|
(Mark One)
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|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the fiscal year ended January 1, 2005 | ||
| or | ||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the transition period from to | ||
| Delaware | 36-4304577 | |
|
(State or other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
1
2
3
4
5
6
7
8
Item 1.
Business.
Table of Contents
Converged Internet Protocol Contact Center
(“CIPCC”) Solutions
eLoyalty’s CIPCC service line focuses on helping clients
realize the benefits of transitioning their contact centers to a
single network infrastructure from the traditional two-network
(voice network and separate data network) model. These benefits
include cost savings, remote agent flexibility and application
enhancements. Over the past two years, eLoyalty has developed a
set of tools and methodologies to help clients financially
model, plan migration paths and configure and integrate
converged Internet Protocol (“IP”) network solutions
within their contact center environments.
Behavioral Analytics
eLoyalty pioneered this service line, which applies human
behavioral modeling to analyze and improve customer
interactions. Using Behavioral Analytics, eLoyalty can help
clients:
•
Automatically measure customer satisfaction and agent
performance on every call
•
Identify and understand customer personality
•
Improve rapport between agent and customer
•
Reduce call handle times while improving customer satisfaction
•
Improve cross-sell and up-sell success rates
eLoyalty has designed a scalable platform to enable the Company
to rapidly implement Behavioral Analytics solutions for its
clients that engage it to do so.
Table of Contents
Contact Center Optimization Solutions (“CCOS”)
The CCOS service line helps clients optimize their contact
centers across people, processes and technology. This service
line assists clients in developing holistic approaches to
improving efficiency and effectiveness within their contact
centers. This can include, among others, improvements in
managing and training the workforce, developing appropriate
workflow and desk top integration and deploying leading edge
infrastructure and routing processes. In recent years, the CCOS
service line has developed expertise in helping clients deploy
speech-enabled self-service solutions to improve contact center
efficiency.
Marketing Solutions
Marketing Solutions helps clients improve acquisition,
cross-sell, and retention of customers by improving customer
data management, interaction management and campaign automation.
In 2004, eLoyalty built on these capabilities by acquiring the
assets of Interelate, Inc., adding to the Company’s ability
to deploy premises-based solutions. eLoyalty now offers clients
the option of faster time-to-market and lower investment costs
through hosted data and campaign management solutions. eLoyalty
expects significant growth in the overall market for customer
data management and analytics as clients refine and target
campaign management in the wake of increasing privacy regulation.
•
Evaluating our clients’ efficiency and effectiveness in
handling customer interactions. We design and construct systems
to capture and analyze the performance measures of each customer
interaction, including the number of legacy systems used to
handle the situation, interaction time, reason for interaction
and actions taken to resolve any customer issues.
•
Implementing systems that assist our clients in identifying
their most valuable customers through detailed segmentation of
their customer base. This allows our clients to target
high-value customers to receive special offers or service levels.
•
Performing detailed financial analysis to calculate the expected
return on investment for the implementation of various CRM
solutions. This process helps our clients establish goals,
alternatives and priorities and assigns client accountability
throughout resulting projects.
•
Selecting the appropriate CRM solution for our clients. The
implementation of a CRM solution can lead to significant
organizational, structural, operational and staffing changes. We
assist our clients in determining the steps they need to take in
this regard.
•
Implementing the technical aspects of CRM solutions, including
the integration of a variety of infrastructure and application
hardware and software from third-party vendors.
Table of Contents
Table of Contents
Item 2.
Properties.
Table of Contents
Item 3.
Legal Proceedings.
Item 4.
Submission of Matters to a Vote of Security
Holders.
Item 4A.
Executive Officers of the Company.
Executive
Officer
Name
Age
Current Position
Since
48
President and Chief Executive Officer
1999
40
Vice President, Client Services
2003
37
Vice President, Delivery
2004
45
Vice President, Strategy and Marketing
2001
45
Vice President, Operations and Chief Financial Officer
2001
40
Vice President, General Counsel and Corporate Secretary
2001
*
Member of the Board of Directors
Table of Contents
Table of Contents
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
Item 5.
Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
High
Low
$
6.56
$
3.42
7.90
5.25
7.70
4.41
6.07
4.74
$
4.20
$
3.28
3.95
3.15
3.90
3.30
4.10
3.18
Total Number
Average
of Shares
Price Paid
Period
Purchased
Per Share
540
$
5.94
519
$
5.50
29,731
$
5.05
30,790
$
5.07
Table of Contents
Item 6.
Selected Financial Data.
Table of Contents
For the Fiscal Year
2004
2003
2002
2001
2000
$
72,573
$
62,579
$
86,698
$
146,729
$
236,498
53,232
48,667
57,811
113,282
150,691
19,482
23,718
28,888
58,832
73,411
947
2,405
9,075
33,444
—
—
9
222
5,091
8,821
5,247
5,299
5,483
5,683
2,372
350
63
—
—
—
—
—
—
4,808
4,972
—
557
—
—
—
79,258
80,718
101,479
221,140
240,267
(6,685
)
(18,139
)
(14,781
)
(74,411
)
(3,769
)
231
256
758
1,654
2,921
(6,454
)
(17,883
)
(14,023
)
(72,757
)
(848
)
(587
)
388
21,381
(4)
(9,096
)
(4)
(424
)
(5,867
)
(18,271
)
(35,404
)
(63,661
)
(424
)
(1,499
)
(1,508
)
(5,371
)
(3,576
)
—
$
(7,366
)
$
(19,779
)
$
(40,775
)
$
(67,237
)
$
(424
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
$
(13.42
)
$
(0.09
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
$
(13.42
)
$
(0.09
)
6.03
5.69
5.19
5.01
4.82
10.44
9.86
9.17
5.16
5.37
(1)
Noncash compensation included in individual line items above:
For the Fiscal Year
2004
2003
2002
2001
2000
$
1,063
$
834
$
872
$
841
$
789
1,697
2,101
2,917
2,294
1,337
176
—
—
—
—
—
—
—
54
81
$
2,936
$
2,935
$
3,789
$
3,189
$
2,207
(2)
Effective January 2002, eLoyalty adopted Statement of Financial
Accounting Standards (“SFAS”) No. 142
“Goodwill and Other Intangible Assets,” which required
that goodwill no longer be amortized.
(3)
The Company tests goodwill for impairment annually. For the year
ended December 27, 2003, the analysis indicated that
goodwill associated with our International reporting unit was
fully impaired and an adjustment of $0.6 million was
recorded in the Consolidated Statement of Operations.
(4)
Includes an income tax expense of $26.7 million and
$14.1 million to establish valuation allowances for
deferred tax assets in fiscal years 2002 and 2001, respectively.
Table of Contents
As of
January 1,
December 27,
December 28,
December 29,
December 30,
2005
2003
2002
2001
2000
$
27,768
(1)
$
37,852
(1)
$
58,458
(1)
$
52,101
(1)
$
41,138
$
28,565
$
33,869
$
47,859
$
59,795
$
109,934
$
55,367
$
59,805
$
88,827
$
128,218
$
184,618
—
—
$
8,600
$
8,600
—
$
1,438
$
1,144
$
2,358
$
3,390
—
$
21,169
$
21,197
$
22,153
$
19,499
—
$
18,963
$
24,018
$
40,303
$
77,347
$
140,856
(1)
Total cash consists of cash and cash equivalents of $27,070,
$36,953, $48,879 and $42,653 and restricted cash of $698, $899,
$9,579 and $9,448 as of January 1, 2005, December 27,
2003, December 28, 2002 and December 29, 2001,
respectively.
(2)
Represents current assets less current liabilities.
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
50,185
$
48,338
$
69,482
14,905
8,241
7,123
65,090
56,579
76,605
3,153
2,198
2,194
4,330
3,802
7,899
$
72,573
$
62,579
$
86,698
28
%
24
%
37
%
(1)
Revenue excluding reimbursed expenses less cost of services
excluding reimbursed expenses.
Table of Contents
Table of Contents
Table of Contents
Revenue
Table of Contents
Cost of Services
Selling, General and
Administrative
Severance and Related
Costs
Depreciation
Table of Contents
Amortization of
Intangibles
Goodwill Impairment
Operating Loss
Interest Income (Expense) and Other, net
Income Tax (Benefit) Provision
Net Loss Available to Common Stockholders
Table of Contents
Revenue
Cost of Services
Table of Contents
Selling, General and Administrative
Severance and Related Costs
Research and Development
Depreciation
Table of Contents
Amortization of Intangibles
Goodwill Amortization
Goodwill Impairment
Operating Loss
Interest Income (Expense) and Other, net
Income Tax (Benefit) Provision
Net Loss Available to Common Stockholders
Table of Contents
Introduction
Cash Flows from Operations
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Table of Contents
Near-Term Liquidity
Bank Facility
Accounts Receivable Customer Concentration
Summary
Table of Contents
Less Than
More Than
Contractual Obligations
Total
1 Year
1-3 Years
3-5 Years
5 Years
$
623
$
623
$
—
$
—
$
—
$
4,376
$
1,534
$
1,575
$
975
$
292
$
2,316
$
1,346
$
970
$
—
$
—
$
1,606
$
1,606
$
—
$
—
$
—
Letters of Credit
Operating Leases
Severance and Related Costs
Purchase Obligations
Table of Contents
•
uncertainties associated with the attraction of new clients, the
continuation of existing and new engagements with existing
clients and the timing of related client commitments, including
potential client delays or deferrals of new engagements or
existing project extensions in light of prevailing general
economic conditions and uncertainties; reliance on a relatively
small number of customers for a significant percentage of our
revenue, reliance on major suppliers, including CRM software
providers and other alliance partners, and maintenance of good
relations with key business partners;
•
risks involving the variability and predictability of the
number, size, scope, cost and duration of, and revenue from
client engagements, including risks to our ability to achieve
revenue from projects that have been awarded to us as a result
of unanticipated deferrals or cancellations of engagements due
to changes in customers’ requirements or preferences for
the company’s services (because the company’s business
is relationship-based, substantially all of the company’s
customers retain the right to defer or cancel the company’s
engagement, regardless of whether there is a written contract);
•
management of the other risks associated with increasingly
complex client projects and new services offerings, including
risks relating to the collection of billed amounts, shifts from
time and materials-based engagements to alternative pricing or
value-based models and variable employee utilization rates,
project personnel costs and project requirements;
•
management of growth, expansion into new geographic and market
areas and development and introduction of new service offerings,
including the timely and cost-effective implementation of
enhanced operating, financial and other infrastructure systems
and procedures;
•
challenges in attracting, training, motivating and retaining
highly skilled management, strategic, technical, product
development and other professional employees in a competitive
information technology labor market;
•
continuing intense competition in the information technology
services industry generally and, in particular, among those
focusing on the provision of CRM services and software,
including firms with both significantly greater financial and
technical resources than eLoyalty and new entrants;
•
the rapid pace of technological innovation in the information
technology services industry, including frequent technological
advances and new product introductions and enhancements, and the
ability to create innovative and adaptable solutions that are
consistent with evolving standards and responsive to client
needs, preferences and expectations;
•
access in tightened capital and credit markets to sufficient
debt and/or equity capital on acceptable terms to meet our
future operating and financial needs;
•
protection of our technology, proprietary information and other
intellectual property rights or challenges to our intellectual
property by third parties;
•
future legislative or regulatory actions relating to the
information technology or information technology services
industries including those relating to data privacy;
•
our ability to execute our strategy of reducing costs, achieving
the benefits of costs reduction activities and maintaining a
lower cost structure;
•
our ability to successfully and timely integrate acquired
operations into our business;
•
maintenance of our reputation and expansion of our name
recognition in the marketplace;
Table of Contents
•
risks associated with global operations, including those
relating to the economic conditions in each country, potential
currency exchange and credit volatility, compliance with a
variety of foreign laws and regulations and management of a
geographically dispersed organization;
•
the overall demand for CRM services and software and information
technology consulting services generally; and
•
the uncertain scope of the current economic recovery and its
impact on our business, as well as the impact of other future
general business, capital market and economic conditions and
volatility.
Item 7A.
Quantitative and Qualitative Disclosures about Market
Risk.
Table of Contents
Item 8.
Financial Statements and Supplementary Data.
Page
28
29
30
31
32
33
50
Table of Contents
Table of Contents
January 1,
December 27,
2005
2003
ASSETS:
$
27,070
$
36,953
698
899
11,187
7,631
2,829
1,430
578
402
42,362
47,315
6,779
9,388
2,650
1,671
1,713
262
1,863
1,169
$
55,367
$
59,805
LIABILITIES AND STOCKHOLDERS’ EQUITY:
1,528
2,852
4,165
4,580
4,466
1,226
3,638
4,788
13,797
13,446
774
—
664
1,144
15,235
14,590
21,169
21,197
—
—
74
69
150,659
149,140
(121,032
)
(115,165
)
(3,451
)
(3,832
)
(7,287
)
(6,194
)
18,963
24,018
$
55,367
$
59,805
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
72,573
$
62,579
$
86,698
53,232
48,667
57,811
19,482
23,727
29,110
947
2,405
9,075
5,247
5,299
5,483
350
63
—
—
557
—
79,258
80,718
101,479
(6,685
)
(18,139
)
(14,781
)
231
256
758
(6,454
)
(17,883
)
(14,023
)
(587
)
388
21,381
(5,867
)
(18,271
)
(35,404
)
(1,499
)
(1,508
)
(5,371
)
$
(7,366
)
$
(19,779
)
$
(40,775
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
6,027
5,689
5,190
6,027
5,689
5,190
$
1,063
$
834
$
872
1,697
2,101
2,917
176
—
—
$
2,936
$
2,935
$
3,789
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
(5,867
)
$
(18,271
)
$
(35,404
)
8,357
8,297
9,273
—
557
—
—
—
(400
)
—
—
856
—
—
22,510
(2,395
)
3,915
11,832
47
199
7,114
(1,426
)
(335
)
43
(1,409
)
1,147
(401
)
3,773
202
1,024
(1,271
)
(1,849
)
(2,881
)
(2,141
)
(3,457
)
(2,604
)
(598
)
31
(550
)
(2,930
)
(9,564
)
10,412
(5,587
)
—
—
(475
)
(1,209
)
(2,266
)
(6,062
)
(1,209
)
(2,266
)
—
25,800
—
—
(34,400
)
—
1
—
—
201
8,680
(131
)
(1,483
)
(1,543
)
(888
)
—
—
89
(1,281
)
(1,463
)
(930
)
390
310
(990
)
(9,883
)
(11,926
)
6,226
36,953
48,879
42,653
$
27,070
$
36,953
$
48,879
$
—
$
(88
)
$
(210
)
$
10
$
227
$
6,820
Table of Contents
Retained
Accumulated
Common Stock
Additional
Earnings
Other
Total
Paid-In
(Accumulated
Comprehensive
Unearned
Stockholders’
Shares
Amount
Capital
Deficit)
Loss
Compensation
Equity
5,629,218
$
56
$
150,071
$
(61,490
)
$
(4,541
)
$
(6,749
)
$
77,347
(35,404
)
(35,404
)
390
390
(35,014
)
20,455
91
91
1,208,470
12
7,604
(7,616
)
—
(324,490
)
(3
)
(2,748
)
4,885
2,134
(3,769
)
(3,769
)
218,745
2
1,114
1,116
(1,602
)
(1,602
)
6,752,398
$
67
$
150,761
$
(96,894
)
$
(4,151
)
$
(9,480
)
$
40,303
(18,271
)
(18,271
)
319
319
(17,952
)
348,656
4
1,268
(1,272
)
—
(368,861
)
(4
)
(2,334
)
4,558
2,220
187,406
2
953
955
(1,508
)
(1,508
)
6,919,599
$
69
$
149,140
$
(115,165
)
$
(3,832
)
$
(6,194
)
$
24,018
(5,867
)
(5,867
)
381
381
(5,486
)
738,027
7
4,309
(4,316
)
—
312
1
1
(256,291
)
(2
)
(1,320
)
3,223
1,901
5,418
28
28
(1,499
)
(1,499
)
7,407,065
$
74
$
150,659
$
(121,032
)
$
(3,451
)
$
(7,287
)
$
18,963
Table of Contents
Table of Contents
North
America
International
Total
$
1,671
$
464
$
2,135
—
(557
)
(557
)
—
93
93
$
1,671
$
—
$
1,671
979
—
979
$
2,650
$
—
$
2,650
Table of Contents
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
(7,366
)
$
(19,779
)
$
(40,775
)
2,585
2,448
2,475
(5,108
)
(13,126
)
(9,163
)
$
(9,889
)
$
(30,457
)
$
(47,463
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
$
(1.64
)
$
(5.35
)
$
(9.15
)
$
(1.22
)
$
(3.48
)
$
(7.86
)
$
(1.64
)
$
(5.35
)
$
(9.15
)
For the Fiscal Years Ended
2004
2003
2002
108%-114%
120%-129%
132%-155%
1.8%-3.5%
1.1%-3.1%
2.7%-4.7%
5.0 years
5.0 years
5.0 years
—
—
—
Table of Contents
$
1,387
1,167
989
979
1,800
6,322
(735
)
$
5,587
Table of Contents
Table of Contents
Reserve
Reserve
Balance
Balance
12-27-03
Charges
Adjustments
Payments
01-01-05
$
1,656
$
1,240
$
(362
)
$
(1,820
)
$
714
1,863
—
(9
)
(651
)
1,203
116
78
—
(166
)
28
$
3,635
$
1,318
$
(371
)
$
(2,637
)
$
1,945
As of
January 1,
December 27,
2005
2003
$
10,443
$
8,938
1,133
186
11,576
9,124
(389
)
(1,493
)
$
11,187
$
7,631
Table of Contents
As of
January 1,
December 27,
2005
2003
$
25,477
$
22,987
2,265
2,333
1,219
1,322
28,961
26,642
(22,182
)
(17,254
)
$
6,779
$
9,388
(1)
Fiscal year 2004 includes $2,091 of Computers and software and
$65 of Furniture and equipment acquired in the Interelate
Acquisition.
For the Fiscal Years Ended
2004
2003
2002
$
(5,127
)
$
(12,142
)
$
3,008
(1,327
)
(5,741
)
(17,031
)
$
(6,454
)
$
(17,883
)
$
(14,023
)
For the Fiscal Years Ended
2004
2003
2002
$
—
$
—
$
—
(25
)
(35
)
60
(562
)
423
(389
)
(587
)
388
(329
)
—
—
19,815
—
—
2,814
—
—
(919
)
—
—
21,710
$
(587
)
$
388
$
21,381
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
(2,259
)
$
(6,259
)
$
(4,908
)
(256
)
(495
)
(270
)
1,269
(5,507
)
—
94
80
88
(159
)
8
(222
)
724
12,561
26,693
$
(587
)
$
388
$
21,381
As of
January 1,
December 27,
2005
2003
$
48,361
$
49,117
154
597
2,188
656
1,638
1,657
1,000
994
594
594
(52,610
)
(53,334
)
1,325
281
(1,325
)
(281
)
(1,325
)
(281
)
$
—
$
—
Table of Contents
As of
January 1,
December 27,
2005
2003
$
741
$
726
567
835
494
1,360
1,836
1,867
$
3,638
$
4,788
Table of Contents
Table of Contents
Table of Contents
As of
January 1,
December 27,
December 28,
2005
2003
2002
714,337
366,484
1,268,918
(1)
Substantially all of this stock came from eLoyalty’s 1999
Stock Incentive Plan. During fiscal years 2004, 2003 and 2002
$4,315, $1,257 and $7,210 in noncash compensation were recorded
and will be charged to income over the five-year restriction
lapsing and installment grant period.
Table of Contents
Weighted
Weighted
Average
Average
Fair Value
Option
Exercise
Options
of Option
Shares
Price
Exercisable
Grants
657,740
$
56.81
467,855
210,750
$
3.85
$
3.35
—
$
—
(87,037
)
$
71.96
781,453
$
40.84
484,794
13,498
$
3.75
$
3.18
—
$
—
(158,911
)
$
80.08
636,040
$
30.18
431,469
7,800
$
5.85
$
4.66
(312
)
$
4.15
(54,206
)
$
31.79
589,322
$
29.71
464,576
Options Outstanding
Options Exercisable
Weighted-Average
Weighted-Average
Weighted-Average
Number
Remaining Contractual
Exercise Price
Number
Exercise Price
Exercise Prices
Outstanding
Life (in Years)
Per Share
Exercisable
Per Share
226,172
7.9
$
3.87
107,906
$
3.90
106,675
6.4
$
18.88
102,734
$
18.92
160,300
6.4
$
23.93
157,764
$
23.98
52,739
6.9
$
69.37
52,739
$
69.37
21,476
5.4
$
108.00
21,473
$
108.00
21,960
5.9
$
218.96
21,960
$
218.96
589,322
7.0
$
29.71
464,576
$
36.45
Table of Contents
For the Fiscal Years Ended
2004
2003
2002
$
(5,867
)
$
(18,271
)
$
(35,404
)
(1,499
)
(1,508
)
(5,371
)
$
(7,366
)
$
(19,779
)
$
(40,775
)
6,027
5,689
5,190
4,408
4,169
3,982
10,435
9,858
9,172
(1)
In periods in which there was a loss, the dilutive effect of
common stock equivalents, which is primarily related to the 7%
Series B Convertible Preferred Stock, was not included in
the diluted loss per share calculation as they were antidilutive.
