EXHIBIT 10.26
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT made effective as of the 17th day of December,
2004, between eLoyalty Corporation, a Delaware corporation (the "Company"), and
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WHEREAS, it is essential to the Company and its stockholders to attract
and retain qualified and capable directors, officers, employees, agents and
fiduciaries;
WHEREAS, the Certificate of Incorporation of the Company (the "Certificate
of Incorporation") and the Company's Bylaws require the Company to indemnify and
advance expenses to its directors and officers to the extent not prohibited by
law;
WHEREAS, historically, basic protection against undue risk of personal
liability of directors and officers has been provided through insurance coverage
affording reasonable protection at reasonable cost;
WHEREAS, it is presently uncertain whether, and to what extent, such
insurance is or will continue to be available to the Company at a reasonable
cost for the protection of Indemnitee;
WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to induce Indemnitee to serve or continue to serve
the Company in an effective manner, and, in the case of directors and officers,
to supplement the Company's directors' and officers' liability insurance
coverage, and in part to provide Indemnitee with specific contractual assurance
that the protection promised by the Certificate of Incorporation and Bylaws will
be available to Indemnitee (regardless of, among other things, any amendment to
or revocation of the Certificate of Incorporation and Bylaws or any change in
the composition of the Company's Board of Directors or any acquisition
transaction relating to the Company), the Company wishes to provide the
Indemnitee with the benefits contemplated by this Agreement; and
WHEREAS, as a result of the provision of such benefits Indemnitee has
agreed to serve or to continue to serve the Company;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. The following terms, as used herein, shall have the
following respective meanings:
(a) Claim: means any threatened, pending or completed action, suit,
arbitration or proceeding, or any inquiry or investigation, whether brought by
or in the right of the Company or otherwise, that Indemnitee in good faith
believes might lead to the institution of any such action, suit, arbitration or
proceeding, whether civil, criminal, administrative, investigative or other, or
any appeal therefrom.
(b) D&O Insurance: means any valid directors' and officers' liability
insurance policy maintained by the Company for the benefit of the Indemnitee.
(c) Company Determination: means a determination based on the facts known
at the time, by: (i) a majority vote of a quorum of disinterested directors of
the Company, or (ii) if such a quorum is not obtainable, or even if obtainable,
if a quorum of disinterested directors of the Company so directs, by independent
legal counsel in a written opinion, or (iii) a majority of the disinterested
stockholders of the Company.
(d) Excluded Claim: means any payment for Losses or Expenses in connection
with any Claim: (i) based upon or attributable to Indemnitee gaining in fact any
personal profit or advantage to which Indemnitee is not entitled; or (ii) for
the return by Indemnitee of any remuneration paid to Indemnitee without the
previous approval of the stockholders of the Company which is illegal; or (iii)
for an accounting of profits in fact made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, or similar provisions of any state
law; or (iv) resulting from Indemnitee's knowingly fraudulent, dishonest or
willful misconduct; or (v) the payment of which by the Company under this
Agreement is not permitted by applicable law.
(e) Expenses: means any reasonable expenses incurred by Indemnitee as a
result of a Claim or Claims by reason of (or arising in part out of)
Indemnifiable Events including, without limitation, attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in any Claim by
reason of (or arising in part out of) any Indemnifiable Event.
(f) Fines: means any fine, penalty or, with respect to an employee benefit
plan, any excise tax or penalty assessed with respect thereto.
(g) Indemnifiable Event: means any event or occurrence, occurring prior
to, on or after the date of this Agreement, related to the fact that Indemnitee
is, was or has agreed to serve as, a director or officer of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise; provided that the Indemnitee acted in good faith and
in a manner the Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, the Indemnitee had no reasonable cause to believe his conduct was
unlawful.
(h) Judicial Determination: means a final nonappealable determination of a
court of competent jurisdiction.
(i) Losses: means any amounts or sums which Indemnitee is or becomes
obligated to pay as a result of a Claim or Claims made against Indemnitee for
Indemnifiable Events including,
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without limitation, damages, judgments and sums or amounts paid in settlement of
a Claim or Claims, and Fines.
