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Exhibit 10.16
eLOYALTY CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED AS OF FEBRUARY 28, 2001)
1. Purpose. The purpose of the eLoyalty Corporation 1999 Employee
Stock Purchase Plan (the "Plan") is to provide employees of eLoyalty
Corporation, a Delaware corporation (the "Company"), and its Subsidiary
Companies (as defined in Section 15) added incentive to remain employed by such
companies and to encourage increased efforts to promote the best interests of
such companies by permitting eligible employees to purchase shares of the common
stock, par value $.01, of the Company ("Common Stock") at below-market prices.
The Plan is intended to qualify as an "employee stock purchase plan" under
section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company and its Subsidiary Companies are sometimes hereinafter called
individually a "Participating Company" or collectively the "Participating
Companies."
2. Eligibility. Participation in the Plan shall be open to each
employee of the Participating Companies (a) who has been continuously employed
by the Participating Companies for at least three months, (b) whose customary
employment by the Participating Companies is greater than 20 hours per week; and
(c) whose customary employment by the Participating Companies is more than five
months in any calendar year (each an "Eligible Employee") or any of its
subsidiaries. For purposes of the preceding sentence, employment with Technology
Solutions Company ("TSC") or any of its subsidiaries immediately prior to the
Effective Date shall be treated as employment by a Participating Company. No
right to purchase Common Stock hereunder shall accrue under the Plan in favor of
any person who is not an Eligible Employee as of the first day of a Purchase
Period (as defined in Section 4). Notwithstanding anything contained in the Plan
to the contrary, no Eligible Employee shall acquire a right to purchase Common
Stock hereunder (i) if, immediately after receiving such right, such employee
would own 5% or more of the total combined voting power or value of all classes
of stock of the Company or any Subsidiary Company (including any stock
attributable to such employee under section 424(d) of the Code), or (ii) if for
a given calendar year such right would permit such employee's aggregate rights
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purchase stock under all employee stock purchase plans of the Company and its
Subsidiary Companies or Parent Corporation (which aggregate rights are
exercisable during such calendar year) to accrue at a rate which exceeds $25,000
of fair market value of such stock for such calendar year, all determined in the
manner provided by section 423(b)(8) of the Code and the rules and regulations
thereunder. In addition, the number of shares of Common Stock which may be
purchased by any Eligible Employee during any Purchase Period shall not exceed
1,500, subject to adjustment pursuant to Section 14.
3. Effective Date of Plan. The Plan was adopted by the Board of
Directors (the "Board") on October 21, 1999, and thereafter approved by the
stockholders of eLoyalty. The Plan became effective on February 16, 2000 (the
"Effective Date"), one day after the record date of the pro rata distribution by
TSC to its stockholders of all of the shares of Common Stock then owned by TSC.
4. Purchase Periods. The first "Purchase Period" shall be the period
beginning on the Effective Date and ending on the last business day of the
calendar quarter in which the Effective Date occurs (or the last business day of
the first calendar quarter beginning after the Effective Date, if so determined
by the Committee prior to the Effective Date in its sole discretion), and shall
be followed thereafter by successive three-month Purchase Periods, each of which
shall begin on the first business day of the following calendar quarter and end
on the last business day of such calendar quarter.
5. Basis of Participation.
(a) Each Eligible Employee shall be entitled to enroll in the Plan as of
the first day of any Purchase Period which begins on or after such employee
becomes an Eligible Employee and shall be considered a Participant in the Plan
thereafter (a "Participant").
(i) To enroll in the Plan, an Eligible Employee shall execute and
deliver a payroll deduction authorization (the "Authorization") to the
Participating Company which is the employee's employer, or its designated
agent, in the time and manner specified by the Committee. The Authorization
shall become effective on the first day of the Purchase Period commencing
after the execution and delivery of such Authorization. Each Authorization
shall direct that payroll deductions be made by the Participating Company
which is the employee's employer for each payroll period during which the
employee is a Participant in the Plan. The amount of each payroll deduction
specified in an Authorization for each such payroll period shall be a whole
percentage amount or a whole dollar amount, as determined by the Committee,
in either case not to exceed 15%, or such lesser percentage as may be
determined by the Committee,
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of the Participant's current regular wage or salary (before withholding or
other deductions) paid to him or her by any of the Participating Companies.
(ii) Payroll deductions (and any other amount paid under the Plan)
shall be made for each Participant in accordance with his or her
Authorization until his or her participation in the Plan terminates or the
Plan terminates, all as hereinafter provided.
(iii) A Participant may change the amount of his or her payroll
deduction by filing a new Authorization with the Company or its designated
agent, which shall become effective on the first day of the Purchase Period
commencing after the execution and delivery of such Authorization. No other
changes shall be permitted, except that a Participant may elect to
terminate his or her participation in the Plan as provided in Section 8.
(iv) Payroll deductions shall be credited to a purchase account
established on the books of the Company on behalf of each Participant (a
"Purchase Account"). At the end of each Purchase Period, the amount in each
Participant's Purchase Account will be applied to the purchase from the
Company of the number of shares of Common Stock determined by dividing such
amount by the Purchase Price (as defined in Section 6) for such Purchase
Period.