North
For the Fiscal Years Ended
America
International
Total
$
65,903
$
6,670
$
72,573
$
56,517
$
6,062
$
62,579
$
77,636
$
9,062
$
86,698
$
(5,640
)
$
(1,045
)
$
(6,685
)
$
(12,525
)
$
(5,614
)
$
(18,139
)
$
(8,346
)
$
(6,435
)
$
(14,781
)
$
48,556
$
6,811
$
55,367
$
54,213
$
5,592
$
59,805
$
81,942
$
6,885
$
88,827
North
United
America
United
International
States
Canada
Total
Kingdom
Ireland
Germany
Other
Total
Total
$
62,002
$
3,901
$
65,903
$
595
$
4,734
$
1,054
$
287
$
6,670
$
72,573
$
53,747
$
2,770
$
56,517
$
742
$
4,832
$
368
$
120
$
6,062
$
62,579
$
74,029
$
3,607
$
77,636
$
2,165
$
2,635
$
4,124
$
138
$
9,062
$
86,698
Table of Contents
For the
Fiscal Years Ended
2004
2003
2002
69
%
77
%
80
%
21
%
13
%
8
%
90
%
90
%
88
%
4
%
4
%
3
%
6
%
6
%
9
%
100
%
100
%
100
%
(1)
The Interelate Acquisition accounted for approximately
one-fourth of the Managed services revenue in fiscal year 2004.
Year
Amount
$
1,484
949
626
480
495
292
$
4,326
Table of Contents
1st
2nd
3rd
4th
Year
$
14,424
$
18,176
$
19,942
$
20,031
$
72,573
$
(2,344
)
$
(488
)
$
(2,121
)
(1)
$
(1,732
)
$
(6,685
)
$
(2,688
)
$
(786
)
$
(2,455
)
(1)
$
(1,437
)
$
(7,366
)
$
(0.45
)
$
(0.13
)
$
(0.41
)
$
(0.23
)
$
(1.22
)
$
(0.45
)
$
(0.13
)
$
(0.41
)
$
(0.23
)
$
(1.22
)
5.93
5.99
6.06
6.13
6.03
5.93
5.99
6.06
6.13
6.03
$
17,727
$
16,408
$
13,458
$
14,986
$
62,579
$
(4,959
)
(2)
$
(3,046
)
$
(5,517
)
$
(4,617
)
(3)
$
(18,139
)
$
(5,277
)
(2)
$
(3,426
)
$
(5,846
)
$
(5,230
)
(3)
$
(19,779
)
$
(0.96
)
$
(0.61
)
$
(1.02
)
$
(0.89
)
$
(3.48
)
$
(0.96
)
$
(0.61
)
$
(1.02
)
$
(0.89
)
$
(3.48
)
5.52
5.62
5.76
5.86
5.69
5.52
5.62
5.76
5.86
5.69
(1)
Includes a $809 charge relating to severance and related costs
associated with cost reduction plans.
(2)
Includes a $1,260 charge relating to severance and related costs
associated with cost reduction plans.
(3)
Includes a $948 charge relating to severance and related costs
associated with cost reduction plans and a $557 adjustment for
impaired international goodwill.
Table of Contents
Balance at
Balance
Description of Allowance
Beginning
at End of
and Reserves
of Period
Additions
Deductions
Period
$
1,493
(502
)
(602
)
$
389
$
1,590
—
(97
)
$
1,493
$
2,400
(400
)
(410
)
$
1,590
$
53,334
—
(724
)
$
52,610
$
40,773
12,561
—
$
53,334
$
14,080
26,693
—
$
40,773
50
| Item 10. | Directors and Executive Officers of the Registrant. |
| Item 11. | Executive Compensation. |
51
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
| Number of Securities | ||||||||||||
| to be Issued | Weighted Average | |||||||||||
| Upon Exercise of | Exercise Price of | Number of Securities | ||||||||||
| Outstanding Options, | Outstanding Options, | Remaining Available for | ||||||||||
| Plan Category | Warrants and Rights (1) | Warrants and Rights | Future Issuance (1)(2) | |||||||||
|
Equity compensation plans approved by security holders
|
560,748 | $ | 29.20 | 303,872 | (3) | |||||||
|
Equity compensation plans not approved by security holders
|
28,574 | $ | 39.86 | 42,391 | ||||||||
|
Total
(4)
|
589,322 | $ | 29.71 | 346,263 | ||||||||
| (1) | Reflects number of shares of the Company’s common stock. |
| (2) | All of the securities available for future issuance listed herein may be issued other than upon the exercise of an option, warrant or similar right. All of these shares are available for award in the form of restricted stock, bonus stock, performance shares or similar awards under eLoyalty’s applicable equity compensation plans. |
| (3) | eLoyalty’s plan that has been approved by its stockholders is the 1999 Stock Incentive Plan. This plan includes an “automatic increase” feature whereby, as of the first day of each fiscal year, the number of shares available for awards, other than incentive stock options, automatically increases by an amount equal to five percent (5%) of the number of shares of common stock then outstanding. |
| (4) | Does not include (i) shares of restricted common stock held by employees, which are included in the amount of issued and outstanding shares or (ii) 105,036 shares of common stock issuable pursuant to installment stock awards granted to employees, which (subject to specified conditions) will be issued in the future in consideration of the employees’ services to the Company. |
| Item 13. | Certain Relationships and Related Transactions. |
| Item 14. | Principal Accounting Fees and Services. |
52
53
Item 15.
Exhibits and Financial Statement Schedules.
The consolidated financial statements filed as part of this
report are listed and indexed under Item 8 of this
Form 10-K and such list is incorporated herein by reference.
The financial statement schedule filed as part of this report is
listed and indexed under Item 8 of this Form 10-K and
is incorporated herein by reference. We have omitted financial
statement schedules other than that listed under Item 8
because such schedules are not required or applicable.
The list of exhibits filed with or incorporated by reference
into this report is contained in the Exhibit Index to this
report on Page I-1, which is incorporated herein by reference.
Table of Contents
| eLoyalty Corporation |
| By | /s/ Kelly D. Conway |
|
|
|
| Kelly D. Conway | |
| President and Chief Executive Officer |
54
| Exhibit | ||||
| No. | Description of Exhibit | |||
| 3 | .1 | Certificate of Incorporation of eLoyalty, as amended (filed as Exhibit 3.1 to eLoyalty’s Registration Statement on Form S-1 (Registration No. 333-94293) (the “S-1”)). | ||
| 3 | .2 | Certificate of Designation of Series A Junior Participating Preferred Stock of the Company (included as Exhibit 4.2 to Amendment No. 1 to eLoyalty’s Registration Statement on Form 8-A (File No. 0-27975) filed with the SEC on March 24, 2000 (the “8-A Amendment”)). | ||
| 3 | .3 | Certificate of Amendment to eLoyalty’s Certificate of Incorporation, effective 7:59 a.m., eastern time, December 19, 2001 (filed as Exhibit 3.3 to eLoyalty’s Annual Report on Form 10-K for the year ended December 29, 2001). | ||
| 3 | .4 | Certificate of Amendment to eLoyalty’s Certificate of Incorporation, effective 7:58 a.m., eastern time, December 19, 2001 (filed as Exhibit 3.4 to eLoyalty’s Annual Report on Form 10-K for the year ended December 29, 2001). | ||
| 3 | .5 | Certificate of Increase of Series A Junior Participating Preferred Stock of eLoyalty, filed December 19, 2001 (filed as Exhibit 3.5 to eLoyalty’s Annual Report on Form 10-K for the year ended December 29, 2001). | ||
| 3 | .6 | Certificate of Designation of 7% Series B Convertible Preferred Stock of eLoyalty, filed December 19, 2001 (filed as Exhibit 3.6 to eLoyalty’s Annual Report on Form 10-K for the year ended December 29, 2001). | ||
| 3 | .7 | By-Laws of eLoyalty (filed as Exhibit 3.2 to the S-1). | ||
| 4 | .1 | Rights Agreement, dated as of March 17, 2000, between eLoyalty and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (filed as Exhibit 4.1 to the 8-A Amendment). | ||
| 4 | .2 | Amendment, dated as of September 24, 2001, to the Rights Agreement between eLoyalty and Mellon Investor Services LLC (filed as Exhibit 4.2 to eLoyalty’s Current Report on Form 8-K dated September 24, 2001, File No. 0-27975). | ||
| 4 | .3 | Certificate of Adjustment dated January 10, 2002 (filed as Exhibit 4.3 to eLoyalty’s Annual Report on Form 10-K for the year ended December 29, 2001). | ||
| 10 | .1 | Form of Tax Sharing and Disaffiliation Agreement between Technology Solutions Company (“TSC”) and eLoyalty (filed as Exhibit 10.6 to the S-1). | ||
| 10 | .2 | eLoyalty Corporation 2000 Stock Incentive Plan (as Amended and Restated as of September 24, 2001) (filed as Exhibit (d)(2) to eLoyalty’s Tender Offer Statement on Schedule TO filed October 15, 2001). | ||
| 10 | .3 | eLoyalty Corporation 1999 Stock Incentive Plan (as Amended and Restated as of May 16, 2002) (filed as Exhibit 10.3 to eLoyalty’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2002). | ||
| 10 | .4 | Summary of Discretionary Cash Bonus Program for Executive Officers (filed as Exhibit 10.18 to eLoyalty’s Annual Report on Form 10-K for the year ended December 30, 2000 (File No. 0-27975)). | ||
| 10 | .5 | Employment Agreement, dated as of November 15, 1999, between Timothy J. Cunningham and TSC (to which eLoyalty has succeeded) (filed as Exhibit 10.10 to the S-1). | ||
| 10 | .6 | Form of Indemnification Agreement entered into between eLoyalty Corporation and each of Tench Coxe and Jay C. Hoag (filed as Exhibit 10.15 to the S-1). | ||
I-1
Exhibit
No.
Description of Exhibit
10
.7
Employment Agreement, dated as of November 7, 2002, between
eLoyalty Corporation and Kelly D. Conway (filed as
Exhibit 10.1 to eLoyalty’s Quarterly Report on Form
10-Q for the quarter ended September 28, 2002).
10
.8
Summary of eLoyalty Corporation’s Vice President
Compensation Program, dated as of August 12, 2002 (filed as
Exhibit 10.2 to eLoyalty’s Quarterly Report on Form
10-Q for the quarter ended June 29, 2002).
10
.9
Loan Agreement, dated as of December 17, 2001, between
eLoyalty Corporation and LaSalle Bank National Association,
together with Amendment No. 1 to Loan Agreement, dated as
of February 27, 2002 (filed as Exhibit 10.27 to
eLoyalty’s Annual Report on Form 10-K for the year ended
December 29, 2001).
10
.10
Amendment No. 2 to Loan Agreement, dated as of
March 18, 2002, between LaSalle Bank National Association
and eLoyalty Corporation (filed as Exhibit 10.1 to
eLoyalty’s Quarterly Report on Form 10-Q for the
quarter ended March 30, 2002).
10
.11
Amendment No. 3 to Loan Agreement, dated as of May 13,
2002, between LaSalle Bank National Association and eLoyalty
Corporation (filed as Exhibit 10.1 to eLoyalty’s
Quarterly Report on Form 10-Q for the quarter ended
June 29, 2002).
10
.12
Amendment No. 4 to Loan Agreement, dated as of
December 9, 2002, between LaSalle Bank National Association
and eLoyalty Corporation (filed as Exhibit 10.22 to
eLoyalty’s Annual Report on Form 10-K for the year
ended December 28, 2002).
10
.13
Amendment No. 5 to Loan Agreement, dated as of May 14,
2003, between LaSalle Bank National Association and eLoyalty
Corporation (filed as Exhibit 10.1 to eLoyalty’s
Quarterly Report on Form 10-Q for the quarter ended
June 28, 2003).
10
.14
Amendment No. 6 to Loan Agreement, dated as of
September 8, 2003, between LaSalle Bank National
Association and eLoyalty Corporation (filed as Exhibit 10.1
to eLoyalty’s Quarterly Report on Form 10-Q for the
quarter ended September 27, 2003).
10
.15
Amendment No. 7 to Loan Agreement, dated as of
December 23, 2003, between LaSalle Bank National
Association and eLoyalty Corporation (filed as
Exhibit 10.19 to eLoyalty’s Annual Report on
Form 10-K for the year ended December 27, 2003).
10
.16†
Amendment No. 8 to Loan Agreement, dated as of
December 21, 2004, between LaSalle Bank National
Association and eLoyalty Corporation.
10
.17
Amended and Restated Investor Rights Agreement, dated as of
December 19, 2001, by and among eLoyalty and the
stockholders named therein (filed as Exhibit 10.3 to
eLoyalty’s Annual Report on Form 10-K for the year
ended December 29, 2001).
10
.18
Employment Agreement, dated January 2 and 8, 2001, and
effective January 29, 2001, between Jay A. Istvan and
eLoyalty (filed as Exhibit 10.1 to eLoyalty’s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001, File No. 0-27975).
10
.19
Indemnification Agreement, effective as of January 29,
2001, between Jay A. Istvan and eLoyalty (filed as
Exhibit 10.4 to eLoyalty’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2001, File
No. 0-27975).
10
.20
Employment Agreement, effective June 1, 2001, between
Steven C. Pollema and eLoyalty (filed as Exhibit 10.1 to
eLoyalty’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, File No. 0-27975).
10
.21
Indemnification Agreement, dated June 11, 2001, between
Steven C. Pollema and eLoyalty (filed as Exhibit 10.3 to
eLoyalty’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001, File No. 0-27975).
10
.22
Employment Agreement, effective September 9, 2002, between
Diane K. Lowe and eLoyalty (filed as Exhibit 10.27 to
eLoyalty’s Annual Report on Form 10-K for the year
ended December 27, 2003).
10
.23†
Form of Restricted Stock Award Agreement between applicable
participant and eLoyalty.
10
.24†
Form of Installment Stock Award Agreement between applicable
participant and eLoyalty.
I-2
Exhibit
No.
Description of Exhibit
10
.25†
Employment Agreement, dated December 17, 2004, between
Christopher Danson and eLoyalty.
10
.26†
Indemnification Agreement, effective as of December 17,
2004, between Christopher Danson and eLoyalty.
10
.27†
Employment Agreement, dated January 21, 2002, between Karen
Bolton and eLoyalty.
10
.28†
Severance Agreement and General Release, effective
November 29, 2004, between Diane K. Lowe and eLoyalty.
10
.29†
Severance Agreement and General Release, effective
January 12, 2005, between Timothy J. Cunningham and
eLoyalty.
14
.1
Code of Conduct (filed as Exhibit 14.1 to eLoyalty’s
Annual Report on Form 10-K for the year ended December 27,
2003).
21
.1†
Subsidiaries of eLoyalty Corporation.
23
.1†
Consent of PricewaterhouseCoopers LLP.
24
.1†
Power of Attorney from Tench Coxe, Director.
24
.2†
Power of Attorney from Jay C. Hoag, Director.
24
.3†
Power of Attorney from John T. Kohler, Director.
24
.4†
Power of Attorney from Michael J. Murray, Director.
24
.5†
Power of Attorney from John C. Staley, Director.
31
.1†
Certification of Kelly D. Conway under Section 302 of the
Sarbanes-Oxley Act of 2002.
31
.2†
Certification of Steven C. Pollema under Section 302 of the
Sarbanes-Oxley Act of 2002.
32
.1†
Certification of Kelly D. Conway and Steven C. Pollema under
Section 906 of the Sarbanes-Oxley Act of 2002.
| † | Filed herewith |
I-3
EXHIBIT 10.16
AMENDMENT NO. 8 TO
LOAN AGREEMENT
This Amendment No. 8 to Loan Agreement (the "Amendment") is dated as of the 21st day of December, 2004 and is by and between LASALLE BANK NATIONAL ASSOCIATION ("Lender") and eLOYALTY CORPORATION, a Delaware corporation (the "Borrower").
WITNESSETH:
WHEREAS, Lender and Borrower are parties to that certain Loan Agreement, dated as of December 17, 2001 (as amended or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement); and
WHEREAS, the Borrower has requested that the Loan Agreement be amended in certain respects;
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of Lender and Borrower hereby agree as follows:
1. Amendments to Loan Agreement. In reliance on the representations and warranties set forth in Section 2 of this Amendment and subject to the satisfaction of the conditions precedent set forth in Section 3 of this Amendment, the Loan Agreement is hereby amended as follows:
1.1. The definition of Maturity Date in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
""Maturity Date" shall mean December 31, 2005."
1.2. The proviso in the first sentence of Section 2.5 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"; provided, however, that Bank may issue Letters of Credit with an expiration date on or before June 30, 2007 in an aggregate face amount not to exceed $1,500,000."
2. Representations and Warranties. To induce the Lender to enter into this Amendment, the Borrower hereby represents and warrants to the Lender that:
2.1. the execution, delivery and performance by the Borrower of this Amendment and each of the other agreements, instruments and documents contemplated
hereby are within its corporate power, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law applicable to the Borrower, the certificate of incorporation and by-laws of the Borrower (as amended to date), any order, judgment or decree of any court or governmental agency, or any agreement, instrument or document binding upon the Borrower or any of its property;
2.2. each of the Loan Agreement and the other Loan Documents, each as amended by this Amendment, are the legal, valid and binding obligation of the Borrower to the extent the Borrower is a party thereto, and the Loan Agreement and such Loan Documents are enforceable against the Borrower in accordance with their respective terms;
2.3. the representations and warranties of Borrower contained in the Loan Agreement and the Loan Documents, each as amended hereby, are true and correct in all material respects as of the date hereof, with the same effect as though made on the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties are true and correct as of such earlier date; and
2.4. Borrower has performed in all material respects all of its obligations under the Loan Agreement and the other Loan Documents to be performed by it on or before the date hereof and as of the date hereof, Borrower is in compliance with all applicable terms and provisions of the Loan Agreement and each of the other Loan Documents to be observed and performed by it and, assuming the effectiveness of the consents set forth herein, no Event of Default has occurred and is continuing.
3. Conditions. The effectiveness of the amendments and consents set forth above is subject to the following conditions precedent:
3.1. Borrower shall have executed and delivered to Lender, or shall have caused to be executed and delivered to Lender, each in form and substance satisfactory to Lender, this Amendment and such other documents, instruments and agreements as Lender may reasonably request.
3.2. Borrower shall have paid to Agent a fully earned, non-refundable fee of $3,400.
3.3. All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Lender and its legal counsel.
3.4. Assuming the effectiveness of the consents set forth herein, no Event of Default shall have occurred and be continuing.
4. References; Effectiveness. Each of the Lender and the Borrower hereby agree that all references to the Loan Agreement which are contained in any of the other Loan Documents shall refer to the Loan Agreement as amended by this Amendment.
5. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment.
6. Continued Effectiveness. Except as specifically set forth herein, the Loan Agreement and each of the other Loan Documents shall continue in full force and effect according to their respective terms.
7. Governing Law. This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois.
8. Costs and Expenses. Borrower hereby agrees that all expenses incurred by the Lender in connection with the preparation, negotiation and closing of the transactions contemplated hereby, including without limitation reasonable attorneys' fees and expenses, shall be part of the Obligations.
IN WITNESS WHEREOF, this Amendment has been executed as of, and is effective as of, the day and year first written above.
eLOYALTY CORPORATION, a Delaware corporation, as Borrower
By Kelly D. Conway Its CEO
LASALLE BANK NATIONAL ASSOCIATION,
as Lender
By June Courtney
Its SVP
Exhibit 10.23
RESTRICTED STOCK AWARD
eLoyalty Corporation, a Delaware corporation (the "Company"), hereby grants to the individual whose name appears below (the "Participant"), pursuant to the provisions of the ELOYALTY CORPORATION _______ STOCK INCENTIVE PLAN (the "Plan"), a Restricted Stock Award (this "Award") of shares of its Common Stock, $0.01 par value per share (the "Restricted Shares"), as set forth below but only upon and subject to the terms and conditions set forth herein, in the Plan, and in Annex I hereto.
All terms and conditions set forth in Annex I and the Plan are deemed to be incorporated herein in their entirety. All capitalized terms used in this Award and not otherwise defined herein have the respective meanings assigned to them in Annex I or the Plan.
PARTICIPANT'S NAME: _______________________
NUMBER OF RESTRICTED SHARES SUBJECT TO AWARD: ______________
DATE OF AWARD GRANT ("AWARD DATE"): ______________
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VESTING PROVISIONS:
(a) The Participant's Restricted Shares will become vested in __________________ quarterly increments ______________________, beginning ________________ and ending __________________; provided that the Participant is employed by the Company on such dates. If the application of this paragraph (a) would result in the Participant vesting in a fraction of a share of Common Stock, such fractional share of Common Stock shall be rounded up to the next whole share, in which case adjustments may be made to future vesting increments to prevent exceeding the total number of Restricted Shares subject to the Award, as provided above.
(b) If the Participant's employment or service with the Company terminates for any reason other than death, Disability or Retirement before all of the Participant's Restricted Shares have become vested under this Award, the Participant's Restricted Shares that have not become vested will be forfeited on and after the effective date of the termination.
