1999 Employee Stock Purchase Plan - eLoyalty Corp.
ELOYALTY CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED AS OF NOVEMBER 6, 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. 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 to purchase stock under all employee stock purchase
plans of the Company and its Subsidiary Companies or
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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. Notwithstanding the foregoing, effective upon the
implementation of the one-for-ten reverse stock split (which reverse stock split
is expected to be submitted to the stockholders for their approval at the
Special Meeting of stockholders anticipated to be held on December 18, 2001 (the
"Special Meeting")) the number of shares of Common Stock that may be purchased
by any Eligible Employee during any Purchase Period shall not exceed 200,
subject to further 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
Technology Solutions Company ("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").
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(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 Eligible 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 Eligible Employee's
employer for each payroll period during which the Eligible 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, of the Participant's current
regular wage, salary or earned commissions (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
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.
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(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 or terminate any participation procedures established pursuant to this
paragraph (b) 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 Market(SM) 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.
Notwithstanding the foregoing, effective upon implementation
of the one-for-ten reverse stock split (which reverse stock split is expected to
be submitted to the stockholders for their approval at the Special Meeting) and
the effectiveness of such reverse stock split, the fair market value of a share
of Common Stock on the first day of the Purchase Period beginning October 1,
2001 shall be adjusted to reflect the one-for-ten reverse stock split by
multiplying the fair market value of a share of Common Stock on such date by
ten.
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
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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, including the payment of any applicable fees by
the Participant, 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 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.
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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 under the Plan that 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 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.
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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: (i) the Compensation Committee
of the Board or (ii) any one or more other committees consisting of two or more
members of the Board, which in any case have been designated by the Board to
administer the Plan (the "Committee"). Notwithstanding the foregoing, in the
absence of any such delegation to the Compensation or other committee,
references herein to the Committee will refer to the Board. 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 the
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 that may be purchased
under the Plan is 1,250,000, subject, however, to adjustment pursuant to Section
14. Effective upon the implementation of the one-for-ten reverse stock split
(which reverse stock split is expected to be submitted to the stockholders for
their approval at the Special Meeting), the maximum number of shares of Common
Stock that may be purchased under the
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Plan is 125,000, subject to adjustment pursuant to Section 14. 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 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 Company by 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 the event of any Change in Control of the Company, as
hereinafter defined, the Purchase Period then in progress will terminate
immediately prior to the consummation of the Change in Control, all
Participants' Purchase Accounts shall be applied to purchase shares of Common
Stock pursuant to Section 6, and the Plan shall terminate immediately
thereafter.
(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
25% or more of either (A) the then outstanding shares of common stock
of the Company (the "Outstanding 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 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 25% or
more of the Outstanding Common Stock or 25% or more
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of the Outstanding Voting Securities by reason of an acquisition by the
Company, and such Person, after such acquisition by the Company,
becomes the beneficial owner of any additional shares of the
Outstanding Common Stock or any additional Outstanding Voting
Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership will constitute a Change in Control;
(ii) individuals who, as of the Effective Date, constitute the
Board (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 Effective Date
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, will 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
other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board, will not be deemed a member
of the Incumbent Board;
(iii) the consummation of a reorganization, merger or
consolidation of the Company 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 Common
Stock and the Outstanding 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 of such
corporation 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
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proportions relative to each other as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Common Stock
and the Outstanding 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, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 25% or more
of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled
to vote generally in the election of directors 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) the consummation of a plan of complete liquidation or
dissolution of the Company. Notwithstanding the foregoing, in no event
will the transactions contemplated by the Share Purchase Agreement
dated September 24, 2001 between the Company and affiliates of
Technology Crossover Ventures and Sutter Hill Ventures (the "Private
Placement"), the distribution to the holders of record of the Company's
common stock on October 8, 2001 of non-transferable rights to purchase
shares of the Company's 7% Series B convertible preferred stock (the
"Rights Offering") or the distribution of any securities of the Company
in connection therewith (whether through the purchase of such preferred
stock or the conversion thereof into common stock) be deemed to
constitute a "Change in Control" for purposes of the Plan.
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