(b) The Committee may, in its discretion, establish additional procedures
whereby Eligible Employees may participate in the Plan by means other than
payroll deduction, including, but not limited to, delivery of funds by
Participants in a lump sum or automatic charges to Participants' bank accounts.
Such other methods of participating shall be subject to such rules and
conditions as the Committee may establish. The Committee may at any time amend,
suspend to terminate any participation procedures established pursuant to this
paragraph without prior notice to any Participant or Eligible Employee.
6. Purchase Price. The purchase price (the "Purchase Price") per share
of Common Stock hereunder for any Purchase Period shall be 85% of the lesser of
(i) the fair market value of a share of Common Stock on the first day of such
Purchase Period and (ii) the fair market value of a share of Common Stock on the
last day of such Purchase Period, unless, prior to the beginning of such
Purchase Period, the Committee shall determine otherwise (subject to the
limitations contained in clause (iii) of Section 9(c)). If such determination
results in a fraction of one cent, the Purchase Price shall be increased to the
next higher full cent. The fair market value of a share of Common Stock on a
given day shall be the average of the high and low transaction prices of a share
of Common Stock as reported on The Nasdaq Stock MarketSM on the date as of which
such value is being determined or, if there shall be no reported transactions on
such date, on the next preceding date for which transactions were reported. In
no event, however, shall the Purchase Price be less than the par value of the
Common Stock.
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7. Issuance of Shares.
(a) The Common Stock purchased by each Participant shall be considered to
be issued and outstanding to his or her credit as of the close of business on
the last day of each Purchase Period. The total number of shares of Common Stock
purchased by all Participants during each Purchase Period shall be issued, as of
the last day in such Purchase Period, to a nominee or agent for the benefit of
the Participants. A Participant will be issued a certificate for his or her
shares upon the request of the Participant in accordance with procedures
established by the Company.
(b) No interest shall accrue at any time for any amount credited to a
Purchase Account of a Participant. After the close of each Purchase Period, a
report will be sent to each Participant stating the entries made to his or her
Purchase Account, the number of shares of Common Stock purchased and the
applicable Purchase Price.
8. Termination of Participation.
(a) A Participant may elect at any time to terminate his or her
participation in the Plan, provided such termination is received by the Company
in writing prior to the last business day of the Purchase Period for which such
termination is to be effective. Upon any such termination, the Company shall
promptly deliver to such Participant cash in an amount equal to the balance to
his or her credit in his or her Purchase Account on the date of such
termination. At any time after such termination, the Participant may request the
delivery to such Participant of one or more certificates for the number of whole
shares of Common Stock held for his or her benefit, and the cash equivalent for
any fractional share so held. Such cash equivalent shall be determined by
multiplying the fractional share by the fair market value of a share of Common
Stock on the last day of the Purchase Period immediately preceding such
termination, determined as provided in Section 6.
(b) If the Participant dies, terminates his or her employment with the
Participating Companies for any reason, or otherwise ceases to be an Eligible
Employee (including, without limitation, as a result of a Participating Company
ceasing to be a Subsidiary Company), his or her participation in the Plan shall
immediately terminate. Upon such terminating event, the Company shall promptly
deliver to such
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Participant or his or her legal representative, as the case may be, cash in an
amount equal to the balance to his or her credit in his or her Purchase Account
on the date of such termination.
9. Termination or Amendment of the Plan.
(a) The Company, by action of the Board or the Committee, may terminate
the Plan at any time. Notice of termination shall be given to all Participants,
but any failure to give such notice shall not impair the effectiveness of the
termination.
(b) Without any action being required, the Plan will terminate in any
event when the maximum number of shares of Common Stock to be sold under the
Plan (as provided in Section 13) has been purchased. Such termination shall not
impair any rights which under the Plan shall have vested on or prior to the date
of such termination. If at any time the number of shares remaining available for
purchase under the Plan are not sufficient to satisfy all then-outstanding
purchase rights, the Board may determine an equitable basis of apportioning
available shares among all Participants consistent with Section 423 of the Code.
(c) The Board or the Committee may amend the Plan from time to time in any
respect for any reason; provided, however, no such amendment shall (i)
materially adversely affect any purchase rights outstanding under the Plan
during the Purchase Period in which such amendment is to be effected, (ii)
unless approved by the stockholders of the Company, increase the maximum number
of shares of Common Stock which may be purchased under the Plan, (iii) decrease
the Purchase Price of the shares of Common Stock for any Purchase Period below
the lesser of 85% of the fair market value thereof on the first day of such
Purchase Period and 85% of the fair market value thereof on the last day of such
Purchase Period, (iv) unless approved by the stockholders of the Company, change
the class of employees eligible to participate in the Plan or (v) adversely
affect the qualification of the Plan under section 423 of the Code.
(d) Upon termination of the Plan, the respective cash balance, if any, to
the credit of each Participant in his or her Purchase Account, one or more
certificates for the number of whole shares of
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Common Stock held for his or her benefit, and the cash equivalent of any
fractional share so held, determined as provided in Section 8(a), shall be
promptly distributed to such Participant.
