EXHIBIT 2.1
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REORGANIZATION AGREEMENT
Dated as of February 15, 2000
by and between
TECHNOLOGY SOLUTIONS COMPANY
and
eLOYALTY CORPORATION
TABLE OF CONTENTS
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Page
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ARTICLE I - DEFINITIONS AND INTERPRETATION................................. 2
1.1. Definitions................................................... 2
1.2. Interpretation................................................ 9
ARTICLE II - THE DISTRIBUTION.............................................. 10
2.1. Issuance and Delivery of eLoyalty Shares...................... 10
2.2. Distribution of eLoyalty Shares............................... 10
2.3. TSC Board Action.............................................. 11
2.4. Additional Approvals.......................................... 11
ARTICLE III - FORMATION OF ELOYALTY/CORPORATE GOVERNANCE................... 11
3.1. Certificate of Incorporation of eLoyalty...................... 11
3.2. By-laws....................................................... 11
3.3. Election of Board of Directors................................ 11
3.4. Appointment of Officers....................................... 12
3.5. Capital Stock of eLoyalty..................................... 12
3.6. Name Reservations and Registrations........................... 12
3.7. Foreign Qualifications........................................ 12
3.8. Corporate Seal................................................ 12
3.9. Adoption of Stockholders Rights Plan.......................... 12
ARTICLE IV - ASSET SEPARATION.............................................. 13
4.1. Transfer of Assets............................................ 13
4.2. Assumption of Liabilities..................................... 16
4.3. Retained Assets............................................... 17
4.4. Retained Liabilities.......................................... 18
4.5. Termination of Existing Intercompany Agreements............... 18
4.6. Shared Contracts.............................................. 18
ARTICLE V - ASSET SEPARATION CLOSING MATTERS............................... 19
5.1. Delivery of Instruments of Conveyance......................... 19
5.2. Delivery of Other Agreements.................................. 19
5.3. Provision of Corporate Records................................ 19
ARTICLE VI - NO REPRESENTATIONS AND WARRANTIES............................. 19
ARTICLE VII - CERTAIN COVENANTS............................................ 20
7.1. Third Party Consents.......................................... 20
7.2. Material Governmental Approvals and Consents.................. 20
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7.3. Non-Assignable Contracts...................................... 20
7.4. Novation of Assumed Liabilities............................... 21
7.5. Further Assurances............................................ 22
7.6. Nominee Shares................................................ 22
7.7. Collection of Accounts Receivable............................. 23
7.8. Election of eLoyalty Board of Directors....................... 23
7.9. Late Payments................................................. 23
7.10. Registration and Listing...................................... 24
7.11. No Noncompetition; Nonhiring; Nonsolicitation................. 24
7.12. Litigation.................................................... 25
7.13. eLoyalty Bank Accounts........................................ 25
7.14. Signs; Use of Company Name.................................... 25
7.15. Reasonable Efforts............................................ 26
7.16. Use of Transferred Intellectual Property...................... 26
ARTICLE VIII - CONDITIONS TO THE DISTRIBUTION.............................. 26
8.1. Approval by TSC Board of Directors............................ 26
8.2. Receipt of IRS Private Letter Tax Ruling...................... 26
8.3. Compliance with State and Foreign Securities and.............. 27
8.4. SEC Filings and Approvals..................................... 27
8.5. Filing and Effectiveness of Registration Statement; No
Stop Order.................................................... 27
8.6. Dissemination of Information to TSC Stockholders.............. 27
8.7. Approval of NASDAQ Listing Application........................ 27
8.8. Receipt of Viability and Fairness Opinion of Financial
Advisor....................................................... 27
8.9. Operating Agreements.......................................... 27
8.10. Resignations.................................................. 27
8.11. Consents...................................................... 27
8.12. No Actions.................................................... 28
8.13. Consummation of Pre-Distribution Transactions................. 28
8.14. No Other Events............................................... 28
8.15. Satisfaction of Conditions.................................... 28
ARTICLE IX - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS........................ 28
9.1. Employment of eLoyalty Employees.............................. 28
9.2. Severance..................................................... 29
9.3. Withdrawal from Participation in TSC Plans and
Establishment of eLoyalty Plans............................... 29
9.4. Transfer of Savings Plan Account Balances..................... 29
9.5. Welfare Benefits Provided Under eLoyalty Plans................ 29
9.6. Stock Purchase Plans.......................................... 30
9.7. Deferred Compensation Plan.................................... 30
9.8. Stock Options................................................. 31
9.9. Workers' Compensation......................................... 32
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9.10. WARN Act...................................................... 32
9.11. Information to be Provided to TSC............................. 32
ARTICLE X - INSURANCE MATTERS.............................................. 32
10.1. Insurance Prior to the Distribution Date...................... 32
10.2. Ownership of Existing Policies and Programs................... 33
10.3. Procurement of Insurance for eLoyalty......................... 33
10.4. Acquisition and Maintenance of Post-Distribution
eLoyalty Insurance Policies and Programs...................... 33
10.5. eLoyalty Directors' and Officers' Insurance................... 34
10.6. Post-Distribution Insurance Claims Administration............. 34
10.7. Certain Adjustments........................................... 35
10.8. Non-Waiver of Rights to Coverage.............................. 35
10.9. Scope of Affected Policies of Insurance....................... 36
ARTICLE XI - EXPENSES...................................................... 36
11.1. Allocation of Expenses........................................ 36
ARTICLE XII - INDEMNIFICATION.............................................. 37
12.1. Release of Pre-Distribution Claims............................ 37
12.2. Indemnification by eLoyalty................................... 38
12.3. Indemnification by TSC........................................ 39
12.4. Applicability of and Limitation on Indemnification............ 40
12.5. Adjustment of Indemnifiable Losses............................ 40
12.6. Procedures for Indemnification of Third Party Claims.......... 42
12.7. Procedures for Indemnification of Direct Claims............... 44
12.8. Contribution.................................................. 44
12.9. Remedies Cumulative........................................... 44
12.10. Survival...................................................... 45
ARTICLE XIII - DISPUTE RESOLUTION.......................................... 45
13.1. Agreement to Arbitrate........................................ 45
13.2. Escalation and Mediation...................................... 45
13.3. Procedures for Arbitration.................................... 46
13.4. Selection of Arbitrator....................................... 47
13.5. Hearings...................................................... 47
13.6. Discovery and Certain Other Matters........................... 47
13.7. Certain Additional Matters.................................... 48
13.8. Continuity of Service and Performance......................... 49
13.9. Law Governing Arbitration Procedures.......................... 49
13.10. Choice of Forum............................................... 49
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ARTICLE XIV - ACCESS TO INFORMATION AND SERVICES........................... 49
14.1. Agreement for Exchange of Information......................... 49
14.2. Ownership of Information...................................... 50
14.3. Compensation for Providing Information........................ 50
14.4. Retention of Records.......................................... 50
14.5. Limitation of Liability....................................... 51
14.6. Production of Witnesses....................................... 51
14.7. Confidentiality............................................... 51
14.8. Privileged Matters............................................ 52
ARTICLE XV - MISCELLANEOUS................................................. 53
15.1. Entire Agreement.............................................. 53
15.2. Choice of Law and Forum....................................... 53
15.3. Amendment..................................................... 53
15.4. Waiver........................................................ 53
15.5. Partial Invalidity............................................ 54
15.6. Execution in Counterparts..................................... 54
15.7. Successors and Assigns........................................ 54
15.8. Third Party Beneficiaries..................................... 54
15.9. Notices....................................................... 54
15.10. Performance................................................... 55
15.11. Force Majeure................................................. 55
15.12. No Public Announcement........................................ 55
15.13. Termination................................................... 56
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EXHIBITS
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Exhibit A - eLoyalty Business
Exhibit B-1 - Form of TSC Intellectual Property License Agreement
Exhibit B-2 - Form of eLoyalty Intellectual Property License Agreement
Exhibit C - Form of Shared Services Agreement
Exhibit D - Form of Tax Sharing and Disaffiliation Agreement
Exhibit E - Form of Stockholder Rights Plan
Exhibit F - Balance Sheet Assets
Exhibit G - eLoyalty Board of Directors
Exhibit H - List of Mediators
SCHEDULES
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Schedule 4.1(d) - Real Estate Leases
Schedule 4.1(e) - Personal Property Leases
Schedule 4.1(f) - Intellectual Property
Schedule 4.1(g)(i) - Contracts Related to Acquisitions or Divestitures
Schedule 4.1(g)(ii) - Service, License, Maintenance and Support Contracts
Schedule 4.1(g)(iii) - Supplier Contracts
Schedule 4.1(g)(iv) - Joint Development and Alliance Contracts
Schedule 4.1(g)(v) - Third-Party Service Contracts
Schedule 4.1(g)(vi) - Telecommunications Contracts
Schedule 4.1(j) - Subsidiaries, Joint Ventures and Minority Interests
Schedule 4.1(m) - Trademarks
Schedule 4.1(n) - Loans to Transferred Employees
Schedule 4.1(o) - Industry Awards
Schedule 4.5 - Surviving Intercompany Agreements
Schedule 7.13 - eLoyalty Bank Accounts
Schedule 9.1 - Transferred Employees
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REORGANIZATION AGREEMENT
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REORGANIZATION AGREEMENT, dated as of February 15, 2000, by and
between Technology Solutions Company, a Delaware corporation ("TSC"), and
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eLoyalty Corporation, a Delaware corporation ("eLoyalty") and, as of the date
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hereof, a wholly-owned Subsidiary (as hereinafter defined) of TSC.
WHEREAS, TSC provides, inter alia, information technology consulting
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and strategic business consulting services that help clients improve operations,
transform customer relationships and build and enhance customer loyalty (as more
fully described in Exhibit A hereto, the "eLoyalty Business");
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WHEREAS, the Board of Directors of TSC has determined that it would be
advisable and in the best interests of TSC and its stockholders for TSC to
transfer to eLoyalty the business, operations, assets and liabilities related to
the eLoyalty Business;
WHEREAS, TSC has agreed to transfer and assign, or cause to be
transferred and assigned, to eLoyalty substantially all of the assets and
properties of the eLoyalty Business held by TSC and/or one or more of its
Subsidiaries, and eLoyalty has agreed to assume, or cause to be assumed by one
or more of its Subsidiaries, certain liabilities and obligations arising out of
or relating to the eLoyalty Business (collectively, the "Contribution");
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WHEREAS, the Board of Directors of TSC has determined that it would be
advisable and in the best interests of TSC and its stockholders for TSC to
distribute on a pro-rata basis to the holders of record of TSC common stock, par
value $.01 per share (the "TSC Common Stock"), without any consideration being
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paid by such holders, all of the outstanding shares of eLoyalty common stock,
par value $.01 per share (the "eLoyalty Common Stock") owned directly and
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indirectly by TSC (the "Distribution");
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WHEREAS, for federal income tax purposes, the Contribution and
Distribution are intended to qualify for tax-free treatment under Sections 355
and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code");
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and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Contribution and Distribution and
certain other agreements that will govern the relationship of TSC and eLoyalty
following the Distribution;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, TSC and eLoyalty
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
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1.1. Definitions. In this Agreement, the following terms have the
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meanings specified or referred to in this Section 1.1:
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"Action" means any action, claim, suit, arbitration, inquiry,
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subpoena, discovery request, proceeding or investigation by or before any court
or grand jury, any governmental or other regulatory or administrative entity,
agency or commission or any arbitration tribunal.
"Affiliate" means, with respect to any Person, any other Person that
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directly or indirectly controls, is controlled by or is under common control
with such Person. For the purpose of this definition, the term "control" means
the power to direct the management of an entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
term "controlled" has the meaning correlative to the foregoing. After the
Distribution Date, eLoyalty and TSC shall not be deemed to be under common
control for purposes hereof due solely to the fact that eLoyalty and TSC have
common stockholders.
"Applicable Deadline" has the meaning specified in Section 13.3(b).
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"Arbitration Act" means the United States Arbitration Act, 9 U.S.C.
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(S)(S)1-16, as the same may be amended from time to time.
"Arbitration Demand Date" has the meaning specified in Section
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13.3(a).
"Arbitration Demand Notice" has the meaning specified in Section
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13.3(a).
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"Asset Transfer Date" means the date determined by the Board of
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Directors of TSC as the date on which the Transferred Assets are transferred to
eLoyalty.
"Assumed Actions" has the meaning specified in Section 7.12(a).
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"Assumed Liabilities" has the meaning specified in Section 4.2.
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"Balance Sheet" has the meaning specified in Section 4.1(a).
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"Board of Directors" means the board of directors of the referenced
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corporation or any duly authorized committee thereof.
"Code" has the meaning specified in the sixth paragraph of this
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Agreement.
"Combined Value" has the meaning specified in Section 9.8(a).
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"Contracts" has the meaning specified in Section 4.1(g).
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"Contribution" has the meaning specified in the fourth paragraph of
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this Agreement.
"Conveyancing Instruments" has the meaning specified in Section 5.1.
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"Copyrights" means United States and foreign copyrights, both
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registered and unregistered, along with the registrations and applications to
register any such copyrights.
"Distribution" has the meaning specified in the fifth paragraph of
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this Agreement.
"Distribution Date" means the date determined by the Board of
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Directors of TSC as the date on which the eLoyalty Shares are distributable to
holders of record of TSC Common Stock as of the Record Date.
"eLoyalty" has the meaning specified in the first paragraph of this
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Agreement.
"eLoyalty Business" has the meaning specified in the second paragraph
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of this Agreement.
"eLoyalty Common Stock" has the meaning specified in the fifth
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paragraph of this Agreement.
"eLoyalty Deferred Compensation Plan" has the meaning specified in
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Section 9.3(b).
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"eLoyalty Distributable Share" means one (1) eLoyalty Share.
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"eLoyalty Indemnified Parties" has the meaning specified in Section
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12.3.
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"eLoyalty Savings Plan" has the meaning specified in Section 9.3(b).
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"eLoyalty Share" means one share of eLoyalty Common Stock.
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"eLoyalty Value" has the meaning specified in Section 9.8(a).
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"Escalation Notice" has the meaning specified in Section 13.2(a).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended
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(together with the rules and regulations promulgated thereunder).
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"Expenses" means any and all expenses incurred in connection with
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investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"Foreign Exchange Rate" means, with respect to any currency other than
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United States dollars, as of any date of determination, the average of the
opening bid and asked rates on such date at which such currency may be exchanged
for United States dollars as quoted by Bank of America, N.A.
"Governmental Authority" means any foreign, federal, state, local or
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other government, governmental, statutory or administrative authority,
regulatory body or commission or any court, tribunal or judicial or arbitral
body.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
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1976, as amended, and the regulations promulgated thereunder.
"Indemnified Party" has the meaning specified in Section 12.5(a).
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"Indemnifying Party" has the meaning specified in Section 12.5(a).
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"Indemnity Payment" has the meaning specified in Section 12.5(a).
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"Information" has the meaning specified in Section 14.1(a).
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"Information Statement" has the meaning specified in Section 7.10(a).
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"Insurance Amount" has the meaning specified in Section 10.5.
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"Insurance Charges" has the meaning specified in Section 10.6.
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"Insurance Policies" means the insurance policies written by insurance
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carriers unaffiliated with TSC pursuant to which eLoyalty or one or more of its
Subsidiaries (or their respective officers or directors) will be insured parties
after the Distribution Date.
"Insurance Proceeds" means those monies (i) received by an insured
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from an insurance carrier, (ii) paid by an insurance carrier on behalf of the
insured or (iii) received from any third Person in the nature of insurance,
contribution or indemnification in respect of any Liability, in each such case
net of any applicable premium adjustments (including reserves and
retrospectively-rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
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"Insured Claims" means those Liabilities that, individually or in the
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aggregate, are covered within the terms and conditions of any of the TSC
Policies, whether or not subject to deductibles, co-insurance, uncollectability,
premium adjustments (including reserves), retrospectively-rated premium
adjustments or retentions, but only to the extent that such Liabilities are
within applicable TSC Policy limits, including aggregates and deductibles.
"Intellectual Property License Agreements" means the TSC and eLoyalty
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intellectual property license agreements in substantially the forms of Exhibits
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B-1 and B-2 hereto.
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"Intercompany Agreements" means any Contract between TSC and eLoyalty
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entered into prior to the Distribution Date.
"Interfaces" means software that creates interfaces between the
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Software and third-party software programs.
"Investors" has the meaning specified in Section 3.3.
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"IRS" means the Internal Revenue Service.
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"Liability" means any and all debts, liabilities and obligations,
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absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and including, without limitation, those debts, liabilities and obligations
arising under any law, rule, regulation, Action, threatened Action, order or
consent decree of any Governmental Authority or any award of any arbitrator of
any kind, and those arising under any contract, commitment or undertaking.
"Losses" means any and all losses, costs, obligations, liabilities,
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settlement payments, awards, judgments, fines, penalties, damages, fees,
expenses, deficiencies, claims or other charges, absolute or contingent, matured
or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown
(including, without limitation, the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions).
"Material Governmental Approvals and Consents" means any material
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notices, reports or other filings to be made with or to, or any consents,
registrations, approvals, permits, clearances or authorizations to be obtained
from, any Governmental Authority.
"Methodologies" means methodologies, architectures, processes,
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algorithms and technologies, including, without limitation, all related trade
secrets and know-how.
