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                                                                    EXHIBIT 10.1


                              ELOYALTY CORPORATION
                            1999 STOCK INCENTIVE PLAN

                                 I. INTRODUCTION

1.1      PURPOSES. The purposes of the 1999 Stock Incentive Plan (the "Plan") of
eLoyalty Corporation, a Delaware corporation (the "Company"), are to (i) align
the interests of the Company's stockholders and the recipients of awards under
this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, (ii) advance the interests of the Company by
attracting and retaining directors (including Non-Employee Directors), officers,
other key employees, consultants, independent contractors and agents and (iii)
motivate such persons to act in the long-term best interests of the Company's
stockholders.

1.2      CERTAIN DEFINITIONS.

         "AGREEMENT" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.

         "BOARD" shall mean the Board of Directors of the Company.

         "BONUS STOCK" shall mean shares of Common Stock which are not subject
to a Restriction Period or Performance Measures.

         "BONUS STOCK AWARD" shall mean an award of Bonus Stock under this Plan.

         "CHANGE IN CONTROL" shall have the meaning set forth in Section 6.8(b).

         "CODE" shall mean the Internal Revenue Code of 1986, as amended.

         "COMMITTEE" shall mean (i) prior to the date that the Company shall
become a separate publicly held corporation for purposes of section 162(m) of
the Code, the Committee under the Technology Solutions Company 1996 Stock
Incentive Plan and (ii) on or after such date, 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.

         "COMMON STOCK" shall mean the common stock, $.01 par value, of the
Company.

         "COMPANY" shall have the meaning set forth in Section 1.1.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

         "FAIR MARKET VALUE" shall mean the closing transaction price of a share
of Common Stock as reported by The Nasdaq Stock Market or the principal national
securities exchange on

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which the Common Stock is then traded, on the date as of which such value is
being determined, or, if there shall be no reported transactions for such date,
on the next preceding date for which transactions were reported; provided,
however, that if (i) the determination date occurs prior to the initial date
that shares of Common Stock are traded on The Nasdaq Stock Market or a national
securities exchange or (ii) the Fair Market Value for any date cannot be so
determined, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.

         "FREE-STANDING SAR" shall mean an SAR which is not issued in tandem
with, or by reference to, an option and which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.

         "INCENTIVE STOCK OPTION" shall mean an option to purchase shares of
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, and which is designated as an Incentive Stock Option.

         "INCUMBENT BOARD" shall have the meaning set forth in Section 6.8(b)(2)
hereof.

         "MATURE SHARES" shall mean shares of Common Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder has held for at least six months.

         "NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is
not an officer or employee of the Company or any Subsidiary; provided, however,
that prior to the Reference Date, "Non-Employee Director" shall mean any
director of the Company who is not an officer or employee of the Company, TSC,
any subsidiary of TSC or any Subsidiary.

         "NON-STATUTORY STOCK OPTION" shall mean a stock option which is not an
Incentive Stock Option.

         "OUTSTANDING COMMON STOCK" shall have the meaning set forth in Section
6.8(b)(1) hereof.

         "OUTSTANDING VOTING SECURITIES" shall have the meaning set forth in
Section 6.8(b)(1) hereof.

         "PERFORMANCE MEASURES" shall mean the criteria and objectives,
established by the


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Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of an option or SAR, (ii) as a condition to
the grant of a Stock Award or (iii) during the applicable Restriction Period or
Performance Period as a condition to the holder's receipt, in the case of a
Restricted Stock Award, of the shares of Common Stock subject to such award, or,
in the case of a Performance Share Award, of the shares of Common Stock subject
to such award and/or of payment with respect to such award. In the sole
discretion of the Committee, the Committee may amend or adjust the Performance
Measures or other terms and conditions of an outstanding award in recognition of
unusual or nonrecurring events affecting the Company or its financial statements
or changes in law or accounting principles. Such criteria and objectives may
include one or more of the following: the attainment by a share of Common Stock
of a specified Fair Market Value for a specified period of time, earnings per
share, return to stockholders (including dividends), operating income, operating
income margin, return on equity, earnings of the Company, revenues, market
share, cash flow or cost reduction goals, or any combination of the foregoing.
If the Committee desires that compensation payable pursuant to any award subject
to Performance Measures be "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code, the Performance Measures (i) shall be
established by the Committee no later than 90 days after the beginning of the
Performance Period or Restriction Period, as applicable (or such other time
designated by the Internal Revenue Service) and (ii) shall satisfy all other
applicable requirements imposed under Treasury Regulations promulgated under
Section 162(m) of the Code, including the requirement that such Performance
Measures be stated in terms of an objective formula or standard.

         "PERFORMANCE PERIOD" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.

