Document:

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                                                                    EXHIBIT 10.2

                           ELOYALTY VENTURES, L.L.C.

                              OPERATING AGREEMENT

                           DATED AS OF JULY 21, 2000

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                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE 1    DEFINED TERMS.....................................................1

ARTICLE 2    ORGANIZATIONAL MATTERS............................................4

      2.1    Formation of Company..............................................4

      2.2    Name..............................................................4

      2.3    Principal Office and Registered Agent.............................5

      2.4    Term..............................................................5

ARTICLE 3    PURPOSE...........................................................5

      3.1    Purpose and Business..............................................5

      3.2    Powers............................................................5

ARTICLE 4    CAPITAL CONTRIBUTIONS.............................................5

      4.1    Capital Contributions of the Members..............................5

      4.2    Additional Funding................................................6

      4.3    Withdrawal of Capital.............................................6

      4.4    Additional Capital Contributions..................................6

      4.5    Interest on Capital Contributions.................................6

      4.6    Additional Offerings of Company Interest..........................6

      4.7    Enforcement of Capital Call.......................................6

ARTICLE 5    DISTRIBUTIONS.....................................................7

      5.1    Distribution Policy...............................................7

      5.2    Non-Cash Distributions............................................8

      5.3    Amounts Withheld..................................................8

      5.4    Distributions Upon Liquidation....................................8

ARTICLE 6    ALLOCATIONS.......................................................8

      6.1    Allocations of Profits and Losses - General.......................8

      6.2    Book/Tax Differences..............................................9

      6.3    Nonrecourse Debt Allocations......................................9

      6.4    Limitation on Loss Allocations; Qualified Income Offset...........9

      6.5    Transfer During Year..............................................9

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                                TABLE OF CONTENTS

                                  (CONTINUED)

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ARTICLE 7    MANAGEMENT AND OPERATIONS OF BUSINESS............................10

      7.1    Powers of Managers...............................................10

      7.2    Officers.........................................................11

      7.3    Major Decisions..................................................12

      7.4    Investment Committee.............................................12

      7.5    Interpretation of Rights and Duties of Members, Members of the
                Investment Committee, Managers and Authorized Officers........13

      7.6    Meetings of and Actions by Members...............................14

      7.7    Certificate of Formation.........................................14

      7.8    Indemnification..................................................14

      7.9    Liability of Certain Parties.....................................16

      7.10   Other Matters Concerning the Managers............................16

      7.11   Title to Company Assets..........................................16

      7.12   Reliance by Third Parties........................................16

      7.13   Covenants Regarding Operations; Investment Restrictions..........17

ARTICLE 8    RIGHTS AND OBLIGATIONS OF MEMBERS................................18

      8.1    Limitation of Liability..........................................18

      8.2    Management of Business...........................................18

      8.3    Return of Capital................................................18

      8.4    Rights of Members Relating to the Company........................19

      8.5    Confidentiality Obligation of Members............................19

      8.6    Waiver of Action.................................................19

ARTICLE 9    BOOKS, RECORDS, ACCOUNTING AND REPORTS...........................19

      9.1    Records and Accounting...........................................19

      9.2    Fiscal Year......................................................20

      9.3    Reports..........................................................20

ARTICLE 10   TAX MATTERS......................................................20

      10.1   Preparation of Tax Returns.......................................20

      10.2   Tax Elections....................................................20

      10.3   Tax Matters Partner..............................................20

      10.4   Withholding......................................................21
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                                TABLE OF CONTENTS

                                  (CONTINUED)

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ARTICLE 11   TRANSFER OF COMPANY INTERESTS....................................22

