Exhibit 4.2
Technology Solutions Company
Non-Statutory
Stock Option Agreement
Technology Solutions Company, a Delaware corporation
(the "Company"), hereby grants to the employee whose name appears
below (the "Employee"), pursuant to the provisions of the
Technology Solutions Company 1996 Stock Incentive Plan (the
"Plan"), an option to purchase from the Company the (the
"Option") such number of shares of its Common Stock, $0.01 par
value ("Stock"), as set forth below at the price per share set
forth below but only upon and subject to the terms and conditions
set forth herein, in the Plan, and in Annex I hereto. All terms
and conditions set forth in Annex I and the Plan shall be deemed
to be incorporated herein in their entirety. All capitalized
terms used in this Agreement and not otherwise defined herein
shall have the respective meanings assigned to them in Annex I or
the Plan. The Option shall become null and void unless the
Employee shall accept this Agreement by executing it in the space
provided and returning it to the Company within 60 days after the
Option Date (as defined below).
Employee Name: _______________________
Number of Shares
Subject to Option: _______________________
Exercise Price
Per Share: _______________________
Exercise Provisions:
(a) The Option shall become exercisable (i) on the
first anniversary of the Option Date with respect to one-third of
the number of shares subject to the Option on the Option Date,
(ii) on the last day of each calendar month for 24 months
thereafter, beginning the month following the first anniversary
of the Option Date, with respect to an additional 1/36 of the
number of shares subject to the Option on the Option Date, and
(iii) as otherwise provided pursuant to paragraphs (b) through
(g) of the Agreement or Section 6.8 of the Plan.
(b) If, prior to the first anniversary of the Option
Date, the Employee's employment by the Company terminates for any
reason whatsoever (including, without limitation, involuntary
termination by the Company) other than death or Disability, the
Option shall terminate in its entirety upon the effective date of
Employee's termination of employment.
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(c) If, on or after the first anniversary of the
Option Date, the Employee's employment by the Company terminates
for any reason whatsoever (including, without limitation,
involuntary termination by the Company) other than death,
Disability, or Retirement, the Option shall remain exercisable
with respect to the number of shares subject to the Option that
are exercisable upon the effective date of the Employee's
termination of employment and may thereafter be exercised for a
period of 90 days from the effective date of the Employee's
termination of employment or until the Expiration Date, whichever
period is shorter, after which the Option shall terminate in its
entirety.
(d) If the Employee's employment by the Company
terminates by reason of the Employee's death, the Option shall
become exercisable as of the date of death with respect to any or
all of the shares subject to the Option on the Option Date and
may thereafter be exercised for a period of one year from the
date of death or until the Expiration Date, whichever period is
shorter, after which the Option shall terminate in its entirety.
(e) If the Employee's employment by the Company
terminates by reason of the Employee's Disability, the Option
shall become exercisable with respect to any or all of the shares
subject to the Option on the Option Date and may thereafter be
exercised for a period of 90 days from the effective date of the
Employee's termination of employment or until the Expiration
Date, whichever period is shorter, after which the Option shall
terminate in its entirety. For purposes of this Agreement,
"Disability" shall mean the inability of an individual to fully
perform the duties pertaining to his or her employment for a
continuous period in excess of 360 days, as determined by the
Board in its sole discretion.
(f) If the Employee's employment by the Company
terminates by reason of the Employee's retirement after the
Employee has completed five years of service as an Employee of
the Company and is at least 55 years of age ("Retirement"), the
Option shall remain exercisable with respect to the number of
shares subject to the Option that are exercisable upon the
effective date of Employee's Retirement, and may thereafter be
exercised for a period of two years from the effective date of
the Employee's Retirement or until the Expiration Date, whichever
period is shorter, after which the Option shall terminate in its
entirety.
(g) If the Employee dies following the termination of
the Employee's employment by the Company, the Option shall be
exercisable only to the extent that it is exercisable on the date
of the Employee's death and may thereafter be exercised only for
that period of time for which the Option is exercisable
immediately prior to the Employee's death.
General:
This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith. A copy
of the Plan is available upon request by contacting the Company's
Legal Department in the Chicago office. The Employee hereby
acknowledges that he or she has read a copy of the Plan and the
Prospectus. This Agreement may be executed in two counterparts
each of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed
this _____ day of _______________, 1999 (the "Option Date").