(c) If the Participant's employment or service with the Company is terminated on account of the Participant's death or Disability, all Restricted Shares that have not otherwise vested under this Award will then become fully vested as of the date of such event. For purposes of this Award, "Disability" means a physical or mental condition of a Participant resulting from a bodily injury, disease or mental disorder that renders the Participant eligible for benefits under the Company's long-term disability plan (as in effect as of the date of the Participant's termination of employment and regardless of whether the Participant is otherwise eligible for benefits under such plan), as determined by the Company in its sole discretion.
(d) If the Participant's employment or service with the Company terminates by reason of the Participant's retirement with the Company's approval at age 55 or greater and with at least 5 years of continuous service with the Company, or with the Company and its predecessor on a combined and uninterrupted basis ("Retirement"), an additional 20% of the Restricted Shares subject to this Award (but not in excess of the remaining number of Restricted Shares not yet vested under this Award) will then become fully vested as of the date of the Participant's Retirement.
(e) Notwithstanding the foregoing, if the Participant terminates employment or service with the Company because he or she has become employed by an affiliate or subsidiary of the Company, the Participant shall continue to vest in the Restricted Shares in accordance with the vesting schedule set forth in the preceding paragraph, and the Participant's cessation of employment or service with the Company shall not be deemed a forfeiture event hereunder.
(f) The Board of Directors will have the right to determine, in its sole discretion, how a Participant's leave of absence will affect the terms of this Award, including the vesting of Shares hereunder.
(g) The Company will not have any further obligations to the Participant under this Award if the Participant's Restricted Shares are forfeited as provided herein.
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GENERAL:
This Award is subject to the provisions of the Plan, and will be interpreted in accordance therewith. In the event of a discrepancy between this Award, or any other material describing this Award or the Restricted Shares awarded hereunder, and the actual terms of the Plan, the Plan will govern in all respects. A copy of the Plan is available upon request by contacting the Legal Department at the Company's Lake Forest, Illinois office.
IN WITNESS WHEREOF, this Award has been executed as of the Award Date set forth above.
ELOYALTY CORPORATION
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ANNEX I
TO
RESTRICTED STOCK AWARD
1. Meaning of Certain Terms. As used herein, the following terms have
the meanings set forth below. "Board" means the Company's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended. References to this
"Award," the "Restricted Shares" and "herein" are deemed to include the
Restricted Stock Award and this Annex I to the Restricted Stock Award taken as a
whole. This Annex I and the Restricted Stock Award are deemed to be one and the
same instrument. The term "employment" shall have the meanings set forth in
Section 1.4 of the Plan. Other capitalized terms used herein without definition
shall have the respective meanings set forth in the Restricted Stock Award or
the Plan, as appropriate.
2. Stock Certificates. The Company will issue certificates, or cause its transfer agent to maintain a book entry, for the Restricted Shares in the Participant's name. The Secretary of the Company, or the Company's transfer agent, will hold the certificates for the Restricted Shares, or such Restricted Shares will be maintained in a book entry, until the Restricted Shares are either: (i) forfeited; or (ii) vested. Any certificates that are issued for Restricted Shares will bear a legend in accordance with Section 5 hereof. The Participant's right to receive this Award hereunder is contingent upon the Participant's execution and delivery to the Company of all stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a portion of the Restricted Shares in the event such Restricted Shares are forfeited in whole or in part. The Company, or its transfer agent, will release the Restricted Shares, as and when provided by Section 4 hereof.
3. Rights as Stockholder. On and after the Award Date, and except to the extent provided in Section 8 hereof, the Participant will be entitled to all of the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares, the right to receive dividends and other distributions payable with respect to the Restricted Shares, and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution with respect to shares of Common Stock, other than a regular cash dividend, will be deposited with the Company and will be subject to the same restrictions as the Restricted Shares. If the Participant forfeits any rights he or she may have under this Award, the Participant shall, on the day following the event of forfeiture, no longer have any rights as a stockholder with respect to the forfeited portion of the Restricted Shares or any interest therein (or with respect to any Restricted Shares not then vested), and the Participant shall no longer be entitled to receive dividends on such stock or vote the Restricted Shares as of any record date occurring thereafter.
4. Terms and Conditions of Distribution. The Company, or its transfer agent, will transfer the vested portion of the Restricted Shares to a brokerage account established by the Company on behalf of the Participant as soon as practicable after the Restricted Shares become vested. If the Participant dies before the Company has distributed any portion of vested Restricted Shares, the Company will transfer that portion of the vested Restricted Shares to a brokerage account established by the Company on behalf of the beneficiary designated by the Participant on a form provided by the Company for this purpose. If the Participant failed to designate a beneficiary, the Company will distribute certificates for the Restricted Shares in accordance with the Participant's will or, if the Participant did not have a will, the Restricted Shares will be distributed in accordance with the laws of descent and distribution. The Company will distribute certificates for any undistributed portion of vested Restricted Shares no later than six months after the Participant's death.
The Committee may require the Participant, or the alternate recipient
identified in the preceding paragraph, will be required to satisfy any potential
federal, state, local or other tax withholding liability. Such liability must be
satisfied at the time the Restricted Shares become "substantially vested" (as
defined in the regulations issued under Section 83 of the Code). In order to
satisfy the withholding, the Company shall withhold whole shares of Common Stock
which would otherwise be delivered having an aggregate Fair Market Value,
determined as of the Tax Date in an amount necessary to satisfy the amount of
applicable taxes required to be withheld; provided, however, that in the event
the Participant is subject to Section 16 of the Exchange Act, the Committee may
require that the method of satisfying such an obligation be in compliance with
Section 16 and the rules and regulations thereunder.
The Company will not make any distribution under this Section 4 before the first date any portion of the Restricted Shares may be distributed to the Participant without penalty or forfeiture under federal or state laws or regulations governing short swing trading of securities. In determining whether a distribution would result in such a penalty or forfeiture, the Company and
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the Committee may rely upon information reasonably available to them or upon representations of the Participant's legal or personal representative.
5. Legend on Stock Certificates. If certificates for Restricted Shares are issued in the Participant's name under this Award before that portion of Restricted Shares becomes vested, the certificates shall bear the following legend, or any alternate legend that counsel to the Company believes is necessary or desirable to facilitate compliance with applicable securities laws:
"The securities represented by this Certificate No. are subject to certain restrictions on transfer specified in the Restricted Stock Award dated as of, _____, between the issuer (the "Company") and _________, and the Company reserves the right to refuse the transfer of such securities until such conditions have been fulfilled with respect to such transfer. A copy of such conditions shall be furnished by the Company to the holder hereof upon written request and without charge."
The foregoing legend will be removed from the certificates evidencing the Restricted Shares after the conditions set forth in Section 4 hereof and the other vesting provisions of this Award have been satisfied.
6. Delivery of Certificates. Despite the provisions of Section 2 hereof, the Company is not required to issue or deliver any certificates for vested Restricted Shares if at any time the Company determines that the listing, registration or qualification of the Restricted Shares upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of the Restricted Shares thereunder, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.
7. No Right to Continue Employment or Service. Nothing in the Plan or this Award will be construed as creating any right in the Participant to continued employment or service with the Company, or as altering or amending the existing terms and conditions of the Participant's employment or service.
8. Nontransferability. No interest of the Participant or any designated
beneficiary in or under this Award will be assignable or transferable by
voluntary or involuntary act or by operation of law, other than as set forth in
Section 4 hereof. Distribution of Restricted Shares will be made only to the
Participant; or, if the Committee has been provided with evidence acceptable to
it that the Participant is legally incompetent, the Participant's personal
representative; or, if the Participant is deceased, to the designated
beneficiary or other appropriate recipient in accordance with Section 4 hereof.
The Committee may require personal receipts or endorsements of a Participant's
personal representative, designated beneficiary or an alternate recipient. Any
effort to otherwise assign or transfer the rights under this Award will be
wholly ineffective, and will be grounds for termination by the Committee of all
rights of the Participant and his or her beneficiary in and under this Award.
9. Administration. The Compensation Committee (the "Committee") of the Board of Directors of the Company has the authority to manage and supervise the administration of the Plan. The Participant's rights under this Award are expressly subject to the terms and conditions of the Plan, including any required continued shareholder approval of the Plan, and to any guidelines the Committee adopts from time to time that are not inconsistent with the Plan.
10. Interpretation; Governing Law. Any interpretation by the Committee of the terms and conditions of the Plan, this Award or any guidelines adopted as described in Section 9 hereof will be final. This Award and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the Code or the laws of the United States, will be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to the principles of conflicts of law.
11. Binding Effect. This Award will be binding upon and will inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns.
12. Amendment and Waiver. The provisions of this Award may be amended or waived only with the prior written consent of the Company and the Participant, and no course of conduct or failure or delay in enforcing the provisions of this Award will affect the validity, binding effect or enforceability of this Award.
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Exhibit 10.24
INSTALLMENT STOCK AWARD
eLoyalty Corporation, a Delaware corporation (the "Company"), hereby grants to the individual whose name appears below (the "Participant"), this Installment Stock Award (this "Award") for the number of shares of its Common Stock, $0.01 par value per share (the "Shares"), as set forth below. Any term capitalized but not defined in this Agreement will have the meaning set forth in the ELOYALTY CORPORATION __________ STOCK INCENTIVE PLAN (the "Plan").
The Plan provides for the grant of shares of Common Stock to eligible individuals as approved by the Company's Board of Directors. In the exercise of its discretion under the Plan, the Company's Board of Directors has determined that the Participant should receive an installment stock award under the Plan and, accordingly, the Company hereby agrees as follows:
PARTICIPANT'S NAME: _______________________________ NUMBER OF SHARES SUBJECT TO AWARD: __________________ DATE OF AWARD: __________________ |
1. Grant. The Company hereby agrees to grant to the Participant the right to receive the Shares, subject to the terms and conditions of this Award. The Shares will be granted in ___________ quarterly installments __________________, beginning __________________ and ending ___________________; provided that the Participant is employed by the Company on such dates. If the application of this Section 1 would result in the grant of a fraction of a Share, such fractional Share shall be rounded up to the next whole Share, in which case adjustments may be made to future issuances to prevent exceeding the total number of shares subject to the Award, as provided above. This Award will be subject to the terms and conditions of the Plan. This Award constitutes the right, subject to the terms and conditions of the Plan and this Agreement, to a distribution of the Shares on each future quarterly grant date.
2. Effect of Termination of Employment or Service. If the Participant terminates employment or service with the Company for any reason before all of the Shares have been granted under this Award, the Company will not have any further obligations to the Participant under this Award and no additional Shares will be granted on and after the effective date of the termination; provided, however, that if the Participant's employment or service is terminated on account of the Participant's (a) death or Disability (as defined below), all the Shares that have not otherwise been granted under this Award will be granted as of the date of such event; or (b) retirement (with the Company's approval at age 55 or greater and with at least 5 years of continuous service with the Company, or with the Company and its predecessor on a combined and uninterrupted basis), an additional 20% of the Shares subject to this Award (but not in excess of the remaining number of Shares not yet granted under this Award) will be granted as of the date of the Participant's retirement. Notwithstanding the foregoing, if the Participant terminates employment or service with the Company because he or she has become employed by an affiliate or subsidiary of the Company, the Participant shall continue to be eligible to receive a grant of the Shares in accordance with the schedule set forth in the preceding paragraph.
For purposes of this Agreement, "Disability" means a physical or mental condition of a Participant resulting from a bodily injury, disease or mental disorder that renders the Participant eligible for benefits under the Company's long-term disability plan (as in effect as of the date of the Participant's termination of employment and regardless of whether the Participant is otherwise eligible for benefits under such plan), as determined by the Company in its sole discretion.
The Board of Directors has the right to determine, in its sole discretion, how the Participant's leave of absence will affect the terms of this Award, including the grant of Shares hereunder.
3. Award Confers No Rights as Stockholder. Neither the Participant nor any other person has or will have any rights as a security holder of the Company or any successor with respect to any Shares that are or may be granted hereunder unless and until the Shares are granted and the Participant becomes a holder of record with respect to such Shares.
4. Terms and Conditions of Distribution. The Company, or its transfer agent, will transfer the portion of the Shares that have been granted to a brokerage account established by the Company on behalf of the Participant as soon as practicable after each installment of the Shares is granted. If the Participant dies before the Company has granted any portion of the Shares, the Company will transfer that portion of the Shares to a brokerage account established by the Company on behalf of the beneficiary designated by the Participant on a form provided by the Company for this purpose. If the Participant failed to designate a beneficiary, the Company will distribute certificates for the Shares in accordance with the Participant's will or, if the Participant
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did not have a will, the Shares will be distributed in accordance with the laws of descent and distribution. The Company will distribute certificates for any undistributed portion of the Shares no later than six months after the Participant's death.
The Participant, or the alternate recipient identified in the preceding
paragraph, will be required to satisfy any potential federal, state, local or
other tax withholding liability. Such liability must be satisfied at the time
the Shares are granted. In order to satisfy such withholding obligation, the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the Tax Date
in an amount necessary to satisfy the amount of applicable taxes required to be
withheld; provided, however, that in the event the Participant is subject to
Section 16 of the Exchange Act, the Committee may require that the method of
satisfying such an obligation be in compliance with Section 16 and the rules and
regulations thereunder.
The Company will not make any distribution under this Section 4 before the first date any portion of the Shares may be granted to the Participant without penalty or forfeiture under federal or state laws or regulations governing short swing trading of securities. In determining whether a distribution would result in such a penalty or forfeiture, the Company and the Committee may rely upon information reasonably available to them or upon representations of the Participant's legal or personal representative.
5. Delivery of Certificates. Despite the provisions of Section 4 hereof, the Company is not required to issue any Shares on any quarterly installment date, or issue or deliver any certificates for Shares if at any time the Company determines that the listing, registration or qualification of the Shares upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of the Shares thereunder, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.
6. No Right to Employment or Service. Nothing in the Plan or this Agreement will be construed as creating any right in the Participant to continued employment or service with the Company, or as altering or amending the existing terms and conditions of the Participant's employment or service.
7. Nontransferability. No interest of the Participant or any designated
beneficiary in or under this Award will be assignable or transferable by
voluntary or involuntary act or by operation of law, other than as set forth in
Section 4 hereof. Distribution of the Shares will be made only to the
Participant; or, if the Committee has been provided with evidence acceptable to
it that the Participant is legally incompetent, the Participant's personal
representative; or, if the Participant is deceased, to the designated
beneficiary or other appropriate recipient in accordance with Section 4 hereof.
The Committee may require personal receipts or endorsements of a Participant's
personal representative, designated beneficiary or an alternate recipient. Any
effort to otherwise assign or transfer the rights under this Award will be
wholly ineffective, and will be grounds for termination by the Committee of all
rights of the Participant and his or her beneficiary in and under this Award.
8. Administration. The Compensation Committee (the "Committee") of the Board of Directors of the Company has the authority to manage and supervise the administration of the Plan. The Participant's rights under this Award are expressly subject to the terms and conditions of the Plan, including any required continued shareholder approval of the Plan, and to any guidelines the Committee adopts from time to time that are not inconsistent with the Plan.
9. Interpretation; Governing Law. Any interpretation by the Committee of the terms and conditions of the Plan, this Award or any guidelines adopted as described in Section 8 hereof will be final. This Award and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the Code or the laws of the United States, will be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to the principles of conflicts of law.
10. General. This Award is subject to the provisions of the Plan, and will be interpreted in accordance therewith. In the event of any discrepancy between this Award, or any other material describing this Award or the Shares to be awarded hereunder, and the actual terms of the Plan, the Plan will govern in all respects. A copy of the Plan is available upon request by contacting the Legal Department at the Company's Lake Forest, Illinois office.
IN WITNESS WHEREOF, this Award has been executed as of the day and year first above written.
ELOYALTY CORPORATION
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EXHIBIT 10.25
EXECUTIVE EMPLOYMENT AGREEMENT
eLOYALTY CORPORATION (the "Company"), and CHRISTOPHER J. DANSON, an individual ("Employee"), enter into this Employment Agreement ("Agreement") as of December 17, 2004.
WHEREAS, the Company desires to continue to employ Employee to provide personal services to the Company and to provide Employee with certain compensation and benefits in return for his services; and
WHEREAS, Employee wishes to continue to be employed by the Company and to provide personal services to the Company in return for certain compensation and benefits.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:
1. DUTIES. The Company shall continue to employ Employee as its Vice President, Delivery, and Employee accepts such employment upon the terms and conditions herein. Employee shall have such responsibilities, duties and authority in all material respects as are presently assigned to Employee and such other responsibilities, duties and authority as the President & Chief Executive Officer may reasonably designate and are customarily associated with his position. During the term of his employment with the Company, Employee shall perform faithfully the duties assigned to him to the best of his ability, and Employee shall devote his full and undivided business time and attention to the transaction of the Company's business.
2. OUTSIDE ACTIVITIES.
(a) NON-COMPANY ACTIVITIES. Except in conformity with the requirements with the Company's then-effective Code of Ethical Business Conduct, Employee will not during the term of this Agreement undertake or engage (other than as a passive investor) in any other employment, occupation or business enterprise, whether as an agent, partner, proprietor, officer, director, employee, consultant, contractor or otherwise, whether during or outside the business hours of the Company. Employee may engage in civic and not-for-profit activities so long as such activities do not interfere with the performance of his duties hereunder.
(b) NO ADVERSE INTERESTS. Except as permitted by Paragraph 2(c), during his employment Employee agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest which is known or should be known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
(c) NON-COMPETITION. During the term of his employment by the Company, except on behalf of the Company, Employee will not directly or indirectly, whether as a stockholder, agent, partner, proprietor, officer, director, employee, consultant, contractor, or in any capacity whatsoever, engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity
whatsoever known by him to compete directly with the Company, anywhere throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, Employee may own, as a passive investor, public securities of any competitor corporation, so long as his direct holdings in any one such corporation shall not in the aggregate constitute more than one percent (1%) of the voting stock of such corporation.
3. TERM OF EMPLOYMENT; TERMINATION.
(a) AT-WILL RELATIONSHIP. Employee's employment relationship is at-will. Either Employee or the Company may terminate the employment relationship at any time, for any reason or no reason, with or without Cause or advance notice.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EMPLOYEE WITH GOOD REASON.
(i) CAUSE DEFINITION. For purposes of this Agreement, "Cause" shall mean any of the following: (A) conviction, including a plea of guilty or no contest, of any felony or any crime involving moral turpitude or dishonesty; (B) fraud upon the Company (or an affiliate), embezzlement or misappropriation of corporate funds; (C) willful acts of dishonesty materially harmful to the Company; (D) activities materially harmful to the Company's reputation; (E) Employee's willful misconduct, willful refusal to perform his duties, or substantial willful disregard of his duties, provided that the Company first provides Employee with written notice of such conduct and thirty (30) days to cure such conduct, if such conduct is reasonably susceptible to cure; or (E) material breach causing material harm to the Company of this Agreement, any other agreement with the Company, any policy of the Company, or any statutory duty or common law duty of loyalty owed to the Company; provided, no act or omission on Employee's part shall be considered "willful" unless it is done by the Employee without reasonable belief that the Employee's action was in the best interests of the Company.
(ii) GOOD REASON DEFINITION. For the purposes of this Agreement, "Good Reason" shall mean: (A) a reduction of Employee's base salary below the amount set forth in Paragraph 4 of this Agreement, or a reduction in the "Target Bonus Percentage" defined in Paragraph 5 of this Agreement), unless such reduction is shared proportionally by the three most highly-salaried officers of the Company; (B) an involuntary relocation of Employee's place of work to any location outside of the metropolitan area in which his primary office is located immediately prior to the relocation, excluding temporary periods of thirty (30) days or less and ordinary course business travel; (C) a significant diminution by the Company in Employee's position (including offices, titles and reporting relationships), authority, duties or responsibilities, excluding diminutions resulting in the ordinary course from the Company becoming pursuant to a Change of Control of (x) part of a larger organization in which Employee directly reports to the Chief Executive Officer of such organization; or (y) a subsidiary or equivalent separate functional business unit of a larger organization; (D) a material breach by the Company of this Agreement; or (E) failure by the Company to assign this Agreement to a successor upon a Change of Control. No Good Reason shall exist where: (1) Employee consents to the event that forms the basis for the Good Reason resignation; (2) Employee does not provide the Company's President and Chief Executive Officer with written notice describing in detail the Good Reason
within thirty (30) days of its occurrence; or (3) the Company cures the Good Reason within thirty (30) days of its receipt of such notice, if such conduct is reasonably susceptible to cure.
(iii) SEVERANCE BENEFITS. In the event that Employee's employment is terminated without Cause by the Company or terminated by Employee with Good Reason, Employee shall receive the following as his sole and exclusive severance benefits (collectively, the "Severance Benefits"):
(1) SEVERANCE PAY. Employee will receive a lump sum payment, within seven (7) days following the effective date of termination, equal to twelve (12) months of his then current base salary, less standard payroll deductions and withholdings (the "Severance Payment").