      11.1   Transfer of Company Interests....................................22

ARTICLE 12   ADMISSION OF MEMBERS.............................................23

      12.1   Admission of Substituted or Additional Members...................23

      12.2   Amendment of Agreement and Certificate of Formation..............23

ARTICLE 13   DISSOLUTION AND LIQUIDATION......................................23

      13.1   Dissolution......................................................23

      13.2   Winding Up.......................................................24

      13.3   Compliance with Timing Requirements of Regulations...............24

      13.4   Rights of Members................................................25

      13.5   Documentation of Liquidation.....................................25

      13.6   Reasonable Time for Winding-Up...................................25

      13.7   Liability of the Liquidator......................................25

      13.8   Waiver of Partition..............................................26

ARTICLE 14   AMENDMENT OF OPERATING AGREEMENT.................................26

      14.1   Amendments.......................................................26

ARTICLE 15   GENERAL PROVISIONS...............................................26

      15.1   Power of Attorney................................................26

      15.2   Addresses and Notice.............................................27

      15.3   Titles and Captions..............................................27

      15.4   Pronouns and Plurals.............................................27

      15.5   Further Action...................................................27

      15.6   Binding Effect...................................................28

      15.7   Creditors........................................................28

      15.8   Waiver...........................................................28

      15.9   No Agency........................................................28

      15.10  Entire Understanding.............................................28

      15.11  Counterparts.....................................................28
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                                TABLE OF CONTENTS

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      15.12  Applicable Law...................................................28

      15.13  Invalidity of Provisions.........................................28

      15.14  Securities Law Representations, Warranties and Agreements........29

      15.15  Co-Investment....................................................29

      15.16  Freedom to Pursue Opportunities, Etc.............................30
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                            ELOYALTY VENTURES, L.L.C.
                               OPERATING AGREEMENT

         THIS OPERATING AGREEMENT (the "AGREEMENT"), dated as of ___________,
2000, is entered into by and among the undersigned parties.

                                   WITNESSETH

         WHEREAS, eLoyalty Ventures, L.L.C., a Delaware limited liability
company (the "COMPANY") was formed pursuant to that certain Certificate of
Formation dated May 18, 2000 and filed with the Office of the Secretary of State
of Delaware on May 18, 2000.

         WHEREAS, the undersigned parties desire to enter into this Operating
Agreement to set forth the agreement among the parties as more fully hereinafter
set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, agree as follows:

                                   ARTICLE 1

                                  DEFINED TERMS

         Except as otherwise herein expressly provided, the following terms and
phrases shall have the meanings set forth below:

         "ACT" means Delaware Limited  Liability  Company Act, 6 Del.
C. Section 18-101,  et seq., as it may be amended from time to time (or any
corresponding provisions of succeeding law).

         "AFFILIATE" means, with respect to any Person, any Person directly or
indirectly Controlling, Controlled by or under common Control with such Person.

         "AGREEMENT" means this Operating Agreement, as it may be amended,
supplemented or restated from time to time.

         "AUTHORIZED OFFICER" means any officer of the Company that is
designated an "authorized officer" by the Managers pursuant to Section 7.2
hereof.

          "CAPITAL ACCOUNT" means the Capital Account maintained for a Member in
accordance with the provisions of Regulations section 1.704-1(b)(2)(iv).

         "CAPITAL COMMITMENT" A Member's Capital Commitment shall mean the
aggregate amount that such Member has agreed to contribute to the capital of the
Company, including his, her or its initial Capital Contribution, as set forth
opposite the Member's name Exhibit A hereto, as amended from time to time.

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         "CAPITAL CONTRIBUTION" means, with respect to any Member, any cash or
cash equivalents that such Member contributes to the Company.

         "CERTIFICATE" means the Certificate of Formation of the Company filed
in the Office of the Secretary of State of the State of Delaware, as amended
from time to time in accordance with the terms hereof and the Act.

         "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.

         "COMMITTED CAPITAL" The Company's Committed Capital shall equal the sum
of the aggregate Capital Commitments of all Members.

         "COMPANY" means eLoyalty Ventures, L.L.C.

         "COMPANY INTEREST" means an ownership interest in the Company of a
Member, and includes any and all benefits to which the holder of such a Company
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement.

         "CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether by ownership of voting securities, by contract or otherwise.

          "FAIR MARKET VALUE" shall be determined as follows with respect to any
assets owned by the Company: (a) securities that are listed on a recognized
securities exchange or on the NASDAQ National Market System shall be valued at
the last sale price, regular way, or if no such sale takes place, the average of
the closing bid and asked prices, regular way, as reported on the exchange where
such securities are primarily traded for the latest trading day ended prior to
the date of determination; and (b) all other assets shall be valued by the
Managers (with approval by the Investment Committee) at fair market value in
such manner as the Managers may reasonably determine. In determining the
appropriate fair market value for assets pursuant to clause (b) above, the
Managers shall consider all factors, information and data deemed in the judgment
of the Managers to be pertinent, which factors, information and data may include
any of the following: purchase cost, estimates of liquidation value, projected
cash flow, investment risk, over-the-counter price quotes, prices received in
recent private placements of securities of the same issuer and prices recently
received by comparable companies in the same or similar industries.