10. Non-Transferability. Rights acquired under the Plan are not
transferable and may be exercised only by a Participant.
11. Stockholder's Rights. No Eligible Employee or Participant shall by
reason of the Plan have any rights of a stockholder of the Company until and to
the extent he or she shall acquire shares of Common Stock as herein provided.
12. Administration of the Plan.
(a) The Plan shall be administered by the Compensation Committee of the
Board (the "Committee"), provided that the Board may otherwise appoint (i) the
entire Board or (ii) a committee consisting of two or more members of the Board,
to act as the Committee. In addition to the power to amend or terminate the Plan
pursuant to Section 9, the Committee shall have full power and authority to: (A)
interpret and administer the Plan and any instrument or agreement entered into
under the Plan; (B) establish such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Plan; and (C)
make any other determination and take any other action that the Committee deems
necessary or desirable for administration of the Plan. Decisions of the
Committee shall be final, conclusive and binding upon all persons, including the
Company, any Participant and any other employee of the Company. A majority of
the members of the Committee may determine its actions and fix the time and
place of its meetings.
(b) The Plan shall be administered so as to ensure all Participants have
the same rights and privileges as required by section 423(b)(5) of the Code.
13. Maximum Number of Shares. Subject to the following sentence, the
maximum number of shares of Common Stock which may be purchased under the Plan
is 500,000, subject, however, to adjustment as hereinafter set forth. Effective
upon approval by the Company's stockholders of the amendment to increase the
maximum number of shares under the Plan as hereinafter set forth (which
amendment is submitted to such stockholders for their approval at the Company's
2001 Annual
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Meeting of stockholders), the maximum number of shares of Common Stock which may
be purchased under the Plan is 1,250,000, subject, however, to adjustment as
hereinafter set forth. Shares of Common Stock sold hereunder may be treasury
shares, authorized and unissued shares, or a combination thereof.
14. Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the maximum number and class of securities which may be purchased
under this Plan, the maximum number and class of securities that may be
purchased by any Eligible Employee during any Purchase Period, and the purchase
price per security shall be appropriately adjusted by the Committee. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any such adjustment would result in a fractional security
being available under this Plan, such fractional security shall be disregarded.
15. Miscellaneous.
(a) Except as otherwise expressly provided herein, any Authorization,
election, notice or document under the Plan from an Eligible Employee or
Participant shall be delivered to the Company, the Participating Company that is
the employer of such Eligible Employee, or their designated agents and, subject
to any limitations specified in the Plan, shall be effective when so delivered.
(b) The term "business day" shall mean any day other than Saturday, Sunday
or a legal holiday recognized by the Participating Corporation for which the
Participant is employed.
(c) The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(d) The term "Parent Corporation" shall mean any corporation which is, or
becomes, after the Effective Date, a parent corporation of the Company (within
the meaning of Section 424(e) of the Code).
(e) The term "Subsidiary Companies" shall mean all corporations which are,
or become, after the Effective Date, subsidiary corporations (within the meaning
of Section 424(f) of the Code) and of which the Company is the common parent.
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(f) The Plan, and the Company's obligation to sell and deliver Common
Stock hereunder, shall be subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approval by any regulatory or
governmental agency as may, in the opinion of counsel for the Company, be
required.
16. Change in Control.
(a) In order to maintain the Participants' rights in the event of any
Change in Control of the Company, as hereinafter defined, upon such Change in
Control, the then current Purchase Period shall thereupon end, and all
Participants' Purchase Accounts shall be applied to purchase shares of Common
Stock pursuant to Section 6, and the Plan shall immediately thereafter
terminate.
(b) "Change in Control" for the purposes hereof means the occurrence of
any of the following events after the Effective Date:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, of beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act, of 35% or more of either (A) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (1) any acquisition directly from the
Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege, unless the security being so
exercised, converted or exchanged was acquired directly from the Company);
(2) any acquisition by the Company; (3) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company or
any Subsidiary Corporation; or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 16(b); provided further, that for purposes
of clause (2) above, if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company) shall become the beneficial
owner of 35% or more of the Outstanding Company Common Stock or 35% or more
of the Outstanding Company Voting Securities by reason of an acquisition by
the Company, and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;
(ii) individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board; provided that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent
Board, shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any
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other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board, shall not be deemed a member of
the Incumbent Board;
(iii) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which (A) all or
substantially all of the individuals or entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60%
of, respectively, the outstanding shares of common stock and the combined
voting power of the outstanding securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a
corporation which, as a result of such transaction, owns the Company or all
or substantially all of the Company's assets either directly or indirectly)
in substantially the same proportions relative to each other as their
ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (other than the Company, any
employee benefit plan (or related trust) sponsored or maintained by the
Company or a Subsidiary Corporation, the corporation resulting from such
Corporate Transaction, and any Person who beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 35% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) will beneficially own, directly or
indirectly, 35% or more of, respectively, the outstanding shares of common
stock or the combined voting power of the outstanding securities entitled
to vote generally in the election of directors of the corporation resulting
from such Corporate Transaction and (C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
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