(2) SEVERANCE BONUS. Employee will be paid a bonus (the "Severance Bonus"), within seven (7) days following the effective date of termination, equal to the average of (A) the annual bonus he was paid for year immediately preceding the termination and (B) a reasonable estimate of his annual bonus for the year in which the termination occurs under the Company's then-current bonus plan if any, less standard payroll deductions and withholdings.
(3) SEVERANCE HEALTH PREMIUM REIMBURSEMENTS. If Employee timely elects to continue his Company-provided group health insurance coverage pursuant to the federal COBRA law, the Company will reimburse Employee for the cost of such COBRA premiums to continue health insurance coverage at the same level of coverage for Employee and his dependents (if applicable) in effect as of the termination date, through the end of twelve (12) months or until such time as Employee qualifies for health insurance benefits through a new employer, whichever occurs first ("Severance Health Premium Benefits"). Employee shall notify the Company in writing of such new employment not later than five (5) business days after securing it.
(4) SEVERANCE VESTING. The vesting of Employee's restricted stock, stock option and other equity grants that Employee previously has then received, shall be accelerated so that, as of the date of the termination, such restricted stock and stock option grants shall vest as to the number of shares that would have vested had Employee provided an additional twelve (12) months of continuous service to the Company, provided, however, that if Employee is terminated without cause within six (6) months following a Change in Control, Employee terminates his employment for Good Reason within six (6) months following a Change in Control, or Employee terminates his employment for the Good Reason described in clause (E) of Section 3(b)(ii), then such restricted stock and stock option grants shall vest as to the number of shares that would have vested had Employee provided an additional twenty-four (24) months of continuous service to the Company.
(iv) SEVERANCE CONDITIONS. As a condition of and prior to the receipt of all or any of the Severance Benefits, Employee must execute and allow to become effective a general release of claims in a form mutually acceptable to the parties in their reasonable determination and to comply with the terms of this Agreement (the "Severance Conditions"). Upon any termination of Employee's employment by the Company without Cause or by
Employee for Good Reason, the Company and its affiliates (by and through their respective directors and senior executive officers) and Executive agree not to disparage the other party.
(c) TERMINATION FOR CAUSE; VOLUNTARY OR MUTUAL TERMINATION.
(i) NO SEVERANCE. In the event Employee's employment is terminated by the Company at any time for Cause, or Employee terminates his employment without Good Reason, or the parties mutually terminate their employment relationship, Employee will not be entitled to any Severance Benefits, pay in lieu of notice, or any other severance, compensation, benefits, equity, acceleration, or any other amounts, with the exception of any benefit to which Employee has a vested right under a written benefit plan.
(ii) RESIGNATION. Employee may voluntarily terminate his employment with the Company at any time, without liability therefore. Employee agrees to use good faith to give the Company reasonable notice of any such voluntary termination. Upon receipt of any termination notice from Employee, the Company, at its election, may require Employee to resign his employment prior to the occurrence of any requested termination date.
(d) TERMINATION FOR DEATH OR DISABILITY.
(i) TERMINATION. Employee's employment will terminate upon his death or Disability.
(ii) DISABILITY DEFINITION. For the purposes of this Agreement, "Disability" shall have the meaning set forth in the Company's then current long term disability benefit program or, if no such program is then in effect, shall mean a permanent disability rendering Employee unable to perform his duties for the Company for ninety (90) consecutive days or one hundred eighty (180) days in any twelve (12) month period, which determination shall be made after the period of disability, unless an earlier determination can be made, by an independent physician appointed by the Board.
(iii) SEVERANCE. Following the death or Disability of Employee while employed by the Company, the Company will provide Employee (or, in the case of death, Employee's estate) with the Severance Payment, two-thirds (2/3) of the Severance Bonus, and Severance Health Premium Reimbursements for twelve (12) months (all as described and on the same terms and conditions provided above). The Employee's restricted stock and stock option grants that Employee has then received from the Company, shall be vested as to half of the unvested shares (or such greater amount, if any, as is provided for in the agreement for the applicable grant), and all such stock options shall, notwithstanding any lesser period, if any, provided for in the agreement for the applicable grant, be exercisable for one (1) year following such termination (but not exceeding the term of such option).
(iv) SEVERANCE CONDITIONS. As a condition of and prior to the receipt of all or any of the Severance provided for death or Disability, Employee (or, in the case of death, Employee's estate) must execute and allow to become effective a general release of claims in a form mutually acceptable to the parties in their reasonable determination and to comply with the terms of this Agreement (the "Severance Conditions"). Upon any termination of Employee's employment for death of Disability, the Company and its affiliates (by and through their
respective directors and senior executive officers) and Executive (or, in the case of death, Employee's estate) agree not to disparage the other party.
(e) NO MITIGATION. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the severance amounts payable to the Employee under Paragraph 3 of this Agreement, and such amounts (other than as provided at Paragraph 3(b)(iii)(3)) shall not be reduced whether or not the Employee obtains other employment.
(f) ACCRUED OBLIGATIONS. Not later than ten (10) days after termination of Employee's employment, the Company shall pay Employee ("Accrued Obligations"): (i) his accrued and unpaid base salary at the rate in effect at the time of notice of termination; (ii) any previous year's earned but unpaid bonus and other earned and unpaid incentive cash compensation; and (iii) accrued and unused vacation time, unpaid expense reimbursements and other unpaid cash entitlements earned by Employee as of the date of termination pursuant to the terms of the applicable Company plan or program.
4. SALARY. For services rendered hereunder, the Company shall pay Employee a base salary at the per annum rate of $300,000, less standard payroll deductions and withholdings, and payable in accordance with the Company's regular payroll schedule. Employee's base salary (as well as his eligibility for incentive equity grants) shall be subject to annual review and his base salary may, at the discretion of the Company's Board of Directors, be adjusted from time to time.
5. BONUSES. Subject to the requirements set forth below, the Company may elect to pay Employee bonuses in its sole discretion. Employee will be offered the opportunity to participate in the Company's then-current bonus plan, and, subject to and in accordance with the terms and conditions of such plan and this paragraph, upon achievement of all target bonus objectives set by the Board of Directors and/or the Chief Executive Officer for the Company and for Employee, shall receive a cash bonus equal to 100% ("Target Bonus Percentage") of his base salary, less standard payroll deductions and withholdings. The Company shall have the sole discretion to change or eliminate bonus plans or programs at any time (provided, however, that after the bonus plan and target objectives have been established by the Board and/or the Chief Executive Officer for a given year, neither the Board nor the Chief Executive Officer shall later materially change the bonus plan or target objectives for such year to Employee's detriment without Employee's consent), to determine whether performance criteria set forth pursuant to the bonus plan for a year have been achieved, and to determine (in accordance with this paragraph and such performance criteria and bonus plan) the amount of any bonus earned by Employee, if any. Bonuses are intended to retain valuable Company employees, and if Employee is not employed, for any reason on the last day of the bonus year, he will not have earned the bonus and, except as expressly provided herein with respect to the Severance Bonus, no partial or pro-rata bonus will be paid.
6. EMPLOYEE BENEFITS. Employee shall be entitled to participate in such employee benefit plans, including the Company's 401(k) plan, life insurance, and medical benefits plans, and shall receive all other fringe benefits, as the Company may make available generally to its senior executive employees generally, for which Employee is eligible under the terms and
conditions of such plans, in each case subject to the requirements, rules and regulations from time to time applicable thereto. Details about these benefits are set forth in summary plan descriptions and other materials.
7. CHANGE OF CONTROL. A Change in Control shall have the meaning set forth in Section 6.8(b) of the Company's 1999 Stock Incentive Plan.
8. PARACHUTE TAX. Notwithstanding anything in the foregoing to the contrary, if any of the payments to Employee (prior to any reduction below) provided for in this Agreement, together with any other payments which Employee has the right to receive from the Company or any corporation which is a member of an "affiliated group" as defined in Section 1504(a) of the Internal Revenue Code of 1986, as amended ("Code"), without regard to Section 1504(b) of the Code, of which the Company is a member (the "Payments") would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Code), and if the Safe Harbor Amount is greater than the Taxed Amount, then the total amount of such Payments shall be reduced to the Safe Harbor Amount. The "Safe Harbor Amount" is the largest portion of the Payments that would result in no portion of the Payments being subject to the excise tax set forth at Section 4999 of the Code ("Excise Tax"). The "Taxed Amount" is the total amount of the Payments (prior to any reduction, above) notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. Solely for the purpose of comparing which of the Safe Harbor Amount and the Taxed Amount is greater, the determination of each such amount, shall be made on an after-tax basis, taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all of which shall be computed at the highest applicable marginal rate). If a reduction of the Payments to the Safe Harbor Amount is necessary, then the reduction shall occur in the following order unless the Employee elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date on which the event that triggers the Payments occurs): reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Employee's participant's stock awards unless the Employee elects in writing a different order for cancellation.
9. BUSINESS EXPENSES. The Company shall reimburse Employee for all reasonable and necessary business expenses incurred by Employee in performing Employee's duties that are submitted in compliance with the Company's then-current policy on such business expense reimbursement. Employee shall provide the Company with supporting documentation sufficient to satisfy reporting requirements of such policy and the Internal Revenue Service. The Company's determinations as to reasonableness and necessity shall be final.
10. PROPRIETARY INFORMATION AND INVENTIONS; NON-COMPETITION AND NON-SOLICITATION. Employee acknowledges that the successful development, marketing, sale and performance of the Company's professional services and products require substantial time and expense. Such efforts generate for the Company valuable and proprietary information ("Confidential Information"), including without limitation business plans and strategies, prospective or actual opportunities, prospects and customer lists, proposals, deliverables, methodologies, training materials, other intellectual property, the nature, identity and requirements of customers, clients, suppliers and business partners, computer software, financial
data of any nature, and any information of others that the Company is obligated, contractually or otherwise, to treat in a confidential manner, in each case in whatever form, whether oral, written, graphic, recorded, photographic, machine readable or otherwise, and whether or not marked or otherwise labeled "confidential" or specifically indicated as being confidential and/or proprietary in nature. The term "Confidential Information" also includes all notes, analyses, compilations, studies, interpretations or other materials to the extent such materials contain or are based on other Confidential Information. Employee acknowledges that during his employment, he will obtain knowledge of such Confidential Information. Employee agrees to undertake the following obligations which he acknowledges to be reasonably designed to protect the Company's legitimate business interests (including its Confidential Information and its near-permanent relationships with customers and other third parties) without unnecessarily or unreasonably restricting Employee's post-employment opportunities:
(a) PROPRIETARY INFORMATION. During the term of employment with the Company, Employee shall disclose to the Company all ideas, inventions and business plans that Employee develops during the course of Employee's employment with the Company that relate directly or indirectly to the Company's business, including but not limited to any computer programs, processes, products or procedures which may, upon application, be protected by patent or copyright. Employee agrees that any such ideas, inventions or business plans shall be the property of the Company (and in furtherance thereof hereby assigns to the Company any and all rights and interests of Employee therein and thereto) and that Employee shall, at the Company's request and cost (including reimbursement of Employee's expenses and, if Employee is no longer in the employ of the Company, reasonable per diem compensation to Employee), provide the Company with such assurances as is necessary to secure a patent or copyright..
(B) NON-COMPETITION. Without limiting the obligations of Paragraph
10(a), without the prior written consent of the President and Chief Executive
Officer or the authorized designee thereof, Employee shall not, for himself or
as an agent, partner or employee of any person, firm or corporation: (i) for a
period of twelve (12) months following his termination of employment with the
Company and all affiliates for any reason, engage in the practice of providing
consulting or related services for any Prohibited Client. The term "Prohibited
Client" shall mean any client or prospect of the Company to or for whom Employee
directly or indirectly performed or provided consulting or related services, or
with whom Employee had personal contact, or prospect to whom Employee submitted,
or assisted or participated in any way in the submission, of a proposal, during
the two (2) year period preceding termination of Employee's employment with the
Company.
(c) NON-SOLICITATION. While employed by the Company and during the twelve (12) month period immediately following Employee's termination of employment for any reason, Employee shall not directly or indirectly hire, solicit, encourage, or otherwise induce or assist in the inducement away from the Company of any Company customer, client, contractor, consultant, or other person or party with whom the Company has a contractual relationship, any Prohibited Client, or any Company employee (either away from the Company's employ or from the faithful discharge of such employee's contractual, statutory and fiduciary obligations to serve the Company's interests with undivided loyalty).
(d) REASONABLE ALTERATION. In the event that a court or other adjudicative body should decline to enforce the provisions of any part of this Paragraph 10, whether because of scope, duration or otherwise, Employee and the Company agree that the provisions shall be modified to restrict Employee's competition with the Company to the maximum extent enforceable under applicable law.
11. REMEDIES. Employee recognizes and agrees that a breach of any or all of the provisions of Paragraph 10 will constitute immediate and irreparable harm to the Company's business advantage, including but not limited to the Company's valuable business relations, for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Employee acknowledges that the Company shall therefore be entitled to an order enjoining any further breaches by the Employee, without the necessity of posting a bond.
12. POLICIES AND PROCEDURES. The employment relationship between the parties shall be governed by the general employment policies and practices of the Company, which the Company may change from time to time, and Employee will be expected to abide by such Company policies and practices.
13. ASSISTANCE IN LITIGATION. Employee shall upon reasonable notice and without compulsion of law (e.g., subpoena), furnish accurate and complete information and other assistance to the Company as the Company may reasonably require in connection with any litigation, proceeding or dispute to which the Company is, or may become, a party, or in which it may otherwise become involved, either during or after Employee's employment; provided, if such assistance shall occur after termination of Employee's employment, the Company shall reimburse Employee for his reasonable expenses incurred in connection with such assistance, including, without limitation, as relevant transportation, meals and lodging, and shall also pay Employee a consulting fee of $200 per hour, as compensation for his inconvenience and the disruption of his other endeavors.
14. INDEMNIFICATION. Employee's rights to indemnification will be as provided in the Indemnification Agreement between Employee and the Company, effective as of the effective date hereof.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of, and be enforceable by, Employee and the Company, and their respective successors, assigns, heirs, executors and administrators. Employee acknowledges that the services to be rendered pursuant to this Agreement are unique and personal. Accordingly, Employee may not assign any of his rights or delegate any of his duties or obligations under this Agreement. The Company may assign its rights, duties or obligations under this Agreement to a subsidiary or affiliated company of the Company or purchaser or transferee of a majority of the Company's outstanding capital stock or a purchaser of all, or substantially all, of the assets of the Company.
16. NOTICES. All notices required by this Agreement shall be in writing. Notices intended for the Company shall be sent by certified mail or nationally recognized overnight courier service, addressed to it at 150 Field Drive, Suite 250, Lake Forest, Illinois 60045, or its current principal office, and notices intended for Employee shall be either delivered personally to Employee or sent by certified mail or nationally recognized overnight courier service addressed
to Employee at his address as listed on the Company's payroll. Notices sent by certified mail in accordance with the foregoing shall be deemed given three (3) business days following delivery to the United States Postal Service, postage prepaid, and notices sent by overnight courier service in accordance with the foregoing shall be deemed given one (1) business day following delivery to such courier, delivery fees for overnight delivery prepaid.
17. ENTIRE AGREEMENT. This Agreement constitutes the complete, final, and exclusive embodiment of the entire agreement between Employee and the Company with regard to the subject matter hereof. It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in a written instrument signed by Employee and a duly authorized officer or director of the Company.
18. WAIVER. If either party should waive any breach of any provisions of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
19. APPLICABLE LAW. This Agreement, and all questions concerning the construction, validity and interpretation of this Agreement, shall be governed by and construed in accordance with the laws of the State of Illinois as applied to contracts made and to be performed entirely within the State of Illinois.
20. MEDIATION OF DISPUTES. Neither party shall initiate arbitration or
other legal proceedings (except for any claim under Paragraph 10 of this
Agreement or the Proprietary Information Agreement), against the other party,
or, in the case of the Company, the Company, its affiliates, and its and their
directors, officers, employees, contractors, agents, and representatives,
relating in any way to claims or disputes or controversies of any nature
whatsoever arising from or regarding Employee's employment, the termination of
such employment, this Agreement (including without limitation its
interpretation, performance, enforcement or breach) or any or all other claims
that one party might have against the other party (collectively, the "Claims"),
until thirty (30) days after the party against whom the Claim[s] is made
("Respondent") receives written notice from the claiming party of the specific
nature of any purported Claim and the amount of any purported damages. Employee
and the Company further agree that if Respondent submits the claiming party's
Claim to JAMS Inc. for nonbinding mediation, in Chicago, Illinois, prior to the
expiration of such thirty (30) day period, the claiming party may not institute
arbitration or other legal proceedings against Respondent until the earlier of
(i) the completion of nonbinding mediation efforts, or (ii) ninety (90) days
after the date on which the Respondent received written notice of the Claim. If
Company is Respondent, the Company shall pay the JAMS Inc. fees and Employee's
reasonable attorneys' fees incurred by Employee in connection with the mediation
up to a maximum of $10,000.
21. BINDING ARBITRATION.
(a) Employee and the Company agree that all Claims, to the fullest extent allowed by law, shall be resolved by confidential, final and binding arbitration conducted under the Expedited Commercial Rules of the American Arbitration Association in Illinois. If either party pursues a Claim and such Claim results in an arbitrator's decision, both parties agree to accept such decision as final and binding. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO THIS
ARBITRATION PROCEDURE, THEY WAIVE THE RIGHT TO RESOLVE ANY SUCH DISPUTE THROUGH A TRIAL BY JURY, JUDGE OR ADMINISTRATIVE PROCEEDING. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator's essential findings and conclusions and a statement of the award. The Company shall pay all AAA arbitration fees. Nothing in this Agreement is intended to prevent either Employee or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
(b) The arbitrator, and not a court, shall be authorized to determine whether the provisions of this paragraph apply to a dispute, controversy or claim sought to be resolved in accordance with these arbitration procedures.
22. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to render it valid, legal, and enforceable consistent with the general intent of the parties insofar as possible.
23. RIGHT TO WORK. As required by law, this Agreement is subject to satisfactory proof of Employee's right to work in the United States.
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD AND ACCEPTS THE PROVISIONS OF THIS AGREEMENT.
eLOYALTY CORPORATION ("COMPANY") CHRISTOPHER J. DANSON ("EMPLOYEE")
By: /s/ Kelly D. Conway /s/ Christopher J. Danson
------------------ -----------------------------------
Title: President and CEO
Date: February 23, 2005 Date: February 23, 2005
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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 Christopher J. Danson (the "Indemnitee").
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,
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
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.
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,
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,
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
150 Field Drive
Suite 250
Lake Forest, Illinois 60045
Attention: General Counsel
Facsimile: (847) 582-7002
(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]
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/ Christopher J. Danson By: /s/ Kelly D. Conway
-------------------------- -------------------
Kelly D. Conway
President and Chief Executive Officer
February 23, 2005 February 23, 2005
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EXHIBIT 10.27
EMPLOYMENT AGREEMENT
eLoyalty Corporation, a Delaware corporation doing business as eLoyalty ("eLoyalty"), and Karen Bolton ("Employee") enter into this Employment Agreement ("Agreement") as of January 21, 2002 ("Effective Date").
In consideration of the agreements and covenants contained in this Agreement, eLoyalty and Employee agree as follows:
1. EMPLOYMENT DUTIES: eLoyalty shall employ Employee as a Senior Vice President. Employee shall have the normal responsibilities, duties and authority of a Senior Vice President of eLoyalty and shall, at the direction of eLoyalty's management, participate in the administration and execution of eLoyalty's policies, business affairs and operations. eLoyalty's Board of Directors or management may, from time to time, expand or contract such duties and responsibilities and may change Employee's title or position. Employee shall perform faithfully the duties assigned to Employee to the best of Employee's ability and shall devote Employee's full and undivided business time and attention to the transaction of eLoyalty's business.
2. TERM OF EMPLOYMENT: The term of employment ("Initial Term of Employment") covered by this Agreement shall commence as of the effective date of this Agreement and continue until January 31 2004, subject to the provisions of paragraph 3 below. This Agreement may be renewed for additional one-year periods by the mutual written agreement of the parties ("Renewal Term"). The Initial Term of Employment and any Renewal Terms shall be hereinafter referred to as the "Term of Employment". If this Agreement is not renewed by the parties upon the expiration of the Initial Term of Employment or upon the expiration of any Renewal Term, eLoyalty shall, within 30 days from the expiration of the Initial Term of Employment or the expiration of the Renewal Term, as the case may be, pay to Employee a lump sum amount equivalent to six (6) months of Employee's normal salary (but not bonus) as Employee's severance payment, subject to ordinary tax and other withholdings in accordance with eLoyalty's normal payroll practices. In addition to the foregoing, if Employee fails to find reasonably comparable employment in the U.S., Australia or elsewhere by the end of the sixth (6th) month after the expiration of the Initial Term of Employment or the Renewal Term, as the case may be, eLoyalty hereby agrees to pay a further severance payment equivalent of six months of employee's normal salary (but not bonus and subject to ordinary tax and other withholdings), payable in monthly installments, unless Employee begins comparable employment with another employer during such time, in which case eLoyalty's obligations shall cease immediately. For the purposes of this Agreement, the term "comparable employment" shall mean any employment where Employee may earn annual cash compensation that is comparable with the annual cash compensation earned by Employee during the one year immediately prior to the termination of Employee's employment. If the parties fail to renew the Agreement upon expiration of the Initial
Term of Employment, Employee agrees to use Employee's best efforts to secure comparable employment as soon as reasonably possible after such expiration and to notify eLoyalty in writing of such employment not later than one (1) business day after securing the same. As a condition of receiving severance under this Paragraph, Employee will be required to execute a general release and waiver, including but not limited to, a release of any and all claims and for any and all other damages resulting from Employee's termination from employment.