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"NASDAQ" means The NASDAQ Stock Market's National Market System or any
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successor thereto.
"Non-Permitted Names" has the meaning specified in Section 7.14.
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"Operating Agreements" means the Intellectual Property License
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Agreements, the Tax Sharing Agreement, the Shared Services Agreement and any
other agreement regarding the ongoing business and service relationships between
TSC and eLoyalty and their respective Subsidiaries and Affiliates following the
Distribution.
"Party" means TSC or eLoyalty.
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"Patents" means United States and foreign patents and applications for
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patents, including any continuations, continuations-in-part, divisions,
renewals, reissues and extensions thereof.
"Person" means any individual, corporation, partnership, joint
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venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Authority.
"Personal Property Leases" has the meaning specified in Section
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4.1(e).
"Prime Rate" means the rate that Bank of America, N.A. (or any
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successor thereto or other major money center commercial bank agreed to by the
Parties) announces from time to time as its prime lending rate, as in effect
from time to time.
"Privilege" or "Privileges" has the meaning specified in Section
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14.8(a).
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"Privileged Information" has the meaning specified in Section 14.8(a).
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"Purchase Agreement" has the meaning specified in Section 3.3.
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"Real Estate Leases" has the meaning specified in Section 4.1(d).
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"Receivables" has the meaning specified in Section 4.1(b)(i).
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"Record Date" means the date determined by the Board of Directors of
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TSC as the record date for determining stockholders of TSC entitled to receive
shares of eLoyalty Common Stock in the Distribution.
"Registration Statement" has the meaning specified in Section 7.10(a).
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"Retained Assets" has the meaning specified in Section 4.3.
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"Retained Business" means those portions of the business of TSC and
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its current Subsidiaries that are not part of the eLoyalty Business.
"Retained Liabilities" has the meaning specified in Section 4.4.
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"Rights Plan" has the meaning specified in Section 3.9.
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"SEC" means the United States Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended
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(together with the rules and regulations promulgated thereunder).
"Security Interest" means any mortgage, security interest, pledge,
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lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
"Shared Contract" means a Contract with a third Person that directly
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benefits both TSC and eLoyalty.
"Shared Contractual Liabilities" mean Liabilities in respect of Shared
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Contracts.
"Shared Services Agreement" means the shared services agreement in
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substantially the form of Exhibit C hereto.
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"Software" means computer software programs, in source code and object
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code form, including, without limitation, all related source diagrams, flow
charts, specifications, documentation and all other materials and documentation
necessary to allow a reasonably skilled third-party programmer or technician to
maintain, support or enhance the Software.
"Subsidiary" means, when used with reference to any Person, any
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corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries; provided, however, that no Person that is not
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directly or indirectly wholly-owned by any other Person shall be a Subsidiary of
such other Person unless such other Person controls, or has the right, power or
ability to control, that Person.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means:
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(i) any federal, state, local or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales,
use, license,
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excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, value-added, transfer, stamp, or environmental tax, or
any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any Governmental Authority;
and
(ii) any Liability of either Party for the payment of amounts with
respect to payments of a type described in clause (i) as a result of being
a member of an affiliated, consolidated, combined or unitary group, or as a
result of any obligation of either Party under any Tax sharing arrangement
or Tax indemnity arrangement.
"Tax Sharing Agreement" means the Tax Sharing and Disaffiliation
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Agreement in substantially the form of Exhibit D hereto.
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"Third Party Claim" has the meaning specified in Section 12.6(a).
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"Third Party Consents" has the meaning specified in Section 7.1.
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"Trademarks" has the meaning specified in Section 4.1(m).
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"Transfer Agent" means ChaseMellon Shareholder Services, L.L.C., the
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transfer agent appointed by TSC to distribute shares of eLoyalty Common Stock
pursuant to the Distribution.
"Transferred Actions" has the meaning specified in Section 7.12(b).
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"Transferred Assets" has the meaning specified in Section 4.1.
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"Transferred Employees" has the meaning specified in Section 9.1.
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"Transferred Intellectual Property" has the meaning specified in
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Section 4.1(f).
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"TSC" has the meaning specified in the first paragraph of this
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Agreement.
"TSC Common Stock" has the meaning specified in the fifth paragraph of
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this Agreement.
"TSC Deferred Compensation Plan" has the meaning specified in Section
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9.7.
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"TSC Indemnified Parties" has the meaning specified in Section
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12.2(a).
"TSC Plans" has the meaning specified in Section 9.3(a).
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"TSC Policy" and "TSC Policies" have the meanings specified in Section
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10.2.
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"TSC Savings Plan" has the meaning specified in Section 9.4.
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"TSC Value" has the meaning specified in Section 9.8(b).
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"Voting Stock" means all of the capital stock of eLoyalty entitled to
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vote generally in the election of directors but excluding any class or series of
capital stock entitled to vote only in the event of dividend arrearages thereon,
whether or not at the time of determination there are any such dividend
arrearages.
"WARN Act" has the meaning specified in Section 9.10.
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1.2. Interpretation. (a) In this Agreement, unless the context
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clearly indicates otherwise:
(i) words used in the singular include the plural and words in the
plural include the singular;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement;
(iii) reference to any gender includes the other gender;
(iv) the word "including" means "including but not limited to";
(v) reference to any Article, Section, Exhibit or Schedule means
such Article or Section of, or such Exhibit or Schedule to, this Agreement,
as the case may be, and references in any Section or definition to any
clause means such clause of such Section or definition;
(vi) the words "herein," "hereunder," "hereof," "hereto" and words
of similar import shall be deemed references to this Agreement as a whole
and not to any particular Section or other provision hereof;
(vii) reference to any agreement, instrument or other document means
such agreement, instrument or other document as amended, supplemented and
modified from time to time to the extent permitted by the provisions
thereof and by this Agreement;
(viii) reference to any law (including statutes and ordinances) means
such law (including all rules and regulations promulgated thereunder) as
amended, modified, codified or reenacted, in whole or in part, and in
effect at the time of determining compliance or applicability;
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(ix) relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding" and "through"
means "through and including";
(x) accounting terms used herein shall have the meanings
historically ascribed to them by TSC and its Subsidiaries based upon TSC's
internal financial policies and procedures in effect prior to the date of
this Agreement;
(xi) in the event of any conflict between the provisions of the body
of this Agreement and the Exhibits or Schedules hereto, the provisions of
the body of this Agreement shall control; and
(xii) the titles to Articles and headings of Sections contained in
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of or to affect the meaning or
interpretation of this Agreement.
(b) This Agreement was negotiated by the Parties with the benefit of
legal representation, and any rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against either Party
shall not apply to any construction or interpretation hereof.
ARTICLE II
THE DISTRIBUTION
----------------
2.1. Issuance and Delivery of eLoyalty Shares. eLoyalty shall issue
----------------------------------------
to TSC the number of eLoyalty Shares required so that the total number of
eLoyalty Shares held by TSC on the Distribution Date is equal to the total
number of eLoyalty Shares distributable pursuant to Section 2.2. TSC shall
-----------
deliver to the Transfer Agent one or more stock certificates representing all of
the eLoyalty Shares held by TSC, together with one or more stock power(s) duly
endorsed in blank. The Transfer Agent will then transfer and distribute such
shares in the manner described in Section 2.2 below.
-----------
2.2. Distribution of eLoyalty Shares. eLoyalty shall provide to the
-------------------------------
Transfer Agent sufficient certificates in such denominations as the Transfer
Agent may request in order to effect the Distribution. TSC shall instruct the
Transfer Agent (i) to distribute to all holders of record of TSC Common Stock as
of the Record Date the eLoyalty Distributable Share for each share of TSC Common
Stock outstanding and held of record by such holder as of the Record Date, and
(ii) to deliver to eLoyalty, as a contribution to eLoyalty, all of the remaining
eLoyalty Shares, if any, then held by the Transfer Agent. Any such returned
eLoyalty Shares shall be canceled immediately by eLoyalty, and the Board of
Directors of eLoyalty shall take appropriate action so that such returned shares
shall not constitute treasury shares. All of the distributed
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eLoyalty Shares shall be validly issued, fully paid and nonassessable and shall
be free of any preemptive rights.
2.3. TSC Board Action. The Board of Directors of TSC shall, in its
----------------
sole discretion, determine the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution. The Board of
Directors of TSC also shall have the right to adjust at any time prior to the
Distribution Date the eLoyalty Distributable Share. The consummation of the
transactions provided for in this Article II shall be effected only after the
----------
Distribution has been declared by the Board of Directors of TSC and after all of
the conditions set forth in Article VIII hereof shall have been satisfied or
------------
waived by TSC.
2.4. Additional Approvals. TSC shall cooperate with eLoyalty in
--------------------
effecting, and if so requested by eLoyalty, TSC shall, as the majority
stockholder of eLoyalty prior to the Distribution, ratify all actions that are
reasonably necessary or desirable to be taken by eLoyalty to effectuate, the
transactions referenced in or contemplated by this Agreement in a manner
consistent with the terms of this Agreement.
ARTICLE III
FORMATION OF ELOYALTY/CORPORATE GOVERNANCE
------------------------------------------
3.1. Certificate of Incorporation of eLoyalty. The original
----------------------------------------
Certificate of Incorporation of eLoyalty was filed with the Secretary of State
of the State of Delaware on May 11, 1999. On July 9, 1999 an amendment to the
Certificate of Incorporation was filed that (i) changed the name of the company
from TSC/ECM Inc. to eLoyalty Corporation and (ii) increased the number of
authorized shares of capital stock to 110,000,000, consisting of 10,000,000
shares of eLoyalty preferred stock, par value $.01 per share, and 100,000,000
shares of eLoyalty Common Stock. On January 20, 2000 an additional amendment to
the Certificate of Incorporation was filed whereby eLoyalty elected to be
governed by Section 203 of the General Corporation Law of the State of Delaware.
3.2. By-laws. The original By-laws of eLoyalty were adopted on June
-------
21, 1999 by written action of the sole incorporator of eLoyalty.
3.3. Election of Board of Directors. The initial Board of Directors
------------------------------
of eLoyalty, consisting of Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, was elected on
June 22, 1999 by written action of TSC in its capacity as the sole stockholder
of eLoyalty. On June 25, 1999 the Board of Directors of eLoyalty, by written
action, increased the size of the Board from three to six and elected Messrs.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and Zucchini as additional directors. On August 13, 1999 TSC and
eLoyalty entered into a Common Stock Purchase and Sale Agreement (the "Purchase
--------
Agreement") that, among other things, grants each of ▇▇▇▇▇▇ Hill Ventures and
---------
Technology Crossover Management III, L.L.C. (together, the "Investors") the
---------
right to designate a nominee to
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the Board of Directors of eLoyalty. The Investors' nominees are Messrs. ▇▇▇▇ and
▇▇▇▇. On January 3, 2000 the Board of Directors of eLoyalty, by written action,
accepted the resignations of Messrs. ▇▇▇▇▇▇▇ and Kohler from the Board and
reduced the size of the Board from six to five. Messrs. Kohler and ▇▇▇▇▇▇▇ were
elected as additional directors on January 3, 2000 by written action of TSC in
its capacity as the sole stockholder of eLoyalty.
3.4. Appointment of Officers. On June 22, 1999 the Board of Directors
-----------------------
of eLoyalty, by written action, appointed ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the President and
Chief Executive Officer, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the Secretary and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
as the Treasurer of eLoyalty. On December 16, 1999, the Board of Directors of
eLoyalty, by written action, appointed ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as the Assistant
Treasurer and Chief Financial Officer. On January 3, 2000 Messrs. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ resigned from their respective positions as officers of eLoyalty, and the
Board of Directors of eLoyalty, by written action, appointed ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as
the Interim Chairman, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the President and Chief Executive
Officer, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as the Chief Financial Officer, Secretary and
Treasurer.
3.5. Capital Stock of eLoyalty. On June 22, 1999 the Board of
-------------------------
Directors of eLoyalty, by written action, approved the issuance and delivery to
TSC of a stock certificate evidencing TSC's ownership of 100 shares of eLoyalty
Common Stock. On December 16, 1999 the Board of Directors of eLoyalty issued
41,399,900 additional shares of eLoyalty Common Stock to TSC in exchange for a
cash payment of $413,999. The Purchase Agreement provides, among other things,
for the sale of 1,200,000 shares of eLoyalty Common Stock to ▇▇▇▇▇▇ ▇▇▇▇
Ventures and an aggregate of 1,200,000 shares of eLoyalty Common Stock to four
entities controlled by Technology Crossover Management III, L.L.C. The number of
shares of eLoyalty Common Stock actually sold to those investors is subject to
adjustment. As of December 31, 1999, options to acquire 5,340,000 shares of
eLoyalty Common Stock have been issued under eLoyalty's 1999 Stock Incentive
Plan.
3.6. Name Reservations and Registrations. eLoyalty has reserved the
-----------------------------------
name "eLoyalty Corporation" in all states except for Florida, which does not
allow such a reservation. eLoyalty has registered the name "eLoyalty
Corporation" in South Dakota and New Mexico.
3.7. Foreign Qualifications. eLoyalty has qualified or will qualify
----------------------
in all jurisdictions (other than its place of incorporation) in which it intends
to conduct business.
3.8. Corporate Seal. On June 22, 1999 the Board of Directors of
--------------
eLoyalty, by written action, approved the form of the corporate seal. Inscribed
thereon is the name "eLoyalty Corporation" and the words "Corporate Seal,
Delaware."
3.9. Adoption of Stockholders Rights Plan. On December 16, 1999 the
------------------------------------
Board of Directors of eLoyalty met to discuss, among other things, the
desirability of adopting a stockholder rights plan. In connection with that
meeting, a presentation was made to the Board of Directors of eLoyalty to assist
them with their analysis of the merits of taking such action. On
-12-
January 20, 2000 the Board of Directors of eLoyalty adopted the Stockholders
Rights Plan (the "Rights Plan") in substantially the form attached as Exhibit E
----------- ---------
hereto, and established a committee of the Board of Directors of eLoyalty to set
the strike price under the Rights Plan.
ARTICLE IV
ASSET SEPARATION
----------------
4.1. Transfer of Assets. Subject to the terms and conditions of
------------------
this Agreement, on or prior to the Distribution Date, TSC shall convey, assign,
transfer, contribute and set over, or cause to be conveyed, assigned,
transferred, contributed and set over, to eLoyalty, and eLoyalty shall accept
and receive, all right, title and interest of TSC in and to the tangible and
intangible assets of the eLoyalty Business (all of such assets being hereinafter
referred to as the "Transferred Assets"), including the following:
------------------
(a) Balance Sheet Assets. All assets reflected or disclosed on the
--------------------
unaudited balance sheet of the eLoyalty Business as of December 31, 1999
attached as Exhibit F hereto (the "Balance Sheet"), including all
--------- -------------
machinery, equipment, furniture and other tangible personal property,
whether owned or leased, used primarily in the operation of the eLoyalty
Business, subject to acquisitions, dispositions and adjustments in the
ordinary course of the eLoyalty Business, consistent with past practice,
after such date;
(b) Receivables.