Accepted and agreed this
___ day of ________________, 1999 TECHNOLOGY SOLUTIONS COMPANY
_____________________________ By:__________________________
Name: Name:
Title:
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Annex I
to
Stock Option Agreement
1. Meaning of Certain Terms. As used herein, the
following terms shall have the meanings set forth below. "Board"
shall mean the Board of Directors of the Company. "Code" shall
mean the Internal Revenue Code of 1986, as amended. "Committee"
shall mean the Committee designated by the Board, consisting of
two or more members of the Board, each of whom shall be a "Non-
Employee Director" within the meaning of Rule 16b-3 under the
Exchange Act and an "outside director" within the meaning of
section 162(m) of the Code. References to this "Agreement," the
"Option" and "herein" shall be deemed to include the Stock Option
Agreement and this Annex I to Stock Option Agreement taken as a
whole. This Annex I and the Stock Option Agreement shall be
deemed to be one and the same instrument. References herein to
sections of the Code shall be deemed to refer to any successor
section of the Code or any successor internal revenue law. The
terms "employment" and "employment by the Company" shall have the
meanings set forth in Section 1.4 of the Plan; provided however
that "employment by the Company" shall also include employment by
eLoyalty Corporation, its subsidiaries or affiliates or any
successors thereto.
2. Time and Manner of Exercise of Option.
2.1. Term and Termination of Option. The maximum term
of the Option shall be the date which is 10 years after the
Option Date (the "Expiration Date"). The Option shall terminate,
to the extent not exercised or earlier terminated pursuant to the
terms of this Agreement, on its Expiration Date. In no event may
the Option be exercised, in whole or in part, after it
terminates.
2.2. Exercisability of Option. The Option shall become
exercisable on the date or dates as set forth in this Agreement.
2.3. Procedure for Exercise; Payment of Purchase Price.
Subject to the limitations set forth in this Agreement, the
Option may be exercised by delivery of written notice to the
Company specifying the number of shares to be purchased,
accompanied by payment in full of the purchase price for such
number of shares. The purchase price shall be payable either (A)
in cash, (B) by delivery of Mature Shares having an aggregate
Fair Market Value, determined as of the date of exercise, equal
to the aggregate purchase price payable by reason of such
exercise, (C) in cash by a broker-dealer acceptable to the
Company to whom the Employee has submitted an irrevocable notice
of exercise or (D) a combination of (A) and (B). The Company
shall have sole discretion to disapprove of an election pursuant
to any of clauses (B)-(D) and if the Employee is subject to
Section 16 of the Exchange Act, the Company may require that the
method of making such payment be in compliance with Section 16
and the rules and regulations thereunder. Any fraction of a
share of Stock which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid
in cash by the Employee. No certificate representing Stock shall
be delivered until the full purchase price therefor has been paid
(or arrangement made for such payment to the Company's
satisfaction).
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3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. Neither the Option
nor any right under this Agreement may be transferred by the
Employee other than (i) by will or the laws of descent and
distribution or (ii) to a Permitted Transferee, as hereinafter
defined. During the Employee's lifetime the Option is
exercisable only by the Employee or a Permitted Transferee. Upon
the Employee's death, the Option may be exercised by the
Employee's successor in interest in accordance with the terms and
conditions of this Agreement. Any other transfer or any
attempted assignment, pledge or hypothecation, whether or not by
operation of law, shall be void. The Option shall not be subject
to execution, attachment or other process, and no person shall be
entitled to exercise any rights of the Employee hereunder or
possess any rights hereunder by virtue of any attempted
execution, attachment or other process. For purposes of this
Agreement, a "Permitted Transferee" shall mean (i) the Employee's
spouse, (ii) any of the Employee's lineal descendants, (iii) a
trust or similar arrangement of which such spouse, a lineal
descendant of the Employee, or one or more of such persons are
the only current beneficiaries, or (iv) a charitable organization
described in Section 170(c) of the Code, provided that such
transferee has entered into a written agreement with the Company
authorizing the Company to withhold shares of Stock which would
otherwise be delivered to such person upon an exercise of the
Option to pay any federal, state, local or other taxes which may
be required to be withheld or paid in connection with such
exercise in the event that the Employee does not provide for an
arrangement satisfactory to the Company to assure that such taxes
will be paid.
3.2. Investment Representation. The Employee hereby
represents and covenants that (a) any share of Stock purchased
upon exercise of the Option will be purchased for investment and
not with a view to the distribution thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act")
unless such purchase has been registered under the Securities Act
or applicable state securities law; (b) any subsequent resale of
any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any
applicable state securities laws, or pursuant to an exemption
from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the
Employee shall submit a written statement, in form satisfactory
to counsel for the Company, to the effect that either
representation (a) above is true and correct as of the date of
purchase of any shares hereunder, or representation (b) above is
true and correct as of the date of any resale of any such shares,
as applicable. As a further condition precedent to any exercise
of the Option, the Employee shall comply with all regulations and
requirements of regulatory authority having control of or
supervision over the issuance of the shares and, in connection
therewith, shall execute any documents which the Company shall in
its sole discretion deem necessary or advisable. Unless covered
by an effective registration statement filed with the U.S.