3. TERMINATION: eLoyalty may terminate Employee's employment for any reason upon written notice to Employee, provided that unless (a) such termination is in the form of a non-renewal of this Agreement as described in paragraph 2 above (in which case the severance provisions of such paragraph 2 shall apply) or (b) eLoyalty has terminated Employee's employment for Serious Misconduct as described below, eLoyalty shall pay to Employee a lump sum amount equivalent to twelve (12) months of Employee's normal salary (but not bonus) as Employee's severance payment, subject to ordinary tax and other withholdings in accordance with eLoyalty's normal payroll practices. In the event of a termination requiring such a lump sum payment, eLoyalty will also continue Employee's health insurance benefits for the lesser of twelve (12) months from the effective date of termination (if Employee remains eligible under these health insurance plans) or until Employee begins employment with another employer during such time, at which time eLoyalty's obligations to continue Employee's health insurance benefits shall cease immediately. Employee shall notify eLoyalty in writing of such new employment not later than one (1) business day after securing the same. In addition, eLoyalty may terminate Employee's employment and this Agreement immediately without notice and with no severance pay and no benefit continuation if Employee engages in "Serious Misconduct." For purposes of this Agreement, "Serious Misconduct" means fraud, embezzlement, misappropriation of corporate funds, any acts of dishonesty, engaging in activities materially harmful to eLoyalty's reputation or business, conviction of a crime, willful refusal to perform or substantial disregard of Employee's assigned duties (including, but not limited to, refusal to travel or work the requested hours), or any violation of any statutory or common law duty of loyalty to eLoyalty. If Employee resigns from, or in any other way terminates, her employment during the Initial Term of Employment or during any subsequent Renewal Term, Employee shall not be entitled to any severance pay or continuation of her salary or benefits.
4. CHANGE IN CONTROL.
(a) Notwithstanding anything contained in this Agreement, if following a Change in Control (as defined in defined in Paragraph 4(b) below), (a) Employee's title, position, duties or salary is diminished and Employee resigns within 90 days after the diminishment becomes effective, or (b) Employee's position is eliminated or Employee's employment otherwise is terminated for reasons other than Serious Misconduct, eLoyalty shall pay to Employee a lump sum amount equivalent to twelve (12) months of Employee's normal salary (but not bonus) as Employee's severance payment, subject to ordinary tax and other withholdings in accordance with eLoyalty's normal payroll practices. In the event of a termination requiring such a lump sum payment, eLoyalty will
also continue Employee's health insurance benefits for the lesser of twelve (12) months from the effective date of termination (if Employee remains eligible under these health insurance plans) or until Employee begins employment with another employer during such time, at which time eLoyalty's obligations to continue Employee's health insurance benefits shall cease immediately. Employee shall notify eLoyalty in writing of such new employment not later than one (1) business day after securing the same.
(b) The term "Change in Control" for the purposes hereunder shall be as defined in eLoyalty Corporation 2000 Stock Incentive Plan. Notwithstanding the foregoing, the following events and other events reasonably related to them, individually or in any aggregate combination, shall not be construed as a "Change in Control" of eLoyalty: (i) the private placement of eLoyalty preferred stock recently consummated between eLoyalty and affiliates of Technology Crossover Ventures and Sutter Hill Ventures ("Financing"); (ii) any tender offer made by eLoyalty to its employees pursuant to which employee stock options were exchanged for common stock of eLoyalty, (iii) the rights offering authorized by the eLoyalty's Board of Directors in conjunction with the Financing (the "Rights Offering"); (iv) any conversion of the preferred stock issued pursuant to the Financing and/or the Rights Offering into common stock of eLoyalty and (iv) the 1-10 reverse stock split authorized by eLoyalty's Board of Directors.
5. SALARY: As compensation for Employee's services, eLoyalty shall pay Employee a base salary in the amount listed in EXHIBIT A to this Agreement. Employee's base salary shall be subject to annual review and may, at the discretion of eLoyalty's management, be adjusted from that listed in EXHIBIT A according to Employee's responsibilities, capabilities and performance during the preceding year.
6. BONUSES: eLoyalty may elect to pay Employee annual bonuses. Payment of such bonuses, if any, shall be at the sole discretion of eLoyalty.
7. EMPLOYEE BENEFITS: During the Term of Employment, Employee shall be entitled to participate in such employee benefit plans, including group pension, life and health insurance and other medical benefits, and shall receive all other fringe benefits as eLoyalty may make available generally to its Senior Vice Presidents. Subject to the eligibility requirements for such insurance, Employee's coverage for Accidental Death, Dismemberment, Short-Term and Long term Disability, Business Travel Accident Insurance and Life Insurance will begin on the Effective Date in accordance with the terms of eLoyalty's standard policy afforded to all its U.S.-based Senior Vice Presidents. eLoyalty agrees that it will, to the extent not in violation under the applicable laws, waive the one-year employment eligibility requirement under the Family and Medical Leave Act of 1993 in order to allow Employee to be immediately eligible for up to twelve-weeks of unpaid leave for certain family and medical reasons permitted such Act. Notwithstanding the foregoing, eLoyalty reserves the right to enforce all other eligibility requirements under the Family and Medical Leave Act of 1993.
8. BUSINESS EXPENSES: eLoyalty shall reimburse Employee for all reasonable and necessary business expenses incurred by Employee in performing Employee's duties. Employee shall provide eLoyalty with supporting documentation
sufficient to satisfy reporting requirements of the Internal Revenue Service and eLoyalty. eLoyalty's determination as to reasonableness and necessary shall be final.
9. RELOCATION EXPENSES: During the Initial Term of Employment under this Agreement, eLoyalty shall reimburse Employee for those re-location expenses, and pay Employee for certain allowances, as specifically described in EXHIBIT B attached hereto.
10. VACATION AND SICK DAYS: Employee will be entitled to vacation time in accordance with eLoyalty's standard policy for U.S.-based Senior Vice Presidents. In addition to the foregoing, Employee will also be entitled to use any of Employee's current unused vacation time from Employee's employment with eLoyalty Corporation (Australia) Pty. Ltd. ("eLoyalty Australia") which has been accrued up to the Effective Date and which was not paid out in any manner by eLoyalty Australia to Employee upon Employee's termination of employment with eLoyalty Australia. Any vacation time used by Employee on and after the Effective Date will first be counted against the unused vacation time transferred from eLoyalty Australia. Employee acknowledges that eLoyalty will not be paying any long service leave to Employee under the applicable Australian laws.
11. NONCOMPETITION AND NONDISCLOSURE: Employee acknowledges that the successful development and marketing of eLoyalty's professional services and products require substantial time and expense. Such efforts generate for eLoyalty valuable and proprietary information ("Confidential Information") which gives eLoyalty a business advantage over others who do not have such information. Confidential Information of eLoyalty and its clients and prospects includes, but is not limited to, the following: business strategies and plans; proposals; deliverables; prospects and customer lists; methodologies; training materials; and computer software. Employee acknowledges that during the Term of Employment, Employee will obtain knowledge of such Confidential Information. Accordingly, Employee agrees to undertake the following obligations which Employee acknowledges to be reasonably designed to protect eLoyalty's legitimate business interests without unnecessarily or unreasonably restricting Employee's post-employment opportunities:
(a) Upon termination of the Term of Employment for any reason, Employee shall return all eLoyalty property, including but not limited to computer programs, files, notes, records, charts, or other documents or things containing in whole or in part any of eLoyalty's Confidential Information;
(b) During the Term of Employment and subsequent to termination, Employee agrees to treat all such Confidential Information as confidential and to take all necessary precautions against disclosure of such information to third parties during and after Employee's employment with eLoyalty . Employee shall refrain from using or disclosing to any person, without the prior written approval of eLoyalty's Chief Executive Officer any Confidential Information unless at that time the information has become generally and lawfully known to eLoyalty's competitors;
(c) Without limiting the obligations of paragraph 11(b), Employee shall not, for a period of one year following Employee's termination of employment for any reason, for Employee's self or as an agent, partner or employee of any person, firm or corporation, engage in the practice of consulting or related services for (1) any client of eLoyalty, for whom Employee performed services, or (2) any prospective eLoyalty client to whom Employee submitted, or assisted in the submission of a proposal during the one year period preceding Employee's termination of employment, provided however, that unless eLoyalty decides to re-establish its business in Australia, Employee shall not be deemed to be in breach of this provision if Employee engages in such restricted activities in Australia as described in this sub-clause (c);
(d) During a one year period immediately following Employee's termination of employment for any reason, Employee shall not induce or assist in the inducement of any eLoyalty employee away from eLoyalty's employ or from the faithful discharge of such employee's contractual and fiduciary obligations to serve eLoyalty's interests with undivided loyalty;
12. REMEDIES: Employee recognizes and agrees that a breach of any or all of the provisions of paragraph 11 will constitute immediate and irreparable harm to eLoyalty's business advantage, including but not limited to eLoyalty's valuable business relations, for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, Employee acknowledges that eLoyalty shall therefore be entitled to an order enjoining any further breaches by the Employee. Employee agrees to reimburse eLoyalty for all costs and expenses, including reasonable attorneys' fees incurred by eLoyalty in connection with the enforcement of its rights under any provision of this Agreement.
13. INTELLECTUAL PROPERTY: During the Term of Employment, Employee shall disclose to eLoyalty all ideas, inventions and business plans which Employee develops during the course of Employee's employment with eLoyalty, which relate directly or indirectly to eLoyalty's business, including but not limited to any computer programs, processes, products or procedures which may or may not, upon application, be protected by patent or copyright. Employee agrees that any such ideas, inventions or business plans shall be the property of eLoyalty and that Employee shall, at eLoyalty's request and cost, provide eLoyalty with such assurances as is necessary to secure a patent or copyright.
14. ASSIGNMENT: Employee acknowledges that the services to be rendered pursuant to this Agreement are unique and personal. Accordingly, Employee may not assign any of Employee's rights or delegate any of Employee's duties or obligations under this Agreement. eLoyalty may assign its rights, duties or obligations under this Agreement to a subsidiary or affiliated company of eLoyalty or purchaser or transferee of a majority of eLoyalty's outstanding capital stock or a purchaser of all, or substantially all, of the assets of eLoyalty.
15. NOTICES: All notices shall be in writing, except for notice of termination of employment, which may be oral if confirmed in writing within 14 days. Notices
intended for eLoyalty shall be sent by registered or certified mail addressed to it at c/o eLoyalty's General Counsel, 150 Field Drive, Suite 250, Lake Forest, Illinois 60045 or its current principal office, and notices intended for Employee shall be either delivered personally to Employee or sent by registered or certified mail addressed to Employee's last known address.
16. ENTIRE AGREEMENT: This Agreement and Exhibits A and B attached hereto constitute the entire agreement between eLoyalty and Employee. Neither Employee nor eLoyalty may modify this Agreement by oral agreements, promises or representations. The parties may modify this Agreement only by a written instrument signed by the parties.
17. APPLICABLE LAW: This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois.
18. MEDIATION OF DISPUTES: Neither party shall initiate arbitration or other legal proceedings (except for any claim under Paragraph 11 of this Agreement), against the other party, or, in the case of eLoyalty, any of its directors, officers, employees, agents, or representatives, relating in any way to this Agreement, to Employee's employment with eLoyalty, the termination of Employee's employment or any or all other claims that one party might have against the other party until 30 days after the party against whom the claim[s] is made ("Respondent") receives written notice from the claiming party of the specific nature of any purported claim and the amount of any purported damages. Employee and eLoyalty further agree that if Respondent submits the claiming party's claim to JAMS/Endispute, for nonbinding mediation, in Chicago, Illinois, prior to the expiration of such 30 day period, the claiming party may not institute arbitration or other legal proceedings against Respondent until the earlier of (i) the completion of nonbinding mediation efforts, or (ii) 90 days after the date on which the Respondent received written notice of the claimant's claim.
19. BINDING ARBITRATION: Employee and eLoyalty agree that all claims or disputes relating to Employee's employment with eLoyalty or the termination of such employment, and any and all other claims that Employee might have against eLoyalty, any eLoyalty director, officer, employee, agent, or representative, and any and all claims or disputes that eLoyalty might have against Employee (except for any claims under Paragraph 11 of this Agreement) shall be resolved under the Expedited Commercial Rules of the American Arbitration Association in Illinois. If either party pursues a claim and such claim results in an Arbitrator's decision, both parties agree to accept such decision as final and binding. eLoyalty and Employee agree that any litigation under Paragraph 10 of this Agreement shall be brought in a relevant court, state or federal, in Illinois.
20. SEVERABILITY: Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions of this Agreement.
21. WORK AUTHORIZATION. This Agreement and eLoyalty's obligations hereunder are subject to Employee's receipt of the appropriate U.S. work authorization from the U.S. Immigration and Naturalization Office (INS) and to Employee's maintenance of such appropriate U.S. work authorization during the Term of Employment. If Employee fails to obtain the appropriate U.S. work authorization from the INS before the Effective Date, or fails to maintain the appropriate U.S. work authorization from the INS during the Term of Employment, eLoyalty shall have the right to, notwithstanding anything contained in Section 3 hereunder, immediately terminate this Agreement upon written notice to Employee without any further liability to Employee.
22. ACCELERATION OF EQUITY INCENTIVE AWARDS.
(a) OUTSTANDING EQUITY INCENTIVE AWARDS. Subject to the approval of eLoyalty's Board of Directors and the terms and conditions of the eLoyalty Corporation 1999 Stock Incentive Plan and/or the eLoyalty Corporation 2000 Stock Incentive Plan, as applicable, the Offer to Exchange Certain Outstanding Stock Options for the Right to Receive Shares of Common Stock (the "Offer to Exchange"), and the applicable Stock Option Agreement(s) and/or Installment Stock Award Agreement(s), as separately amended by the parties, eLoyalty agrees that:
(I) if Employee completes the Initial Term of Employment (that is, Employee has not resigned or been terminated by eLoyalty for any reason during such Initial Term of Employment): (i) the stock options granted by eLoyalty to Employee prior to the Effective Date hereunder and listed in EXHIBIT A hereto will become immediately exercisable at the expiration of the Initial Term of Employment with respect to any or all of the remaining shares subject thereto; and (ii) any or all of the shares remaining subject to the installment stock awards granted by eLoyalty to Employee prior to the Effective Date hereunder and listed in EXHIBIT A hereto will become issuable at the expiration of the Initial Term of Employment; or
(II) if the parties renew this Agreement for any additional Renewal Terms, then in lieu of Section 22(a)(I) above, (i) the stock options granted by eLoyalty to Employee prior to the Effective Date hereunder and listed in EXHIBIT A hereto will become immediately exercisable at the earlier of the termination of Employee's employment during such Renewal Term (other than termination by eLoyalty for Serious Misconduct) or expiration of such Renewal Term with respect to any or all of the remaining shares subject thereto; and (ii) any or all of the shares remaining subject to the installment stock awards granted by eLoyalty to Employee prior to
the Effective Date hereunder and listed in EXHIBIT A hereto will become issuable at the earlier of the termination of Employee's employment during such Renewal Term (other than termination by eLoyalty for Serious Misconduct) or expiration of such Renewal Term. If Employee's employment is terminated by eLoyalty during the Renewal Term for Serious Misconduct, any stock option or installment stock award that remains outstanding but unvested will terminate in its entirety upon the effective date of Employee's termination of employment.
The accelerated vesting of any stock options described in this
Section 22(a) shall not otherwise alter any other terms and
conditions of the stock options set forth in Employee's applicable
stock option agreement(s).
(b) FUTURE EQUITY INCENTIVE AWARDS. Subject to the approval of eLoyalty's Board of Directors and the terms and conditions of the eLoyalty Corporation 1999 Stock Incentive Plan and/or the eLoyalty Corporation 2000 Stock Incentive Plan, as applicable, and any stock option agreements and/or restricted stock agreements entered into by Employee and eLoyalty, in the event eLoyalty grants Employee options to purchase eLoyalty's common stock after the Effective Date hereunder ("Future Option Grants) or additional restricted shares of eLoyalty common stock after the Effective Date hereunder ("Future Restricted Stock Awards") , eLoyalty agrees to accelerate the vesting of such Future Option Grants and Future Restricted Stock Awards as set forth below:
(I) Upon Employee's completion of the Initial Term of Employment (that is, Employee has not resigned or been terminated by eLoyalty for any reason during such Initial Term of Employment):
i. any outstanding Future Options Grants will become immediately exercisable on January 31, 2004 with respect to the portion of shares of eLoyalty common stock remaining subject thereto for which the Future Option Grants otherwise would become exercisable as of June 30, 2004 if Employee were to continue in the employ of eLoyalty through June 30, 2004; and
ii. any outstanding Future Restricted Stock Awards will become immediately vested on January 31, 2004 with respect to the portion of restricted shares of eLoyalty common stock remaining subject thereto that would have vested as of June 30, 2004 if Employee were to continue in the employ of eLoyalty through June 30, 2004.
(II) If this Agreement is renewed by the mutual written agreement of the parties for an additional one year period after the Initial Term of Employment, upon Employee's completion of such additional one-year Renewal Term (that is, Employee has not resigned or been terminated by eLoyalty for any reason during such Renewal Term):
i. any outstanding Future Options Grants will become immediately exercisable on January 31, 2005 with respect to the portion of shares of eLoyalty common stock remaining subject thereto for which the Future Option Grants otherwise would become exercisable as of January 31, 2006 if Employee were to continue in the employ of eLoyalty through January 31, 2006; and
ii. any Future Restricted Stock Awards will become immediately vested on January 31, 2005 with respect to the portion of restricted shares of eLoyalty common stock remaining subject thereto that would have vested as of January 31, 2006 if Employee were to continue in the employ of eLoyalty through January 31, 2006.
23. Employee acknowledges that Employee has read, understood and accepts the provisions of this Agreement.
eLoyalty Corporation Karen Bolton
By: /s/ Steven Pollema /s/ Karen Bolton
--------------------------- ----------------------
Position: Senior Vice President
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Date: February 1, 2002 Date: January 31, 2002
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EXHIBIT A
BASE SALARY, EFFECTIVE DATE
AND
OUTSTANDING STOCK OPTIONS AND INSTALLMENT STOCK AWARDS
GRANTED PRIOR TO EFFECTIVE DATE
EMPLOYEE: Karen Bolton POSITION: Senior Vice President BASE SALARY: US$250,000 EFFECTIVE DATE: January 21, 2002 |
NUMBER OF SHARES (AFTER TAKING INTO ACCOUNT ELOYALTY'S 1-10 REVERSE STOCK SPLIT) SUBJECT TO OUTSTANDING STOCK OPTIONS GRANTED BY ELOYALTY TO EMPLOYEE PRIOR TO THE EFFECTIVE DATE (AS DESCRIBED IN PARAGRAPH 22(A) OF THE AGREEMENT): 2,000 (this includes shares subject to both vested and unvested stock options as of the Effective Date)
NUMBER OF SHARES (AFTER TAKING INTO ACCOUNT ELOYALTY'S 1-10 REVERSE STOCK SPLIT)
SUBJECT TO OUTSTANDING INSTALLMENT STOCK AWARDS GRANTED BY ELOYALTY TO EMPLOYEE
PRIOR TO THE EFFECTIVE DATE (AS DESCRIBED IN PARAGRAPH 22(A) OF THE AGREEMENT):
6,099
EXHIBIT B
REIMBURSABLE RELOCATION EXPENSES
(I) GENERAL RELOCATION RULES:
Employee acknowledges and agrees that:
(a) The terms of this Exhibit B shall apply only during the Initial Term of Employment. In the event that Employee desires for the Agreement to be extended for one or more Renewal Terms, then, not later that thirty (30) days prior to the expiration of the Initial Term of Employment, Employee shall initiate discussions with eLoyalty regarding the reimbursement and allowance obligations of eLoyalty that will apply during any such Renewal Term and the parties will negotiate in good faith to reach agreement regarding such obligations, to be set forth in a substitute Exhibit B.
(b) If Employee resigns from her employment with eLoyalty, or is terminated by eLoyalty for Serious Misconduct at anytime during the Term of Employment, Employee's rights to receive reimbursement of all relocation expenses and payment of any all allowances, if any, described hereunder (collectively, "Relocation Costs") will terminate immediately, including, without limitation, Employee's rights to receive any reimbursement for the final return trip as set forth in Paragraph 2(d) below, reimbursement for the return moving costs as set forth in Paragraph 3(c) below and to receive outplacement assistance as set forth in Paragraph 11 below. In such event, Employee will be solely responsible for any costs or expenses incurred by Employee after the termination of Employee's employment, including without limitation, any monthly payments required for Employee's housing or automobile leased by Employee as a result of Employee's relocation to the U.S. Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by third parties against eLoyalty with respect to any such costs or expenses incurred by Employee after the date of Employee's termination of employment.