-----------
(i) All accounts receivable, notes receivable, lease
receivables, prepayments (other than prepaid insurance), advances and
other receivables arising out of or produced by the eLoyalty Business
and owing by any Persons (the "Receivables");
-----------
(ii) all cash payments received after the Distribution Date on
account of the Receivables;
(iii) all manufacturers' warranties or guarantees related to the
Transferred Assets or related to any of the Assumed Liabilities; and
(iv) any and all manufacturers' or third party service or
replacement programs relating to the Transferred Assets;
(c) Inventories. All supplies, packaging and other inventories
-----------
related to the eLoyalty Business;
(d) Real Property Leases. Those certain real estate leases set forth
--------------------
on Schedule 4.1(d) hereto (the "Real Estate Leases") and any and all
--------------- ------------------
improvements, fixtures,
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machinery, equipment and other property located on the premises demised
under such Real Estate Leases;
(e) Personal Property Leases. Those certain machinery, equipment or
------------------------
other tangible personal property leases (the "Personal Property Leases")
------------------------
set forth on Schedule 4.1(e) hereto;
---------------
(f) Intellectual Property. All Copyrights, Interfaces, Methodologies,
---------------------
Patents and Software to the extent the foregoing are used primarily in
connection with the eLoyalty Business, including (i) those set forth on
Schedule 4.1(f) hereto; (ii) all business and technical information,
---------------
nonpatented inventions, discoveries, processes, formulations, trade
secrets, know-how and technical data used primarily in connection with the
eLoyalty Business made or conceived by employees, consultants or
contractors of TSC or its Subsidiaries as to which TSC or its Subsidiaries
have rights under any agreement or otherwise relating to the foregoing;
(iii) all business and technical information, nonpatented inventions,
discoveries, processes, formulations, trade secrets, know-how and technical
data used primarily in connection with the eLoyalty Business made or
conceived by third parties as to which TSC or its Subsidiaries have rights
pursuant to executory agreements with said third parties relating to the
foregoing; and (iv) all permits, grants, contracts, agreements and licenses
running to or from TSC or its Subsidiaries relating to the foregoing; and
all rights that are associated with the foregoing (collectively, the
"Transferred Intellectual Property");
---------------------------------
(g) Contracts. All of the following contracts, agreements,
---------
arrangements, leases (other than Real Estate Leases and Personal Property
Leases), manufacturers' warranties, memoranda, understandings and offers
open for acceptance of any nature, whether written or oral (the
"Contracts"):
---------
(i) all Contracts related to acquisitions or divestitures of
assets or stock related primarily to the eLoyalty Business, including
Contracts related to the transactions set forth on Schedule 4.1(g)(i)
------------------
hereto, except to the extent any such Contracts relate to the Retained
Business and except to the extent indicated on Schedule 4.1(g)(i);
------------------
(ii) all service, license, maintenance and support Contracts
with customers related primarily to the eLoyalty Business, including
those set forth on Schedule 4.1(g)(ii) hereto;
-------------------
(iii) all supplier Contracts related primarily to the eLoyalty
Business relating either to raw materials or distributed products,
including those set forth on Schedule 4.1(g)(iii) hereto;
--------------------
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(iv) all joint development and alliance Contracts related
primarily to the eLoyalty Business, including those set forth on
Schedule 4.1(g)(iv) hereto;
-------------------
(v) all Contracts with third-parties related primarily to the
eLoyalty Business relating to services provided to, or for the benefit
of, eLoyalty, including those set forth on Schedule 4.1(g)(v) hereto;
------------------
(vi) the telecommunications Contracts related primarily to the
eLoyalty Business, including those set forth on Schedule 4.1(g)(vi)
-------------------
hereto;
(vii) the Shared Contracts that are designated as being assigned
to eLoyalty; and
(viii) all other Contracts related primarily to the eLoyalty
Business;
(h) Permits and Licenses. All permits, approvals, licenses,
--------------------
franchises, authorizations or other rights granted by any Governmental
Authority held or applied for by TSC and its Subsidiaries and that are used
primarily in the eLoyalty Business or that relate primarily to the
Transferred Assets, and all other consents, grants and other rights that
are used primarily for the lawful ownership of the Transferred Assets or
the operation of the eLoyalty Business and that are legally transferable to
eLoyalty;
(i) Claims and Indemnities. All rights, claims, demands, causes of
----------------------
action, judgments, decrees and rights to indemnity or contribution, whether
absolute or contingent, contractual or otherwise, in favor of TSC relating
primarily to the eLoyalty Business, including the right to ▇▇▇, recover and
retain such recoveries and the right to continue in the name of TSC and its
Subsidiaries any pending actions relating to the foregoing, and to recover
and retain any damages therefrom;
(j) Subsidiaries, Joint Ventures and Minority Interests. All shares
---------------------------------------------------
of capital stock or equity or debt or other interests owned by TSC or its
Subsidiaries in the Subsidiaries, joint ventures and minority investments
set forth on Schedule 4.1(j) hereto;
---------------
(k) Books And Records. All books and records (including all records
-----------------
pertaining to customers, suppliers and personnel), wherever located, that
relate primarily to the operation of the eLoyalty Business;
(l) Supplies. All office supplies, production supplies, spare parts,
--------
purchase orders, forms, labels, shipping material, art work, catalogues,
sales brochures, operating manuals and advertising and promotional material
and all other printed or written material that relate primarily to the
operation of the eLoyalty Business;
-15-
(m) Trademarks. All United States, state and foreign trademarks,
----------
service marks, logos, trade dress and trade names (including all assumed or
fictitious names under which TSC is conducting the eLoyalty Business),
whether registered or unregistered, including all goodwill associated with
the foregoing, and all registrations and pending applications to register
the foregoing to the extent the foregoing are used or intended to be used
primarily in connection with the eLoyalty Business, including those set
forth on Schedule 4.1(m) hereto (collectively, the "Trademarks");
--------------- ----------
(n) Loans to Transferred Employees. All loans, notes or other debts
------------------------------
owed to TSC and its Subsidiaries by any Transferred Employees (as
hereinafter defined), including those set forth on Schedule 4.1(n) hereto;
---------------
(o) Industry Awards. All industry awards that are sponsored primarily
---------------
by the eLoyalty Business, including those set forth on Schedule 4.1(o)
---------------
hereto;
(p) Tax Credits. Any right, title or interest in any tax refund,
-----------
credit or benefit to which eLoyalty or any of its Subsidiaries is entitled
in accordance with the terms of the Tax Sharing Agreement; and
(q) Other Assets. All other assets, tangible or intangible, including
------------
all goodwill, that are used primarily in or relate primarily to the
operations of the eLoyalty Business, including, without limitation, e-mail
addresses, domain names and websites.
4.2. Assumption of Liabilities. Except as expressly limited in
-------------------------
this Article IV, eLoyalty shall assume, effective on or before the Distribution
----------
Date, and pay, comply with and discharge all contractual and other Liabilities
of TSC arising out of or relating to the eLoyalty Business, whether due or to
become due, including:
(a) All Liabilities of TSC that are reflected, disclosed or reserved
for on the Balance Sheet, as such Liabilities may be increased or decreased
in the operation of the eLoyalty Business from the date of the Balance
Sheet through the Distribution Date in the ordinary course of business
consistent with past practice;
(b) All Liabilities of TSC under or related to the Real Estate
Leases, the Personal Property Leases and the Contracts, such assumption to
occur as (i) assignee if such Real Estate Leases, Personal Property Leases
and Contracts are assignable and are assigned or otherwise transferred to
eLoyalty, or (ii) subcontractor, sublessee or sublicensee as provided in
Section 7.3 below if assignment of such Real Estate Leases, Personal
-----------
Property Leases and Contracts and/or the proceeds thereof is prohibited by
law, by the terms thereof or not permitted by the other contracting party;
-16-
(c) All warranty, performance and similar obligations entered into or
made by TSC prior to the Distribution Date with respect to the products or
services of the eLoyalty Business;
(d) All Liabilities of TSC in connection with claims of past or
current employees of the eLoyalty Business, except as otherwise expressly
provided in this Agreement;
(e) All Liabilities of TSC related to any and all Actions asserting a
violation of any law, rule or regulation related to or arising out of the
operations of the eLoyalty Business, whether before or after the
Distribution Date and the Liabilities relating to any Assumed Actions (as
hereinafter defined);
(f) All Liabilities for which eLoyalty is liable in accordance with
the terms of the Tax Sharing Agreement;
(g) All Liabilities of TSC related to the immigrant and nonimmigrant
status of any foreign national employees who are Transferred Employees (as
hereinafter defined); and
(h) All other Liabilities of TSC relating to the eLoyalty Business,
whether existing on the date hereof or arising at any time or from time to
time after the date hereof, and whether based on circumstances, events or
actions arising heretofore or hereafter, whether or not such Liabilities
shall have been disclosed herein, and whether or not reflected on the books
and records of TSC or eLoyalty or the Balance Sheet.
The Liabilities described in this Section 4.2 are referred to in this
-----------
Agreement collectively as the "Assumed Liabilities."
-------------------
4.3. Retained Assets. Notwithstanding anything to the contrary
---------------
herein, the following assets (the "Retained Assets") are not, and shall not be
---------------
deemed to be, Transferred Assets:
(a) Cash and cash equivalents, any cash on hand or in bank accounts,
certificates of deposit, commercial paper and similar securities, except
for (i) deposits securing bonds, letters of credit, leases and all other
obligations related to the eLoyalty Business, (ii) ▇▇▇▇▇ cash and impressed
funds related to the eLoyalty Business, (iii) cash held in foreign bank
accounts and (iv) $20,000,000;
(b) Any right, title or interest in any tax refund, credit or benefit
to which TSC or any of its Subsidiaries is entitled in accordance with the
terms of the Tax Sharing Agreement;
(c) Any amounts accrued on the books and records of TSC and its
Subsidiaries or the eLoyalty Business with respect to any Retained
Liabilities (as hereinafter defined);
-17-
(d) Except as provided in Sections 9.4 and 9.7, assets relating to
------------ ---
the provision of benefits to present or former employees of the eLoyalty
Business;
(e) Any intellectual property rights in and to the name "TSC" and the
related emblem design, and any variants thereof, and the trademarks and
trade names used by TSC or its Subsidiaries in relation to the Retained
Business, except as provided in the Intellectual Property License
Agreements attached as Exhibits B-1 and B-2 hereto; and
------------ ---
(f) Any right, title or interest in any prepaid insurance existing at
the Distribution Date or any payments received after the Distribution Date
with respect thereto.
4.4. Retained Liabilities. Notwithstanding anything to the
--------------------
contrary in this Agreement, neither eLoyalty nor any of its Subsidiaries shall
assume any of the following Liabilities of TSC or its Subsidiaries (the
"Retained Liabilities"):
--------------------
(a) Except as provided in Article IX, the Liabilities under all the
----------
TSC Plans; and
(b) All Liabilities for which TSC is liable in accordance with the
terms of the Tax Sharing Agreement.
4.5. Termination of Existing Intercompany Agreements. Except as
-----------------------------------------------
otherwise expressly provided in this Agreement, the Operating Agreements or the
agreements set forth on Schedule 4.5, all Intercompany Agreements and all other
------------
intercompany arrangements and course of dealings, whether or not in writing and
whether or not binding, in effect immediately prior to the Distribution Date,
shall be terminated and be of no further force and effect from and after the
Distribution Date.
4.6. Shared Contracts. (a) With respect to Shared Contractual
----------------
Liabilities pursuant to, arising under or relating to any Shared Contract, such
Shared Contractual Liabilities shall be allocated between TSC and eLoyalty as
follows:
(i) First, if a Liability is incurred exclusively in respect of a
benefit received by one Party, the Party receiving such benefit shall be
responsible for such Liability; and
(ii) Second, if a Liability cannot be so allocated under clause (i),
such Liability shall be allocated between the Parties based on the relative
proportions of total benefit received (over the term of the Shared
Contract, measured as of the date of the allocation) under the relevant
Shared Contract. Notwithstanding the foregoing, each Party shall be
responsible for any and all Liabilities arising out of or resulting from
its breach of the relevant Shared Contract.
-18-
(b) If either TSC or eLoyalty improperly receives any benefit or
payment under any Shared Contract that was intended for the other Party, the
Party receiving such benefit or payment will use commercially reasonable efforts
to deliver, transfer or otherwise afford such benefit or payment (on an after-
tax basis) to the other Party.
ARTICLE V
ASSET SEPARATION CLOSING MATTERS
--------------------------------
5.1. Delivery of Instruments of Conveyance. In order to effectuate
-------------------------------------
the transactions contemplated by Article IV, the Parties shall execute and
deliver, or cause to be executed and delivered, prior to or as of the
Distribution Date such deeds, bills of sale, instruments of assumption,
instruments of assignment, stock powers, certificates of title and other
instruments of assignment, transfer, assumption and conveyance (collectively,
the "Conveyancing Instruments") as the Parties shall reasonably deem necessary
------------------------
or appropriate to effect such transactions.
5.2. Delivery of Other Agreements. Prior to or as of the Distribution
----------------------------
Date, the Parties shall execute and deliver, or shall cause to be executed and
delivered, each of the Operating Agreements.
5.3. Provision of Corporate Records. Prior to or as promptly as
------------------------------
practicable after the Distribution Date, TSC shall deliver to eLoyalty all
corporate books and records of eLoyalty and copies of all corporate books and
records of TSC relating to the eLoyalty business, including in each case all
active agreements, litigation files and government filings. From and after the
Distribution Date, all books, records and copies so delivered shall be the
property of eLoyalty.
ARTICLE VI
NO REPRESENTATIONS AND WARRANTIES
---------------------------------
Except as expressly set forth herein or in any Operating Agreement,
TSC does not represent or warrant in any way (i) as to the value or freedom from
encumbrance of, or any other matter concerning, any of the Transferred Assets or
(ii) as to the legal sufficiency to convey title to any of the Transferred
Assets on the execution, delivery and filing of the Conveyancing Instruments.
ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN "AS IS, WHERE IS" BASIS WITHOUT ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and eLoyalty shall bear the
-19-
economic and legal risks that any conveyances of such assets shall prove to be
insufficient or that eLoyalty's title to any such assets shall be other than
good and marketable and free of encumbrances. Except as expressly set forth in
this Agreement or in any Operating Agreement, TSC does not represent or warrant
that the obtaining of the consents or approvals, the execution and delivery of
any amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of all applicable
agreements or the requirements of all applicable laws or judgments, and, subject
to Section 7.4, eLoyalty shall bear the economic and legal risk that any
-----------
necessary consents or approvals are not obtained or that any requirements of law
or judgments are not complied with. Notwithstanding the foregoing, the Parties
shall fully cooperate and use reasonable efforts to obtain all consents and
approvals, to enter into all amendatory agreements and to make all filings and
applications that may be required for the consummation of the transactions
contemplated by this Agreement.
ARTICLE VII
CERTAIN COVENANTS
-----------------
7.1. Third Party Consents. To the extent that the transactions
--------------------
contemplated by this Agreement require any material consents, approvals or
waivers from third parties (the "Third Party Consents"), the Parties will use
--------------------
commercially reasonable efforts to obtain any such Third Party Consents.
7.2. Material Governmental Approvals and Consents. To the extent that
--------------------------------------------
the transactions contemplated by this Agreement require any approvals or
consents of any Governmental Authority, the Parties will use commercially
reasonable efforts to obtain any Material Governmental Approvals and Consents.
7.3. Non-Assignable Contracts. In the event and to the extent that
------------------------
TSC is unable to obtain any consent, approval or amendment to any Contract,
lease, license or other rights relating to the eLoyalty Business that would
otherwise be transferred or assigned to eLoyalty as contemplated by this
Agreement or any other agreement or document contemplated hereby, (i) TSC shall
continue to be bound thereby and the purported transfer or assignment to
eLoyalty shall automatically be deemed deferred until such time as all legal
impediments are removed and/or all necessary consents have been obtained, and
(ii) unless not permitted by the terms thereof or by law, eLoyalty shall pay,
perform and discharge fully all of the obligations of TSC thereunder from and
after the Distribution Date, or such earlier date as such transfer or assignment
would otherwise have taken place, and indemnify TSC for all indemnifiable Losses
arising out of such performance by eLoyalty. TSC shall, without further
consideration therefor, pay and remit to eLoyalty promptly all monies, rights
and other considerations received in respect of such performance. TSC shall
exercise or exploit its rights and options under all such Contracts, leases,
licenses and other rights and commitments referred to in this Section 7.3 only
-----------
as reasonably directed by eLoyalty and at eLoyalty's expense. If and when any
such consent shall be
-20-
obtained or such Contract, lease, license or other right shall otherwise become
assignable or be able to be novated, TSC shall promptly assign and novate (to
the extent permissible) all of its rights and obligations thereunder to eLoyalty
without payment of further consideration, and eLoyalty shall, without the
payment of any further consideration therefor, assume such rights and
obligations. To the extent that the assignment of any Contract, lease, license
or other right (or the proceeds thereof) pursuant to this Section 7.3 is
-----------
prohibited by law, the assignment provisions of this Section 7.3 shall operate
-----------
to create a subcontract with eLoyalty to perform each relevant unassignable TSC
Contract at a subcontract price equal to the monies, rights and other
considerations received by TSC with respect to the performance by eLoyalty under
such subcontract.
7.4. Novation of Assumed Liabilities. (a) Except as otherwise
-------------------------------
specifically provided in Section 4.6 with respect to Shared Contracts and
-----------
elsewhere in this Agreement, it is expressly understood and agreed to by the
Parties that upon the assumption by eLoyalty of the Assumed Liabilities, TSC,
its Subsidiaries and their respective officers, directors and employees shall be
released unconditionally by eLoyalty from any and all Liability, whether joint,
several or joint and several, for the discharge, performance or observance of
any of the Assumed Liabilities, so that eLoyalty will be solely responsible for
such Assumed Liabilities.
(b) eLoyalty, at the reasonable request of TSC, shall use
commercially reasonable efforts to obtain, or cause to be obtained, any consent,
approval, release, substitution or amendment required to novate (including with
respect to any federal government contract) or assign all obligations under the
Assumed Liabilities, or to obtain in writing the unconditional release of all
parties to such arrangements other than eLoyalty; provided, however, that
-------- -------
eLoyalty shall not be obligated to pay any consideration therefor to any third
party from whom such consents, approvals, releases, substitutions or amendments
are requested.
(c) If eLoyalty is unable to obtain, or to cause to be obtained, any
such required consent, approval, release, substitution or amendment, TSC shall
continue to be bound by such Assumed Liability and, unless not permitted by law
or the terms thereof, eLoyalty shall, as agent or subcontractor for TSC, pay,
perform and discharge fully all of the obligations or other Liabilities of TSC
thereunder from and after the date hereof. eLoyalty shall indemnify and hold
harmless TSC against any Liabilities arising in connection with such Assumed
Liability or with eLoyalty's payment, performance and discharge of such Assumed
Liability. Except as otherwise set forth in this Agreement, TSC shall, without
further consideration, pay and remit, or cause to be paid or remitted, to
eLoyalty promptly the after-tax amount of all money, rights and other
consideration received by it in respect of such performance (unless any such
consideration is a Retained Asset), increased by any actual tax benefit derived
by TSC as a result of such payment or remittance (with such tax benefit
determined pursuant to Section 12.5(d)). If and when any such consent,
---------------
approval, release, substitution or amendment shall be obtained or such Assumed
Liability shall otherwise become assignable or be able to be novated, TSC shall
thereafter assign, or cause to be assigned, all of its rights, obligations and
other Liabilities thereunder to eLoyalty
-21-
without payment of further consideration and eLoyalty shall, without the payment
of any further consideration, assume such rights and obligations.
