EXHIBIT 10.26
WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
Dated December 18, 2001
ELOYALTY (UK) LIMITED
and
XXXXXXX XXXXXX
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COMPROMISE AGREEMENT
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WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
THIS AGREEMENT is made Dec. 18, 2001
BETWEEN:
(1) "The Company" ELOYALTY (UK) LIMITED, whose registered office is at
Xxxxxx Xxxxx, 0 Xxxxx Xxxxxx, Xxxxxx X0X 0XX; and
(2) "The Executive" XXXXXXX XXXXXX of Xxxxxxxx, Xxxxxxx Xxxx, Xxxxxx X0
0XX.
BACKGROUND
A. The Executive was employed by the Company as Senior Vice President from
1 July 2000 under the terms and conditions set out in a Contract of
Employment between the Executive and the Company dated 12 May 2000 (the
"Contract of Employment"), a complete copy of which is attached to this
Agreement at Appendix A.
B. The Executive's employment with the Company terminated on 7th December
2001 ("the Termination Date") by reason of redundancy.
C. The Executive has sought advice from the Independent Adviser about his
ability to commence proceedings against the Company regarding his
employment or the termination of it in relation to unfair dismissal
(including constructive, unfair dismissal), wrongful dismissal, unpaid
wages, unpaid holiday pay, redundancy pay (including statutory
redundancy pay), race discrimination, bonus and commission payments,
stock options, restricted stock grants, damages for breach of contract
(the "Claims") and any other statutory or contractual claims which he
has or may have against the Company or any Group Company, or its or
their agents.
D. This Agreement records the terms and conditions upon which the Company
and the Executive have agreed to settle all outstanding claims that the
Executive may have against the Company and/or any Group Company and/or
any of its or their agents (including directors and officers), arising
out of his employment and/or its termination, and it is the complete
agreement between the parties regarding this matter.
E. The Company is entering into this Agreement for itself and as agent for
any Group Company and is duly authorised in that respect. Any Group
Company may enforce any of the terms of this Agreement in its own
right. The Contracts (Rights of Third Parties) Xxx 0000 shall apply to
this Agreement.
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AND SUBJECT TO CONTRACT
IT IS AGREED AS FOLLOWS:-
1.1 In this Agreement the following words and expressions shall have the
following meanings:-
INTERPRETATION
EXPRESSION MEANING
---------- -------
Group Company any of (i) the Company and (ii) any
Holding Company of the Company
(including but not limited to
eLoyalty Corporation) and (iii) any
Subsidiary of any such Holding
Company and (iv) any Subsidiary,
parent, shareholder, employee,
agent, officer or director of the
Company or of any Holding Company.
Independent Adviser Xxxxxxx Xxxxxx of
RadcliffesLeBrasseur, 0 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxx
XX0X 0XX.
Subsidiary and Holding Company have the respective meanings given
to them by Section 736 of the
Companies Xxx 0000 and any reference
to the subsidiary or subsidiaries or
holding company is (unless
inconsistent with the context)
intended to be a reference to the
Subsidiary or Subsidiaries or
Holding Company respectively of the
Company in question at the relevant
time.
US Business Day Any day of any week which is not
either a Saturday, Sunday or a
public holiday in the United States
of America.
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WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
S203 ERA Section 203(3) of the Employment
Rights Xxx 0000.
1.2 References to "clauses" are references to clauses in this Agreement
unless specifically stated otherwise.