(c) Unless specifically set forth otherwise below, if Employee resigns from eLoyalty's employment on or before January 31, 2003, or is terminated by eLoyalty for Serious Misconduct on or before January 31, 2003, Employee will be required to repay eLoyalty a pro-rata portion of all Relocation Costs paid by eLoyalty to Employee hereunder, amounting to 1/12 of the Relocation Costs for each month between the effective date of termination of Employee's employment and January 31, 2003. Employee will not be obligated to repay eLoyalty for Relocation Costs reimbursed or paid by eLoyalty hereunder if Employee is terminated by eLoyalty for any reason other than Serious Misconduct on or before January 31, 2003. If Employee resigns or if Employee is terminated by eLoyalty for any reason (including Serious Misconduct) after January 31, 2003, Employee will not be obligated to repay eLoyalty for any Relocation Costs reimbursed or paid by eLoyalty hereunder which were incurred by Employee after January 31, 2003.
(d) If Employee is terminated by eLoyalty for any reason other than for Serious Misconduct during the Term of Employment, Employee's rights to receive reimbursement of all Relocation Costs, if any, will also terminate immediately, except for: (i) reimbursement of monthly housing lease payments under the Lease until January 31, 2004 as described in Section (II)(4)(a) hereunder; (ii) reimbursement of monthly auto lease payments under the Auto Lease until January 31, 2004 as described in Section (II)(6)(a) hereunder; (iii) reimbursement for the final return trip as set forth in Paragraph 2(d) below; (iv) reimbursement for the return moving costs as set forth in Paragraph 3(c) below; and (v) outplacement assistance as set forth in Paragraph 11 below.
(e) If permitted under applicable laws, eLoyalty reserves the right to offset all repayments due from Employee hereunder against amounts payable by eLoyalty to Employee under this Agreement, if any, upon termination or expiration of the Term of Employment.
(f) eLoyalty shall have the right to proceed against Employee or Employee's property in a court in any location to enable eLoyalty to enforce a judgment or other court order entered in favor of eLoyalty. Employee waives any objection that Employee may have to the location of the court in which eLoyalty has commenced a proceeding.
(g) Employee must submit original receipts for all expense reimbursement set forth herein.
(II) REIMBURSABLE RELOCATION EXPENSES AND ALLOWANCES:
Subject to the provisions of Section (I) above and in consideration of Employee's relocation from Australia to the United States to work as an employee of eLoyalty for the Initial Term of Employment, eLoyalty agrees to reimburse Employee for those relocation costs listed below:
1. House-hunting Trip.
(a) House-hunting Expenses: eLoyalty will reimburse Employee for Employee's reasonable expenses incurred in a one-week house-hunting trip in the U.S not to exceed Twenty-Five Thousand United States Dollars (US$25,000), provided that Employee complies with eLoyalty's current expense policy. Such expenses reimbursable by eLoyalty will include: (1) a roundtrip business class airfare for each of Employee, Employee's spouse and Employee's child for such house-hunting trip, (2) reasonable hotel accommodations for a week and (3) rental car and other reasonable travel expenses incurred in connection with Employee's house hunting activities.
(b) Relocation Consultant: Employee may use the services of an independent relocation consultant approved by eLoyalty in connection
with Employee's house hunting activities, and eLoyalty will, at its sole discretion, either directly pay to such relocation consultant, or reimburse Employee, for the reasonable costs of such services, provided such costs do not exceed One Thousand United States Dollars (US$1,000).
2. Airfares.
(a) Initial Trip: eLoyalty will reimburse Employee for the purchase of one business-class airfare for each of Employee, Employee's spouse and Employee's child associated with Employee's final move from Sydney, Australia to Chicago, Illinois. Such travel expenses will be reimbursed based on the most direct route.
(b) Annual Trips: As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, reimburse Employee for Employee's purchase of roundtrip airfares from the United States to Australia, for Employee, Employee's spouse, Employee's child and/or Employee's spouse's parents, provided that such reimbursement shall not exceed the net amount of Fifty-Six Thousand United States Dollars (US$56,000) per year ("Annual Airfare Budget"). The parties agree to review the Annual Airfare Budget promptly after December 31, 2002 to determine if the Annual Airfare Budget of Fifty-Six Thousand United States Dollars (US$56,000) would be sufficient to cover two round-trip business class airfares for each of Employee, Employee's spouse, Employee's child and one round-trip business class airfare for each of Employee's spouse's parents for the calendar year of 2003. If the parties mutually agree that such Annual Airfare Budget of Fifty-Six Thousand United States Dollars (US$56,000) would be materially insufficient, the parties will negotiate in good faith for an equitable adjustment to such Annual Airfare Budget for the calendar year of 2003.
(c) Emergency Trips: As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, reimburse Employee for the purchase of business class airfare for Employee's emergency trips back to Australia, provided that eLoyalty shall have the final determination in its sole discretion as to whether any such trips proposed to be undertaken by Employee qualify as an "emergency trip".
(d) Final Return Trip: If at the expiration of any Term or if Employee is terminated by eLoyalty during the Term of Employment for any reason other than for Serious Misconduct and Employee decides to return back to Australia within twelve (12) months after such termination or expiration of the Term of Employment, eLoyalty will purchase for each of Employee, Employee's spouse and Employee's child a business class airfare for a one-way trip from the U.S. to NSW, Australia. This trip may be direct or
indirect, provided that the total cost is no greater than the cost of a direct one-way trip from the U.S. to NSW, Australia.
3. Shipment of Household Goods and/or Personal Effects:
(a) Initial Moving Costs: eLoyalty will directly pay for the initial shipment of Employee's furnishings and personal effects from Employee's primary residence in Australia to the State of Illinois, U.S., provided that Employee has obtained eLoyalty's prior approval of such shipping costs payable by eLoyalty.
(b) Temporary Furniture Rental Pending Shipment: If there is an interim period that Employee requires furnishings in the U.S. while waiting for the arrival of Employee's furnishings that were shipped from Australia to the U.S. as described in Paragraph 1(a) above, eLoyalty will, as long as Employee remains in the employ of eLoyalty during such interim period, reimburse Employee for the reasonable costs incurred by Employee during this interim period for the rental of any such temporary furnishings in the U.S., provided that Employee has obtained eLoyalty's prior approval of such temporary furniture rental costs reimbursable by eLoyalty.
(c) Return Moving Costs. If at the expiration of any Term or if Employee is terminated by eLoyalty during the Term of Employment for any reason other than for Serious Misconduct and Employee decides to return back to Australia within twelve (12) months after such termination or expiration of the Term of Employment, eLoyalty shall directly pay for the reasonable costs of shipping Employee's furnishings and personal effects from the State of Illinois, U.S. to Employee's primary residence in Australia, provided that Employee has obtained eLoyalty's prior approval of such return shipping costs payable by eLoyalty.
4. Monthly Housing Allowance; Lease Deposit; and Utilities Setup Charges.
(a) Monthly Housing Allowance.
- In connection with Employee's relocation to the U.S. hereunder, Employee has executed a written lease ("Lease") with Howard Kaplan and Louis Natanshon (collectively, "Lessor") for housing in the U.S. for a period of two years, commencing from February 1, 2002 ("Lease Effective Date") and expiring on January 31, 2004 ("Lease Expiration Date").
- eLoyalty has directly paid to Lessor the net amount of Five Thousand Dollars (U.S.$5,000) representing payment for the first month (the month of February 2002) under the lease ("First Month Payment") and the net amount of Five Thousand Five Hundred Dollars (U.S.$5,500)
representing payment for the final month (the month of January 2004) under the Lease ("Last Month Prepayment").
- In addition, as long as Employee remains in the employ of
eLoyalty until January 31, 2004, eLoyalty will, at eLoyalty's
sole discretion, either pay to Employee or directly to Lessor:
(i) the net amount of Five Thousand United States Dollars
(US$5,000) a month to be applied against Employee's monthly
payments required under the Lease from March 1, 2002 to
January 31, 2003, and (ii) the net amount of Five Thousand
Five Hundred United States Dollars (US$5,500) a month to be
applied against Employee's monthly payments required under the
Lease from February 1, 2003 to December 31, 2003. Such monthly
housing allowance will be paid by eLoyalty, at eLoyalty's sole
discretion, to Employee or the Lessor no later than the first
of each month from March 1, 2002.
- If eLoyalty is a guarantor of such Lease and Employee fails to remit to Lessor any such monthly lease payments made by eLoyalty to Employee hereunder, Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by Lessor or any third parties against eLoyalty for such monthly payments due under the Lease which have been paid by eLoyalty to Employee. If eLoyalty is a guarantor of such Lease, Employee may not renew the Lease at the Lease Expiration Date without eLoyalty's prior written consent.
- Consistent with Section (I)(b) (General Relocation Rules), all such monthly lease payments under this Paragraph 4(a) will cease immediately if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time and Employee will be solely responsible for all payments due under the Lease after the date of such termination or resignation. In such event, Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by Lessor or any third parties against eLoyalty for such payments due under the Lease after the date of such termination or resignation.
- In addition, if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time prior to January 31, 2003, Employee will repay to eLoyalty a pro-rata portion of all monthly lease payments (including, without limitation, a pro-rata portion of the First Month Payment and the Last Month Prepayment) paid by eLoyalty to
Employee and/or Lessor hereunder as further described under
Section (I)(c) (General Relocation Rules).
- If Employee is terminated by eLoyalty for any reason other than for Serious Misconduct during the Initial Term of Employment, eLoyalty will, at its sole discretion, either reimburse Employee, or pay the Lessor, for all monthly payments remaining under the Lease from Employee's date of termination to the Lease Expiration Date, provided that at eLoyalty's request, Employee will fully cooperate with eLoyalty in negotiating the early termination of the Lease with Lessor.
(b) Lease Deposit. eLoyalty has paid directly to the Lessor, a one-time security deposit ("Deposit") in the amount of one month's rent required under the Lease. Employee will ensure that eLoyalty receives a full refund of such Deposit upon the termination or expiration of such Lease. Employee agrees that it will immediately remit to eLoyalty all such Deposit proceeds refunded by the Lessor to Employee. Notwithstanding anything contained in this Agreement, if Employee resigns or is terminated by eLoyalty prior to January 31, 2004, Employee will immediately repay to eLoyalty all such Deposit (not any pro-rata portion) paid by eLoyalty and Employee shall be entitled to retain any such Deposit proceeds refunded by the Lessor to Employee at the termination or expiration of such Lease. eLoyalty reserves the right to offset its loss of any portion of such Deposit against any amounts payable by eLoyalty to Employee upon termination or expiration of the Term of Employment.
(c) Initial Utilities Set-Up Charges. Employee will be reimbursed for all actual and reasonable one-time costs charged by the various utility companies for the initial set up of the necessary utilities (such as telephone, electric, gas, etc.) in Employee's first leased home in the U.S. during the Initial Term of Employment.
5. Appliances. In the event that the first home Employee leases in the U.S. does not have any necessary major appliances such as a washer, dryer or dish washer, eLoyalty will, during the Initial Term of Employment, reimburse Employee for Employee's purchase of such necessary major appliances, provided that Employee remains in the employ of eLoyalty during such Initial Term of Employment. eLoyalty will also, during the Initial Term of the Agreement, either purchase or rent miscellaneous small electrical appliances for Employee's use that are deemed reasonable and necessary by eLoyalty, such as toaster, hair dryer, alarm clock, microwave, or television, provided that Employee remains in the employ of eLoyalty during such Initial Term of Employment. The aggregate amount of such purchase and/or lease of the reasonably necessary major appliances and small electrical appliances reimbursable by eLoyalty during the Initial Term of the Agreement shall not exceed Seven Thousand Five Hundred United States Dollars (US$7,500).
6. Automobile Lease Allowance; Automobile Registration Costs; Sale of Australia Automobiles
(a) Automobile Lease Allowance.
- During the Initial Term of Employment, eLoyalty will, at eLoyalty's sole discretion, pay to Employee or directly to the applicable automobile leasing company ("Auto Lessor"), the net amount of Seven Hundred and Fifteen United States Dollars (US$715) per month to be applied against Employee's monthly payments required for Employee's lease of an automobile in the U.S ("Automobile Lease") until January 31, 2004 ("Automobile Lease Expiration Date"). In addition to the foregoing, eLoyalty has paid directly to the Auto Lessor, a one-time lease acquisition payment ("Acquisition Payment") of One Thousand Dollars (US$1,000), which covers the costs of acquiring the necessary registration and license plates to operate the leased automobile in the U.S. as well as other related local governmental fees charged. In no event shall eLoyalty be responsible for reimbursing or paying Employee or Auto Lessor any other associated costs of operating such leased automobile (e.g. gasoline, car insurance, repairs and maintenance, renewal registration, vehicle stickers, etc.)
- Consistent with Section (I)(b) (General Relocation Rules), all such monthly lease payments under this Paragraph 6(a) will cease immediately if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time during the Initial Term of Employment, and Employee will be solely responsible for all payments due under the Automobile Lease after the date of such termination or resignation. In such event, Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by the Auto Lessor or any third parties against eLoyalty for such payments due under the Automobile Lease after the date of such termination or resignation.
- In addition, if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time prior to January 31, 2003, Employee will repay to eLoyalty a pro-rata portion of all monthly lease payments paid by eLoyalty to Employee hereunder as further described under Section (I)(c) (General Relocation Rules).
- If Employee is terminated by eLoyalty for any reason other than for Serious Misconduct during the Initial Term of Employment, eLoyalty will, at its sole discretion, and either reimburse Employee, or pay to the Auto Lessor, for all monthly payments remaining under the Automobile Lease from Employee's date of termination to the Automobile Lease Expiration Date, provided that at eLoyalty's request, Employee will fully cooperate with eLoyalty in negotiating the early termination of the Auto Lease with Auto Lessor.
(b) Sale of Employee's Automobiles in Australia. eLoyalty will reimburse Employee for losses that Employee incurs as a result of the sale of two automobiles owned by Employee in Australia in connection with Employee's relocation to the U.S., provided that such reimbursement by eLoyalty shall not exceed Sixteen Thousand United Stated Dollars (US$16,000) for both vehicles and Employee must have used Employee's best efforts to mitigate any such losses.
7. Land Tax. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, reimburse Employee for the reasonable annual cost of Employee's land tax bill on Employee's current primary residence in Australia (which is the special tax incurred by Employee as Employee will not be living at such primary residence in Australia), which are above and beyond the normal real estate taxes Employee pays on such primary residence and which solely are attributable to Employee's absence from such residence as a result of Employee's relocation to the U.S. to work for eLoyalty. Employee estimates that as of the Effective Date of this Agreement, such amount reimbursable by eLoyalty is approximately US$4,000 and that the first installment would be payable in July 2002.
8. Visa Processing. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, pay, or reimburse Employee, for reasonable costs to obtain the proper work authorization from the U.S. Immigration and Naturalization Office (INS) for Employee's U.S. relocation and any necessary dependent U.S. visas required for Employee's spouse and Employee's child in connection with their relocation to the U.S. as a result of Employee's employment by eLoyalty in the U.S.
9. Taxes.
(a) Grossing up for Taxes. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, reimburse Employee for any incremental taxes actually incurred by Employee (both US and foreign) under the items set forth in Paragraphs 1 through 8 above. eLoyalty will calculate any incremental tax resulting from these items and gross-up Employee's compensation in an amount adequate to offset the increased tax cost.
(b) Tax Returns Preparation Costs. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, pay PriceWaterhouseCoopers (PWC) to prepare both Employee's annual U.S. and Australian income tax returns.
10. Outplacement Assistance. If Employee's employment is terminated by eLoyalty for any reason other than for Serious Misconduct, eLoyalty will provide Employee with up to ninety (90) days of reasonable outplacement assistance, in the geography elected by the Employee, from the outplacement firm of Drake Beam (or another similar outplacement firm designated by eLoyalty) as such services are generally provided to terminated eLoyalty employees.
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made and entered into as of the 20th day of October, 2003, by and between eLoyalty Corporation, a Delaware corporation ("eLoyalty"), and Karen Bolton, a resident of the State of Illinois ("Employee").
RECITALS
A. eLoyalty and Employee are parties to that certain Employment Agreement, dated as of January 21, 2002 (the "Agreement"), setting forth the terms and conditions of Employee's employment with eLoyalty.
B. The parties desire to amend the Agreement as set forth herein to reflect the changes in the terms and conditions of Employee's employment resulting the mutual decision to extend the term of Employee's employment.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. All capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.
2. The Term of Employment is hereby extended for a period of three (3) successive Renewal Terms (the third such Renewal Term being a partial term of eleven (11) months), ending on December 31, 2006.
3. The Agreement hereby is amended by deleting Exhibit B attached thereto and inserting in lieu thereof Attachment 1 attached hereto.
4. The Agreement shall remain unmodified other than as expressly set forth herein and, as so modified, shall remain in full force and effect.
5. This Amendment shall be governed in all respects by the laws of the State of Illinois.
6. This Amendment shall be effective only upon approval hereof by the Compensation Committee of eLoyalty's Board of Directors, which approval shall be sought at the next regular meeting of such committee, currently scheduled for November 6, 2003.
IN WITNESS WHEREOF, Employee and the duly authorized officer of eLoyalty have executed this Amendment as of the date set forth above.
Employee eLoyalty Corporation
/s/ Karen Bolton By: /s/ Kelly D. Conway
---------------- -------------------
Karen Bolton Title: President & Chief Executive Officer
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ATTACHMENT 1
EXHIBIT B
REIMBURSABLE RELOCATION EXPENSES
(I) GENERAL RELOCATION RULES:
Employee acknowledges and agrees that:
(a) The terms of this Exhibit B shall apply only during the Initial Term of Employment and the first three (3) Renewal Terms (the third such Renewal Term being a partial term of eleven (11) months) (collectively, the "Applicable Term"). In the event that Employee desires for the Agreement to be extended for one or more additional Renewal Terms, then, not later that thirty (30) days prior to the expiration of the Applicable Term, Employee shall initiate discussions with eLoyalty regarding the reimbursement and allowance obligations of eLoyalty that will apply during any such Renewal Term and the parties will negotiate in good faith to reach agreement regarding such obligations, to be set forth in a substitute Exhibit B.
(b) If Employee resigns from her employment with eLoyalty, or is terminated by eLoyalty for Serious Misconduct at anytime during the Term of Employment, Employee's rights to receive reimbursement of all relocation expenses and payment of any all allowances, if any, described hereunder (collectively, "Relocation Costs") will terminate immediately, including, without limitation, Employee's rights to receive any reimbursement for the final return trip as set forth in Section II, Paragraph 1(c) below, reimbursement for the return moving costs as set forth in Section II, Paragraph 2 below and to receive outplacement assistance as set forth in Section II, Paragraph 8 below. In such event, Employee will be solely responsible for any costs or expenses incurred by Employee after the termination of Employee's employment, including without limitation, any monthly payments required for Employee's housing as a result of Employee's relocation to the U.S. Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by third parties against eLoyalty with respect to any such costs or expenses incurred by Employee after the date of Employee's termination of employment.
(c) If Employee is terminated by eLoyalty for any reason other than for
Serious Misconduct during the Term of Employment, Employee's rights to receive
reimbursement of all Relocation Costs, if any, will also terminate immediately,
except for: (i) reimbursement of monthly housing payments until December 31,
2006 as described in Section II, Paragraph (3)(a) hereunder; (ii) reimbursement
for the final return trip as set forth in Section II, Paragraph 1(c) below;
(iii) reimbursement for the return moving costs as set forth in Section II,
Paragraph 2 below; (iv) payment of the Equity Protection Payment (to the extent
payable in accordance with the terms thereof) set forth
in Section II, Paragraph 3(c) below, and (v) outplacement assistance as set forth in Section II, Paragraph 8 below.
(d) If permitted under applicable laws, eLoyalty reserves the right to offset all repayments due from Employee hereunder against amounts payable by eLoyalty to Employee under this Agreement, if any, upon termination or expiration of the Term of Employment.
(e) eLoyalty shall have the right to proceed against Employee or Employee's property in a court in any location to enable eLoyalty to enforce a judgment or other court order entered in favor of eLoyalty. Employee waives any objection that Employee may have to the location of the court in which eLoyalty has commenced a proceeding.
(f) Employee must submit original receipts for all expense reimbursement set forth herein.
(II) REIMBURSABLE RELOCATION EXPENSES AND ALLOWANCES:
Subject to the provisions of Section I above, eLoyalty agrees to reimburse Employee for those relocation costs listed below:
1. Airfares.
(a) Annual Trips: As long as Employee remains in the employ of eLoyalty , eLoyalty will, during the Applicable Term, reimburse Employee for Employee's purchase of roundtrip airfares from the United States to Australia, for Employee, Employee's spouse, Employee's child and/or Employee's spouse's parents, provided that such reimbursement shall not exceed the net amount of Fifty-Six Thousand United States Dollars (US$56,000) per year ("Annual Airfare Budget").