7.5. Further Assurances. (a) In addition to the actions specifically
------------------
provided for elsewhere in this Agreement, each of the Parties shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws, regulations and agreements to consummate and make
effective the Distribution and the other agreements and documents contemplated
hereby. Without limiting the generality of the foregoing, each Party shall
cooperate with the other Party to execute and deliver, or use commercially
reasonable efforts to cause to be executed and delivered, all instruments,
including instruments of conveyance, assignment and transfer, and to make all
filings with, and to obtain all consents, approvals or authorizations of, any
governmental or regulatory authority or any other Person under any permit,
license, Contract or other instrument, and to take all such other actions as
such Party may reasonably be requested to take by the other Party from time to
time, consistent with the terms of this Agreement, in order to confirm the title
of eLoyalty to all of the eLoyalty Business, to put eLoyalty in actual
possession and operating control thereof and to permit eLoyalty to exercise all
rights with respect thereto and to effectuate the provisions and purposes of
this Agreement and the other agreements and documents contemplated hereby or
thereby.
(b) If, as a result of mistake or oversight, any asset reasonably
necessary to the conduct of the eLoyalty Business is not transferred to
eLoyalty, or any asset reasonably necessary to the conduct of the Retained
Business is transferred to eLoyalty, TSC and eLoyalty shall negotiate in good
faith after the Distribution Date to determine whether such asset should be
transferred to eLoyalty or to TSC, as the case may be, and/or the terms and
conditions upon which such asset shall be made available to eLoyalty or to TSC,
as the case may be. Unless expressly provided to the contrary in this Agreement
or any Operating Agreement, if, as a result of mistake or oversight, any
Liability arising out of or relating to the eLoyalty Business is retained by
TSC, or any Liability arising out of or relating to the Retained Business is
assumed by eLoyalty, TSC and eLoyalty shall negotiate in good faith after the
Distribution Date to determine whether such Liability should be transferred to
eLoyalty or TSC, as the case may be, and/or the terms and conditions upon which
any such Liability shall be transferred.
(c) If either Party identifies any commercial or other service that
is needed to assure a smooth and orderly transition of the businesses in
connection with the consummation of the transactions contemplated hereby or any
desired modification to any such service, including any service that is governed
by the provisions of any Operating Agreement, the Parties shall give reasonable
notice of such service or proposed modification, and shall cooperate in
implementing any such service or modification and in determining the mutually
acceptable arm's-length basis on which one Party will provide such service to
the other Party.
7.6. Nominee Shares. TSC agrees to use commercially reasonable
--------------
efforts to cause to be transferred to, or as directed by, eLoyalty all
director's qualifying or other shares of
-22-
capital stock of any of the transferred Subsidiaries held as of the Distribution
Date by persons who are not employees of eLoyalty. eLoyalty agrees to use
commercially reasonable efforts to cause to be transferred to, or as directed
by, TSC all director's qualifying or other shares of capital stock of any TSC
Subsidiary other than eLoyalty and the transferred Subsidiaries held as of the
Distribution Date by employees of eLoyalty.
7.7. Collection of Accounts Receivable. (a) TSC shall be entitled to
---------------------------------
control all collection actions related to the Retained Assets, including the
determination of what actions are necessary or appropriate and when and how to
take any such action.
(b) eLoyalty shall be entitled to control all collection actions
related to the Transferred Assets, including the determination of what actions
are necessary or appropriate and when and how to take any such action.
(c) If, after the Distribution Date, eLoyalty shall receive any
remittance from any account debtors with respect to the accounts receivable
arising out of the Retained Assets or other amounts due TSC in respect of
services rendered by TSC after the Distribution Date, or TSC shall receive any
remittance from any account debtors with respect to the accounts receivable
arising out of the Transferred Assets or other amounts due eLoyalty in respect
of services rendered by eLoyalty after the Distribution Date, such Party shall
receive and deposit the after-tax amount of such remittance and deliver cash in
an amount equal thereto to the other Party, increased by any actual tax benefit
derived by such Party as a result of payment to such other Party (with such tax
benefit determined pursuant to Section 12.5(d)) as soon as practicable and, in
---------------
any event, within five (5) business days of receiving such remittance. The
Parties shall reconcile any amounts due and owed under this Section 7.7 on a
-----------
daily basis.
(d) Each Party shall deliver to the other such schedules and other
information with respect to the accounts receivable included in the Transferred
Assets and those not included therein as each shall reasonably request from time
to time in order to permit such Parties to reconcile their respective records
and to monitor the collection of all accounts receivable (whether or not
Transferred Assets). Each Party shall afford the other reasonable access to its
books and records relating to any accounts receivable.
7.8. Election of eLoyalty Board of Directors. Prior to the
---------------------------------------
Distribution Date, TSC agrees to vote all shares of eLoyalty Common Stock held
by it in favor of the nominees to the Board of Directors of eLoyalty, as set
forth on Exhibit G hereto.
---------
7.9. Late Payments. Except as expressly provided to the contrary in
-------------
this Agreement or in any Operating Agreement, any amount not paid when due
pursuant to this Agreement or any Operating Agreement (and any amounts billed or
otherwise invoiced or demanded and properly payable that are not paid within
thirty (30) days of such ▇▇▇▇, invoice or other demand) shall accrue interest at
a rate per annum equal to the Prime Rate plus 2%.
-23-
7.10. Registration and Listing. Prior to the Distribution Date:
------------------------
(a) TSC and eLoyalty shall prepare a registration statement on Form
S-1, including such amendments or supplements thereto as may be necessary
(together, the "Registration Statement") to effect the registration of the
----------------------
eLoyalty Common Stock under the Exchange Act, which Registration Statement
shall include an information statement/prospectus to be sent by TSC to its
stockholders in connection with the Distribution (the "Information
-----------
Statement"). eLoyalty shall file the Registration Statement with the SEC
---------
and shall use commercially reasonable efforts to cause the Registration
Statement to become and remain effective under the Exchange Act as soon as
reasonably practicable. After the Registration Statement becomes
effective, TSC shall mail the Information Statement to the holders of TSC
Common Stock as of the Record Date.
(b) The Parties shall use commercially reasonable efforts to take all
such action as may be necessary or appropriate under state and foreign
securities and "Blue Sky" laws in connection with the transactions
contemplated by this Agreement.
(c) TSC and eLoyalty shall prepare, and eLoyalty shall file and seek
to make effective, an application for the listing of the eLoyalty Common
Stock on the NASDAQ, subject to official notice of issuance.
(d) The Parties shall cooperate in preparing, filing with the SEC and
causing to become effective any registration statements or amendments
thereto that are necessary or appropriate in order to effect the
transactions contemplated hereby or to reflect the establishment of, or
amendments to, any employee benefit plans contemplated hereby.
7.11. No Noncompetition; Nonhiring; Nonsolicitation. (a) After
---------------------------------------------
the Distribution Date, neither Party shall have any duty to refrain from (i)
engaging in the same or similar activities or lines of business as the other
Party, (ii) doing business with any potential or actual supplier or customer of
the other Party or (iii) engaging in, or refraining from, any other activities
whatsoever relating to any of the potential or actual suppliers or customers of
the other Party.
(b) During the period beginning on December 1, 1999 and ending
eighteen (18) months after such date, neither TSC nor eLoyalty shall, nor shall
either Party permit any of its respective Subsidiaries, Affiliates or agents to,
directly or indirectly, without the prior written consent of the other, actively
solicit or recruit for employment any then current employee of the other Party
or of any of the other Party's Subsidiaries or Affiliates. However, nothing
contained in this Section 7.11(b) shall (i) prohibit the hiring of any employee
---------------
who is seeking employment on his or her own initiative without prior contact
initiated by any employee or agent of the company where employment is sought, or
any of such company's Affiliates, provided that such employee has obtained
authorization from an officer (or a direct report to a current officer) of his
or her current employer; or (ii) prohibit TSC or eLoyalty or any of their
respective Subsidiaries
-24-
or Affiliates from hiring any person who has terminated employment with the
other Party. The foregoing restriction shall cease to apply on July 1, 2001.
7.12. Litigation. (a) On or as of the Distribution Date, eLoyalty
----------
shall assume and pay all Liabilities that may result from the Assumed Actions
(as hereinafter defined) and all fees and costs relating to the defense of the
Assumed Actions, including attorneys' fees and costs incurred after the
Distribution Date. "Assumed Actions" shall mean those cases, claims and
---------------
investigations (on which TSC, its Subsidiaries or its Affiliates, other than
eLoyalty, are a defendant or the party against whom the claim or investigation
is directed) primarily related to the eLoyalty Business.
(b) TSC and its Subsidiaries shall transfer the Transferred Actions
(as hereinafter defined) to eLoyalty, and eLoyalty shall receive and have the
benefit of all of the proceeds of such Transferred Actions. "Transferred
-----------
Actions" shall mean those cases and claims (on which TSC, its Subsidiaries or
-------
its Affiliates are a plaintiff or claimant) primarily relating to the eLoyalty
Business.
7.13. eLoyalty Bank Accounts. On or prior to the Distribution Date,
----------------------
TSC and its Subsidiaries shall transfer the bank accounts set forth on Schedule
--------
7.13 hereto to eLoyalty. eLoyalty shall cause any amounts received, by mistake
----
or otherwise, in such accounts after the Distribution Date on account of the
Retained Business to be transferred promptly to TSC and its Subsidiaries, as
appropriate. TSC shall cause any amounts received, by mistake or otherwise,
after the Distribution Date on account of the eLoyalty Business to be
transferred promptly to eLoyalty.
7.14. Signs; Use of Company Name. As soon as practicable, and in any
--------------------------
event within sixty (60) days after the Distribution Date, the Parties, at
eLoyalty's expense, shall remove (or, if necessary, on an interim basis cover
up) any and all exterior and interior signs and identifiers that refer or
pertain to TSC or the Retained Business on the Transferred Assets, in the case
of eLoyalty, or that refer or pertain to eLoyalty or the Transferred Business on
the Retained Assets, in the case of TSC. After such period, (i) eLoyalty shall
not use or display the names "TSC," "Technology Solutions Company" or any
variations thereof, or other trademarks, tradenames, logos or identifiers using
any of such names or otherwise owned by or licensed to TSC that have not been
assigned or licensed to eLoyalty, and (ii) TSC shall not use or display the name
"eLoyalty," "eLoyalty Corporation" or any variations thereof, or other
trademarks, tradenames, logos or identifiers using any of such names or
otherwise owned by or licensed to eLoyalty that have not been assigned or
licensed to TSC (collectively, the "Non-Permitted Names"), without the prior
-------------------
written consent of the other Party; provided, however, that notwithstanding the
-------- -------
foregoing, nothing contained in this Agreement shall prevent either Party from
using the other's name in public filings with Governmental Authorities,
materials intended for distribution to either Party's stockholders or any other
communication in any medium that describes the relationship between the Parties.
-25-
7.15. Reasonable Efforts. Upon the terms and subject to the
------------------
conditions set forth in this Agreement, each of the Parties agrees to use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, and to assist and cooperate with the other Parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Authorities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority (including those in connection with
the HSR Act, if any), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed and (iv) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by this Agreement.
7.16. Use of Transferred Intellectual Property. As of the
----------------------------------------
Distribution Date, and except as permitted pursuant to the terms and conditions
of the Intellectual Property License Agreements, TSC and its Subsidiaries, other
than eLoyalty and its Subsidiaries, shall cease all use of the Transferred
Intellectual Property, and TSC agrees to terminate any license granted to its
Subsidiaries, other than eLoyalty and its Subsidiaries, with respect to the
foregoing.
ARTICLE VIII
CONDITIONS TO THE DISTRIBUTION
------------------------------
The obligation of TSC to effect the Distribution is subject to the
satisfaction or the waiver by TSC, at or prior to the Distribution Date, of each
of the following conditions:
8.1. Approval by TSC Board of Directors. This Agreement and the
----------------------------------
transactions contemplated hereby, including the declaration of the Distribution,
shall have been duly approved by the Board of Directors of TSC in accordance
with applicable law and the Certificate of Incorporation, as amended, and By-
laws of TSC.
8.2. Receipt of IRS Private Letter Tax Ruling. TSC shall have
----------------------------------------
received a ruling from the IRS or, at TSC's sole discretion, an opinion of its
tax counsel Sidley & Austin, substantially to the effect that the Contribution
will qualify as a tax-free transaction for federal income tax purposes under
Section 368(a)(1)(D) or Section 351 of the Code, that the Distribution will
qualify as a tax-free distribution for federal income tax purposes under Section
355 of the Code, and that no income, gain or loss will be recognized by TSC,
eLoyalty or their respective stockholders upon the Contribution or the
Distribution.
-26-
8.3. Compliance with State and Foreign Securities and "Blue Sky"
-----------------------------------------------------------
Laws. The Parties shall have taken all such action as may be necessary or
----
appropriate under state and foreign securities and "blue sky" laws in connection
with the Distribution.
8.4. SEC Filings and Approvals. The Parties shall have prepared and
-------------------------
eLoyalty shall, to the extent required under applicable law, have filed with the
SEC any such documentation and any requisite no action letters that TSC
reasonably determines are necessary or desirable to effectuate the Distribution,
and each Party shall use commercially reasonable efforts to obtain all necessary
approvals from the SEC with respect thereto as soon as practicable.
8.5. Filing and Effectiveness of Registration Statement; No Stop
-----------------------------------------------------------
Order. The Registration Statement shall have been filed with and declared
-----
effective by the SEC, and no stop order suspending the effectiveness of the
Registration Statement shall have been initiated or, to the knowledge of either
of the Parties, threatened by the SEC.
8.6. Dissemination of Information to TSC Stockholders. Prior to the
------------------------------------------------
Distribution Date, the Parties shall have prepared and mailed to the holders of
TSC Common Stock such information concerning eLoyalty, its business, operations
and management, the Distribution and such other matters as TSC shall reasonably
determine and as may be required by law.
8.7. Approval of NASDAQ Listing Application. The eLoyalty Common
--------------------------------------
Stock to be distributed in the Distribution shall have been approved for listing
on the NASDAQ, subject to official notice of issuance.
8.8. Receipt of Viability and Fairness Opinion of Financial Advisor.
--------------------------------------------------------------
The TSC Board of Directors shall have received a written opinion of Credit
Suisse First Boston, in form acceptable to TSC, to the effect that (i) the
Distribution will not have a material adverse effect on the financial viability
of TSC or of eLoyalty through the period ending December 31, 2000, and (ii) the
Distribution is fair to the TSC stockholders from a financial point of view,
which opinion shall not have been withdrawn or modified.
8.9. Operating Agreements. Each of the Operating Agreements shall
--------------------
have been executed and delivered, and each of such agreements shall be in full
force and effect.
8.10. Resignations. On or prior to the Distribution Date, TSC shall
------------
cause all of its designees to resign or to be removed as officers and from all
Boards of Directors or similar governing bodies of eLoyalty and its Affiliates.
8.11. Consents. (a) All Material Governmental Approvals and Consents
--------
required to permit the valid consummation of the Distribution shall have been
obtained without any conditions being imposed that would have a material adverse
effect on TSC or eLoyalty.
-27-
(b) TSC shall have obtained the consent, approval or waiver of each
Person (other than the Governmental Authorities referred to in Section 8.11(a))
---------------
whose consent, approval or waiver shall be required in connection with the
Distribution, except those for which the failure to obtain such consents or
approvals would not, in the reasonable opinion of TSC, individually or in the
aggregate have a material adverse effect on TSC, eLoyalty or the consummation of
the Distribution.
8.12. No Actions. No action, suit or proceeding shall have been
----------
instituted or threatened by or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator to restrain, enjoin or otherwise prevent the Distribution
or the other transactions contemplated this Agreement (including but not limited
to a stop order with respect to the effectiveness of the Registration
Statement), and no order, injunction, judgment, ruling or decree issued by any
court of competent jurisdiction shall be in effect restraining the Distribution
or such other transactions.
8.13. Consummation of Pre-Distribution Transactions. The pre-
---------------------------------------------
Distribution transactions contemplated by Articles III-V of this Agreement shall
--------------
have been consummated in all material respects.
8.14. No Other Events. No other events or developments shall have
---------------
occurred that, in the judgment of the TSC Board of Directors, would result in
the Distribution having a material adverse effect on TSC or its stockholders.
8.15. Satisfaction of Conditions. The satisfaction of the foregoing
--------------------------
conditions are for the sole benefit of TSC and shall not give rise to or create
any duty on the part of TSC or the TSC Board of Directors to waive or not waive
any such condition, to effect the Distribution or in any way limit TSC's power
of termination set forth in Section 15.13.
-------------
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
--------------------------------------
9.1. Employment of eLoyalty Employees. On the Asset Transfer Date,
--------------------------------
eLoyalty shall, or shall cause its Subsidiaries to, employ each employee of the
eLoyalty Business ("Transferred Employees") set forth on Schedule 9.1 hereto,
--------------------- ------------
and TSC shall cause all such Transferred Employees to resign from all positions
as officers or employees of TSC and its Subsidiaries. eLoyalty and TSC (and
their respective Subsidiaries) shall use commercially reasonable efforts to
accomplish any transfers of employment required by this Section 9.1 in a timely
-----------
manner. As of the Asset Transfer Date, eLoyalty shall assume each employment
agreement between TSC and a Transferred Employee and shall be solely responsible
for all of the obligations of the employer thereunder.