2. AGREEMENTS BY THE COMPANY
Unless and until the Executive breaches any of his agreements contained
in clause 3 of this Agreement, the Company agrees that:
2.1 the Executive's employment with the Company terminated with effect from
7th December 2001 (the "Termination Date"). The Company will pay the
Executive his final accrued salary, and all accrued and unused
reasonably documented holiday pay (7.5 days), earned up to and
including the Termination Date through the payroll in the normal
manner;
2.2 subject to clause 2.3 below, it will pay to the Executive a severance
payment which includes a payment in lieu of the Executive's notice
entitlement and is taxable in full. The severance payment made by the
Company will be the sum of (pound)363,025 less basic rate Income Tax
and Employee National Insurance Contributions ("the Severance
Payment"). The Company will account to the Inland Revenue for the
deductions of Income Tax and Employee National Insurance Contributions
made. Any additional Income Tax and/or Employee National Insurance
Contributions for which the Executive may be liable will be payable by
the Executive to the Inland Revenue as part of the settlement of his
tax affairs for the tax year 2001/2002;
2.3 the Severance Payment will be paid as follows:
2.3.1 the first (pound)150,000 (`the First Lump Sum Payment') will
be paid into an escrow account opened in the joint names of
Eversheds Solicitors and Radcliffes Solicitors for the benefit
of the Executive ("the Escrow Account") within 7 US Business
Days of receipt of this Agreement signed by the Executive and
the Independent Adviser by Xxxxxxxx Garden of Eversheds, 000
Xxxxxxx Xxx, Xxxxxxxxxx X0 0XX ("Eversheds"). In the event
that the Company receives confirmation from the Inland Revenue
that the Loan Forgiveness referred to at clause 2.7 below is
not subject to Income Tax and/or Employee National Insurance
Contributions the First Lump Sum Payment will be paid to the
Executive, together with any interest
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WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
earned thereon, within 7 US Business Days of receipt of such
confirmation from the Inland Revenue. In the event that the
Inland Revenue deems the Loan Forgiveness to be subject to
Income Tax and/or Employee National Insurance Contributions,
the Company will pay any such sums demanded to the Inland
Revenue from the Escrow Account and pay to the Executive any
balance remaining in the Escrow Account together with interest
earned thereon, within 7 US Business Days of the Company's
receipt of the demand from the Inland Revenue, subject to the
Executive first being given 7 US Business Days from the
Company's receipt of such demand from the Inland Revenue to
appeal against such demand and obtain a decision from the
Inland Revenue;
2.3.2 the sum of (pound)131,000 will be paid by the Company, after
receipt by Eversheds of this Agreement signed by the Executive
and the Independent Adviser, in 12 equal monthly instalments
(`the Instalment Payments') commencing on 7th January 2002 and
continuing until 7th December 2002;
2.3.3 the balance of the Severance Payment remaining after the
deduction of the First Lump Sum Payment and the Instalment
Payments ("the Second Lump Sum Payment") will be paid after
the issue of the Executive's P45 and within 7 US business days
of receipt by Eversheds of this Agreement signed by the
Executive and the Independent Adviser;
2.4 payment by the Company of the Instalment Payments referred to in clause
2.3.2 above will be secured by a Letter of Credit with LaSalle Bank N.A
("the Letter of Credit");
2.5 it will pay to the Executive an ex gratia payment of (pound)30,000
("the Ex Gratia Payment"). The parties acknowledge that the Ex Gratia
Payment is a non-contractual payment for loss of employment and that
section 148 of the Income and Corporation Taxes Act 1988 applies. The
Ex Gratia Payment will be paid without deduction for Income Tax and
Employee National Insurance Contributions and will be paid after the
issue of the Executive's P45 and within 7 US business days of receipt
by Eversheds of this Agreement signed by the Executive and the
Independent Adviser;
2.6 for the period of 1 year from the Termination Date or until the date on
which the Executive finds alternative employment, whichever is the
earlier, the Company will:-
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2.6.1 continue to pay the Executive's health benefits; and
2.6.2 continue to make pension plan contributions on the Executive's
behalf (collectively "the Benefits")
on the same terms as the Executive enjoyed during his employment with
the Company;