(b) Emergency Trips: As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Applicable Term, reimburse Employee for the purchase of business class airfare for Employee's emergency trips back to Australia, provided that eLoyalty shall have the final determination in its sole discretion as to whether any such trips proposed to be undertaken by Employee qualify as an "emergency trip".
(c) Final Return Trip: If at the expiration of the Term of Employment or if Employee is terminated by eLoyalty during the Term of Employment for any reason other than for Serious Misconduct and Employee decides to return back to Australia within twelve (12) months after such termination or expiration of the Term of Employment, eLoyalty will purchase for each of Employee, Employee's spouse and Employee's child a business class airfare for a one-way trip from the U.S. to NSW, Australia. This trip may
be direct or indirect, provided that the total cost is no greater than the cost of a direct one-way trip from the U.S. to NSW, Australia.
2. Return Shipment of Household Goods and/or Personal Effects. If at the expiration of the Term of Employment or if Employee is terminated by eLoyalty during the Term of Employment for any reason other than for Serious Misconduct and Employee decides to return back to Australia within twelve (12) months after such termination or expiration of the Term of Employment, eLoyalty shall directly pay for the reasonable costs of shipping Employee's furnishings and personal effects from the State of Illinois, U.S. to Employee's primary residence in Australia, provided that Employee has obtained eLoyalty's prior approval of such return shipping costs payable by eLoyalty.
3. Monthly Housing Allowance; Lease Deposit; and Principal Protection.
(a) Monthly Housing Allowance.
- In connection with Employee's relocation to the U.S. hereunder, Employee has executed a written lease ("Lease") with Howard Kaplan and Louis Natanshon (collectively, "Lessor") for housing in the U.S. for a period of two years, commencing from February 1, 2002 ("Lease Effective Date") and expiring on January 31, 2004 ("Lease Expiration Date").
- eLoyalty has directly paid to Lessor the net amount of Five Thousand Five Hundred Dollars (U.S.$5,500) representing payment for the final month (the month of January 2004) under the Lease ("Last Month Prepayment").
- Employee has contracted to purchase a home located at 641 S.
Waukegan Road, Lake Forest, Illinois 60045, to serve as her
primary residence through at least December 31, 2006 (the
"Purchased Residence").
- As long as Employee remains in the employ of eLoyalty until December 31, 2006, eLoyalty will pay to Employee the net amount of Five Thousand Five Hundred United States Dollars (US$5,500) a month to be applied against either (i) Employee's monthly payments required under the Lease or (ii) Employee's financing payments for the Purchased Residence. Such monthly housing allowance will be paid by eLoyalty to Employee no later than the first of each month. eLoyalty will not be obligated to make such payment for the month of January 2004, as eLoyalty already has made the Last Month Prepayment.
- If eLoyalty is a guarantor of such Lease and Employee fails to remit to Lessor any such monthly lease payments made by eLoyalty to
Employee hereunder, Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by Lessor or any third parties against eLoyalty for such monthly payments due under the Lease which have been paid by eLoyalty to Employee. If eLoyalty is a guarantor of such Lease, Employee may not renew the Lease at the Lease Expiration Date without eLoyalty's prior written consent.
- Consistent with Section I, Paragraph (b), all such monthly housing payments under this Paragraph 4(a) will cease immediately if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time and Employee will have no claim against eLoyalty therefor after the date of such termination or resignation. In such event, Employee will indemnify and hold harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by Lessor or any third parties against eLoyalty for any payments due under the Lease after the date of such termination or resignation.
- If Employee is terminated by eLoyalty for any reason other than for Serious Misconduct during the Applicable Term, eLoyalty will continue to pay Employee her monthly housing allowance until the earliest of (i) the date that Employee both sells the Purchased Residence and makes her final return trip to Australia, (ii) twelve (12) months following the effective date of termination and (iii) the end of the Applicable Term.
(b) Lease Deposit. eLoyalty has paid directly to the Lessor, a one-time security deposit ("Deposit") in the amount of one month's rent required under the Lease. Employee will ensure that eLoyalty receives a full refund of such Deposit upon the termination or expiration of such Lease. Employee agrees that it will immediately remit to eLoyalty all such Deposit proceeds refunded by the Lessor to Employee. Notwithstanding anything contained in this Agreement, if Employee resigns or is terminated by eLoyalty prior to January 31, 2004, Employee will immediately repay to eLoyalty all such Deposit (not any pro-rata portion) paid by eLoyalty and Employee shall be entitled to retain any such Deposit proceeds refunded by the Lessor to Employee at the termination or expiration of such Lease. eLoyalty reserves the right to offset its loss of any portion of such Deposit against any amounts payable by eLoyalty to Employee upon termination or expiration of the Term of Employment.
(c) Initial Equity Protection.
- In connection with the purchase of the Purchased Residence, Employee has made an Initial Equity Investment of $276,000, being equal to the difference between (i) the contract purchase price for the Purchased Residence (the "Purchase Price") minus (ii) the original principal amount of the mortgage loan for the Purchased Residence (the "Equity Investment").
- In the event that, within twelve (12) months following the earlier of (i) expiration of the Applicable Term and (ii) termination of Employee's employment by eLoyalty, other than for Serious Misconduct, Employee sells the Purchased Residence after making a reasonable, good faith effort to maximize the sales price therefor, and the contract sale price, less real estate broker's commission payable by Employee with respect to such sale, but including real property tax pro ration allocations (the "Sale Price"), is such that Employee will not receive amounts in connection with such sale equal to or in excess of the Initial Equity Investment, then eLoyalty shall pay to Employee, within ten (10) days following the closing of such sale and written notification of the Sale Price, an amount equal to the difference between the Initial Equity Investment and the amount so received by Employee (such payment hereinafter referred to as the "Equity Protection Payment").
- eLoyalty's obligation to make the Equity Protection Payment shall be subject to the following conditions:
- Employee shall make all reasonable, good faith efforts to maximize the Sale Price.
- Employee shall maintain the Purchased Residence at all times in good condition, ordinary wear and tear excepted.
- Employee shall undertake no voluntary act with respect to the Purchased Residence, including, without limitation, any modification thereto, that has the effect of reducing the market value thereof.
- Employee shall maintain adequate insurance on the Purchased Residence and, in the event of a loss that reduces the value of Purchased Residence at the time of its sale, the Sale Price shall be deemed increased by the amount of any applicable insurance recovery and the payment of the Equity Protection Payment will be delayed until such amount is reasonably determinable.
- Employee shall provide eLoyalty with prior written notice (as promptly as is practicable and in no event later than one business day prior to the following described event) of (i) her intent to enter into a sale contract for the Purchased Residence that would result in an Equity Protection Payment and (ii) any amendment or modification to such a sale contract that would increase the amount of any Equity Protection Payment.
(d) Moving Costs. eLoyalty shall reimburse Employee for all costs incurred by her and associated with her relocation to the Purchased Residence, up to a maximum of Five Thousand Dollars ($5,000) and subject to the presentation of appropriate documentation of the incurrence thereof.
4. Automobile Lease Allowance; Automobile Registration Costs;
(a) Automobile Lease Allowance.
- During the Initial Term of Employment, eLoyalty will, at eLoyalty's sole discretion, pay to Employee or directly to the applicable automobile leasing company ("Auto Lessor"), the net amount of Seven Hundred and Fifteen United States Dollars (US$715) per month to be applied against Employee's monthly payments required for Employee's lease of an automobile (the "Leased Automobile") in the U.S ("Automobile Lease") until January 31, 2004 ("Automobile Lease Expiration Date"). In addition to the foregoing, eLoyalty has paid directly to the Auto Lessor, a one-time lease acquisition payment ("Acquisition Payment") of One Thousand Dollars (US$1,000), which covers the costs of acquiring the necessary registration and license plates to operate the Leased Automobile in the U.S. as well as other related local governmental fees charged. In no event shall eLoyalty be responsible for reimbursing or paying Employee or Auto Lessor any other associated costs of operating such Leased Automobile (e.g. gasoline, car insurance, repairs and maintenance, renewal registration, vehicle stickers, etc.)
- Consistent with Section (I)(b) (General Relocation Rules), all such monthly lease payments under this Paragraph 6(a) will cease immediately if eLoyalty terminates Employee for Serious Misconduct or Employee resigns at any time prior to the Automobile Lease Expiration Date, and Employee will be solely responsible for all payments due under the Automobile Lease after the date of such termination or resignation and the Buy-Out Payment described below shall not be made.. In such event, Employee will indemnify and hold
harmless eLoyalty (and its subsidiaries, parent and sister companies and their agents, employees, officers and directors) from any and all liabilities, costs and expenses (included, but not limited to, attorney's fees) arising in connection with any claims by the Auto Lessor or any third parties against eLoyalty for such payments due under the Automobile Lease after the date of such termination or resignation.
- If Employee is terminated by eLoyalty for any reason other than for Serious Misconduct prior to the Automobile Lease Expiration Date, eLoyalty will, at its sole discretion, either reimburse Employee, or pay to the Auto Lessor, for all monthly payments remaining under the Automobile Lease from Employee's date of termination to the Automobile Lease Expiration Date, provided that at eLoyalty's request, Employee will fully cooperate with eLoyalty in negotiating the early termination of the Auto Lease with Auto Lessor.
- On or prior, as mutually determined by eLoyalty and Employee, the Automobile Lease Expiration Date, eLoyalty shall pay to Employee an amount equal to the lesser of (i) the amount necessary to purchase the Leased Automobile under the Automobile Lease and (ii) the portion of Employee's Annual Airfare Budget for 2003, which amount Employee shall pay to Auto Lessor or its designee in order to purchase the Leased Automobile.
- Upon any sale of the Leased Automobile by Employee, Employee shall use commercially reasonable efforts to maximize the sale proceeds thereof and shall promptly remit such proceeds to eLoyalty.
5. Land Tax. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Applicable Term, reimburse Employee for the reasonable annual cost of Employee's land tax bill on Employee's current primary residence in Australia (which is the special tax incurred by Employee as Employee will not be living at such primary residence in Australia), which are above and beyond the normal real estate taxes Employee pays on such primary residence and which solely are attributable to Employee's absence from such residence as a result of Employee's relocation to the U.S. to work for eLoyalty.
6. Visa Processing. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Applicable Term, pay, or reimburse Employee, for reasonable costs to obtain the proper work authorization from the U.S. Immigration and Naturalization Office (INS) for Employee's U.S. relocation and any necessary dependent U.S. visas required for Employee's spouse and Employee's child in connection with their relocation to the U.S. as a result of Employee's employment by eLoyalty in the U.S.
7. Taxes.
(a) Grossing up for Taxes. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, reimburse Employee for any incremental taxes actually incurred by Employee (both US and foreign) under the items set forth in Paragraphs 1 through 8 above. eLoyalty will calculate any incremental tax resulting from these items and gross-up Employee's compensation in an amount adequate to offset the increased tax cost.
(b) Tax Returns Preparation Costs. As long as Employee remains in the employ of eLoyalty, eLoyalty will, during the Initial Term of Employment, pay PriceWaterhouseCoopers (PWC) to prepare both Employee's annual U.S. and Australian income tax returns.
8. Outplacement Assistance. If Employee's employment is terminated by eLoyalty for any reason other than for Serious Misconduct, eLoyalty will provide Employee with up to ninety (90) days of reasonable outplacement assistance, in the geography elected by the Employee, from the outplacement firm of Drake Beam (or another similar outplacement firm designated by eLoyalty) as such services are generally provided to terminated eLoyalty employees.
EXHIBIT 10.28
SEVERANCE AGREEMENT AND GENERAL RELEASE
This Severance Agreement and General Release (this "Agreement") is entered into by and between Diane Lowe ("Employee") and eLoyalty Corporation, a Delaware corporation ("eLoyalty" or the "Company"), on the date set forth at the Employee signature lines below, arising out of the employment relationship between Employee and eLoyalty and constitutes an amendment to Employee's Employment Agreement with eLoyalty, a copy of which is attached hereto as Exhibit A (the "Employment Agreement"). It shall become effective seven days after execution of the Agreement by both parties, unless revoked within such seven-day period in accordance with this Agreement.
Employee's employment will terminate effective November 30, 2004 ("Termination Date").
Pursuant to the Employment Agreement and subject to the terms and conditions thereof, Employee will receive payments in lieu of notice equal to her regular base salary, less applicable deductions, beginning on the day after the Termination Date and continuing through February 28, 2005 ("Termination Payments"); provided, however, that notwithstanding the terms of the Employment Agreement, the Termination Payments will continue in the event that Employee secures alternative employment during the period they are being made. In addition, if Employee accepts this Agreement and does not revoke her acceptance (as described below), Employee would receive payments equal to her regular base salary, less applicable deductions, for an additional period ending May 31, 2005, subject to the terms and conditions set forth in this Agreement.
Employee will continue to pay her portion of the cost of her existing medical, dental, vision and flexible spending account coverage while receiving Termination Payments, and such coverage will continue until February 28, 2005 ("Termination Benefit Period"). Employee, however, may elect to discontinue such coverage by submitting a completed election change form to eLoyalty's Employee Loyalty Service Center ("ELSC") at eLoyalty Corporation, 150 Field Drive, Suite 250, Lake Forest, Illinois, 60045 within 31 days of the Termination Date; however, any such change will not be effective until the day after the election change form is received by the ELSC. Except as otherwise provided in this Agreement (if it becomes effective as provided herein), after the Termination Benefit Period, Employee will no longer be eligible to participate in any eLoyalty benefit programs, except to the extent that she may be eligible to continue her existing health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), at the applicable COBRA rate and for the period prescribed by COBRA.
In addition to Employee's Termination Payments and the Termination Benefit Period, and in consideration of the mutual covenants and agreements hereinafter set forth, and intending to be legally bound, the parties, eLoyalty and Employee, agree as follows:
1. Employee specifically acknowledges and agrees that she is not otherwise
entitled to the additional payments and benefits set forth in Paragraph 4 below,
that the Company is providing such payments and benefits in exchange for the
mutual covenants and agreements set forth herein, and that such payments and
benefits under Paragraph 4 below are greater than the payments and benefits
Employee would have been entitled to receive upon termination in the absence of
this Agreement. Further, Employee specifically acknowledges and agrees that (i)
the payments and benefits described in this Agreement are in full and final
settlement of any and all amounts that may be claimed to be payable to Employee
by the Company for any period or portion thereof ending on or prior to the date
hereof, and (ii) Employee is not entitled to any other payments whatsoever,
including, without limitation, any amounts in the nature of base or incentive
(bonus) compensation, commissions or other compensatory payments or
reimbursements.
2. Employee represents and warrants that Employee has no interest or obligation that is inconsistent with or in conflict with this Agreement or that would prevent, limit or impair Employee's performance of any part of this Agreement.
3. In exchange for the valuable consideration set forth in Paragraph 4 below and the mutual covenants contained herein:
a. Employee agrees to release and forever discharge the Company and
its past and present officers, directors, employees, agents, subsidiaries,
divisions, affiliates, stockholders, predecessors, successors and assigns,
(collectively "Releasees") from any and all claims and/or causes of action,
known or unknown, arising (i) from or during Employee's employment or (ii) as a
result of the termination of that employment, whether currently known or
unknown, and agrees that she will not assert any such claims and/or causes of
action against any Releasees. This release includes, but is not limited to, (i)
claims and/or causes of action arising under Title VII of the Civil Rights Act;
(ii) claims and/or causes of action arising under the Americans with
Disabilities Act; (iii) claims and/or causes of action arising under the Age
Discrimination in Employment Act, as amended by the Older Workers Benefit
Protection Act; (iv) claims and/or causes of action arising under federal, state
or local laws, including national origin, religion, sex, disability, race, or
age discrimination, or any other discrimination or retaliation prohibited by
law; (v) claims and/or causes of action growing out of any alleged legal
restrictions on eLoyalty's right to terminate its employees, including breach of
contract, express or implied, discharge in violation of public policy, wrongful
or retaliatory termination, or promissory estoppel; or (vi) tort claims and/or
causes of action, including infliction of emotional distress, defamation, libel
or slander. This release specifically excludes the following: (i) any right
Employee has to seek or obtain indemnification from the Company or relating to
her service with the Company, whether by contract, insurance policy, statute,
law or otherwise; (ii) any right or claims relating to facts or circumstances
arising after this Agreement is executed; (iii) any expense reimbursement that
has been validated and approved through the Company's normal processes; and/or
(iv) any right provided for or any action necessary to enforce any right or
obligation provided in this Agreement.
b. Employee and the Company agree not to disparage, defame, libel, slander, place in a negative light, or otherwise harm the reputation, business or goodwill of the other, including any statements in any format regarding the Company's employment practices,
business, services, products, conduct, or policies, or its employees, directors, officers or agents. Any public statements by Employee or the Company regarding the other will be mutually agreed in writing, in advance of publication or dissemination.
c. Employee agrees to return all property in good working condition (including computer equipment, any and all files and documents, whether in written or electronic form or in any other form or media whatsoever, and including all copies, excerpts and derivatives) of the Releasees in her possession. Employee specifically understands and agrees that no payments or obligations set forth in Paragraph 4 below shall arise until Employee returns all such property to the Company pursuant to this Paragraph.
d. Employee agrees that the terms of this Agreement are confidential and that Employee will treat them as confidential and will not disclose them to any person, except as may be required by law or legal process, other than Employee's attorneys, accountants, tax or financial advisors, or spouse or domestic partner (who must be informed of and agree to be bound by the terms of this Paragraph). Notwithstanding the foregoing, Employee will notify any person, firm, corporation or other entity with which Employee becomes employed of Employee's undertakings in Paragraph 7 and 8 hereof.
4. In exchange for Employee's covenants contained herein, the Company agrees:
a. To pay Employee the gross amount of $75,000.00 (from which applicable taxes, benefit premiums and other withholdings will be deducted). Such gross amount will be paid in installments of $12,500.00 (less applicable deductions) on regular eLoyalty paydays, beginning on the first payday after the Termination Payments have ended, until the total gross amount is reached. These payments represent continuation of Employee's base salary through May 31, 2005.
b. To provide Employee with the option of continuing her existing medical and dental/vision coverage, and the health care spending account and dependent care spending account benefits for three additional months. Such continuation will begin on the first day following expiration of the Termination Benefit Period set forth above. Employee will continue to pay her portion of the cost of those coverages and benefits during this period. Employee, however, is not required to continue such coverage or benefits and she may terminate them within 31 days of the Termination Date by following the procedure outlined above. (After coverage ends, Employee may be eligible for continued health benefit coverage under COBRA).
5. This Agreement does not waive any benefits Employee may be eligible to receive under the eLoyalty Corporation 401(k) Plan. Employee acknowledges that eligibility and benefits under that plan, if any, will be determined and payable in accordance with the terms of that plan.
6. This Agreement does not waive Employee's entitlement to receive continued vesting in her outstanding grants of restricted Company stock for the period in which she receives payments pursuant to Paragraph 4. Employee and Company have agreed that Employee will continue to vest in her grants during that period.
7. Employee acknowledges that Employee has an obligation of confidence, non-disclosure and non-use with respect to any and all confidential information and trade secrets that Employee acquired during the course of employment with Company, pursuant to the Employment Agreement. This obligation of confidence, non-disclosure and non-use extends to both Company information and third-party information held by the Company in confidence, and this obligation continues after the Termination Date. Employee acknowledges that in her position, she has had access to confidential and proprietary information including, without limitation, that concerning eLoyalty's business, operations, services/products, strategies, finances, customers, prospects, employees, plans, designs, and goals. Employee further acknowledges that she is bound by the non-competition, confidentiality/trade secrets and non-solicitation provisions of the Employment Agreement and that such provisions continue in full force and effect according to the terms of that agreement. Employee represents and acknowledges that her experience and capabilities are such that she would be able to use her skills and knowledge in businesses that do not compete with the business of eLoyalty.
8. Employee acknowledges and agrees that in the event that Employee breaches any provision of this Agreement, or any of the post-employment covenants in the Employment Agreement, the Company will have the right to immediately discontinue the payments and benefits described in Paragraph 4, in addition to any other remedy that may be available to the Company, including but not limited to recovery of amounts theretofore paid to Employee under Paragraph 4, additional monetary damages or injunctive relief. Employee further acknowledges and agrees that she will pay any expenses or damages incurred by the Company as a result of any such breach, including reasonable attorneys' fees and costs. The parties expressly acknowledge that this provision does not apply to a challenge or suit filed where such suit or challenge solely pertains to the validity of this Agreement under the Age Discrimination in Employment Act as amended by the Older Workers' Benefit Protection Act.
9. Employee acknowledges and agrees that if she is re-hired by eLoyalty before all the installments described in Paragraph 4(a) have been received, the installments will cease and Employee will not be entitled to any further payments under this Agreement.
10. Except as specifically provided herein, the Employment Agreement, as amended by this Agreement, and the provisions thereof that continue in effect after termination of Employee's employment constitute the entire understanding between Employee and the Company relating to the subject matter contained herein and supersede any previous agreement(s) that may have been made in connection with Employee's employment with eLoyalty. The provisions of the Employment Agreement that expressly survive termination of Employee's employment with eLoyalty, together with the provisions hereof, shall continue to survive such termination.
11. This Agreement may not be changed, modified, or altered without the express written consent of Employee and Sonja Kassebaum or an executive officer of eLoyalty.