         "INDEMNITEES" means the Managers, members of the Investment Committee
and, if designated by the Managers, other officers or employees of the Company.

         "IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.

         "INVESTMENT COMMITTEE" has the meaning set forth in 7.4.

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          "INVESTMENT EXPENSES" means all costs and expenses attributable to
acquiring, holding and disposing of the Company's investments, including without
limitation all accounting, auditing, consulting, legal and other fees and
expenses, financing commitment fees, finders fees, appraisal costs and printing
costs incurred with respect to investment and disposition opportunities of the
Company, whether or not such opportunities are consummated.

         "LIQUIDATING EVENT(S)" has the meaning set forth in Section 13.1
hereof.

         "LIQUIDATOR" means the Managers or, in the event there are no Managers,
any Person selected by the Investment Committee, as set forth in Section 13.2(a)
hereof.

         "MAJORITY" means Members holding a majority of the Company Interests
held by such class.

          "MANAGER" means such Person or Persons who shall have the powers and
duties described in Section 7.1.

         "MEMBER" or "MEMBERS" means the Persons identified as Members on
Exhibit A hereto, as the same may be amended from time to time.

         "OFFER" means a written offer made in good faith by a Person unrelated
to the Member receiving the offer and having sufficient financial resources to
purchase the Company Interests specified in the offer on the terms and
conditions stated therein, provided that (a) the name and residence and business
address of the offeror are stated in the offer, (b) the purchase price and all
other material terms and conditions for the purchase are stated in the offer,
and (c) the offer is accompanied by a deposit in the form of a certified or
cashier's check in an amount equal to not less than five percent (5%) of the
proposed purchase price.

         "OPERATING EXPENSES" means all reasonable operating costs and expenses
(other than Start-Up Expenses, Investment Expenses, debt service expenses,
litigation expenses (including without limitation all settlement costs), and
indemnification payments) relating to the Company's activities, investments and
business, including without limitation (i) ordinary overhead and operating
administrative expenses of the Company incurred in connection with maintaining
and operating its office, including salaries and other compensation, rent,
utilities, routine office equipment and liability and other insurance premiums,
(ii) travel, lodging, meals and related expenses and other out-of-pocket fees
and expenses incurred by or on behalf of the Company or the Investment Committee
relating to investment and disposition opportunities for the Company whether or
not consummated, (iii) accounting, auditing, consulting, escrow, custodial,
legal and other fees and expenses, including expenses associated with the
preparation of the Company's financial statements and tax returns, (iv) expenses
of the Managers, Investment Committee and Member meetings, (v) the cost of any
insurance obtained pursuant to Section 7.1(b)(ix) hereof, and (vi) any taxes,
fees and other governmental charges levied against the Company.

         "PERSON" means an individual or a corporation, partnership, trust,
limited liability company, unincorporated organization, association or other
entity.

         "PRIME RATE" means the rate of interest published from time to time by
The Wall Street Journal as the "prime rate" at large U.S. money center banks.

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         "REGULATIONS" means the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

         "SECURITIES ACT" means the Securities Act of 1933, as it may be amended
from time to time.

         "SPECIFIED PRICE" means (a) with respect to any proposed voluntary
Transfer by a Member pursuant to an Offer, the purchase price stated in such
Offer, and (b) with respect to any involuntary Transfer by a Member (e.g., due
to death or bankruptcy), the fair market value as of the date of the involuntary
Transfer of such Company Interests (determined as the amount such Member would
receive as a liquidating distribution under Section 13.2 if the Company sold all
of its assets at their respective Fair Market Values and liquidated), as
reasonably calculated by the Managers.

