INDEMNIFICATION
AGREEMENT
INDEMNIFICATION
AGREEMENT made effective as of the 24 th day of April, 2006, between eLoyalty
Corporation, a Delaware corporation (the “Company”),
and Steven H. Shapiro (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
2
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
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