2.7 it will forgive one hundred percent (100%) of the outstanding
indebtedness as of the Termination Date owed by the Executive to the
Company pursuant to the Loan Note between the Company and the Executive
dated July 1, 2000 ("the Loan Forgiveness"), a copy of which is
included within Appendix A, provided that the Executive will be solely
responsible for any taxes or Employee National Insurance Contributions
required to be paid to the Inland Revenue or any other governmental
entity as a result of the Loan Forgiveness;
2.8 it will use reasonable endeavours to ensure that its directors and
executive officers do not disparage the Executive in any manner likely
to be harmful to him, provided that the Company's executive officers
will respond accurately and fully to any question, enquiry or request
for information when required by law;
2.9 it will provide upon request from any prospective employer of the
Executive a reference in the terms attached to this Agreement at
Appendix B. The Company agrees not to derogate from the terms of that
reference to the detriment of the Executive;
2.10 it will refund to the Executive in accordance with the terms of the
Company's Employee Share Purchase Plan the balance of the Executive's
contributions paid by the Executive into that Plan;
2.11 it will pay a contribution towards the legal costs incurred by the
Executive in obtaining advice from the Independent Adviser in respect
of the termination of his employment and this Agreement of
(pound)24,675 inclusive of VAT within 14 days of receipt of an invoice
from the Independent Adviser's firm addressed to the Executive and
marked as payable by the Company; and
2.12 it will accept compliance by the Executive of the agreements on his
part contained in clause 3 in full and final settlement of any claims
it has or may have against the Executive, save that this will not
preclude the operation of Section 310 of the
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WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
Companies Act 1985 and save in respect of the Company's right to
enforce the terms of this Agreement.
3. AGREEMENTS BY THE EMPLOYEE
In consideration of the agreements on the part of the Company contained
in clause 2, the Executive agrees as follows:
3.1 that he will accept compliance by the Company of the agreements on its
part contained in clause 2 in full and final settlement of the Claims
and all claims which he has or may have against the Company, any Group
Company, or its or their agents, whether statutory or contractual
including any claims arising out of or in any way connected with the
Contract of Employment and the termination thereof save in respect of
accrued pension rights and the right to enforce the terms of this
Agreement;
3.2 that on the advice of the Independent Adviser he is not aware of any
claims that he has or may have other than those Claims referred to in
this Agreement;
3.3 that with effect from the Termination Date, the Executive ceased to be
an employee of the Company and has no authority to himself hold out as
having any continuing connection with the Company or any Group Company;
3.4 that he will immediately notify the Company in writing as soon as he
commences alternative employment;
3.5 that he will continue to comply with the post-termination restrictions
set out at Section 12.1 of the Contract of Employment ("the Restrictive
Covenants"), amended only to the extent that the definition of 'client'
at clause 12.1.(a) of the Contract of Employment be limited to those
companies set out at Appendix C of this Agreement. The Executive
acknowledges that the Restrictive Covenants are enforceable and remain
binding upon him for the period and extent contemplated by Clause 12.1
of the Contract of Employment. The Executive further acknowledges that
in the one year period preceding the Termination Date, he has not dealt
with in the course of his employment or participated in the submission
of a proposal in relation to any companies not listed at Appendix C;
3.6 that he will promptly deliver up to Xxx Xxxxxxxx at the Company's
London office at its request and in any event within 3 working days of
this Agreement, any and all
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WITHOUT PREJUDICE
AND SUBJECT TO CONTRACT
property belonging to the Company or any Group Company which is in the
Executive's possession, custody or control, including but not limited
to computer hardware and software, keycards, cell phones and pagers,
which must be returned in good working condition. Such property also
includes credit and phone cards (which must be cut in half),
information and records, all correspondence and all other documents,