         "START-UP EXPENSES" means all expenses incurred (whether prior to or
after the date of this Agreement) during the period ending twelve (12) months
after the date of this Agreement by or on behalf of the Company in connection
with the formation and start-up of the Company, and the admission of the
Members, including without limitation legal and accounting fees and expenses,
reasonable finders' fees, initial employee costs (including employment agency
fees and relocation reimbursements), costs of obtaining and furnishing the
Company's office (including furniture, fixture and equipment costs and leasing
costs), marketing costs and offering costs.

         "TRANSFER" means a sale, assignment, transfer, gift, hypothecation or
encumbrance.

                                   ARTICLE 2

                             ORGANIZATIONAL MATTERS

2.1      FORMATION OF COMPANY

         The Company was formed upon the filing of the Certificate with the
Secretary of State of the State of Delaware. Except as expressly provided herein
to the contrary, the rights and obligations of the Members and the
administration and termination of the Company shall be governed by the Act. The
Company Interests of each Member shall be personal property for all purposes.

2.2      NAME

         The name of the Company is eLoyalty Ventures, L.L.C. The Company's
business may be conducted under any other name or names deemed advisable by the
Managers. The words "Limited Liability Company," "L.L.C.," "LLC," or similar
words or letters shall be included in the Company's name where necessary for
purposes of complying with the laws of any jurisdiction that so requires.

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2.3      PRINCIPAL OFFICE AND REGISTERED AGENT

         The initial principal office of the Company is Two Conway Park, 150
Field Drive, Lake Forest, Illinois 60045, or such other place as the Managers
may from time to time designate by notice to the Members. The registered agent
of the Company is CorpAmerica, Inc., 30 Old Rudnick Lane, Dover, Delaware 19901.
The Company may maintain offices at such other place or places within or outside
the State of Delaware as the Managers deem advisable.

2.4      TERM

         The term of the Company commenced upon filing of the Certificate in the
Office of the Secretary of State of Delaware, and shall continue until July 15,
2010, unless it is dissolved sooner pursuant to the provisions of Article 13 or
as otherwise provided by law.

                                   ARTICLE 3

                                     PURPOSE

3.1      PURPOSE AND BUSINESS

         The purpose and nature of the business to be conducted by the Company
is to (a) invest in the securities of early stage companies in the internet and
technology sectors, and primarily in electronic Customer Relationship Management
software companies and (b) engage in any other lawful activities determined by
the Investment Committee to be necessary or advisable in furtherance of the
foregoing.

3.2      POWERS

         Subject to all of the terms, covenants, conditions and limitations
contained in this Agreement, the Company shall have full power and authority to
do any and all acts and things necessary, appropriate, proper, advisable,
desirable, incidental to or convenient for the furtherance and accomplishment of
the purposes and business described herein and for the protection and benefit of
the Company, including, without limitation, full power and authority, directly
or through its ownership interest in other entities, to enter into, perform and
carry out contracts of any kind, borrow money and provide guarantees in
connection with a borrowing by or other transaction involving an entity in which
the Company has a direct or indirect interest.

                                   ARTICLE 4

                             CAPITAL CONTRIBUTIONS

4.1      CAPITAL CONTRIBUTIONS OF THE MEMBERS

                  Each Member has contributed in cash to the Company the initial
Capital Contribution in the amount set forth opposite his, her or its name on
Exhibit A hereto. Thereafter, each Member shall contribute capital to the
Company in accordance with such Member's Capital Commitment at such times and in
such amounts as determined by the Investment Committee upon ten (10) business
days' prior written notice.

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4.2      ADDITIONAL FUNDING

         Subject to the restrictions set forth below and in Section 7.13, if the
Company requires funds for any Company purpose in excess of any other funds
determined by the Managers to be available to the Company, the Managers (i) may
cause the Company to borrow such funds from third parties, (ii) may cause the
Company to borrow such funds from one or more Members (including the Managers)
on terms that are commercially reasonable as determined by the Managers in their
reasonable discretion, (iii) may obtain such funds through additional Capital
Contributions from one or more existing Members or (iv) may obtain such funds
from additional Members as provided in Section 4.6 hereof. Notwithstanding the
foregoing, as more fully set forth in Section 7.3 of the Agreement, the
following actions by the Managers shall require the prior approval of the
Investment Committee: (a) causing the Company to borrow money, whether on a
secured or an unsecured basis, if the total borrowings (including guarantees) of
the Company would exceed thirty-five percent (35%) of the aggregate Fair Market
Value of the assets of the Company, and (b) selling additional Company
Interests.