         "PERFORMANCE SHARE" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu of
all or a portion thereof, the Fair Market Value of such Performance Share in
cash.

         "PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares
under this Plan.

         "PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.

         "REFERENCE DATE" shall mean the initial date that the Company shall be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act.

         "RESTRICTED STOCK" shall mean shares of Common Stock which are subject
to a Restriction Period.


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         "RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under
this Plan.

         "RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.

         "SAR" shall mean a stock appreciation right which may be a
Free-Standing SAR or a Tandem SAR.

         "SPIN-OFF" shall mean a pro rata distribution by TSC to its
stockholders of all of the shares of Common Stock then owned by TSC.

         "STOCK AWARD" shall mean a Restricted Stock Award or a Bonus Stock
Award.

         "SUBSIDIARY" shall have the meaning set forth in Section 1.4.

         "SUBSTITUTE OPTIONS" shall have the meaning set forth in Section 2.4.

         "TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.

         "TAX DATE" shall have the meaning set forth in Section 6.5.

         "TEN PERCENT HOLDER" shall have the meaning set forth in Section
2.1(a).

         "TSC" shall mean Technology Solutions Company, a Delaware corporation,
and its successors.

         "TSC OPTIONS" shall have the meaning set forth in Section 2.4.

1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any one or
a combination of the following awards may be made under this Plan to eligible
persons: (i) options to purchase shares of Common Stock in the form of Incentive
Stock Options or Non-Statutory


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Stock Options, (ii) SARs in the form of Tandem SARs or Free-Standing SARS, (iii)
Stock Awards in the form of Restricted Stock or Bonus Stock and (iv) Performance
Shares. The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and determine the form, amount and timing
of each award to such persons and, if applicable, the number of shares of Common
Stock, the number of SARs and the number of Performance Shares subject to such
an award, the exercise price or base price associated with the award, the time
and conditions of exercise or settlement of the award and all other terms and
conditions of the award, including, without limitation, the form of the
Agreement evidencing the award. The Committee may, in its sole discretion and
for any reason at any time, subject to the requirements imposed under Section
162(m) of the Code and regulations promulgated thereunder in the case of an
award intended to be qualified performance-based compensation, take action such
that (i) any or all outstanding options and SARs shall become exercisable in
part or in full, (ii) all or a portion of the Restriction Period applicable to
any outstanding Restricted Stock Award shall lapse, (iii) all or a portion of
the Performance Period applicable to any outstanding Performance Share Award
shall lapse and (iv) the Performance Measures applicable to any outstanding
Restricted Stock Award (if any) and to any outstanding Performance Share Award
shall be deemed to be satisfied at the maximum or any other level. The Committee
shall, subject to the terms of this Plan, interpret this Plan and the
application thereof, establish rules and regulations it deems necessary or
desirable for the administration of this Plan and may impose, incidental to the
grant of an award, conditions with respect to the award, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be final, binding and conclusive.

         The Committee may delegate some or all of its power and authority
hereunder to the President or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the grant of an award to any
person who is a "covered employee" within the meaning of Section 162(m) of the
Code or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period an award hereunder to such employee would be
outstanding or (ii) the selection for participation in this Plan of an officer
or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer or other
person.


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1.4 ELIGIBILITY. Participants in this Plan shall consist of such directors,
officers, other key employees, consultants, independent contractors and agents
of the Company and its subsidiaries (individually a "Subsidiary" and
collectively the "Subsidiaries") and, prior to the Spin-Off, directors, officers
and other key employees of TSC and its subsidiaries, as the Committee in its
sole discretion may select from time to time and such other persons receiving
Substitute Options. For purposes of this Plan, references to employment shall
also mean an agency or independent contractor relationship and references to
employment by the Company shall also mean employment by a Subsidiary.
Notwithstanding the preceding sentence, in the case of (i) options granted
hereunder prior to the Reference Date and (ii) Substitute Options, references to
employment with the Company shall include all employment with TSC or any of its
subsidiaries. The Committee's selection of a person to participate in this Plan
at any time shall not require the Committee to select such person to participate
in this Plan at any other time. Without limiting their eligibility for
discretionary awards under the Plan, as described above, Non-Employee Directors
of the Company shall be eligible to participate in this Plan in accordance with
Section V. Notwithstanding anything contained herein to the contrary, no person
other than an employee of the Company or a Subsidiary may be granted an
Incentive Stock Option hereunder.