-28-
9.2. Severance. (a) Transferred Employees shall not be eligible
---------
for any severance benefits from TSC or its Subsidiaries or Affiliates as a
result of either their employment with eLoyalty or its Subsidiaries or
Affiliates or their subsequent termination of employment with eLoyalty or its
Subsidiaries or Affiliates.
(b) eLoyalty (or the applicable eLoyalty Subsidiary) shall have the
obligation to pay severance benefits to any employee or former employee of the
eLoyalty Business whose employment terminates on or after January 1, 2000. TSC
shall continue to have the obligation to pay severance benefits to any employee
or former employee of the eLoyalty Business whose employment terminated prior to
January 1, 2000.
9.3. Withdrawal from Participation in TSC Plans and Establishment of
---------------------------------------------------------------
eLoyalty Plans. (a) No later than the Distribution Date, Transferred Employees
--------------
shall cease to participate in the TSC employee benefit plans and programs (the
"TSC Plans"), except as otherwise specifically provided in this Article IX.
--------- ----------
(b) No later than the Distribution Date, eLoyalty or an eLoyalty
Subsidiary shall establish its own employee benefit plans and programs for the
benefit of eligible employees of eLoyalty and its Subsidiaries that shall be
substantially similar to the TSC Plans, including but not limited to a 401(k)
savings plan (the "eLoyalty Savings Plan"), a nonqualified executive deferred
---------------------
compensation plan (the "eLoyalty Deferred Compensation Plan"), a medical and
-----------------------------------
dental plan, a group vision care plan, a cafeteria plan, a group term life and
accidental death and dismemberment plan, a long-term disability plan and a group
legal expense plan.
9.4. Transfer of Savings Plan Account Balances. Subject to applicable
-----------------------------------------
law and the provisions of the Technology Solutions Company d.b.a. TSC 401(k)
Plan (the "TSC Savings Plan"), as soon as administratively practicable following
----------------
the establishment of the eLoyalty Savings Plan, or effective as of any other
date as agreed to in writing by the plan administrator for the TSC Savings Plan
and the plan administrator for the eLoyalty Savings Plan, the account balances
(including outstanding loans) of all TSC Savings Plan participants who are
Transferred Employees shall be transferred from the TSC Savings Plan to the
eLoyalty Savings Plan. Each Transferred Employee shall receive credit for all
purposes under the eLoyalty Savings Plan for periods of service with TSC or any
of its Affiliates. The plan administrator for the eLoyalty Savings Plan shall
take any other action reasonably requested by the plan administrator for the TSC
Savings Plan that is necessary or advisable, in the opinion of the plan
administrator for the TSC Savings Plan, to maintain the tax-qualified status of
the TSC Savings Plan or to avoid the imposition of any penalties with respect to
such plan.
9.5. Welfare Benefits Provided Under eLoyalty Plans. (a) Each
----------------------------------------------
Transferred Employee who becomes eligible to participate in an eLoyalty welfare
benefit plan shall be credited under such plan with (i) any deductibles and
copayments paid by such employee during the same plan year under the medical or
dental plan maintained by TSC and (ii) periods of service with TSC or any of its
Affiliates for all purposes under such plan. Amounts paid under a TSC medical
or
-29-
dental plan that are taken into account for purposes of determining each
eLoyalty employee's lifetime maximum benefits under such plan shall be taken
into account for purposes of determining such eLoyalty employee's lifetime
maximum benefits under the eLoyalty medical or dental plan.
(b) eLoyalty (or the applicable eLoyalty Subsidiary) shall pay all
costs associated with the provision of disability benefits to any employee or
former employee of the eLoyalty Business, other than an employee or former
employee whose long-term disability benefits commenced prior to the earlier of
(i) the Distribution Date or (ii) the effective date of the eLoyalty long-term
disability insurance plan. Any employee or former employee of the eLoyalty
Business receiving benefits under the TSC long-term disability insurance plan
prior to such date shall continue to receive benefits under the terms of such
plan and the insurance contract used to fund such plan, and neither eLoyalty nor
any eLoyalty Subsidiary shall be charged for the payment of such benefits.
(c) TSC (or the applicable TSC Subsidiary) shall pay all claims under
the TSC medical plan (including dental benefits) relating to Transferred
Employees that have been incurred but not paid prior to the earlier of (i) the
Distribution Date or (ii) the effective date of the eLoyalty medical plan, but
only if claims for such costs are submitted in written form to the authorized
agents of TSC (or the applicable TSC Subsidiary) during the nine-month period
beginning on such date.
(d) As of the earlier of (i) the Distribution Date or (ii) the date
eLoyalty adopts a cafeteria plan, within the meaning of Section 125 of the Code,
for the benefit of its employees, eLoyalty (or the applicable eLoyalty
Subsidiary) shall assume all of the obligations of TSC under its cafeteria plan
with respect to participants who are Transferred Employees.
9.6. Stock Purchase Plans. No later than the record date of the
--------------------
Distribution, Transferred Employees shall cease to be eligible to purchase TSC
Common Stock under the terms of the TSC 1995 Employee Stock Purchase Plan, and
as of the later of (i) the first business day after the record date of the
Distribution or (ii) the first day on which eLoyalty Common Stock is traded on a
"when issued" basis, Transferred Employees shall become eligible to participate
in the eLoyalty 1999 Employee Stock Purchase Plan.
9.7. Deferred Compensation Plan. No later than the Distribution Date,
--------------------------
eLoyalty shall establish the eLoyalty Deferred Compensation Plan, which
shall be substantially similar to the TSC Executive Deferred Compensation Plan
(the "TSC Deferred Compensation Plan") in effect immediately prior to the date
------------------------------
the eLoyalty Deferred Compensation Plan is established. As of its effective
date, the eLoyalty Deferred Compensation Plan shall assume all Liabilities with
respect to amounts credited to the accounts of Transferred Employees under the
TSC Deferred Compensation Plan, and the TSC Deferred Compensation Plan shall be
relieved of all Liabilities for such benefits and payments thereof. On or before
the Distribution Date, TSC shall direct the trustee of the trust established by
TSC with respect to the TSC Deferred Compensation Plan to transfer to the trust
established by eLoyalty with respect to the eLoyalty
-30-
Deferred Compensation Plan an amount equal to the fair market value (determined
as of the date of transfer) of the amount credited to the accounts of
Transferred Employees under the TSC Deferred Compensation Plan.
9.8. Stock Options. (a) As of the Distribution, each outstanding
-------------
nonqualified option to purchase shares of TSC Common Stock held by a Transferred
Employee or a director of eLoyalty (who is not also a director of TSC) shall be
converted into a substitute option to purchase shares of eLoyalty Common Stock.
The exercise price of each substitute option, and the number of shares of
eLoyalty Common Stock subject thereto, shall be equal to the exercise price of
the existing TSC option and the number of shares subject thereto, adjusted to
reflect the Distribution based on a comparison of (i) the trading price of TSC
Common Stock prior to the Distribution (the "Combined Value") and (ii) the
--------------
trading price of eLoyalty Common Stock after the Distribution (the "eLoyalty
--------
Value").
-----
(b) As of the Distribution, each outstanding nonqualified option to
purchase shares of TSC Common Stock that was granted on or before June 21, 1999
to a person other than a person described in Section 9.8(a) shall be converted
--------------
into an adjusted option to purchase TSC Common Stock and a substitute option to
purchase shares of eLoyalty Common Stock. Such options shall be converted in a
manner that preserves the aggregate exercise price of each option, and allocates
the exercise price between the TSC option and the eLoyalty option based on a
comparison of (i) the eLoyalty Value and (ii) the trading price of TSC Common
Stock after the Distribution (the "TSC Value").
---------
(c) Each nonqualified option to purchase TSC Common Stock granted
after June 21, 1999 to a person other than a person described in Section 9.8(a)
--------------
and each option to purchase eLoyalty Common Stock (other than an option granted
in substitution of an outstanding option to purchase TSC Common Stock) shall
continue solely as an option to purchase TSC Common Stock or eLoyalty Common
Stock, as the case may be. Each such option to purchase TSC Common Stock shall
be adjusted to reflect the Distribution, based on a comparison of (i) the
Combined Value and (ii) the TSC Value. Each such option to purchase eLoyalty
Common Stock shall not be adjusted.
(d) Each option to purchase TSC Common Stock that is an incentive
stock option, within the meaning of Section 422 of the Code, shall be converted
into an incentive stock option to purchase the stock of the corporation with
which the optionee is employed immediately after the Distribution. Such options
converted into substitute options to purchase eLoyalty Common Stock shall be
adjusted in the manner described in Section 9.8(a) and such options converted
--------------
into adjusted options to purchase TSC Common Stock shall be adjusted in the
manner described in Section 9.8(c).
--------------
(e) TSC and eLoyalty agree to assist each other as appropriate with
respect to the ongoing administration of the outstanding options issued to
employees of the other Party, or
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issued by the other Party to its employees, under the TSC stock incentive plans
and the eLoyalty stock incentive plans, as applicable.
9.9. Workers' Compensation. eLoyalty shall assume the Liability for
---------------------
any workers' compensation or similar workers' protection claims with respect to
any employee of the eLoyalty Business, whether incurred prior to, on or after
the Distribution Date which are the result of an injury or illness originating
prior to or on the Distribution Date.
9.10. WARN Act. eLoyalty and its Subsidiaries agree that they shall
--------
not, at any time during the 90-day period following the Distribution Date, (i)
effectuate a "plant closing" as defined in the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act") affecting any site of employment or
--------
operating units within any site of employment of the eLoyalty Business, or (ii)
take any action to precipitate a "mass layoff" as defined in the WARN Act
affecting any site of employment of the eLoyalty Business, except, in either
case, after complying fully with the notice and other requirements of the WARN
Act. eLoyalty agrees to indemnify TSC and its Subsidiaries and to defend and
hold harmless TSC and its Subsidiaries from and against any and all claims,
losses, damages, expenses, obligations and liabilities (including attorney's
fees and other costs of defense) that TSC and its Subsidiaries may incur in
connection with any suit or claim of violation brought against TSC under the
WARN Act, which relates in whole or in part to actions taken by eLoyalty or its
Subsidiaries with regard to any site of employment of eLoyalty or operating
units within any site of employment of the eLoyalty Business.
9.11. Information to be Provided to TSC. eLoyalty (or the applicable
---------------------------------
eLoyalty Subsidiary) shall provide any information that TSC (or any TSC
Subsidiary) may reasonably request, including but not limited to information
relating to dates of termination of employment, in order to provide benefits to
any eligible employee of eLoyalty or any of its Subsidiaries under the terms and
conditions described herein or under the applicable TSC Plans. Any information
relating to an employee's termination of employment shall be provided by
eLoyalty (or the applicable eLoyalty Subsidiary) to TSC as soon as available to
eLoyalty or any of its Subsidiaries, but in any event no later than 30 days
after such information is made available to eLoyalty or any such Subsidiaries.
eLoyalty (or the applicable eLoyalty Subsidiary) shall, as necessary, update the
system used to keep such information in such timely manner as is required to
administer the TSC Plans.
ARTICLE X
INSURANCE MATTERS
-----------------
10.1. Insurance Prior to the Distribution Date. eLoyalty does hereby
----------------------------------------
agree that TSC shall not have any Liability whatsoever as a result of the
insurance policies and practices of TSC in effect at any time prior to the
Distribution Date, including as a result of the level or
-32-
scope of any such insurance, the creditworthiness of any insurance carrier, the
terms and conditions of any policy and the adequacy or timeliness of any notice
to any insurance carrier with respect to any claim or potential claim or
otherwise.
10.2. Ownership of Existing Policies and Programs. TSC or one or
-------------------------------------------
more of its Subsidiaries shall continue to own all property, casualty and
liability insurance policies and programs, including, without limitation,
primary and excess general liability, errors and omissions, automobile, workers'
compensation, property, fire, crime and surety insurance policies, in effect on
or before the Distribution Date (collectively, the "TSC Policies" and
------------
individually, a "TSC Policy"). TSC shall use reasonable efforts to maintain the
----------
TSC Policies in full force and effect up to and including the Distribution Date,
and, subject to the provisions of this Agreement, TSC and its Subsidiaries shall
retain all of their respective rights, benefits and privileges, if any, under
the TSC Policies. Nothing contained herein shall be construed to be an
attempted assignment of or to change the ownership of the TSC Policies.
10.3. Procurement of Insurance for eLoyalty. To the extent not
-------------------------------------
already provided for by the terms of a TSC Policy, TSC shall use reasonable
efforts to cause eLoyalty to be named as an additional insured under TSC
Policies whose effective policy periods include the Distribution Date, in
respect of claims arising out of or relating to periods prior to the
Distribution Date; provided, however, that nothing contained herein shall be
-------- -------
construed to require TSC or any of its Subsidiaries to pay any additional
premium or other charges in respect to, or waive or otherwise limit any of its
rights, benefits or privileges under, any TSC Policy in order to effect the
naming of eLoyalty as such an additional insured.
10.4. Acquisition and Maintenance of Post-Distribution eLoyalty
---------------------------------------------------------
Insurance Policies and Programs. Commencing on and as of the Distribution Date,
-------------------------------
eLoyalty shall establish and maintain separate property, casualty and liability
insurance policies and programs (including, without limitation, primary and
excess general liability, errors and omissions, automobile, workers'
compensation, property, fire, crime, surety and other similar insurance
policies) for activities and claims involving eLoyalty or any of its
Subsidiaries or Affiliates, in each case with commercially reasonable limits and
deductibles. eLoyalty agrees to maintain errors and omissions coverage with
limits of at least $35,000,000 for a period of at least five (5) years after the
Distribution Date. In addition to the foregoing, eLoyalty shall obtain insurance
covering its contractual obligations to indemnify TSC and the TSC Indemnified
Parties under this Agreement and shall maintain such coverage for at least five
(5) years after the Distribution Date. eLoyalty shall arrange for TSC and the
TSC Indemnified Parties to be named insureds under the errors and omissions
policies and the contractual indemnity policies described above. All insurance
policies required to be maintained by eLoyalty shall be with insurers reasonably
acceptable to TSC with respect to financial condition and claims paying ability.
eLoyalty will exercise commercially reasonable efforts to secure liability
insurance to avoid potential gaps in coverage for claims arising from events
prior to the Distribution Date, which gap would not exist had the eLoyalty
Business continued to be covered with the same retroactive dates existing in the
TSC Policies in effect on the Distribution Date. eLoyalty and each of its
Subsidiaries and Affiliates, as
-33-
appropriate, shall be responsible for all administrative and financial matters
relating to insurance policies established and maintained by eLoyalty and its
Subsidiaries or Affiliates for claims relating to any period on or after the
Distribution Date involving eLoyalty or any of its Subsidiaries or Affiliates.
Notwithstanding any other agreement or understanding to the contrary, except as
set forth in Section 10.6 with respect to claims administration and financial
------------
administration of the TSC Policies, neither TSC nor any of its Subsidiaries or
Affiliates shall have any responsibility for or obligation to eLoyalty or any of
its Subsidiaries or Affiliates relating to property and casualty insurance
matters for any period, whether prior to, on or after the Distribution Date.
10.5. eLoyalty Directors' and Officers' Insurance. TSC shall use
-------------------------------------------
commercially reasonable efforts to cause the persons currently serving as
officers and/or directors of TSC or any of its Subsidiaries to be covered for a
period of three (3) years from the Distribution Date by the directors' and
officers' liability insurance policy maintained by TSC (including corporate
reimbursement) (provided that TSC may substitute therefor policies of at least
--------
the same coverage and amounts containing terms and conditions that are not less
advantageous than such policy) with respect to matters covered under the
existing policy occurring prior to the Distribution Date that were committed by
such officers and/or directors in their capacity as such; provided, however,
-------- -------
that in no event shall TSC be required to expend with respect to any year more
than 200% of the current annual premium expended by TSC (the "Insurance Amount")
----------------
to maintain or procure insurance coverage pursuant hereto; and provided,
--------
further, that if TSC is unable to maintain or obtain the insurance called for by
-------
this Section 10.5, TSC shall use commercially reasonable efforts to obtain as
------------
much comparable insurance as available for the Insurance Amount. In the event
TSC or any of its successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of TSC assume the obligations set forth in this Section
-------
10.5. The provisions of this Section 10.5 are intended to be for the benefit
---- ------------
of, and shall be enforceable by, each such officer and director and his or her
heirs and representatives. As provided in Section 12.5, any amount eLoyalty is
------------
required to pay to TSC as an indemnity under this Agreement is reduced to the
extent TSC receives insurance proceeds from the above coverage, but only to the
extent such proceeds are actually received by TSC.