papers, customer lists, customer contacts, customer sales proposals,
sales contacts, customer sales proposals, sales contracts, Company
plans, Company internal and external business correspondence, including
those which may have been prepared by the Executive in the course of
his employment which are in his possession, custody or control, and the
Executive acknowledges that he has not made or retained copies of or
extracts from documents or any notes of or information in relation to
the business of the Company or any Group Company. The Executive further
acknowledges that he has not deleted any files from his computer and
that all files on his computer are the property of the Company and must
not be copied, altered or deleted;
3.7 that any services being billed to the Company on behalf of the
Executive have been terminated by the Executive;
3.8 that he will not demand any payment under the Letter of Credit referred
to at clause 2.4 if he has breached any of the terms of this Agreement
and if he does so, he will indemnify the Company in full in respect of
the same;
3.9 that he will honour his obligations under Section 10.3(b) of the
Contract of Employment to keep secret and not use for any purposes,
reveal, disclose or publish to any person any Confidential Information
(as defined in the Contract of Employment) or any other information
concerning the business or affairs of the Company;
3.10 that he will honour his obligations under Section 2.9 of the Contract
of Employment to not make any public statements in relation to the
Company or any Group Company at any time and that he will not (a)
represent that he is employed by or connected with the Company, or (b)
use the style of "eLoyalty" or any name including the words "
eLoyalty
Corporation" or any name which is similar or likely to be confused
therewith;
3.11 that he will keep the terms of this Agreement and the reason for the
termination of his employment stated herein confidential and will not
disclose the same to any
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AND SUBJECT TO CONTRACT
person other than his professional advisers, the Inland Revenue, his
immediate family or as may be required by law;
3.12 that, save for any tax and National Insurance Contributions deducted by
the Company, the Executive will indemnify and keep indemnified the
Company and any Group Company against all and any liability to Income
Tax and Employee National Insurance Contributions (including penalties
and interest thereon) arising out of the Severance Payment, the Ex
Gratia Payment and the Loan Forgiveness made by the Company pursuant to
clauses 2.2, 2.3, 2.5 and 2.7, provided that the Executive is given
notice by the Company of any assessment for Income Tax and National
Insurance Contributions and is given 7 US Business Days from the
Company's receipt of such assessment from the Inland Revenue to appeal
against that assessment and obtain a decision from the Inland Revenue;
3.13 that notwithstanding the terms of the
eLoyalty Corporation 1999 Stock
Incentive Plan all outstanding stock options lapsed and ceased to be
exercisable at the Termination Date;
3.14 that notwithstanding the terms of the
eLoyalty Corporation 1999 Stock
Incentive Plan as amended and restated on 28 February 2001, the
restricted stock under that Plan ceased vesting as of the Termination
Date. The Executive's right to any remaining unvested restricted stock
will be cancelled with effect from the Termination Date and the
Executive agrees that he will undertake any action required by the
Company to ensure that he ceases to have any interest in that
restricted stock;
3.15 that in respect of any Company or Group Company shares owned
(beneficially or otherwise) by the Executive or any Company or Group
Company shares which the Executive has the right to vote in relation to
as of the record date of 22nd October 2001 or any other record date
established for such voting (including but not limited to the
Executive's 131,250 shares of Restricted Stock and the Executive's
shares held in the
eLoyalty Corporation Employee Stock Purchase Plan),
the Executive will vote in favour of the 3 proposals as recommended by
the
eLoyalty Corporation Board of Directors which are described in the
eLoyalty Corporation Proxy Statement dated 14th November 2001 and which
are scheduled for consideration at the
eLoyalty Corporation Special
Meeting of Stockholders to be held on 18th December 2001 (or at any
adjourned or postponed meeting thereof) and any subsequent meeting of
shareholders called for the purpose of voting on such proposals. The
Executive further agrees that he will not amend, modify or revoke such
vote.