1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 6.7, the
total number of shares of Common Stock initially available for all grants of
awards over the term of the Plan, other than Substitute Options, shall be
5,340,000. As of the first day of each fiscal year of the Company beginning on
or after January 1, 2000, the total number of shares of Common Stock available
for all grants under this Plan, other than Incentive Stock Options, shall
automatically increase by an amount equal to five percent (5%) of the number of
shares of Common Stock then outstanding. To the extent that shares of Common
Stock subject to an outstanding option granted hereunder (except to the extent
shares of Common Stock are issued or delivered by the Company in connection with
the exercise of a Tandem SAR), Free-Standing SAR Stock Award or Performance
Share are not issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such award or by reason of the delivery or
withholding of shares of Common Stock to pay all or a portion of the exercise
price of an award, if any, or to satisfy all or a portion of the tax withholding
obligations relating to an award, then such shares of Common Stock shall again
be available under this Plan.

         Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.

         To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options or SARS, Stock Awards or Performance Share Awards or a
combination thereof may be granted to any person during (i) the 1999 fiscal year
shall be 750,000 and (ii) any other fiscal year of the


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Company shall be 300,000, subject to adjustment as provided in Section 6.7.


                 II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

2.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is granted to a person
other than an employee of the Company or a Subsidiary or that is otherwise not
an Incentive Stock Option, shall be a Non-Statutory Stock Option. Each Incentive
Stock Option shall be granted within ten years of the effective date of this
Plan. To the extent that the aggregate Fair Market Value (determined as of the
date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or subsidiary as defined in Section 424 of the Code)
exceeds the amount (currently $100,000) established by the Code, such options
shall constitute Non-Statutory Stock Options.

         Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:

         (a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of an Incentive Stock Option shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant of such
option; provided further, that if an Incentive Stock Option shall be granted to
any person who, at the time such option is granted, owns capital stock
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Company (or of any parent or subsidiary) (a "Ten
Percent Holder"), the purchase price per share of Common Stock shall be the
price (currently 110% of Fair Market Value) required by the Code in order to
constitute an Incentive Stock Option.

         (b) Option Period and Exercisability. The period during which an option
may be exercised shall be determined by the Committee; provided, however, that
no Incentive Stock Option shall be exercised later than ten years after its date
of grant; provided further, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five
years after its date of grant. The Committee may, in its discretion, establish
Performance Measures which shall be satisfied or met as a condition to the grant
of an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with


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respect to whole shares of Common Stock.

         (c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) 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 optionee has submitted an irrevocable notice of exercise
or (D) a combination of (A) and (B), in each case to the extent set forth in the
Agreement relating to the option, (ii) if applicable, by surrendering to the
Company any Tandem SARs which are cancelled by reason of the exercise of the
option and (iii) by executing such documents as the Company may reasonably
request. The Company shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(D) and in the case of an optionee who 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 Common 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 optionee. No certificate representing
Common Stock shall be delivered until the full purchase price therefor has been
paid (or arrangement made for such payment to the Company's satisfaction).

2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant SARs
to such eligible persons as may be selected by the Committee. The Agreement
relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.

         SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:

         (a) Number of SARs and Base Price. The number of SARs subject to an
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR shall be determined by the Committee.

         (b) Exercise Period and Exercisability. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met


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as a condition to the grant of an SAR or to the exercisability of all or a
portion of an SAR. The Committee shall determine whether an SAR may be exercised
in cumulative or non-cumulative installments and in part or in full at any time.
An exercisable SAR, or portion thereof, may be exercised, in the case of a
Tandem SAR, only with respect to whole shares of Common Stock and, in the case
of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR
is exercised for shares of Restricted Stock, a certificate or certificates
representing such Restricted Stock shall be issued in accordance with Section
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the exercise of an SAR for shares of Common Stock, including Restricted Stock,
the holder of such SAR shall have no rights as a stockholder of the Company with
respect to the shares of Common Stock subject to such SAR and shall have rights
as a stockholder of the Company in accordance with Section 6.10.

         (c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.

2.3 TERMINATION OF EMPLOYMENT OR SERVICE. Subject to Section 1.4, all of the
terms relating to the exercise, cancellation or other disposition of an option
or SAR upon a termination of employment with or service to the Company of the
holder of such option or SAR, as the case may be, whether by reason of
disability, retirement, death or other termination, shall be determined by the
Committee. Such determination shall be made at the time of the grant of such
option or SAR, as the case may be, and shall be specified in the Agreement
relating to such option or SAR.