4.3      WITHDRAWAL OF CAPITAL

         A Member shall not be entitled to withdraw any part of such Member's
Capital Account or to receive any distribution from the Company, except as
provided in this Agreement.

4.4      ADDITIONAL CAPITAL CONTRIBUTIONS

         No Member shall be required to make any additional Capital Contribution
after contributing its aggregate Capital Commitment.

4.5      INTEREST ON CAPITAL CONTRIBUTIONS

         No interest shall be due from the Company on any Capital Contribution
of any Member.

4.6      ADDITIONAL OFFERINGS OF COMPANY INTEREST

         The Managers, with the consent of the Investment Committee, shall have
the authority to issue additional Company Interests upon such terms and
conditions (including, without limitation, voting rights and provisions for
repayment of Capital Contributions) as are determined by the Managers, provided
that (1) the additional Company Interests shall be issued at a price that is no
less than a fair market price for such Company Interests (as determined by the
Managers, with advice from the Investment Committee), and (2) the additional
Company Interests shall dilute all existing Company Interests on a pro rata
basis and each existing Member's Capital Account shall be adjusted to equal the
Fair Market Value of such Company Interests.

4.7      ENFORCEMENT OF CAPITAL CALL

                  (a) The Company shall be entitled to enforce the obligations
of each Member to make the Capital Contributions specified in paragraph 4.1
above, and the Company shall have all rights and remedies available at law or in
equity in the event that any such Capital Contribution is not made. If any legal
proceedings relating to the failure of a Member to make

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such a Capital Contribution are commenced, such Member shall pay all costs and
expenses incurred by the Company, including attorneys' fees, in connections with
such proceedings.

                  (b) Additionally, should any Member fail to make any of
Capital Contributions pursuant to paragraph 4.1, such Member shall be in
default, and the Managers shall take the following actions:

                      (i)      Notice of default (the "DEFAULT  NOTICE") from
the Company shall be  transmitted to the defaulting Member by certified or
registered mail, with a copy by first class mail and such Default Notice shall
be deemed effectively given three (3) days after deposit in any United States
mail box. The Default Notice shall (i) describe in reasonable detail the nature
of the default, and (ii) the potential Forfeiture (as defined below) pursuant to
this subparagraph 4.7(b).

                      (ii)     The defaulting Member will have thirty (30) days
(the "GRACE PERIOD") after the deemed receipt of the Default Notice to remit to
the Company the payment in cash; provided, however, that in extraordinary
circumstances, in the Managers' sole discretion, alternative payment schedules
may be agreed to in writing by the Managers and the defaulting Member.

                      (iii)    If the full amount of such contribution is not
received by the Company by the expiration of the Grace Period, each Member
hereby agrees that as liquidated and agreed current damages to the
non-defaulting Members for such default (it being agreed that it would be
difficult to fix the actual damages to such non-defaulting Members), the
defaulting Member's Capital Account shall be reduced (but not below zero) by
fifty percent (50%), which amount shall thereupon become unrestricted funds of
the Company and shall be allocated pro rata to and among the respective Capital
Accounts of the non-defaulting Members in such proportion as the Capital Account
of each such non-defaulting Member then bears to the sum of the Capital Accounts
of all non-defaulting Members (the "FORFEITURE"). If the imposition of this
reduction in the defaulting Member's Capital Account would reduce the balance
of such account below zero (0), the amount by which such account would be
reduced below zero shall be applied whenever the balance in such account next
becomes positive. Upon the Forfeiture, such Member shall be relieved of any
further obligations to make Capital Contributions pursuant to paragraph 4.1 and
the Managers may, in their sole discretion, allow the non-defaulting Members to
increase the amount of their capital contributions, proportionately based on
their respective Membership Interests, up to the aggregate amount relieved from
the defaulting Member.