2. Basic Indemnification Agreement. In consideration of, and as an
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event Indemnitee is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, a Claim by reason of ( or arising in part out of) an
Indemnifiable Event, the Company will indemnify Indemnitee to the fullest extent
authorized by law, against any and all Losses and Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Losses and Expenses) of such Claim, whether or not such Claim
proceeds to judgment or is settled or otherwise is brought to a final
disposition, subject in each case, to the further provisions of this Agreement.
3. Limitations on Indemnification. Notwithstanding the provisions of
Section 2, Indemnitee shall not be indemnified and held harmless from any Losses
or Expenses (a) which have been determined by Judicial Determination to
constitute an Excluded Claim; (b) to the extent Indemnitee is indemnified by the
Company and has already received payment in full of all such Losses and Expenses
pursuant to the Certificate of Incorporation and Bylaws, D&O Insurance or
otherwise; or (c) other than pursuant to the last sentence of Section 4(d) or
Section 12, in connection with any claim initiated by Indemnitee, unless such
claim has been authorized by a Company Determination.
4. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice of any Claim,
Indemnitee shall, if indemnification with respect thereto may be sought from the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, that the failure to give such notice promptly shall not
affect or limit the Company's obligations with respect to the matters described
in the notice of such Claim, except to the extent that the Company is materially
prejudiced thereby. Indemnitee agrees further not to make any admission or
effect any settlement with respect to such Claim without the consent of the
Company, except any Claim with respect to which the Indemnitee has undertaken
the defense in accordance with the second to last sentence of Section 4(d).
(b) If, at the time of the receipt of such notice, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement of
Claim to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
Losses and Expenses payable as a result of such Claim.
(c) The Company shall pay the Expenses of any Claim in advance of the
final disposition thereof and the Company, if appropriate, shall be entitled to
assume the defense of such Claim, with counsel satisfactory to Indemnitee, upon
the delivery to Indemnitee of written
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notice of its election so to do. After the delivery of such notice, the Company
will not be liable to Indemnitee under this Agreement for any legal or other
Expenses subsequently incurred by Indemnitee in connection with such defense
other than reasonable Expenses of investigation; provided that Indemnitee shall
have the right to employ separate counsel in such Claim but the fees and
expenses of such counsel incurred after delivery of notice from the Company of
its assumption of such defense shall be at the Indemnitee's expense; provided
further that if: (i) the employment of counsel by Indemnitee has been previously
authorized by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such action, the reasonable fees and
expenses of counsel shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification obligations
under this Agreement shall be made within thirty (30) days of Indemnitee's
written request therefor unless a Company Determination is made that the Claims
giving rise to Indemnitee's request are Excluded Claims or otherwise not payable
under this Agreement, provided that all payments on account of the Company's
obligation to pay Expenses under Section 4(c) of this Agreement prior to the
final disposition of any Claim shall be made within 20 days of Indemnitee's
written request therefor and such obligation shall not be subject to Section
4(e) of this Agreement. In the event of a Company Determination that Indemnitee
is not entitled to indemnification in connection with the proposed settlement of
any Claim, Indemnitee shall have the right at his own expense to undertake
defense of any such Claim, insofar as such proceeding involves Claims against
the Indemnitee, by written notice given to the Company within 10 days after the
Company has notified Indemnitee in writing of its contention that Indemnitee is
not entitled to indemnification; provided, however, that the failure to give
such notice within such 10-day period shall not affect or limit the Company's
obligations with respect to any such Claim if such Claim is subsequently
determined not to be an Excluded Claim or otherwise to be payable under this
Agreement, except to the extent that the Company is materially prejudiced
thereby. If it is subsequently determined in connection with such proceeding
that the Claims are not Excluded Claims or that Indemnitee is otherwise entitled
to be indemnified under the provisions of Section 2 hereof, the Company shall
promptly indemnify Indemnitee in full against all Losses and Expenses arising
out of such Claims or Indemnifiable Events.