2.4 SUBSTITUTE AWARDS. In the event of a Spin-Off, the Committee shall be
authorized to grant substitute options ("Substitute Options") to purchase Common
Stock, in accordance with the terms hereof, to holders of options to acquire
common stock of TSC ("TSC Options"). The aggregate number of shares of Common
Stock subject to Substitute Options shall not exceed the aggregate number of
shares of Common Stock that would be distributed in the Spin-Off with respect to
shares of TSC stock equal in number to the shares subject to TSC Options
immediately prior to the Spin-Off. The Committee shall determine the exercise
price and number of shares of Common Stock subject to each Substitute Option in
a manner that preserves the economic value of the TSC Option to which such
Substitute Option relates. The terms and conditions of each Substitute Option,
including, without limitation, the expiration date of the option, the time or
times when, and the manner in which, such Substitute Option shall be
exercisable, the duration of the exercise period, the method of exercise,
settlement and payment, and, subject to Section 1.4, the rules in the event of
termination of employment, shall be the same as those of the TSC Option


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to which the Substitute Option relates.

                                III. STOCK AWARDS

3.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards to
such eligible persons as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a Restricted
Stock Award or Bonus Stock Award.

3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.

         (a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.

         (b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of or service to
the Company during the specified Restriction Period and for the forfeiture of
the shares of Common Stock subject to such award (x) if specified Performance
Measures are not satisfied or met during the specified Restriction Period or (y)
if the holder of such award does not remain continuously in the employment of or
service to the Company during the specified Restriction Period.

         Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.

         (c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award may be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the shares of
Common Stock represented by such certificate is subject to the restrictions,
terms and conditions of this Plan and the Agreement relating to the Restricted
Stock Award. All such certificates shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Company, which would permit transfer to the
Company of all or a portion of the shares of Common Stock subject to the


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Restricted Stock Award in the event such award is forfeited in whole or in part.
Upon termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), or upon the grant of a Bonus
Stock Award, in each case subject to the Company's right to require payment of
any taxes in accordance with Section 6.5, a certificate or certificates
evidencing ownership of the requisite number of shares of Common Stock shall be
delivered to the holder of such award.

         (d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made.

         (e) Awards to Certain Executive Officers. Notwithstanding any other
provision of this Article III, and only to the extent necessary to ensure the
deductibility of the award to the Company, the Fair Market Value of the number
of shares of Common Stock subject to a Stock Award granted to a "covered
employee" within the meaning of Section 162(m) of the Code shall not exceed
$250,000 (i) at the time of grant in the case of a Stock Award granted upon the
attainment of Performance Measures or (ii) in the case of a Restricted Stock
Award with Performance Measures which shall be satisfied or met as a condition
to the holder's receipt of the shares of Common Stock subject to such award, on
the earlier of (x) the date on which the Performance Measures are satisfied or
met and (y) the date the holder makes an election under Section 83(b) of the
Code.

3.3 TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms relating to the
satisfaction of Performance Measures and the termination of the Restriction
Period relating to a Restricted Stock Award, or any cancellation or forfeiture
of such Restricted Stock Award upon a termination of employment with or service
to the Company of the holder of such Restricted Stock Award, whether by reason
of disability, retirement, death or other termination, shall be set forth in the
Agreement relating to such Restricted Stock Award.

                          IV. PERFORMANCE SHARE AWARDS

4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.

4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall be subject
to the


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following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.

         (a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.

         (b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.

         (c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on or the deemed
reinvestment of any deferred dividend equivalents, with respect to the number of
shares of Common Stock subject to such award. If a Performance Share Award is
settled in shares of Restricted Stock, a certificate or certificates
representing such Restricted Stock shall be issued in accordance with Section
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the settlement of a Performance Share Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a stockholder
of the Company with respect to the shares of Common Stock subject to such award
and shall have rights as a stockholder of the Company in accordance with Section
6.10.

4.3 TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms relating to the
satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Share Award, or any cancellation or forfeiture
of such Performance Share Award upon a termination of employment with the
Company of the holder of such Performance Share Award, whether by reason of
disability, retirement, death or other termination, shall be set forth in the
Agreement relating to such Performance Share Award.


                V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS

5.1 ELIGIBILITY. Each Non-Employee Director shall be granted options to purchase
shares of Common Stock in accordance with this Article V. All options granted
under this Article V ("Automatic Non-Employee Director's Options") shall
constitute Non-Statutory Stock Options.


                                      -12-
<PAGE>   13

5.2 GRANTS OF STOCK OPTIONS. Each Non-Employee Director shall be granted
Automatic Non- Employee Director's Options as follows:

         (a) Automatic Initial Grant of Options. Each person who becomes a
Non-Employee Director shall be automatically awarded and issued on the date of
his or her first election to the Board, without further action of the Board or
the Committee, an Automatic Non-Employee Director's Option to purchase 25,000
shares of Common Stock. An option described in this Section 5.2(a) shall
hereinafter be referred to as an "Initial Grant."