10.6. Post-Distribution Insurance Claims Administration. TSC and its
-------------------------------------------------
Subsidiaries shall have the primary right, responsibility and authority for
claims administration and financial administration of claims that relate to or
affect the TSC Policies. Upon notification by eLoyalty or one of its
Subsidiaries or Affiliates of a claim relating to eLoyalty or a Subsidiary or
Affiliate thereof under one or more of the TSC Policies, TSC shall cooperate
with eLoyalty in asserting and pursuing coverage and payment for such claim by
the appropriate insurance carrier(s). In asserting and pursuing such coverage
and payment, TSC shall have sole power and authority to make binding decisions,
determinations, commitments and stipulations on its own behalf and on behalf of
eLoyalty and its Subsidiaries and Affiliates, which decisions,
-34-
determinations, commitments and stipulations shall be final and conclusive if
reasonably made to maximize the overall economic benefit of the TSC Policies.
eLoyalty and its Subsidiaries and Affiliates shall assume responsibility for,
and shall pay to the appropriate insurance carriers or otherwise, any premiums,
retrospectively-rated premiums, defense costs, indemnity payments, deductibles,
retentions or other charges (collectively, "Insurance Charges") whenever
-----------------
arising, which shall become due and payable under the terms and conditions of
any applicable TSC Policy in respect of any liabilities, losses, claims, actions
or occurrences, whenever arising or becoming known, involving or relating to any
of the assets, businesses, operations or liabilities of eLoyalty or any of its
Subsidiaries or Affiliates, whether the same relate to the period prior to, on
or after the Distribution Date. To the extent that the terms of any applicable
TSC Policy provide that TSC or any of its Subsidiaries shall have an obligation
to pay or guarantee the payment of any Insurance Charges relating to eLoyalty or
any of its Subsidiaries, TSC shall be entitled to demand that eLoyalty make such
payment directly to the Person or entity entitled thereto. In connection with
any such demand, TSC shall submit to eLoyalty a copy of any invoice received by
TSC pertaining to such Insurance Charges together with appropriate supporting
documentation, to the extent available. In the event that eLoyalty fails to pay
any such Insurance Charges when due and payable, whether at the request of the
Person entitled to payment or upon demand by TSC, TSC and its Subsidiaries may
(but shall not be required to) pay such insurance charges for and on behalf of
eLoyalty and, thereafter, eLoyalty shall forthwith reimburse TSC for such
payment. Subject to the other provisions of this Article X, the retention by
---------
TSC of the TSC Policies and the responsibility for claims administration and
financial administration of such policies are in no way intended to limit,
inhibit or preclude any right of eLoyalty, TSC or any other insured to insurance
coverage for any Insured Claims under the TSC Policies.
10.7. Certain Adjustments. (a) The Parties acknowledge that prepaid
-------------------
insurance and any cash received by TSC with respect to prepaid insurance is not
included within the Transferred Assets. Notwithstanding the foregoing, TSC
agrees to pay to eLoyalty, promptly upon receipt by TSC, the amount of any cash
received by TSC from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Risk Management Services Inc. as a
premium adjustment to reflect the exclusion of eLoyalty and its Subsidiaries
from the coverage of the TSC Policies.
(b) TSC will enter into a letter agreement with Aon Financial
Services Group providing for the provision of certain insurance brokerage and
consulting services to TSC. Such letter agreement requires three annual payments
by TSC to Aon Financial Services Group, the first of which has been paid.
eLoyalty agrees to reimburse TSC, on demand, for 50% of each of the second and
third annual payments due under such letter agreement.
10.8. Non-Waiver of Rights to Coverage. An insurance carrier that
--------------------------------
would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto, or, solely by virtue of the provisions of
this Article X, have any subrogation rights with respect thereto, it being
---------
expressly understood and agreed that no insurance carrier or any third party
shall be entitled to a windfall (i.e., a benefit they would not be entitled to
----
receive had no
-35-
Distribution occurred or in the absence of the provisions of this Article X) by
---------
virtue of the provisions hereof.
10.9. Scope of Affected Policies of Insurance. The provisions of
---------------------------------------
this Article X relate solely to matters involving liability, casualty and
---------
workers' compensation insurance, and shall not be construed to affect any
obligation of or impose any obligation on the Parties with respect to any life,
health and accident, dental or medical insurance policies applicable to any of
the officers, directors, employees or other representatives of the Parties or
their Affiliates.
ARTICLE XI
EXPENSES
--------
11.1. Allocation of Expenses. (a) Except as otherwise provided in
----------------------
this Agreement or any other agreement contemplated hereby, or as otherwise
agreed to in writing by the Parties, all fees and expenses incurred in
connection with the transactions contemplated hereby or thereby shall be paid by
TSC. Specifically, (i) TSC shall absorb all of the costs associated with the
dedication of internal resources and personnel to such transaction at all times
prior to the Distribution Date, and (ii) TSC shall pay all fees and expenses
that are related directly to the implementation of the Distribution transactions
on or prior to the Distribution Date.
(b) Without limiting the generality of the foregoing, TSC shall be
solely responsible for the following costs incurred in connection with the
transactions contemplated hereby: (i) the reasonable fees and expenses of Sidley
& Austin in connection with its representation of TSC; (ii) the reasonable fees
and expenses of investment banks relating to their financial advisory services
rendered to TSC and eLoyalty in connection with the Distribution; (iii) the
reasonable fees and expenses of PricewaterhouseCoopers LLP in connection with
its audit and tax services rendered to TSC; (iv) all SEC registration and "blue
sky" filing fees associated with the Registration Statement; (v) the printing,
mailing and distribution of the Information Statement to TSC's stockholders;
(vi) the reasonable fees and expenses of eLoyalty's Transfer Agent and registrar
relating to the initial issuance of eLoyalty Shares as a dividend to TSC's
stockholders; (vii) the NASDAQ listing fees for the eLoyalty Shares; (viii) the
design and initial printing of certificates of the eLoyalty Shares; (ix) the
design and initial printing of certificates of eLoyalty Common Stock as a
dividend to TSC stockholders; (x) the development, search and registration of
the name "eLoyalty"; and (xi) various international professional services
related directly to the Distribution.
(c) Notwithstanding Section 11.1(a) (i) above, eLoyalty shall be
-------------------
solely responsible for all fees, expenses and other costs incurred in connection
with the transactions contemplated hereby related to: (i) the reasonable fees
and expenses of Sidley & Austin in connection with its representation of
eLoyalty related to the creation of benefits plans; (ii) the reasonable fees and
expenses relating to the syndication and arrangement of revolving credit
facilities for eLoyalty;
-36-
and (iii) the reasonable fees or expenses of any financial advisors, other than
those approved by TSC, retained by eLoyalty in connection with any "road shows"
or presentations to investors.
ARTICLE XII
INDEMNIFICATION
---------------
12.1. Release of Pre-Distribution Claims. (a) Except as provided
----------------------------------
in Section 12.1(b), effective as of the Distribution Date, each Party does
---------------
hereby, on behalf of itself and its respective Subsidiaries and Affiliates,
successors and assigns and all Persons who at any time prior to the Distribution
Date have been shareholders, directors, officers, agents or employees of either
Party (in each case, in their respective capacities as such), remise, release
and forever discharge the other Party, its respective Subsidiaries and
Affiliates, successors and assigns and all Persons who at any time prior to the
Distribution Date have been shareholders, directors, officers, agents or
employees of such Party (in each case, in their respective capacities as such),
and their respective heirs, executors, administrators, successors and assigns,
from any and all Liabilities whatsoever, whether at law or in equity (including
any right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed to
occur or any conditions existing or alleged to have existed on or before the
Distribution Date, including in connection with the transactions and all other
activities to implement the Distribution.
(b) Nothing contained in Section 12.1(a) shall impair any right of
---------------
any Person to enforce this Agreement, any Operating Agreement or any agreements,
arrangements, commitments or understandings that are specified in Section 4.5 or
-----------
the applicable Schedules thereto not to terminate as of the Distribution Date,
in each case in accordance with its terms. Nothing contained in Section 12.1(a)
---------------
shall release any Person from:
(i) any Liability provided in or resulting from any agreement
of the Parties that is specified in Section 4.5 or the applicable
-----------
Schedules thereto as not to terminate as of the Distribution Date, or
any other Liability specified in Section 4.5 as not to terminate as of
-----------
the Distribution Date;
(ii) any Liability, contingent or otherwise, assumed,
transferred, assigned, retained or allocated to a Party in accordance
with, or any other Liability of any Party under, this Agreement or any
Operating Agreement;
(iii) any Liability for the sale, lease, construction or receipt
of goods, property or services purchased, obtained or used in the
ordinary course of business by one Party from the other Party prior to
the Distribution Date;
-37-
(iv) any Liability for unpaid amounts for products or services
or refunds owing on products or services due on a value-received basis
for work done by one Party at the request or on behalf of the other
Party; or
(v) any Liability that the Parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the Parties by third Persons, which Liability shall be
governed by the provisions of this Article XIII and, if applicable,
------------
the appropriate provisions of the Operating Agreements.
(c) Neither Party shall make, nor permit any of its Subsidiaries or
Affiliates to make, any claim or demand, or commence any Action asserting any
claim or demand, including any claim of contribution or indemnification, against
the other Party, or any other Person released pursuant to Section 12.1(a), with
---------------
respect to any Liability released pursuant to Section 12.1(a).
---------------
(d) It is the intent of each of the Parties by virtue of the
provisions of this Section 12.1 to provide for a full and complete release and
------------
discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Distribution Date, between the Parties (including any contractual agreements or
arrangements existing or alleged to exist between the Parties on or before the
Distribution Date), except as expressly set forth in Section 12.1(b). At any
---------------
time, at the reasonable request of either Party, the other Party shall execute
and deliver releases reflecting the provisions hereof.
12.2. Indemnification by eLoyalty. (a) Except as provided in Section
--------------------------- -------
12.5, eLoyalty shall indemnify, defend and hold harmless TSC and each of
----
its Affiliates, directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "TSC Indemnified Parties"), from and against any and all Expenses or Losses
-----------------------
incurred or suffered by TSC (and/or one or more of the TSC Indemnified Parties),
in connection with, relating to, arising out of or due to, directly or
indirectly, any of the following items:
(i) any claim that the information included in the Registration
Statement or the Information Statement that relates to the eLoyalty
Business or any other information relating to the eLoyalty Business
provided to TSC or distributed to third parties by employees of
eLoyalty or individuals who were employees of the eLoyalty Business
prior to the Distribution Date, is or was false or misleading with
respect to any material fact or omits or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, regardless of whether the occurrence,
action or other event giving rise to the applicable matter took place
prior to or subsequent to the Distribution Date;
-38-
(ii) the eLoyalty Business as conducted by TSC or its
Subsidiaries, Affiliates or predecessors on or at any time prior to
the Distribution Date;
(iii) the Transferred Assets;
(iv) the Assumed Liabilities;
(v) the breach by eLoyalty or any of its Subsidiaries of any
covenant or agreement set forth in this Agreement, any Operating
Agreement or any Conveyancing Instrument, regardless of when or where
the loss, claim, accident, occurrence, event or happening giving rise
to the Expense or Loss took place, or whether any such loss, claim,
accident, occurrence, event or happening is known or unknown, or
reported or unreported;
(vi) the employee benefits provided or the actions taken or
omitted to be taken with respect thereto in connection with this
Agreement or otherwise relating to the provision of employee benefits
to employees or former employees of eLoyalty (or its Subsidiaries),
their beneficiaries, alternate payees or any other person claiming
benefits through them (except to the extent such Expenses or Losses
are specifically allocated to TSC pursuant to Article IX), including,
----------
without limitation, Expenses or Losses arising in connection with (A)
eLoyalty's reduction, elimination or failure to provide any benefit
provided prior to or after the Distribution Date to its employees or
employees of any of its Subsidiaries or (B) the transfer of account
balances from the TSC Savings Plan to the eLoyalty Savings Plan where
such Expenses or Losses are incurred as a result of (1) any act or
omission by eLoyalty (or eLoyalty's representative) or (2) a
determination by the IRS that the eLoyalty Savings Plan is not a tax-
qualified plan; or
(vii) any use of, access to or reliance upon the technical
information or data made available to eLoyalty or its Subsidiaries
pursuant to Section 14.1.
------------
(b) In addition, except as provided in Section 12.5, eLoyalty shall
------------
indemnify, defend and hold harmless the TSC Indemnified Parties from and against
fifty percent (50%) of any Expenses or Losses incurred or suffered by TSC
(and/or one or more of the TSC Indemnified Parties), in connection with,
relating to, arising out of or due to, directly or indirectly, any claims of any
infrastructure employee of TSC to the extent such claim relates to the period
prior to the Distribution Date.
12.3. Indemnification by TSC. Except as provided in Section 12.5,
---------------------- ------------
TSC shall indemnify, defend and hold harmless eLoyalty and each of its
Affiliates, directors, officers, employees and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"eLoyalty Indemnified Parties"), from and against any and all Expenses or Losses
----------------------------
incurred or suffered by eLoyalty (and/or one or more of the eLoyalty
-39-
Indemnified Parties) in connection with, relating to, arising out of or due to,
directly or indirectly, any of the following items:
(a) the business (other than the eLoyalty Business) conducted by TSC
or its Subsidiaries, Affiliates or predecessors on or at any time prior to
the Distribution Date;
(b) the assets owned by TSC or its Subsidiaries other than the
Transferred Assets;
(c) the Liabilities (including the Retained Liabilities) of TSC or
its Subsidiaries other than the Assumed Liabilities;
(d) the breach by TSC or any of its Subsidiaries of any covenant or
agreement set forth in this Agreement, any Operating Agreement or any
Conveyancing Instrument, regardless of when or where the loss, claim,
accident, occurrence, event or happening giving rise to the Expense or Loss
took place, or whether any such loss, claim, accident, occurrence, event or
happening is known or unknown, or reported or unreported; and
(e) TSC's reduction, elimination or failure to provide any benefit
provided prior to or after the Distribution Date to its employees (or
employees of its Subsidiaries), other than a benefit assumed by eLoyalty
pursuant to Article IX, or any act or omission by TSC in connection with
----------
the transfer of assets and liabilities from the TSC Savings Plan to the
eLoyalty Savings Plan.
12.4. Applicability of and Limitation on Indemnification. EXCEPT AS
--------------------------------------------------
EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION UNDER THIS ARTICLE XII SHALL
-----------
APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNIFIED
PARTY AND SHALL APPLY WITHOUT REGARD TO WHETHER THE LOSS, LIABILITY, CLAIM,
DAMAGE, COST OR EXPENSE FOR WHICH INDEMNITY IS CLAIMED HEREUNDER IS BASED ON
STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION FOR
CONTRIBUTION.
12.5. Adjustment of Indemnifiable Losses. (a) The amount that any
----------------------------------
Party (an "Indemnifying Party") is required to pay to any Person entitled to
------------------
indemnification hereunder (an "Indemnified Party") shall be reduced (including,
-----------------
without limitation, retroactively) by any Insurance Proceeds and other amounts
actually recovered by or on behalf of such Indemnified Party in reduction of the
related Expense or Loss. If an Indemnified Party receives a payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
-----------------
respect of any Expense or Loss and subsequently actually receives Insurance
Proceeds or other amounts in respect of such Expense or Loss, then such
Indemnified Party shall pay to the Indemnifying Party a sum equal to the lesser
of (1) the after-tax amount of such Insurance Proceeds or other amounts actually
received or (2) the net amount of Indemnity Payments actually received
previously, in each case increased by any actual tax benefit derived by the
Indemnified Party as a result of such
-40-
payment (with such tax benefit determined pursuant to Section 12.5(d)). The
---------------
Indemnified Party agrees that the Indemnifying Party shall be subrogated to such
Indemnified Party under any insurance policy.
(b) An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto, or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to a "windfall" (i.e., a benefit he
or she would not be entitled to receive in the absence of the indemnification
provisions) by virtue of the indemnification provisions hereof.
(c) If any Indemnified Party realizes a Tax benefit or detriment in
one or more Tax periods by reason of having incurred an Expense or a Loss for
which such Indemnified Party receives an Indemnity Payment from an Indemnifying
Party (or by reason of the receipt of any Indemnity Payment), then such
Indemnified Party shall pay to such Indemnifying Party an amount equal to the
Tax benefit or such Indemnifying Party shall pay to such Indemnified Party an
additional amount equal to the Tax detriment (taking into account, without
limitation, any Tax detriment resulting from the receipt of such additional
amounts), as the case may be. The amount of any Tax benefit or any Tax detriment
for a Tax period realized by an Indemnified Party by reason of having incurred
an Expense or a Loss (or by reason of the receipt of any Indemnity Payment)
shall be deemed to equal the product obtained by multiplying (i) the amount of
any deduction or loss or inclusion in income for such period resulting from such
Expense or Loss (or the receipt of any Indemnity Payment or additional amount),
as the case may be without regard to whether such deduction or loss or such
inclusion in income results in any actual decrease or increase in Tax liability
for such period (with the amount of any deduction or loss or inclusion in income
determined in accordance with Section 12.5(d) below), by (ii) the highest
---------------
applicable marginal Tax rate for such period (provided, however, that the amount
-------- -------
of any Tax benefit attributable to an amount that is creditable shall be deemed
to equal the amount of such creditable item). Any payment due under this Section
-------
12.5(c) with respect to a Tax benefit or Tax detriment realized by an
------
an Indemnified Party in a Tax period shall be due and payable within 30 days
from the time the return for such Tax period is due, without taking into account
any extension of time granted to the Party filing such return.
(d) Amounts paid by TSC to or for the benefit of eLoyalty, or by
eLoyalty to or for the benefit of TSC, under this Article XII (and under other
-----------
specified provisions of this Agreement) shall be treated by the Parties, for all
applicable Tax purposes, as adjustments to the amount of Transferred Assets.
