK; and
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(ii) he will assist JLK and its nominees during and subsequent
to such employment in every proper way (entirely at its or
their expense) to obtain for its or their own benefit patents
for such inventions in any and all countries; the said
inventions, without further consideration other than such
salary as from time to time may be paid to him by JLK as
compensation for his services in any capacity, shall be and
remain the sole and exclusive property of JLK or its nominee
whether patented or not; and
(iii) he will keep and maintain adequate and current written
records of all such inventions, in the form of but not
necessarily limited to notes, sketches, drawings, or reports
relating thereto, which records shall be and remain the
property of and available to JLK at all times.
(c) Employee agrees that, promptly upon termination of his employment,
he will disclose to JLK, or to such officer or other agent as may be
designated by JLK, all inventions which have been partly or wholly
conceived, invented or developed by him for which applications for
patents have not been made and will thereafter execute all such
instruments of the character hereinbefore referred to, and will take
such steps as may be necessary to secure and assign to JLK the
exclusive rights in and to such inventions and any patents that may be
issued thereon any expense therefor to be borne by JLK.
(d) Employee agrees that he will not at any time aid in attacking the
patentability, scope, or validity of any invention to which the
provisions of subparagraphs (b) and (c), above, apply.
10. In the event that (a) Employee institutes any legal action to enforce
his rights under, or to recover damages for breach of this agreement,
or (b) JLK institutes any action to avoid making any payments due to
Employee under this agreement, Employee, if he is the prevailing party,
shall be entitled to recover from JLK any actual expenses for
attorney's fees and other disbursements incurred by him in relation
thereto.
11. The terms and provisions of this agreement shall be binding upon, and
shall inure to the benefit of, Employee and JLK, its subsidiaries and
affiliates and their respective successors and assigns.
12. This agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and understandings, whether
oral or written, among the parties with respect to the subject matter
hereof. This agreement may not be amended orally, but only by an
instrument in writing signed by each of the parties to this agreement.
13. The invalidity or enforceability of any provision of this agreement
shall not affect the other provisions hereof, and this agreement shall
be construed in all respects as if such invalid or unenforceable
provision were omitted.
14. Any pronoun and any variation thereof used in this agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the parties hereto may require.
15. JLK shall be entitled as a condition to paying any severance pay or
providing any benefits hereunder upon a termination
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of the Employee's employment to require the Employee to deliver on or
before the making of any severance payment or providing of any benefit
a release in the form of Exhibit A attached hereto.
16. Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received or to be received by Employee in
connection with a change in control of the Corporation, or the
termination of the Employee's employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the
Corporation, any person whose actions result in a change in control or
any person affiliated with the Corporation or such person)
(collectively, the "Total Payments") would not be deductible, in whole
or part, as a result of section 280G of the Internal Revenue Code of
1986 (the "Code") by the Corporation, an affiliate or other person
making such payment or providing such benefit, the payments due under
this Agreement (the "Contract Payments") shall be reduced until no
portion of the Total Payments is not deductible, or the Contract
Payments are reduced to zero. In the event that the Corporation
determines that the Total Payments would not be deductible, in whole or
part, as a result of section 280G of the Code, the Corporation shall
immediately notify Employee of this determination and the amount which
would not be so deductible as well as a computation of Total Payments.
Employee shall have five (5) business days after receipt of the
foregoing notice and computation to waive in writing all or any portion
of any of the Total Payments and any portion of the Total Payments the
receipt or enjoyment of which Employee shall have effectively waived in
writing shall not be taken into account. If the Corporation had already
withheld any Contract Payments prior to receipt of such waiver, the
Corporation upon receipt of such waiver shall immediately pay to
Employee any withheld Contract Payments which would have been paid had
the Corporation had the Employee's written waiver prior to the date the
Corporation withheld any such payments.
For purposes of this limitation
(a) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Corporation's independent
auditors and acceptable to Employee does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code,
(b) the Contract Payments shall be reduced only to the extent necessary
so that the Total Payments (other than those Contract Payments which
are waived in writing by the Employee or referred to in clause (a)) in
their entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of
the tax counsel referred to in clause (a); and
(c) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the
Corporation's independent auditors in accordance with the principles of
section 280G(d)(3) and (4) of the Code.
17. This agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
WITNESS the due execution hereto the day and year first above written.
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ATTEST: JLK DIRECT DISTRIBUTION INC.
/s/ XXXXX X. XXXX, Assistant Secretary By:/s/ XXXXXXX X. XXXXXXX
-------------------------------------- --------------------------------
WITNESS: Employee:
/s/ XXXXX X. XXXXX /s/ XXXXXX X. XXXXXXX (SEAL)
-------------------------------------- -----------------------------------
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Exhibit A
RELEASE
KNOW ALL MEN BY THESE PRESENTS that the undersigned for good and
valuable consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound, hereby releases, remises, quitclaims and
discharges completely and forever JLK Inc. and its directors, officers,
employees, subsidiaries and affiliates from any and all claims, causes of action
or rights which the undersigned has or may have, whether arising by virtue of
contract or of applicable state laws or federal laws, and whether such claims,
causes of action or rights are known or unknown; provided, however, that this
Release shall not release, remise, quitclaim or discharge any claims, causes of
action or rights which the undersigned may have (i) under that certain Amended
and Restated Employment Agreement dated __________ between the undersigned and
JLK Inc., (ii) to any unreimbursed expense account or similar out-of-pocket
reimbursement amounts owing the undersigned, or (iii) under the bylaws of JLK
Inc. or the applicable state corporate statutes to indemnification for having
served as an officer and/or employee of JLK Inc. and/or its subsidiaries.
DATE: __________________ _____________________________