         (b) Automatic Annual Grant of Options. On the day immediately following
the date of each annual meeting of stockholders of the Company (the "Current
Annual Meeting"), beginning with the annual meeting that occurs in 2000, each
Non-Employee Director (other than a Non-Employee Director who received an
Initial Grant at the Current Annual Meeting) shall be automatically awarded and
issued on such date, without further action of the Board or the Committee, an
Automatic Non-Employee Director's Option to purchase 6,000 shares of Common
Stock (an "Annual Grant"); provided that in the case of an Annual Grant to a
Non-Employee Director who received an Initial Grant within the twelve-month
period ending on the date of the Current Annual Meeting, the number of shares
subject to such Annual Grant shall be 6,000 multiplied by a fraction, the
numerator of which is the number of days in the period beginning on the day
after the date of such Initial Grant and ending on the day of the Current Annual
Meeting, and the denominator of which is 365.

         (c) Option Price. The purchase price per share of Common Stock subject
to each Automatic Non-Employee Director's Option shall be 100 percent of the
Fair Market Value of a share of Common Stock on the date such option is
automatically granted.

         (d) Exercisability. Except as otherwise provided herein, each Automatic
Non-Employee Director's Option shall not be exercisable until the last day of
the calendar month following the calendar month in which such option is granted
(the "Initial Date of Exercisability"). Each Initial Grant shall become
exercisable incrementally on its Initial Date of Exercisability and on the last
day of each of the next 47 calendar months following the Initial Date of
Exercisability with respect to 1/48 of the shares of Common Stock subject to the
Initial Grant on the date of its grant. Each Annual Grant shall become
exercisable incrementally on its Initial Date of Exercisability and on the last
day of each of the next 11 calendar months following the Initial Date of
Exercisability with respect to one-twelfth of the shares of Common Stock subject
to such Annual Grant on the date of its grant. An exercisable option, or portion
thereof, may be exercised in whole or in part only with respect to whole shares
of Common Stock. Automatic Non-Employee Director's Options shall be exercisable
in accordance with Section 2.1(c).

         (e) Options Granted Prior to Reference Date. Notwithstanding Section
5.2(d), no option granted prior to the Reference Date pursuant to this Article V
shall be exercisable until the


                                      -13-
<PAGE>   14

Reference Date, at which time such option shall become exercisable for the same
number of shares for which such option would have been exercisable under Section
5.2(d) as of the Reference Date. Such option shall thereafter continue to become
exercisable in accordance with Section 5.2(d). The number of shares of Common
Stock subject to each such option, and the exercise price thereof, shall be
adjusted in accordance with the Agreement setting forth the terms of such
option.

5.3 OPTION PERIOD AND TERMINATION OF DIRECTORSHIP. (a) Term and Termination of
Option. The maximum term of each Automatic Non-Employee Director's Option shall
be the date which is 10 years after the date on which it was granted (the
"Expiration Date"). Each Automatic Non-Employee Director's Option shall
terminate, to the extent not exercised or earlier terminated pursuant to the
terms of this Article V, on its Expiration Date. In no event may an Automatic
Non-Employee Director's Option be exercised, in whole or in part, after it
terminates.

                  (b) Termination of Directorship Other than by Death,
Disability or Retirement. If the holder of an Automatic Non-Employee Director's
Option ceases to be a director of the Company for any reason other than death,
Disability, or Retirement, the option shall remain exercisable with respect to
the number of shares subject to such option that are exercisable upon the
effective date of such holder's ceasing to be a director and may thereafter be
exercised for a period of 90 days from the effective date of such holder's
ceasing to be a director or until the Expiration Date, whichever period is
shorter, after which the Automatic Non-Employee Director's Option shall
terminate in its entirety.

                  (c) Death. If the holder of an Automatic Non-Employee
Director's Option ceases to be a director of the Company by reason of death, the
option shall become exercisable as of the date of death with respect to any or
all of the shares subject to such option 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 Automatic Non-Employee Director's
Option shall terminate in its entirety.

                  (d) Disability. If the holder of an Automatic Non-Employee
Director's Option ceases to be a director of the Company by reason of
Disability, the option shall become exercisable as of the effective date of such
holder's ceasing to be a director with respect to any or all of the shares
subject to such option and may thereafter be exercised for a period of 90 days
from the effective date of such termination or until the Expiration Date,
whichever period is shorter, after which the Automatic Non-Employee Director's
Option shall terminate in its entirety. For purposes of this Article V,
"Disability" shall mean the inability of an individual to fully perform the
duties of a director of the Company for a continuous period in excess of 360
days, as determined by the Board in its sole discretion.