(e) In the event that an Indemnity Payment shall be denominated in a
currency other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
-41-
(i) with respect to an Expense or a Loss arising from payment by a
financial institution under a guarantee, comfort letter, letter of credit,
foreign exchange contract or similar instrument, the Foreign Exchange Rate
for such currency shall be determined as of the date on which such
financial institution shall have been reimbursed;
(ii) with respect to an Expense or a Loss covered by insurance, the
Foreign Exchange Rate for such currency shall be the Foreign Exchange Rate
employed by the insurance company providing such insurance in settling such
Expense or Loss with the Indemnifying Party; and
(iii) with respect to an Expense or a Loss not covered by clause (i)
or (ii) above, the Foreign Exchange Rate for such currency shall be
determined as of the date that notice of the claim with respect to such
Expense or Loss shall be given to the Indemnified Party.
12.6. Procedures for Indemnification of Third Party Claims. (a) If
----------------------------------------------------
any third party shall make any claim or commence any arbitration proceeding or
suit (collectively, a "Third Party Claim") against any one or more of the
-----------------
Indemnified Parties with respect to which an Indemnified Party intends to make
any claim for indemnification against eLoyalty under Section 12.2 or against TSC
------------
under Section 12.3, such Indemnified Party shall promptly give written notice to
------------
the Indemnifying Party describing such Third Party Claim in reasonable detail,
and the following provisions shall apply. Notwithstanding the foregoing, the
failure of any Indemnified Party to provide notice in accordance with this
Section 12.6(a) shall not relieve the related Indemnifying Party of its
---------------
obligations under this Article XII, except to the extent that such Indemnifying
-----------
Party is actually prejudiced by such failure to provide notice.
(b) The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in Section 12.6(a) to notify the Indemnified Party
---------------
that it elects to conduct and control the defense of such Third Party Claim. If
the Indemnifying Party does not give the foregoing notice, the Indemnified Party
shall have the right to defend, contest, settle or compromise such Third Party
Claim in the exercise of its exclusive discretion subject to the provisions of
Section 12.6(c), and the Indemnifying Party shall, upon request from any of the
---------------
Indemnified Parties, promptly pay to such Indemnified Parties in accordance with
the other terms of this Section 12.6(b) the amount of any Expense or Loss
---------------
resulting from their liability to the third party claimant. If the Indemnifying
Party gives the foregoing notice, the Indemnifying Party shall have the right to
undertake, conduct and control, through counsel reasonably acceptable to the
Indemnified Party, and at its sole expense, the conduct and settlement of such
Third Party Claim, and the Indemnified Party shall cooperate with the
Indemnifying Party in connection therewith, provided that (i) the Indemnifying
--------
Party shall not thereby permit any lien, encumbrance or other adverse charge to
thereafter attach to any asset of any Indemnified Party; (ii) the Indemnifying
Party shall not thereby permit any injunction against any Indemnified Party;
(iii) the Indemnifying Party shall permit the Indemnified Party and counsel
chosen by the Indemnified Party and reasonably acceptable to the Indemnifying
Party to monitor such conduct or settlement and shall
-42-
provide the Indemnified Party and such counsel with such information regarding
such Third Party Claim as either of them may reasonably request (which request
may be general or specific), but the fees and expenses of such counsel
(including allocated costs of in-house counsel and other personnel) shall be
borne by the Indemnified Party unless (A) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(B) the named parties to any such Third Party Claim include the Indemnified
Party and the Indemnifying Party and in the reasonable opinion of counsel to the
Indemnified Party representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, in
either of which cases the reasonable fees and disbursements of counsel for such
Indemnified Party (including allocated costs of in-house counsel and other
personnel) shall be reimbursed by the Indemnifying Party to the Indemnified
Party; and (iv) the Indemnifying Party shall agree promptly to reimburse to the
extent required under this Article XII the Indemnified Party for the full amount
-----------
of any Expense or Loss resulting from such Third Party Claim and all related
expenses incurred by the Indemnified Party. In no event shall the Indemnifying
Party, without the prior written consent of the Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment that does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all liability in respect of
such claim.
If the Indemnifying Party shall not have undertaken the conduct and
control of the defense of any Third Party Claim as provided above, the
Indemnifying Party shall nevertheless be entitled through counsel chosen by the
Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor
the conduct or settlement of such claim by the Indemnified Party, and the
Indemnified Party shall provide the Indemnifying Party and such counsel with
such information regarding such Third Party Claim as either of them may
reasonably request (which request may be general or specific), but all costs and
expenses incurred in connection with such monitoring shall be borne by the
Indemnifying Party.
(c) So long as the Indemnifying Party is contesting any such Third
Party Claim in good faith, the Indemnified Party shall not pay or settle any
such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such Third Party Claim, provided that
--------
in such event the Indemnified Party shall waive any right to indemnity therefor
by the Indemnifying Party, and no amount in respect thereof shall be claimed as
an Expense or a Loss under this Article XII.
-----------
If the Indemnified Party shall have undertaken the conduct and control
of the defense of any Third Party Claim as provided above, the Indemnified
Party, on not less than 30 days prior written notice to the Indemnifying Party,
may make settlement (including payment in full) of such Third Party Claim, and
such settlement shall be binding upon the Parties for the purposes hereof,
unless within said 30-day period the Indemnifying Party shall have requested the
Indemnified Party to contest such Third Party Claim at the expense of the
Indemnifying Party. In such event, the Indemnified Party shall promptly comply
with such request and the Indemnifying Party shall have the right to direct the
defense of such claim or any litigation based thereon subject to all of the
conditions of Section 12.6(b). Notwithstanding anything in this Section 12.6(c)
--------------- ---------------
to
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the contrary, if the Indemnified Party, in the belief that a claim may
materially and adversely affect it other than as a result of money damages or
other money payments, advises the Indemnifying Party that it has determined to
settle a claim, the Indemnified Party shall have the right to do so at its own
cost and expense, without any requirement to contest such claim at the request
of the Indemnifying Party, but without any right under the provisions of this
Article XII for indemnification by the Indemnifying Party.
-----------
(d) To the extent that, with respect to any Tax audit or proceeding
governed by Article V of the Tax Sharing Agreement, there is any inconsistency
---------
between the provisions of such Article V and of this Section 12.6, the
--------- ------------
provisions of Article V of the Tax Sharing Agreement shall control with respect
---------
to such Tax audit or proceeding.
12.7. Procedures for Indemnification of Direct Claims. Any claim
-----------------------------------------------
for indemnification on account of an Expense or a Loss made directly by the
Indemnified Party against the Indemnifying Party and that does not result from a
Third Party Claim shall be asserted by written notice from the Indemnified Party
to the Indemnifying Party specifically claiming indemnification hereunder. Such
Indemnifying Party shall have a period of 30 business days after the receipt of
such notice within which to respond thereto. If such Indemnifying Party does
not respond within such 30 business-day period, such Indemnifying Party shall be
deemed to have accepted responsibility to make payment and shall have no further
right to contest the validity of such claim. If such Indemnifying Party does
respond within such 30 business-day period and rejects such claim in whole or in
part, such Indemnified Party shall be free to pursue resolution as provided in
Article XIII.
------------
12.8. Contribution. If the indemnification provided for in this
------------
Article XII is unavailable to an Indemnified Party in respect of any Expense or
-----------
Loss arising out of or related to information contained in the Registration
Statement or the Information Statement, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Expense or Loss in such
proportion as is appropriate to reflect the relative fault of the eLoyalty
Indemnified Parties, on the one hand, or the TSC Indemnified Parties, on the
other hand, in connection with the statements or omissions that resulted in such
Expense or Loss. The relative fault of any eLoyalty Indemnified Party, on the
one hand, and of any TSC Indemnified Party, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission of a
material fact relates to information about or supplied by the eLoyalty Business
or an eLoyalty Indemnified Party, on the one hand, or about or by the Retained
Business or a TSC Indemnified Party, on the other hand.
12.9. Remedies Cumulative. The remedies provided in this Article
------------------- -------
XII shall be cumulative and, subject to the provisions of Article XIII below,
--- ------------
shall not preclude assertion by an Indemnified Party of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
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12.10. Survival. All covenants and agreements of the Parties
--------
contained in this Agreement relating to indemnification shall survive the
Distribution Date indefinitely, unless a specific survival or other applicable
period is expressly set forth herein.
ARTICLE XIII
DISPUTE RESOLUTION
------------------
13.1. Agreement to Arbitrate. Except as otherwise specifically
----------------------
provided in any Operating Agreement, the procedures for discussion, negotiation
and arbitration set forth in this Article XIII shall apply to all disputes,
------------
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with, this
Agreement or any Operating Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or the
commercial or economic relationship of the Parties. Each Party agrees on behalf
of itself and its respective Subsidiaries and Affiliates that the procedures set
forth in this Article XIII shall be the sole and exclusive remedy in connection
------------
with any dispute, controversy or claim relating to any of the foregoing matters
and irrevocably waives any right to commence any Action in or before any
Governmental Authority, except as expressly provided in Section 13.7(b) and
---------------
except to the extent provided under the Arbitration Act in the case of judicial
review of arbitration results or awards. EACH PARTY ON BEHALF OF ITSELF AND ITS
RESPECTIVE SUBSIDIARIES AND AFFILIATES IRREVOCABLY WAIVES ANY RIGHT TO ANY TRIAL
IN A COURT THAT WOULD OTHERWISE HAVE JURISDICTION OVER ANY CLAIM, CONTROVERSY OR
DISPUTE SET FORTH IN THE FIRST SENTENCE OF THIS SECTION 13.1.
------------
13.2. Escalation and Mediation. (a) The Parties agree to use
------------------------
commercially reasonable efforts to resolve expeditiously any dispute,
controversy or claim between them with respect to the matters covered hereby
that may arise from time to time on a mutually acceptable negotiated basis. In
furtherance of the foregoing, any Party involved in a dispute, controversy or
claim may deliver a notice (an "Escalation Notice") demanding an in-person
-----------------
meeting involving representatives of the Parties at a senior level of management
of the Parties (or if the Parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice
shall be given to the General Counsel, or like officer or official, of each
Party involved in the dispute, controversy or claim (which copy shall state that
it is an Escalation Notice pursuant to this Agreement). Any agenda, location or
procedures for such discussions or negotiations between the Parties may be
established by the Parties from time to time; provided, however, that the
-------- -------
Parties shall use commercially reasonable efforts to meet within 30 days of the
Escalation Notice.
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(b) The Parties must retain a mediator to aid the Parties in their
discussions and negotiations by informally providing advice to the Parties. Any
opinion expressed by the mediator shall be strictly advisory and shall not be
binding on the Parties, nor shall any opinion expressed by the mediator be
admissible in any arbitration proceeding. The mediator shall be selected by the
Party that did not deliver the applicable Escalation Notice from the list of
individuals set forth on Exhibit H, the names of which individuals were supplied
---------
to the Parties by JAMS/Endispute. Costs of the mediation shall be borne equally
by the Parties involved in the matter, except that each Party shall be
responsible for its own expenses. Mediation is a prerequisite to a demand for
arbitration under Section 13.3.
------------
13.3. Procedures for Arbitration. (a) At any time after the
--------------------------
completion of the mediation required by Section 13.2(b) (the "Arbitration Demand
--------------- ------------------
Date"), any Party involved in the dispute, controversy or claim (regardless of
----
whether such Party delivered the Escalation Notice) may, unless the Applicable
Deadline (as hereinafter defined) has occurred, make a written demand (the
"Arbitration Demand Notice") that the dispute be resolved by binding
--------------------------
arbitration, which Arbitration Demand Notice shall be given to the Parties to
the dispute, controversy or claim in the manner set forth in Section 15.9. In
------------
the event that any Party shall deliver an Arbitration Demand Notice to another
Party, such other Party may itself deliver an Arbitration Demand Notice to such
first Party with respect to any related dispute, controversy or claim with
respect to which the Applicable Deadline has not passed without the requirement
of delivering an Escalation Notice. No Party may assert that the failure to
resolve any matter during any discussions or negotiations, the course of conduct
during the discussions or negotiations or the failure to agree on a mutually
acceptable time, agenda, location or procedures for the meeting, in each case,
as contemplated by Section 13.2, is a prerequisite to a demand for arbitration
------------
under this Section 13.3. In the event that any Party delivers an Arbitration
------------
Demand Notice with respect to any dispute, controversy or claim that is the
subject of any then pending arbitration proceeding or of a previously delivered
Arbitration Demand Notice, all such disputes, controversies and claims shall be
resolved in the arbitration proceeding for which an Arbitration Demand Notice
was first delivered unless the arbitrator in his or her sole discretion
determines that it is impracticable or otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Operating Agreement,
any Arbitration Demand Notice may be given until one year and 45 days after the
later of (i) the occurrence of the act or event giving rise to the underlying
claim or (ii) the date on which such act or event was, or should have been, in
the exercise of reasonable due diligence, discovered by the Party asserting the
claim (as applicable and as it may in a particular case be specifically extended
by the Parties in writing, the "Applicable Deadline"). Any discussions,
-------------------
negotiations or mediations between the Parties pursuant to this Agreement or
otherwise will not toll the Applicable Deadline unless expressly agreed in
writing by the Parties. Each Party agrees on behalf of itself and its
respective Subsidiaries and Affiliates that if an Arbitration Demand Notice with
respect to a dispute, controversy or claim is not given prior to the expiration
of the Applicable Deadline, such dispute, controversy or claim will be barred.
Subject to Section 13.7(d), upon delivery of an Arbitration Demand Notice
---------------
pursuant to Section 13.3(a) prior to the Applicable Deadline, the
---------------
-46-
dispute, controversy or claim shall be decided by a sole arbitrator in
accordance with the rules set forth in this Article XIII.
------------
13.4. Selection of Arbitrator. (a) If the amount in dispute is less
-----------------------
than $500,000, the mediator selected by the provisions set forth in Section
-------
13.2(b) above shall also serve as the sole arbitrator. If the amount in dispute
-------
equals or exceeds $500,000, the mediator selected by the provisions set forth in
Section 13.2(b) above shall select a sole arbitrator from a list provided by
---------------
JAMS/Endispute. After selection of such sole arbitrator, the mediator shall
have no further role with respect to the dispute. Any arbitrator selected
pursuant to this paragraph (a) shall be disinterested with respect to any of the
Parties and the matter and shall be reasonably competent in the applicable
subject matter.
(b) The sole arbitrator selected pursuant to paragraph (a) above will
set a time for the hearing of the matter which will commence no later than 90
days after the date of appointment of the sole arbitrator pursuant to paragraph
(a) above, and such hearing will be no longer than 30 days (unless in the
judgment of the arbitrator the matter is unusually complex and sophisticated and
thereby requires a longer time, in which event such hearing shall be no longer
than 90 days). The final decision of such arbitrator will be rendered in
writing to the Parties not later than 60 days after the last hearing date,
unless otherwise agreed by the Parties in writing.
13.5. Hearings. Within the time period specified in Section
-------- -------
13.4(d), the matter shall be presented to the arbitrator at a hearing by means
-------
of written submissions of memoranda and verified witness statements, filed
simultaneously, and responses, if necessary in the judgment of the arbitrator or
both of the Parties. If the arbitrator deems it to be essential to a fair
resolution of the dispute, live cross-examination or direct examination may be
permitted, but is not generally contemplated to be necessary. The arbitrator
shall actively manage the arbitration with a view to achieving a just, speedy
and cost-effective resolution of the dispute, claim or controversy. The
arbitrator may, in his or her sole discretion, set time and other limits on the
presentation of each Party's case, its memoranda or other submissions, and
refuse to receive any proffered evidence that the arbitrator, in his or her sole
discretion, finds to be cumulative, unnecessary, irrelevant or of low probative
nature. Except as otherwise set forth herein, any arbitration hereunder will be
conducted in accordance with the JAMS/Endispute Streamlined Rules for
Commercial, Real Estate and Construction Cases then prevailing. The decision of
the arbitrator will be final and binding on the Parties, and judgment thereon
may be had and will be enforceable in any court having jurisdiction over the
Parties. Arbitration awards will bear interest at an annual rate of the Prime
Rate plus 2% per annum. To the extent that the provisions of this Agreement and
the prevailing rules of JAMS/Endispute conflict, the provisions of this
Agreement shall govern.
13.6. Discovery and Certain Other Matters. (a) Any Party involved
-----------------------------------
in the applicable dispute may request limited document production from the other
Party of specific and expressly relevant documents, with the reasonable expenses
of the producing Party incurred in such production paid by the requesting Party.
Any such discovery (which rights to documents shall be substantially less than
document discovery rights prevailing under the Federal Rules of Civil Procedure)
shall be conducted expeditiously and shall not cause the hearing provided for in
-47-
Section 13.5 to be adjourned except upon consent of all of the Parties or upon
------------
an extraordinary showing of cause demonstrating that such adjournment is
necessary to permit discovery essential to a Party to the proceeding.
Depositions, interrogatories or other forms of discovery (other than the
document production set forth above) shall not occur except by consent of all of
the Parties. Disputes concerning the scope of document production and
enforcement of the document production requests will be determined by written
agreement of the Parties or, failing such agreement, will be referred to the
arbitrator for resolution. All discovery requests will be subject to the
Parties' rights to claim any applicable privilege. The arbitrator will adopt
procedures to protect the proprietary rights of the Parties and to maintain the
confidential treatment of the arbitration proceedings (except as may be required
by law). Subject to the foregoing, the arbitrator shall have the power to issue
subpoenas to compel the production of documents relevant to the dispute,
controversy or claim.