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AND SUBJECT TO CONTRACT
3.16 that he will agree to any reasonable request by the Company to make
himself available and assist the Company with any litigation that
arises in respect of the period of the Executive's employment with the
Company. The Company will pay the Executive at the rate of (pound)100
per hour for such assistance, together with reasonable documented
expenses incurred;
3.17 that he will not disparage the Company or any Group Company, or its or
their officers, directors, employees, shareholders and agents, in any
manner likely to be harmful to them or their business, business
reputation or personal reputation; and
3.18 that if he engages in any of the activities prohibited pursuant to
Section 12.1 of the Contract of Employment or otherwise breaches any of
the terms set out in this clause 3 of this Agreement, the Company's
obligation to provide the Severance Payment, the Loan Forgiveness, the
Ex Gratia Payment and the Benefits hereunder will immediately cease and
the Company shall be entitled to seek recovery of damages from the
Executive associated with or caused by Executive's breach.
4. WAIVER OF RIGHT TO COMMENCE TRIBUNAL PROCEEDINGS
4.1 The parties hereto believe the following statements to be true:
4.1.1 the Executive has received advice from the Independent Adviser
as to the terms and effect of this Agreement and in particular
its effect on his ability to pursue his rights before an
Employment Tribunal; and
4.1.2 that at the time when the Independent Adviser gave the advice
referred to in clause 4.1.1 the risk of all or any claims by
the Executive in respect of loss arising in consequence of the
advice was covered by a contract of insurance or an indemnity
provided for members of a profession or professional body;
4.2 the Independent Adviser by signing this Agreement warrants that:
4.2.1 he is a qualified lawyer; and
4.2.2 the statements set out in clauses 4.1.1 and 4.1.2 are correct.
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5. PROCEEDINGS
5.1 The Executive hereby warrants that, as at the date of this Agreement,
he has not commenced proceedings against the Company or any Group
Company in respect of the Claims or any other proceedings in either a
Court or Employment Tribunal.
5.2 In the event that the Executive commences proceedings in respect of the
Claims then the Executive will repay to the Company the Severance
Payment and the Ex Gratia Payment and the Executive will have no
entitlement to the Loan Forgiveness (which will become immediately due
and payable together with interest at the rate specified in the Loan
Note referred to at clause 2.7 above);
6. This Agreement satisfies the conditions for regulating
Compromise
Agreements under S203 ERA and Section 72 (4) (A) of the Race Relations
Xxx 0000.
7. The parties acknowledge and agree that the various provisions and
sub-provisions of this Agreement are severable and that if any
provision or sub-provision or identifiable part is held to be invalid
or unenforceable by any court of competent jurisdiction then such
invalidity or unenforceability shall not affect the validity or
enforceability of the agreement's remaining provisions, sub-provisions,
or parts of the Agreement.
Signed for and on
behalf of the Company /s/ Xxxxxxx X. Xxxxxxxxxx
Signed by the Executive /s/ Xxxxxxx Xxxxxx
Signed by the
Independent Advisor /s/ Xxxx Xxxxxx
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AND SUBJECT TO CONTRACT
APPENDIX A
CONTRACT OF EMPLOYMENT
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AND SUBJECT TO CONTRACT
APPENDIX B
AGREED REFERENCE
TO BE TYPED ON ELOYALTY (UK) LIMITED NOTEPAPER
[Date]
Dear
XXXXXXX XXXXXX
We confirm that Xxxxxxx Xxxxxx was employed as a Senior Vice President of the
Company between 1 July 2000 and 7 December 2001. His responsibilities as a
member of the executive included full operational management of the
international business operations. This included profit & loss responsibility
for Australia, Germany, France and the United Kingdom.
Xx Xxxxxx left the Company's employment by mutual agreement following a
strategic realignment of the Company's business on a global basis.
In accordance with the Company's usual practice, this reference is given without
liability on the part of the Company or the writer.
Yours
Chief Executive
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APPENDIX C
LIST OF CLIENTS
Client
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ASV
Xxxxxx Labs
Xxxx Xxxxxxxx
BBC
BSkyB
Deutsche Telekom
Eircell
Xxx Lily
Geneva Technology
News Limited
Teleperformance
Westpac Banking
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