                  (e) Retirement. If the holder of an Automatic Non-Employee
Director's Option


                                      -14-
<PAGE>   15

ceases to be a director of the Company by reason of retirement after such holder
has completed five years of service as a director 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 such option that are exercisable upon the
effective date of such Retirement, and may thereafter be exercised for a period
of two years from the effective date of such Retirement or until the Expiration
Date, whichever period is shorter, after which the Automatic Non-Employee
Director's Option shall terminate in its entirety.

                  (f) Death After Termination of Directorship. If the holder of
an Automatic Non-Employee Director's Option dies after he or she has ceased to
be a director of the Company, the option shall be exercisable only to the extent
that it is exercisable on the date of such holder's death and may thereafter be
exercised only for that period of time for which the option is exercisable
immediately prior to the holder's death pursuant to Sections 5.3(b) through (e).


                                   VI. GENERAL

6.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholder of the Company for approval and shall become effective on the date
of such approval. This Plan shall terminate ten years after its effective date,
unless terminated earlier by the Board. Termination of this Plan shall not
affect the terms or conditions of any award granted prior to termination.

6.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) and Section 422 of the Code;
provided, however, that no amendment shall be made without stockholder approval
if such amendment would (a) increase the maximum number of shares of Common
Stock available under this Plan (subject to Section 6.7), (b) effect any change
inconsistent with Section 422 of the Code or (c) extend the term of this Plan.
No amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.

6.3 AGREEMENT. Each award under this Plan shall be evidenced by an Agreement
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by the Company and the recipient of such
award and, upon execution by each party and delivery of the Agreement to the
Company, such award shall be effective as of the effective date set forth in the
Agreement.

6.4 NON-TRANSFERABILITY OF AWARDS. Unless otherwise specified in the Agreement
relating to an award, no award shall be transferable other than by will, the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the first
sentence of this Section 6.4, or the Agreement relating to an award, each


                                      -15-
<PAGE>   16

award may be exercised or settled during the holder's lifetime only by the
holder or the holder's legal representative or similar person. Except to the
extent permitted by the first sentence of this Section 6.4 or the Agreement
relating to an award, no award may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any such award, other than as permitted by the first
sentence of this Section 6.4 or the Agreement relating to an award, such award
and all rights thereunder shall immediately become null and void.

6.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
payable to a holder, in the minimum amount necessary to satisfy any such
obligation or (ii) the holder may satisfy any such obligation by any of the
following means: (A) a cash payment to the Company, (B) delivery to the Company
of Mature Shares having an aggregate Fair Market Value, determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation, (C)
authorizing the Company to withhold whole shares of Common Stock which would
otherwise be delivered having an aggregate Fair Market Value, determined as of
the Tax Date, or withhold an amount of cash which would otherwise be payable to
a holder, equal to the minimum amount necessary to satisfy any such obligation,
(D) in the case of the exercise of any option, a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (E) any combination of (A), (B), and (C), in each case to
the extent set forth in the Agreement relating to the award; provided, however,
that the Company shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(E) and that in the case of a holder who is
subject to Section 16 of the Exchange Act, the Company may require that the
method of satisfying such an obligation be in compliance with Section 16 and the
rules and regulations thereunder. Any fraction of a share of Common Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.

6.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award 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
thereunder, 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


                                      -16-
<PAGE>   17

Company. The Company may require that certificates evidencing shares of Common
Stock delivered pursuant to any award made hereunder 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.

6.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security, the number of securities subject to each option to
be granted to Non-Employee Directors pursuant to Article V, the terms of each
outstanding SAR, the number and class of securities subject to each outstanding
Stock Award, and the terms of each outstanding Performance Share Award shall be
appropriately adjusted by the Committee. The decision of the Committee regarding
any such adjustment shall be final, binding and conclusive. If any such
adjustment would result in a fractional security being (a) available under this
Plan, such fractional security shall be disregarded, or (b) subject to an award
under this Plan, the Company shall pay the holder of such award, in connection
with the first vesting, exercise or settlement of such award 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 vesting, exercise or
settlement date over (B) the exercise or base price, if any, of such award.

6.8      CHANGE IN CONTROL.

         (a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control, the Board may, but shall not be required to,
make such adjustments to outstanding awards hereunder as it deems appropriate,
including, without limitation, electing that each outstanding award shall be
surrendered to the Company by the holder thereof, and that each such award shall
immediately be cancelled by the Company, and that the holder shall receive,
within a specified period of time from the occurrence of the Change in Control,
a cash payment from the Company in an amount equal to:

                  (i) in the case of an option, the number of shares of Common
Stock then subject to such option, multiplied by the excess, if any, of the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock subject to
the option,


                                      -17-
<PAGE>   18

                  (ii) in the case of a Free-Standing SAR, the number of shares
of Common Stock then subject to such SAR, multiplied by the excess, if any, of
the greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the base price of the SAR, and

                  (iii) in the case of a Restricted Stock Award or Performance
Award, the number of shares of Common Stock or the number of Performance Shares,
as the case may be, then subject to such award, multiplied by the greater of (A)
the highest per share price offered to stockholders of the Company in any
transaction whereby the Change in the Control takes place or (B) the Fair Market
Value of a share of Common Stock on the date of occurrence of the Change in
Control.