(b) The arbitrator shall have full power and authority to determine
issues of arbitrability but shall otherwise be limited to interpreting or
construing the applicable provisions of this Agreement or any Operating
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Operating Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Operating
Agreement and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided, however, that the
-------- -------
arbitrator shall not have any authority in excess of the authority a court
having jurisdiction over the Parties and the controversy or dispute would have
absent these arbitration provisions. It is the intention of the Parties that in
rendering a decision the arbitrator give effect to the applicable provisions of
this Agreement and the Operating Agreements and follow applicable law (it being
understood and agreed that this sentence shall not give rise to a right of
judicial review of the arbitrator's award).
(c) If a Party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and determine the
controversy upon evidence produced by the appearing Party.
(d) Arbitration costs will be borne equally by each Party involved in
the matter, except that each Party will be responsible for its own attorney's
fees and other costs and expenses, including the costs of witnesses selected by
such Party.
13.7. Certain Additional Matters. (a) Any arbitration award shall be
--------------------------
a bare award limited to a holding for or against a Party and shall be without
findings as to facts, issues or conclusions of law (including with respect to
any matters relating to the validity or infringement of patents or patent
applications) and shall be without a statement of the reasoning on which the
award rests, but must be in adequate form so that a judgment of a court may be
entered thereupon. Judgment upon any arbitration award hereunder may be entered
in any court having jurisdiction thereof.
-48-
(b) Prior to the time at which an arbitrator is appointed pursuant to
Section 13.4, any Party may seek one or more temporary restraining orders in a
------------
court of competent jurisdiction if necessary in order to preserve and protect
the status quo. Neither the request for, nor the grant or denial of, any such
temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein, and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the Parties shall hold, and shall
cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article XIV and
-----------
except as may be required in order to enforce any award. Each of the Parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall fail to
serve as an arbitrator for any reason, the Parties shall select a new arbitrator
who shall be disinterested as to the Parties and the matter in accordance with
the procedure set forth herein for the selection of the initial arbitrator. The
extent, if any, to which testimony previously given shall be repeated or as to
which the replacement arbitrator elects to rely on the stenographic record (if
there is one) of such testimony shall be determined by the replacement
arbitrator.
13.8. Continuity of Service and Performance. Unless otherwise
-------------------------------------
agreed in writing, the Parties will continue to provide service and honor all
other commitments under this Agreement and each Operating Agreement during the
course of dispute resolution pursuant to the provisions of this Article XIII
------------
with respect to all matters not subject to such dispute, controversy or claim.
13.9. Law Governing Arbitration Procedures. The interpretation of
------------------------------------
the provisions of this Article XIII, only insofar as they relate to the
------------
agreement to arbitrate and any procedures pursuant thereto, shall be governed by
the Arbitration Act and other applicable federal law. In all other respects,
the interpretation of this Agreement shall be governed as set forth in Section
-------
15.2.
----
13.10. Choice of Forum. Any arbitration hereunder shall take place
---------------
in Chicago, Illinois, unless otherwise agreed in writing by the Parties.
ARTICLE XIV
ACCESS TO INFORMATION AND SERVICES
----------------------------------
14.1. Agreement for Exchange of Information. (a) At all times
-------------------------------------
from and after the Distribution Date for a period of ten (10) years, as soon as
reasonably practicable after written
-49-
request: (i) TSC shall afford to eLoyalty, its Subsidiaries and their authorized
accountants, counsel and other designated representatives reasonable access
during normal business hours to, or, at eLoyalty's expense, provide copies of,
all records, books, contracts, instruments, data, documents and other
information (collectively, "Information") in the possession or under the control
-----------
of TSC immediately following the Distribution Date that relates to eLoyalty, the
eLoyalty Business or the eLoyalty Employees; and (ii) eLoyalty shall afford to
TSC, its Subsidiaries and their authorized accountants, counsel and other
designated representatives reasonable access during normal business hours to,
or, at TSC's expense, provide copies of, all Information in the possession or
under the control of eLoyalty immediately following the Distribution Date that
relates to TSC, the TSC Business or the TSC Employees; provided, however, that
-------- -------
in the event Party determines that any such provision of or access to
Information could be commercially detrimental, violate any law or agreement or
waive any attorney-client privilege, the Parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that avoids
any such harm or consequence.
(b) Either Party may request Information under Section 14.1(a) (i) to
---------------
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, tax or other proceeding
or in order to satisfy audit, accounting, claims defense, regulatory filings,
litigation, tax or other similar requirements, (iii) for use in compensation,
benefit or welfare plan administration or other bona fide business purposes or
(iv) to comply with its obligations under this Agreement or any Operating
Agreement.
14.2. Ownership of Information. Any Information owned by one Party
------------------------
that is provided to a requesting Party pursuant to Section 14.1 shall be deemed
------------
to remain the property of the providing Party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed to grant or
confer rights of license or otherwise in any such Information.
14.3. Compensation for Providing Information. The Party requesting
--------------------------------------
Information agrees to reimburse the providing Party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting Party. Except as
otherwise specifically provided in this Agreement, such costs shall be computed
in accordance with the providing Party's standard methodology and procedures.
14.4. Retention of Records. To facilitate the possible exchange of
--------------------
Information pursuant to this Article XIV after the Distribution Date, the
-----------
Parties agree to use commercially reasonable efforts to retain all Information
in their respective possession or control on the Distribution Date in accordance
with the policies and procedures of TSC as in effect on the Distribution Date.
No party will destroy, or permit any of its Subsidiaries or Affiliates to
destroy, any Information that the other Party may have the right to obtain
pursuant to this Agreement prior to the seventh anniversary of the date hereof,
and thereafter without first using commercially
-50-
reasonable efforts to notify the other Party of the proposed destruction and
giving the other Party the opportunity to take possession of such Information
prior to such destruction; provided, however, that in the case of any
-------- -------
Information relating to Taxes, such period shall be extended to one year after
the expiration of the applicable statute of limitations (giving effect to any
extensions thereof).
14.5. Limitation of Liability. No Party shall have any liability to
-----------------------
the other Party (i) if any Information exchanged or provided pursuant to this
Agreement that is an estimate or forecast, or that is based on an estimate or
forecast, is found to be inaccurate, in the absence of willful misconduct by the
Party providing such Information, or (ii) if any Information is destroyed after
commercially reasonable efforts to comply with the provisions of Section 14.4.
------------
14.6. Production of Witnesses. At all times from and after the
-----------------------
Distribution Date, each Party shall use commercially reasonable efforts to make
available to the other Party (without cost (other than reimbursement of actual
out-of-pocket expenses) to, and upon prior written request of, the other Party)
its directors, officers, employees and agents as witnesses to the extent that
the same may reasonably be required by the other Party in connection with any
legal, administrative or other proceeding in which the requesting Party may from
time to time be involved with respect to the eLoyalty Business, the Retained
Business or any transactions contemplated hereby.
14.7. Confidentiality. (a) From and after the Distribution Date,
---------------
each of TSC and eLoyalty shall hold, and shall cause their respective directors,
officers, employees, agents, consultants, advisors and other representatives to
hold, in strict confidence, with at least the same degree of care that applies
to TSC's confidential and proprietary information pursuant to policies in effect
as of the Distribution Date, all non-public information concerning or belonging
to the other Party or any of its Subsidiaries or Affiliates obtained by it prior
to the Distribution Date, accessed by it pursuant to Section 14.1 hereof, or
------------
furnished to it by the other Party or any of its Subsidiaries or Affiliates
pursuant to this Agreement or any agreement or document contemplated hereby,
including, without limitation, any trade secrets, technology, know-how and other
non-public, proprietary intellectual property rights licensed pursuant to the
Intellectual Property License Agreements and shall not release or disclose such
information to any other Person, except its representatives, who shall be bound
by the provisions of this Section 14.7; provided, however, that TSC and eLoyalty
------------ -------- -------
and their respective directors, officers, employees, agents, consultants,
advisors and other representatives may disclose such information if, and only to
the extent that, (i) a disclosure of such information is compelled by judicial
or administrative process or, in the opinion of such Party's counsel, by other
requirements of law (in which case the disclosing Party will provide, to the
extent practicable under the circumstances, advance written notice to the other
Party of its intent to make such disclosure), or (ii) such Party can show that
such information (A) is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
(B) has been furnished or made known to the recipient without any obligation to
keep it confidential by a third party under circumstances which are not known to
the recipient to involve a breach of the third party's obligations to a Party
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hereto; (C) was developed independently of information furnished to the
recipient under this Agreement; or (D) in the case of information furnished
after the Distribution Date, was not known to the recipient at the time of the
Distribution but became known to the recipient prior to the time of receipt
thereof from the other Party.
(b) Each Party acknowledges that the other Party would not have an
adequate remedy at law for the breach by the acknowledging Party of any one or
more of the covenants contained in this Section 14.7 and agrees that, in the
------------
event of such breach, the other Party may, in addition to the other remedies
that may be available to it, apply to a court for an injunction to prevent
breaches of this Section 14.7 and to enforce specifically the terms and
------------
provisions of this Section. Notwithstanding any other Section hereof, the
provisions of this Section 14.7 shall survive the Distribution Date
------------
indefinitely.
14.8. Privileged Matters. (a) Each of TSC and eLoyalty agrees to
------------------
maintain, preserve and assert all privileges, including, without limitation,
privileges arising under or relating to the attorney-client relationship (which
shall include without limitation the attorney-client and work product
privileges), not heretofore waived, that relate to the eLoyalty Business and the
Transferred Assets for any period prior to the Distribution Date ("Privilege" or
---------
"Privileges"). Each Party agrees that it shall not waive any Privilege that
----------
could be asserted under applicable law without the prior written consent of the
other Party. The rights and obligations created by this Section 14.8 shall
------------
apply to all information relating to the eLoyalty Business as to which, but for
the Distribution, either Party would have been entitled to assert or did assert
the protection of a Privilege ("Privileged Information"), including without
----------------------
limitation, (i) any and all information generated prior to the Distribution Date
but which, after the Distribution, is in the possession of either Party; and
(ii) all information generated, received or arising after the Distribution Date
that refers to or relates to Privileged Information generated, received or
arising prior to the Distribution Date.
(b) Upon receipt by either Party of any subpoena, discovery or other
request that may call for the production or disclosure of Privileged Information
or if either Party obtains knowledge that any current or former employee of TSC
or eLoyalty has received any subpoena, discovery or other request that may call
for the production or disclosure of Privileged Information, such Party shall
notify promptly the other Party of the existence of the request and shall
provide the other Party a reasonable opportunity to review the information and
to assert any rights it may have under this Section 14.8 or otherwise to prevent
------------
the production or disclosure of Privileged Information. Each Party agrees that
it will not produce or disclose any information that may be covered by a
Privilege under this Section 14.8 unless (i) the other Party has provided its
------------
written consent to such production or disclosure (which consent shall not be
unreasonably withheld), or (ii) a court of competent jurisdiction has entered a
final, nonappealable order finding that the information is not entitled to
protection under any applicable Privilege.
(c) TSC's transfer of books and records and other information to
eLoyalty, and TSC's agreement to permit eLoyalty to possess Privileged
Information existing or generated prior
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to the Distribution Date, are made in reliance on eLoyalty's agreement, as set
forth in Sections 14.7 and 14.8, to maintain the confidentiality of Privileged
------------- ----
Information and to assert and maintain all applicable Privileges. The access to
information being granted pursuant to Section 14.1, the agreement to provide
------------
witnesses and individuals pursuant to Section 14.6 and the transfer of
------------
Privileged Information to eLoyalty pursuant to this Agreement shall not be
deemed a waiver of any Privilege that has been or may be asserted under this
Section 14.8 or otherwise. Nothing in this Agreement shall operate to reduce,
------------
minimize or condition the rights granted to TSC in, or the obligations imposed
upon eLoyalty by, this Section 14.8.
------------
ARTICLE XV
MISCELLANEOUS
-------------
15.1. Entire Agreement. This Agreement and the Operating Agreements
----------------
including the Schedules and Exhibits referred to herein and therein and the
documents delivered pursuant hereto and thereto, constitute the entire agreement
between the Parties with respect to the subject matter contained herein or
therein, and supersede all prior agreements, negotiations, discussions,
understandings, writings and commitments between the Parties with respect to
such subject matter.
15.2. Choice of Law and Forum. This Agreement shall be governed by
-----------------------
and construed and enforced in accordance with the substantive laws (except for
any otherwise applicable conflicts of law provisions) of the State of Illinois
and the federal laws of the United States of America applicable therein, as
though all acts and omissions related hereto occurred in Illinois. Any lawsuit
arising from or related to this Agreement or any of the Operating Agreements
shall be brought only in the United States District Court for the Northern
District of Illinois or the Circuit Court of ▇▇▇▇ County, Illinois. To the
extent permissible by law, the Parties hereby consent to the jurisdiction and
venue of such courts. Each Party hereby waives, releases and agrees not to
assert, and agrees to cause its Affiliates to waive, release and not to assert,
any rights such Party or its Affiliates may have under any foreign law or
regulation that would be inconsistent with the terms of this Agreement as
governed by Illinois law.
15.3. Amendment. This Agreement shall not be amended, modified or
---------
supplemented except by a written instrument signed by an authorized
representative of each of the Parties.
15.4. Waiver. Any term or provision of this Agreement may be waived,
------
or the time for its performance may be extended, by the Party or Parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently given for the purposes of this Agreement if, as to any Party, it is
in writing signed by an authorized representative of such Party. The failure of
any Party to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, or in any way to affect the validity
of this Agreement or any part hereof or the
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right of any Party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
15.5. Partial Invalidity. Wherever possible, each provision hereof
------------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision or provisions shall be ineffective to the extent, but
only to the extent, of such invalidity, illegality or unenforceability without
invalidating the remainder of such provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
15.6. Execution in Counterparts. This Agreement may be executed in
-------------------------
one or more counterparts, each of which shall be deemed an original instrument,
but all of which shall be considered one and the same agreement, and shall
become binding when one or more counterparts have been signed by and delivered
to each of the Parties.
15.7. Successors and Assigns. (a) This Agreement and each
----------------------
Operating Agreement shall be binding upon and inure to the benefit of the
Parties hereto and thereto, respectively, and their successors and permitted
assigns; provided, however, that the rights of either Party under this Agreement
-------- -------
and each Operating Agreement shall not be assignable by such Party without the
prior written consent of the other Party. The successors and permitted assigns
hereunder shall include, without limitation, any permitted assignee as well as
the successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).
15.8. Third Party Beneficiaries. Except to the extent otherwise
-------------------------
provided in Section 10.5 or Article XII hereof or in any Operating Agreement,
------------ -----------
the provisions of this Agreement and each Operating Agreement are solely for the
benefit of the Parties and their respective Affiliates, successors and permitted
assigns and shall not confer upon any third Person any remedy, claim, liability,
reimbursement or other right in excess of those existing without reference to
this Agreement or any Operating Agreement. Nothing in this Agreement or any
Operating Agreement shall obligate TSC or eLoyalty to assist any eLoyalty
Employee to enforce any rights such employee may have with respect to any of the
employee benefits described in this Agreement.
15.9. Notices. All notices, requests, claims, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered (i) when delivered personally, (ii) if transmitted by
facsimile when confirmation of transmission is received, (iii) if sent by
registered or certified mail, postage prepaid, return receipt requested, on the
third business day after mailing or (iv) if sent by private courier when
received; and shall be addressed as follows:
If to TSC, to:
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Technology Solutions Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to eLoyalty, to:
eLoyalty Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as such Party may indicate by a notice delivered to the
other Party.
15.10. Performance. Each Party shall cause to be performed, and
-----------
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such Party.
15.11. Force Majeure. No Party shall be deemed in fault of this
-------------
Agreement or any Operating Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Operating
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, including, without limitation, acts of God, acts of civil
or military authority, embargoes, epidemics, war, riots, insurrections, fires,
explosions, earthquakes, floods, unusually severe weather conditions, labor
problems or unavailability of parts, or, in the case of computer systems, any
failure in electrical or air conditioning equipment. In the event of any such
excused delay, the time for performance shall be extended for a period equal to
the time lost by reason of the delay.
15.12. No Public Announcement. Neither TSC nor eLoyalty shall,
----------------------
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such Party shall be so obligated by law or the
rules of any stock exchange or quotation system, in which case the other Party
shall be advised and the Parties shall use commercially reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
--------
however, that the foregoing shall not preclude communications or disclosures
-------
necessary to implement the provisions of this
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Agreement or to comply with the accounting and SEC disclosure obligations or the
rules of any stock exchange.
15.13. Termination. Notwithstanding any provisions hereof, this
-----------
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board of Directors of
TSC without the prior written approval of any Person. In the event of such
termination, this Agreement shall forthwith become void and no Party shall have
any liability to any Person by reason of this Agreement, except that TSC shall
be liable for any costs and expenses, including attorneys' fees, incurred by
eLoyalty or its Subsidiaries prior to or arising out of such termination.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their authorized representatives as of the date first above written.
TECHNOLOGY SOLUTIONS COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board
eLOYALTY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer, Secretary and
Treasurer
Signature Page
to the
Reorganization Agreement