12. The Company's or Employee's failure to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of, or deprive the Company or the Employee of, the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. To be effective, any waiver by the Company must be in
writing and signed by Sonja Kassebaum or an executive officer of eLoyalty. To be effective, any waiver by the Employee must be in writing and signed by the Employee.
13. This Agreement shall be construed in accordance with the laws of the State of Illinois. The parties specifically agree that if any dispute should arise with respect to this Agreement, any legal claim shall be brought in a court of the State of Illinois, federal or state, as appropriate. The parties specifically agree to waive any argument that jurisdiction or venue is not proper in the State of Illinois.
14. If any provision herein is determined to be unenforceable, the parties agree that any such provision, or any part thereof, shall be construed consistent with the apparent purpose of the provision to avoid the unenforceability or, in the event that this is not possible, the provision shall be severed and all remaining provisions shall remain in full force and effect. However, in the event that the waiver or release of any claim is found to be invalid or unenforceable, then Employee shall promptly execute any documents presented by Company that would make the waiver or release valid and enforceable.
15. The parties to this Agreement have been given an opportunity to review and to revise the language in this Agreement. Therefore, in any construction to be made of this Agreement, the same shall not be construed against any party.
16. Employee acknowledges: that she has been advised to consult an attorney before signing this Agreement; that she understands the terms of this Agreement and is signing this Agreement knowingly and voluntarily. Employee further understands that she may accept this Severance Agreement offer at any time up to and including December 3, 2004 by returning one signed original of this Agreement to Sonja Kassebaum, Director of Human Resources, at eLoyalty Corporation, 150 Field Drive, Suite 250, Lake Forest, Illinois 60045. If Employee does not accept this Agreement on or before that date, the offer set forth in this Agreement is automatically rescinded unless eLoyalty expressly notifies Employee in writing otherwise. To be effective, any revocation within the seven (7) day period after acceptance must be in writing and it must be received by Sonja Kassebaum by the close of business on the seventh day. This Agreement shall not become effective or enforceable until this seven (7) day revocation period has expired. Employee expressly acknowledges that if she revokes this Agreement, she is not entitled to any payments or benefits set forth in Paragraph 4 of this Agreement.
IN WITNESS WHEREOF, the parties have executed and agreed to this Agreement consisting of five (5) pages.
ELOYALTY CORPORATION
By: /s/ Sonja Kassebaum Date: 11/11/04
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DIANE LOWE
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/s/ Diane K. Lowe Date: 11/22/04 ------------------- |
EXHIBIT 10.29
SEVERANCE AGREEMENT AND GENERAL RELEASE
This Severance Agreement and General Release (this "Agreement") is entered into by and between Timothy Cunningham ("Employee") and eLoyalty Corporation, a Delaware corporation ("eLoyalty" or the "Company"), on the date set forth at the Employee signature lines below, arising out of the employment relationship between Employee and eLoyalty and constitutes an amendment to Employee's Employment Agreement with eLoyalty, a copy of which is attached hereto as Exhibit A (the "Employment Agreement"). It shall become effective seven days after execution of the Agreement by both parties, unless revoked within such seven-day period in accordance with this Agreement.
Employee's employment will terminate effective January 15, 2005 ("Termination Date").
Pursuant to the Employment Agreement with eLoyalty and subject to the terms and conditions thereof, Employee will receive payments in lieu of notice equal to his regular base salary, less applicable deductions, beginning on the day after the Termination Date and continuing through July 15, 2005 ("Termination Payments"). In addition, if Employee accepts this Agreement and does not revoke his acceptance (as described below), Employee would receive payments equal to his regular base salary, less applicable deductions, for an additional period ending October 15, 2005, and an additional period ending January 15, 2006, subject to the terms and conditions set forth in this Agreement.
Employee will continue to pay his portion of the cost of his existing medical, dental, vision and flexible spending account coverage while receiving Termination Payments, and such coverage will continue until July 31, 2005 ("Termination Benefit Period"). Employee, however, may elect to discontinue such coverage by submitting a completed election change form to eLoyalty's Employee Loyalty Service Center ("ELSC") at eLoyalty Corporation, 150 Field Drive, Suite 250, Lake Forest, Illinois, 60045 within 31 days of the Termination Date; however, any such change will not be effective until the day after the election change form is received by the ELSC. Except as otherwise provided in this Agreement (if it becomes effective as provided herein), after the Termination Benefit Period, Employee will no longer be eligible to participate in any eLoyalty benefit programs, except to the extent that he may be eligible to continue his existing health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), at the applicable COBRA rate and for the period prescribed by COBRA.
In addition to Employee's Termination Payments and the Termination Benefit Period, and in consideration of the mutual covenants and agreements hereinafter set forth, and intending to be legally bound, the parties, eLoyalty and Employee, agree as follows:
1. Employee specifically acknowledges and agrees that he is not otherwise entitled to the additional payments and benefits set forth in Paragraph 4 below, that the Company is providing such payments and benefits in exchange for the mutual covenants and agreements
set forth herein, and that such payments and benefits under Paragraph 4 below are greater than the payments and benefits Employee would have been entitled to receive upon termination in the absence of this Agreement. Further, Employee specifically acknowledges and agrees that (i) the payments and benefits described in this Agreement are in full and final settlement of any and all amounts that may be claimed to be payable to Employee by the Company for any period or portion thereof ending on or prior to the date hereof, and (ii) Employee is not entitled to any other payments whatsoever, including, without limitation, any amounts in the nature of base or incentive (bonus) compensation, commissions or other compensatory payments or reimbursements.
2. Employee represents and warrants that Employee has no interest or obligation that is inconsistent with or in conflict with this Agreement or that would prevent, limit or impair Employee's performance of any part of this Agreement.
3. In exchange for the valuable consideration set forth in Paragraph 4 below and the mutual covenants contained herein:
a. Employee agrees to release and forever discharge the Company and
its past and present officers, directors, employees, agents, subsidiaries,
divisions, affiliates, stockholders, predecessors, successors and assigns,
(collectively "Releasees") from any and all claims and/or causes of action,
known or unknown, arising (i) from or during Employee's employment or (ii) as a
result of the termination of that employment, whether currently known or
unknown, and agrees that he will not assert any such claims and/or causes of
action against any Releasees. This release includes, but is not limited to, (i)
claims and/or causes of action arising under Title VII of the Civil Rights Act;
(ii) claims and/or causes of action arising under the Americans with
Disabilities Act; (iii) claims and/or causes of action arising under the Age
Discrimination in Employment Act, as amended by the Older Workers Benefit
Protection Act; (iv) claims and/or causes of action arising under federal, state
or local laws, including national origin, religion, sex, disability, race, or
age discrimination, or any other discrimination or retaliation prohibited by
law; (v) claims and/or causes of action growing out of any alleged legal
restrictions on eLoyalty's right to terminate its employees, including breach of
contract, express or implied, discharge in violation of public policy, wrongful
or retaliatory termination, or promissory estoppel; or (vi) tort claims and/or
causes of action, including infliction of emotional distress, defamation, libel
or slander. This release specifically excludes the following: (i) any right
Employee has to seek or obtain indemnification from the Company or relating to
his service with the Company, whether by contract, insurance policy, statute,
law or otherwise; (ii) any right or claims relating to facts or circumstances
arising after this Agreement is executed; (iii) any expense reimbursement that
has been validated and approved through the Company's normal established
processes and practices; and/or (iv) any right provided for or any action
necessary to enforce any right or obligation provided in this Agreement.
b. Employee and the Company agree not to disparage, defame, libel, slander, place in a negative light, or otherwise harm the reputation, business or goodwill of the other, including any statements in any format regarding the Company's employment practices, business, services, products, conduct, or policies, or its employees, directors, officers or agents. Any public statements by Employee or the Company regarding the other will be mutually agreed in writing, in advance of publication or dissemination.
c. Employee agrees to return all property in good working condition (including computer equipment, any and all files and documents, whether in written or electronic form or in any other form or media whatsoever, and including all copies, excerpts and derivatives) of the Releasees in his possession. Employee specifically understands and agrees that no payments or obligations set forth in Paragraph 4 below shall arise until Employee returns all such property to the Company pursuant to this Paragraph.
d. Employee agrees that the terms of this Agreement are confidential and that Employee will treat them as confidential and will not disclose them to any person, except as may be required by law or legal process, other than Employee's attorneys, accountants, tax or financial advisors, or spouse or domestic partner (who must be informed of and agree to be bound by the terms of this Paragraph). Notwithstanding the foregoing, Employee will notify any person, firm, corporation or other entity with which Employee becomes employed of Employee's undertakings in Paragraph 7 and 8 hereof.
e. Employee agrees that he will consult with and advise the Company on an as-needed basis during the first quarter of 2005 regarding the Company's annual audit process, form 10-K filing, Section 404 compliance and requirements, proxy statement, and other accounting and finance issues that may arise during that period, such consulting to occur at such times as are mutually agreed by the parties in their reasonable determination. In addition, Employee agrees that he will be available on a consulting basis after that period on an as-needed basis, such consulting to occur at such times as are mutually agreed by the parties in their reasonable determination; however, the Company agrees to pay Employee $200 per hour for his time, plus expenses, for time spent in this capacity after the end of the first quarter 2005.
4. In exchange for Employee's covenants contained herein, the Company agrees:
a. To pay Employee the gross amount of $75,000.00 (from which applicable taxes, benefit premiums and other withholdings will be deducted). Such gross amount will be paid in installments of $12,500.00 (less applicable deductions) on regular eLoyalty paydays, beginning on the first payday after the Termination Payments have ended, until the total gross amount is reached. These payments represent continuation of Employee's base salary through October 15, 2005.
b. To continue installment payments to Employee in the amount of $12,500.00 each (less applicable deductions) on regular eLoyalty paydays for up to six additional payperiods following the completion of payments to Employee pursuant to Paragraph 4(a) (meaning through January 15, 2006), if Employee has not begun alternate employment.
c. To provide Employee with the option of continuing his existing medical and dental/vision coverage, and the health care spending account and dependent care spending account benefits for three additional months automatically (meaning through October 31, 2005), and for the duration of the period in which he is receiving payments under Paragraph 4(b). Such continuation will begin on the first day following expiration of the Termination Benefit Period set forth above. Employee will continue to pay his portion of the cost of those coverages and benefits during this period. Employee, however, is not required to continue such coverage or benefits and he may terminate them within 31 days of the Termination Date by following the
procedure outlined above. (After coverage ends, Employee may be eligible for continued health benefit coverage under COBRA).
d. In the event of Employee's death during the payment period described in Paragraphs 4(a) or 4(b) above, the payments and benefits described in this Paragraph 4 will be provided to Employee's spouse. If Employee's spouse is not then living, the payments and benefits will be provided to Employee's survivors. Notwithstanding the foregoing, the continuation of benefits in the Company's benefit programs under this Paragraph 4(d) will be limited by the terms of the benefits programs, including eligibility restrictions.
5. This Agreement does not waive any benefits Employee may be eligible to receive under the eLoyalty Corporation 401(k) Plan. Employee acknowledges that eligibility and benefits under that plan, if any, will be determined and payable in accordance with the terms of that plan.
6. This Agreement does not waive Employee's entitlement to receive continued vesting in his outstanding grants of restricted Company stock for the period in which he receives payments pursuant to Paragraph 4. Employee and Company have agreed that Employee will continue to vest in his grants during that period, and that the grant he received on November 9, 2001 (for which he made an election under Section 83(b) of the Internal Revenue Code) will vest fully on the Termination Date.
7. Employee acknowledges that Employee has an obligation of confidence, non-disclosure and non-use with respect to any and all confidential information and trade secrets that Employee acquired during the course of employment with Company, pursuant to the Employment Agreement. This obligation of confidence, non-disclosure and non-use extends to both Company information and third-party information held by the Company in confidence, and this obligation continues after the Termination Date. Employee acknowledges that in his position, he has had access to confidential and proprietary information including, without limitation, that concerning eLoyalty's business, operations, services/products, strategies, finances, customers, prospects, employees, plans, designs, and goals. Employee further acknowledges that he is bound by the non-competition, confidentiality/trade secrets and non-solicitation provisions of the Employment Agreement and that such provisions continue in full force and effect according to the terms of that agreement. Employee represents and acknowledges that his experience and capabilities are such that he would be able to use his skills and knowledge in businesses that do not compete with the business of eLoyalty.
8. Employee acknowledges and agrees that in the event that Employee breaches any provision of this Agreement, or any of the post-employment covenants in the Employment Agreement, the Company will have the right to immediately discontinue the payments and benefits described in Paragraph 4, in addition to any other remedy that may be available to the Company, including but not limited to recovery of amounts theretofore paid to Employee under Paragraph 4, additional monetary damages or injunctive relief. Employee further acknowledges and agrees that he will pay any expenses or damages incurred by the Company as a result of any such breach, including reasonable attorneys' fees and costs. The parties expressly acknowledge that this provision does not apply to a challenge or suit filed where such suit or challenge solely
pertains to the validity of this Agreement under the Age Discrimination in Employment Act as amended by the Older Workers' Benefit Protection Act.
9. Employee acknowledges and agrees that if he is re-hired by eLoyalty before all the installments described in Paragraph 4 have been received, the installments will cease and Employee will not be entitled to any further payments under this Agreement.
10. Except as specifically provided herein, the Employment Agreement, as amended by this Agreement, and the provisions thereof that continue in effect after termination of Employee's employment constitute the entire understanding between Employee and the Company relating to the subject matter contained herein and supersede any previous agreement(s) that may have been made in connection with Employee's employment with eLoyalty. The provisions of the Employment Agreement that expressly survive termination of Employee's employment with eLoyalty, together with the provisions hereof, shall continue to survive such termination.
11. This Agreement may not be changed, modified, or altered without the express written consent of Employee and Sonja Kassebaum or an executive officer of eLoyalty.
12. The Company's or Employee's failure to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of, or deprive the Company or the Employee of, the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. To be effective, any waiver by the Company must be in writing and signed by Sonja Kassebaum or an executive officer of eLoyalty. To be effective, any waiver by the Employee must be in writing and signed by the Employee.
13. This Agreement shall be construed in accordance with the laws of the State of Illinois. The parties specifically agree that if any dispute should arise with respect to this Agreement, any legal claim shall be brought in a court of the State of Illinois, federal or state, as appropriate. The parties specifically agree to waive any argument that jurisdiction or venue is not proper in the State of Illinois.
14. If any provision herein is determined to be unenforceable, the parties agree that any such provision, or any part thereof, shall be construed consistent with the apparent purpose of the provision to avoid the unenforceability or, in the event that this is not possible, the provision shall be severed and all remaining provisions shall remain in full force and effect. However, in the event that the waiver or release of any claim is found to be invalid or unenforceable, then Employee shall promptly execute any documents presented by Company that would make the waiver or release valid and enforceable.
15. The parties to this Agreement have been given an opportunity to review and to revise the language in this Agreement. Therefore, in any construction to be made of this Agreement, the same shall not be construed against any party.
16. Employee acknowledges: that he has been advised to consult an attorney before signing this Agreement; that he understands the terms of this Agreement and is signing this Agreement knowingly and voluntarily. Employee further understands that he may accept this Severance Agreement offer at any time up to and including January 6, 2005 by returning one
signed original of this Agreement to Sonja Kassebaum, Director of Human Resources, at eLoyalty Corporation, 150 Field Drive, Suite 250, Lake Forest, Illinois 60045. If Employee does not accept this Agreement on or before that date, the offer set forth in this Agreement is automatically rescinded unless eLoyalty expressly notifies Employee in writing otherwise. To be effective, any revocation within the seven (7) day period after acceptance must be in writing and it must be received by Sonja Kassebaum by the close of business on the seventh day. This Agreement shall not become effective or enforceable until this seven (7) day revocation period has expired. Employee expressly acknowledges that if he revokes this Agreement, he is not entitled to any payments or benefits set forth in Paragraph 4 of this Agreement.
IN WITNESS WHEREOF, the parties have executed and agreed to this Agreement consisting of six (6) pages.
ELOYALTY CORPORATION
By: /s/ Robert S. Wert Date: 12/15/04
--------------------
TIMOTHY CUNNINGHAM
/s/ Timothy J. Cunningham Date: 1/5/2005
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Exhibit 21.1
eLOYALTY SUBSIDIARIES
Name of Company Jurisdiction of Incorporation --------------- ----------------------------- eLoyalty Europe Holding Corporation Delaware eLoyalty International Holding, Inc. Illinois eLoyalty (Netherlands) B.V. Netherlands eLoyalty (Canada) Corporation Canada eLoyalty (Deutschland) GmbH Germany eLoyalty (UK) Limited England & Wales eLoyalty (France) S.A.R.L. France eLoyalty Corporation (Australia) Pty. Ltd. Australia eLoyalty International Limited Ireland |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-70078 and 333-100051) and S-8 (File Nos. 333-68530, 333-68540, 333-30374 and 333-101031) of eLoyalty Corporation of our report dated February 19, 2005 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 23, 2005
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of eLoyalty Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints each of Kelly D. Conway, Steven C. Pollema, and Robert S. Wert, signing singly, as the undersigned's true and lawful attorney-in-fact, with full power and authority and full power of substitution, re-substitution or revocation, to:
(a) execute for, in the name and on behalf of the undersigned, in the undersigned's capacity as a director and/or officer of the Company, the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005, together with any and all amendments thereto on Form 10-K/A deemed necessary, appropriate or desirable (collectively, the "Form 10-K"), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;
(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company's Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and
(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February, 2005.
/s/ Tench Coxe -------------------- Signature |
Printed Name
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of eLoyalty Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints each of Kelly D. Conway, Steven C. Pollema, and Robert S. Wert, signing singly, as the undersigned's true and lawful attorney-in-fact, with full power and authority and full power of substitution, re-substitution or revocation, to:
(a) execute for, in the name and on behalf of the undersigned, in the undersigned's capacity as a director and/or officer of the Company, the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005, together with any and all amendments thereto on Form 10-K/A deemed necessary, appropriate or desirable (collectively, the "Form 10-K"), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;
(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company's Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and
(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February, 2005.
/s/ Jay C. Hoag ----------------------- Signature |
Printed Name
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of eLoyalty Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints each of Kelly D. Conway, Steven C. Pollema, and Robert S. Wert, signing singly, as the undersigned's true and lawful attorney-in-fact, with full power and authority and full power of substitution, re-substitution or revocation, to:
(a) execute for, in the name and on behalf of the undersigned, in the undersigned's capacity as a director and/or officer of the Company, the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005, together with any and all amendments thereto on Form 10-K/A deemed necessary, appropriate or desirable (collectively, the "Form 10-K"), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;
(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company's Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and
(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February, 2005.
/s/ John T. Kohler ----------------------- Signature |
Printed Name
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of eLoyalty Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints each of Kelly D. Conway, Steven C. Pollema, and Robert S. Wert, signing singly, as the undersigned's true and lawful attorney-in-fact, with full power and authority and full power of substitution, re-substitution or revocation, to:
(a) execute for, in the name and on behalf of the undersigned, in the undersigned's capacity as a director and/or officer of the Company, the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005, together with any and all amendments thereto on Form 10-K/A deemed necessary, appropriate or desirable (collectively, the "Form 10-K"), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;
(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company's Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and
(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February, 2005.
/s/ Michael J. Murray ---------------------------- Signature |
Printed Name
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of eLoyalty Corporation, a Delaware corporation (the "Company"), hereby constitutes and appoints each of Kelly D. Conway, Steven C. Pollema, and Robert S. Wert, signing singly, as the undersigned's true and lawful attorney-in-fact, with full power and authority and full power of substitution, re-substitution or revocation, to:
(a) execute for, in the name and on behalf of the undersigned, in the undersigned's capacity as a director and/or officer of the Company, the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005, together with any and all amendments thereto on Form 10-K/A deemed necessary, appropriate or desirable (collectively, the "Form 10-K"), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;
(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company's Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and
(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February, 2005.
/s/ John C. Staley -------------------------- Signature |
Printed Name
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Kelly D. Conway, being the President and Chief Executive Officer of eLoyalty Corporation, certify that:
1. I have reviewed this annual report on Form 10-K of eLoyalty Corporation;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of the internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 25, 2005 By /s/ KELLY D. CONWAY ---------------------------------- Kelly D. Conway President & Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Steven C. Pollema, being the Vice President, Operations and Chief Financial Officer of eLoyalty Corporation, certify that:
1. I have reviewed this annual report on Form 10-K of eLoyalty Corporation;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of the internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 25, 2005 By /s/ STEVEN C. POLLEMA --------------------------- Steven C. Pollema Vice President, Operations and Chief Financial Officer |
EXHIBIT 32.1
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 accompanying Annual Report on Form 10-K of eLoyalty Corporation (the "Company") for the year ended January 1, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Kelly D. Conway, as Chief Executive Officer of the Company, and Steven C. Pollema, as Chief Financial Officer of the Company, hereby certify, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 25, 2005 /s/ KELLY D. CONWAY ----------------------------------- Kelly D. Conway President & Chief Executive Officer /s/ STEVEN C. POLLEMA ----------------------------------- Steven C. Pollema Vice President, Operations and Chief Financial Officer |
This certification shall not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. In addition, this certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.