         In the event of a Change in Control in which options are cancelled,
each Tandem SAR related to a cancelled option shall be surrendered by the holder
thereof and shall be cancelled simultaneously with the cancellation of the
related option. The Company may, but is not required to, cooperate with any
person who is subject to Section 16 of the Exchange Act to assure that any cash
payment in accordance with the foregoing to such person is made in compliance
with Section 16 and the rules and regulations thereunder.

         In the event of a Change in Control, the Board may, but shall not be
required to, substitute for each share of Common Stock available under this
Plan, whether or not then subject to an outstanding award, the number and class
of shares into which each outstanding share of Common Stock shall be converted
pursuant to such Change in Control. In the event of any such substitution, the
purchase price per share in the case of an option and the base price in the case
of an SAR shall be appropriately adjusted by the Committee.

         (b) Prior to the consummation of a Spin-Off, "Change in Control" shall
mean any event, other than a Spin-Off, after which TSC is the beneficial owner
of less than a majority of the Outstanding Voting Securities. After the
consummation of a Spin-Off, "Change in Control" shall mean one or more of the
following events:

         (1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or (ii) the combined voting power of the then outstanding securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (A) any
acquisition directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Company),


                                      -18-
<PAGE>   19

(B) any acquisition by the Company, (C) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by a corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (3) of this Section 6.8(b); provided further, that for purposes of
clause (B), if any Person (other than the Company or any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of 25% or more of
the Outstanding Common Stock or 25% or more of the Outstanding Voting Securities
by reason of an acquisition by the Company, and such Person shall, after such
acquisition by the Company, become the beneficial owner of any additional shares
of the Outstanding Common Stock or any additional Outstanding Voting Securities
and such beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;

         (2) individuals who, as of the date of the Spin-Off constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual who becomes a director of
the Company subsequent to the date of the Spin-Off whose election, or nomination
for election by the Company's stockholders, was approved by the vote of at least
a majority of the directors then comprising the Incumbent Board shall be deemed
a member of the Incumbent Board; and provided further, that any individual who
was initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;

         (3) the consummation of a reorganization, merger or consolidation of
the Company or sale or other disposition of all or substantially all of the
assets of the Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior
to such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock, and the
combined voting power of the outstanding securities of such corporation entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each other as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Common Stock and the Outstanding Voting Securities, as the case may
be, (ii) no Person (other than: the Company; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 25% or more of the


                                      -19-
<PAGE>   20

Outstanding Common Stock or the Outstanding Voting Securities, as the case may
be) will beneficially own, directly or indirectly, 25% or more of, respectively,
the outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding securities
of such corporation entitled to vote generally in the election of directors and
(iii) individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or

         (4) the consummation of a plan of complete liquidation or dissolution
of the Company.

         (c) (1) With respect to any optionee who is subject to Section 16 of
the Exchange Act, notwithstanding the exercise period contained in any Agreement
to which such optionee is a party and notwithstanding the expiration date of the
term of such option (other than an Incentive Stock Option), in the event the
Company is involved in a business combination which is intended to be treated as
a pooling of interests for financial accounting purposes (a "Pooling
Transaction") or pursuant to which such optionee receives a substitute option to
purchase securities of any entity, including an entity directly or indirectly
acquiring the Company, then each option (or option in substitution thereof) held
by such optionee shall be exercisable to the extent set forth in the Agreement
evidencing such option until and including the latest of (x) the expiration date
of the term of the option, (y) the date which is six months and one day after
the consummation of such business combination and (z) the date which is ten
business days after the date of expiration of any period during which such
optionee may not dispose of a security issued in the Pooling Transaction in
order for the Pooling Transaction to be accounted for as a pooling of interests;
and
         (2) With respect to any holder of an SAR (other than an SAR which may
be settled only for cash) who is subject to Section 16 of the Exchange Act,
notwithstanding the exercise periods set forth in any Agreement to which such
holder is a party, and notwithstanding the expiration date of the term of such
SAR (other than a Tandem SAR which is related to an Incentive Stock Option), in
the event the Company is involved in a Pooling Transaction or pursuant to which
such holder receives a substitute SAR relating to any entity, including an
entity directly or indirectly acquiring the Company, then each such SAR (or SAR
in substitution thereof) held by such holder shall be exercisable to the extent
set forth in the Agreement evidencing such SAR until and including the latest of
(x) the expiration date of the term of such SAR, (y) the date which is six
months and one day after the consummation of such business combination and (z)
the date which is ten business days after the date of expiration of any period
during which such holder many not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests.