(e) Indemnitee hereby expressly undertakes and agrees to reimburse the
Company for all Losses and Expenses paid by the Company in connection with any
Claim against Indemnitee in the event and only to the extent that a Judicial
Determination shall have been made that Indemnitee is not entitled to be
indemnified by the Company for such Losses and Expenses because the Claim is an
Excluded Claim or because Indemnitee is otherwise not entitled to payment under
applicable law.
(f) In connection with any dispute as to whether Indemnitee is entitled to
be indemnified hereunder the presumption shall be that Indemnitee is so entitled
and the burden of proof shall be on the Company to establish that Indemnitee is
not so entitled.
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5. Settlement. The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent. The Company shall not
settle any Claim in which it takes the position that Indemnitee is not entitled
to indemnification in connection with such settlement without the consent of
Indemnitee, nor shall the Company settle any Claim in any manner which would
impose any Fine, admission of wrongdoing or any obligation on Indemnitee,
without Indemnitee's written consent. Neither the Company nor Indemnitee shall
unreasonably withhold its or his consent to any proposed settlement.
6. No Presumption. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
7. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Certificate of
Incorporation and Bylaws, the Company's By-laws, the Delaware General
Corporation Law, any vote of stockholders or disinterested directors or
otherwise, both as to action in Indemnitee's official capacity and as to action
in any other capacity by holding such office, and shall continue after
Indemnitee ceases to serve the Company as a director or officer for so long as
Indemnitee shall be subject to any Claim by reason of (or arising in part out
of) an Indemnifiable Event. To the extent that a change in the Delaware General
Corporation Law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the
Certificate of Incorporation and By-Laws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
8. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee, if at any time an officer or director of the Company, shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any director or officer of the
Company.
9. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
10. Partial Indemnity, Etc. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
Losses and Expenses of a Claim but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover,
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notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to any Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
11. Liability of Company. Indemnitee agrees that neither the stockholders
nor the directors nor any officer, employee, representative or agent of the
Company shall be personally liable for the satisfaction of the Company's
obligations under this Agreement and Indemnitee shall look solely to the assets
of the Company for satisfaction of any claims hereunder.
12. Enforcement.
(a) Indemnitee's right to indemnification and other rights under this
Agreement shall be specifically enforceable by Indemnitee and shall be
enforceable notwithstanding any adverse Company Determination and no such
Company Determination shall create a presumption that Indemnitee is not entitled
to be indemnified hereunder.
(b) In the event that any action is instituted by Indemnitee under this
Agreement, or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and reasonable expenses,
including reasonable counsel fees, incurred by Indemnitee with respect to such
action, unless the court determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous.
13. Severability. In the event that any provision of this Agreement is
determined by a court to require the Company to do or to fail to do an act which
is in violation of applicable law, such provision (including any provision
within a single section, paragraph or sentence) shall be limited or modified in
its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with their terms to the fullest extent
permitted by law.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consents to the jurisdiction of the courts of and in the States of
Delaware and Illinois for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agrees that any
action instituted under this Agreement shall be brought only in the state or
Federal courts of the States of Delaware and Illinois.
16. Notices. All notices or other communications required or permitted
hereunder shall be sufficiently given for all purposes if in writing and
personally delivered, telegraphed,
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telexed, sent by facsimile transmission or sent by registered or certified mail,
return receipt requested, with postage prepaid addressed as follows, or to such
other address as the parties shall have given notice of pursuant hereto:
(a) If to the Company, to:
eLoyalty Corporation
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▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Indemnitee, to his home address, as reflected in the
Company's payroll records.
17. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.
18. Successors and Assigns. This Agreement shall be (i) binding upon all
successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii) binding
upon and inure to the benefit of any successors and assigns, heirs, and personal
or legal representatives of Indemnitee.
19. Amendment; Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement to be effective as of the day and year first above written.
eLOYALTY CORPORATION
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
February 23, 2005 February 23, 2005
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