Securities and Exchange Commission, all certificates representing
shares of Stock acquired pursuant to the exercise of the Option
shall bear the following legend:
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The shares represented by this certificate
have been acquired for investment and have
not been registered under the Securities Act
of 1933. The shares may not be sold or
transferred in the absence of such
registration or exemption therefrom under
said Act.
3.3. Withholding Taxes. As a condition precedent to
any exercise of the Option, the Employee shall, upon request by
the Company, pay to the Company in addition to the purchase price
of the Stock, such amount of cash as the Company may be required,
under all applicable federal, state or local laws or regulations,
to withhold and pay over as income or other withholding taxes
(the "Required Tax Payments") with respect to such exercise of
the Option. If the Employee shall fail to advance such Required
Tax Payments after request by the Company, the Company may, in
its discretion, deduct any such Required Tax Payments from the
amount to be paid hereunder, whether in Stock or in cash, or from
any other amount then or thereafter payable by the Company to the
Employee.
3.4. Adjustments in the Event of Capitalization
Changes. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to
holders of Stock other than a regular cash dividend, the number
and class of securities subject to the Option and the purchase
price per security, shall be appropriately adjusted by the
Committee. The Committee may adjust the Option using any method
which it deems appropriate, which may be the same as or different
than the method used to adjust other options granted under the
Plan with respect to such change in capitalization or event. The
decision of the Committee regarding any such adjustment shall be
final, binding and conclusive. If any such adjustment would
result in a fractional security being subject to the Option, the
Company shall pay the Employee, in connection with the first
exercise of the Option in whole or in part occurring after such
adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by
(ii) the excess, if any, of (A) the Fair Market Value on the
exercise date over (B) the exercise price of the Option.
3.5. Compliance with Applicable Law. The Option is
subject to the requirement that if at any time the Company
determines that the listing, registration or qualification of the
shares of Stock subject to the Option upon any securities
exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary
or desirable as a condition of, or in connection with, the
delivery of shares hereunder, such shares shall not be delivered
unless such listing, registration, qualification, consent,
approval or other action shall have been effected or obtained,
free of any conditions not acceptable to the Company. The Company
may require that certificates evidencing shares of Stock
delivered pursuant to the Option bear a legend indicating that
the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933,
as amended, and the rules and regulations thereunder.
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3.6. Indemnification. The Employee hereby covenants
and agrees to indemnify and hold harmless the Company, its
officers, directors, employees and agents from and against any
loss, claim, damage and expense (including, without limitation,
reasonable attorneys' fees) arising out of or based upon any
breach or failure by the Employee to comply with any
representation, warranty, covenant or agreement made by the
Employee herein or in any other document furnished by the
Employee in connection with this transaction.
3.7. Delivery of Certificates. Upon the exercise of
the Option in whole or in part, the Company shall deliver one or
more certificates representing the number of shares purchased
against full payment therefor. The Company shall pay all
original issue or transfer taxes and all fees and expenses
incident to such delivery, except as otherwise provided in
paragraph 3.3.
3.8. Option Confers No Rights as Stockholder. The
Employee shall have no rights as a stockholder of the Company
with respect to any shares of Stock or other equity security of
the Company which is subject to the Option hereunder unless and
until the Employee becomes a stockholder of record with respect
to such shares of Stock or equity security.
3.9. Option Confers No Rights to Continue Employment.
In no event shall the granting of the Option or its acceptance by
the Employee confer upon the Employee any right to continued
employment by the Company or any of its subsidiaries or
affiliates or affect in any manner the right of the Company or
any of its subsidiaries or affiliates to terminate the employment
of the Employee at any time without liability hereunder.
3.10. Decisions of Committee. Subject to Section 1.3
of the Plan, the Committee shall have the right to resolve all
questions which may arise in connection with the Option or its
exercise. Any interpretation, determination or other action made
or taken by the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.11. Company to Reserve Shares. The Company shall at
all times prior to the expiration or termination of the Option
reserve and keep available, either in its treasury or out of its
authorized but unissued shares of Stock, the full number of
shares subject to the Option from time to time.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The
Option is hereby designated as not constituting an "incentive
stock option" within the meaning of section 422A of the Code;
this Agreement shall be interpreted and treated consistently with
such designation.
4.2. Successors. This Agreement shall be binding upon
and inure to the benefit of any successor or successors of the
Company and any person or persons who shall acquire any rights
under paragraph 3.1.
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4.3. Notices. All notices, requests or other
communications provided for in this Agreement shall be made in
writing either (1) by actual delivery to the party entitled
thereto, or (2) by mailing in the U.S. mails to the last known
address of the party entitled thereto, via certified or
registered mail, return receipt requested. The notice shall be
deemed to be received in case (1) on the date of its actual
receipt by the party entitled thereto, and in case (2) on the
date of its mailing.
4.4. Governing Law. This Agreement, and all
determinations made and actions taken pursuant thereto, to the
extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving
effect to the principles of conflicts of laws.
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