6.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, TSC, or
any of their subsidiaries or affiliates or affect in any manner the right of the
Company, TSC, or any of their subsidiaries or affiliates to


                                      -20-
<PAGE>   21

terminate the employment of any person at any time without liability hereunder.

6.10 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of Common
Stock or equity security.

6.11 GOVERNING LAW. This Plan, each award hereunder and the related 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.


                                      -21-
<PAGE>   22

                              AMENDMENT NUMBER ONE
                                     TO THE
                              eLOYALTY CORPORATION
                            1999 STOCK INCENTIVE PLAN


                  WHEREAS, eLoyalty Corporation (the "Company") has heretofore
adopted and maintains the eLoyalty Corporation 1999 Stock Incentive Plan (the
"Plan"); and

                  WHEREAS, the Company desires to amend the Plan in certain
respects.

                  NOW, THEREFORE, pursuant to the power of amendment contained
in Section 6.2 of the Plan, the Plan is hereby amended as follows, subject to
approval by the stockholders of the Company pursuant to Section 6.2 of the Plan:

                  1. Effective as of the date hereof, Section 1.4 of the Plan is
hereby amended by deleting the second sentence thereof, and inserting the
following sentence in lieu thereof:

         For purposes of this Plan, references to employment shall also mean
         service as a director or pursuant to an agency or independent
         contractor relationship, and references to employment by the Company
         shall also mean employment by a Subsidiary or such other employer
         designated in the Agreement evidencing the award.

                  2. Effective as of the date hereof, Section 2.4 of the Plan is
hereby amended by

<PAGE>   23

deleting the second and third sentences thereof, and inserting the following
sentences in lieu thereof:

         Such Substitute Options shall not be subject to the limit on the
         aggregate number of shares of Common Stock available for grants of
         awards under the Plan set forth in Section 1.5. The number of shares of
         Common Stock subject to Substitute Options shall be determined as
         follows:

                           (a) eLoyalty Employees and Directors. A Substitute
                  Option shall be granted to each holder of a TSC Option who,
                  immediately after the Spin-Off, is an employee or director of
                  the Company (but who is not also a director of TSC). The
                  number of shares of Common Stock subject to such Substitute
                  Option shall be determined by multiplying the number of shares
                  subject to the TSC Option to which such Substitute Option
                  relates by a ratio, the numerator of which is the trading
                  price of a share of TSC common stock, traded "regular way,"
                  and the denominator of which is the trading price of a share
                  of Common Stock, traded on a "when-issued" basis, in each case
                  over a fixed period of time determined by the Committee on or
                  around the record date of the Spin-Off.

                           (b) Other TSC Option Holders. A Substitute Option
                  shall be granted to each holder of a nonqualified TSC Option
                  granted prior to June 22, 1999 who, immediately after the
                  Spin-Off, is either (i) an employee or director of TSC or (ii)
                  an employee or director of neither TSC nor the Company. The
                  number of shares of Common Stock subject to such Substitute
                  Option shall equal the number of shares of Common Stock that
                  would be distributed in the Spin-Off with respect to a number
                  of shares of TSC common stock equal to the number of shares
                  subject to the TSC Option to which such Substitute Option
                  relates immediately prior to the Spin-Off.

         The Committee shall determine the exercise price of each Substitute
         Option in a manner that preserves the economic value of the TSC Option
         to which such Substitute Option relates.

                  3. Effective as of the date hereof, Section 5.1 of the Plan is
hereby amended by adding the following sentence at the end thereof:

         Notwithstanding anything to the contrary herein, any Non-Employee
         Director who was granted an option pursuant to Section 2.1 hereof on or
         around July 1, 1999

<PAGE>   24

         shall not be eligible to receive Automatic Non-Employee Director's
         Options hereunder.

                  4. Effective as of the date hereof, Section 5.2 of the Plan is
hereby amended by deleting the first sentence thereof, and inserting the
following sentence in lieu thereof:

                           Except as provided otherwise in Section 5.1, each
         Non-Employee Director shall be granted Automatic Non-Employee
         Director's Options as follows:

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by its duly authorized officer on this 16th day of December, 1999.


                                           eLOYALTY CORPORATION

                                           By: /s/ Paul Peterson
                                               -----------------------------