                                   ARTICLE 5

                                  DISTRIBUTIONS

5.1      DISTRIBUTION POLICY

         The Managers may, subject to Investment Committee approval, make
distributions of cash or securities to the Members at any time or from time to
time to all Members in proportion to their respective Capital Accounts. In
addition, the Company will use reasonable efforts, after the end of each fiscal
year during the original term of the Company, to make a distribution to

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each Member equal to the excess, if any of (a) the aggregate state and federal
income tax liability such Member would have incurred as a result of such
Member's ownership of an interest in the Company for all prior fiscal years,
calculated as if (i) such Member were a natural person resident in the State of
Delaware and taxable at the maximum rates provided for under applicable federal
and Delaware state income tax laws, and (ii) allocations of income and loss from
the Member were the sole source of income and loss for such Member, over (b) all
prior cash distributions made pursuant to Section 5.1; provided that the
Managers shall not be required to make any such distribution if in the Managers'
reasonable determination cash reserves are inadequate for such purpose in view
of identifiable Company expenses and projected investment activities.

5.2      NON-CASH DISTRIBUTIONS

         In the event of any non-cash distribution pursuant to Section 5.1 above
or Section 5.4 below, the Managers shall, to the greatest extent practicable,
for any such distribution (a) distribute to the Members property of the same
type, and (b) if cash and other property are to be distributed simultaneously,
distribute such cash and other property in the same proportion to each Member,
except to the extent a disproportionate distribution of such property is
necessary to avoid distributing fractional shares. Any property distributed in
kind to the Members shall be treated for all purposes under this Agreement as if
it were sold for cash in an amount equal to its Fair Market Value.

5.3      AMOUNTS WITHHELD

         All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.4 hereof with respect to any allocation,
payment or distribution to a Member shall be treated as an advance on amounts
distributed to such Member pursuant to Section 5.1 for all purposes under this
Agreement.

5.4      DISTRIBUTIONS UPON LIQUIDATION

         Liquidating proceeds shall be distributed to the Members in accordance
with Section 13.2.

                                   ARTICLE 6

                                   ALLOCATIONS

6.1      ALLOCATIONS OF PROFITS AND LOSSES - GENERAL

         The terms "net profits" and "net losses" of the Company shall mean the
net profits or net losses of the Company as determined for federal income tax
reporting purposes in accordance with Regulations section 1.704-1(b)(2)(iv).
After giving effect to the special allocations set forth below in this Article
6, the Company's net profits and all other items of income and gain and net
losses and other items of loss and deduction shall be allocated among the
Members in proportion to their respective Capital Commitment.

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6.2      BOOK/TAX DIFFERENCES

         Notwithstanding anything to the contrary contained in this Article 6,
any portion of any income, gain, loss or deduction with respect to property
contributed to the Company by a Member (or revalued by the Company pursuant to
Regulations section 1.704-1(b)(2)(iv)(f)) shall be allocated among the Members
in accordance with Code section 704(c) and Regulations section 1.704-3 so as to
take account of the variation, if any, between the adjusted tax basis of such
property to the Company and its fair market value at the time of the
contribution (or revaluation), provided, however, that allocations to Members
under this Section 6.2 shall not affect a Member's Capital Account to the extent
such amounts have previously been reflected in such Capital Account.

6.3      NONRECOURSE DEBT ALLOCATIONS

         Notwithstanding anything to the contrary contained above in this
Article 6, the Company shall comply with Regulations section 1.704-2, as
amended, with respect to the allocation of deductions and the chargeback of
minimum gain on nonrecourse debts of the Company. For purposes of allocating
Company nonrecourse liabilities among the Members pursuant to Regulations
section 1.752-3, the Members' interests in Company profits shall be determined
based on their respective Company Interests.

6.4      LIMITATION ON LOSS ALLOCATIONS; QUALIFIED INCOME OFFSET

         Notwithstanding anything to the contrary contained in Section 6.1
hereof, no Member shall be allocated net losses that would cause or increase a
deficit balance in his, her or its Capital Account in excess of any actual or
deemed obligation of such Member to restore deficits (as defined in Regulations
section 1.704-1(b)(2)(ii)(c)). If any Member shall receive with respect to the
Company an adjustment, allocation or distribution in the nature described in
Regulations section 1.704-1(b)(2)(ii)(d)(4)-(6) which causes or increases a
deficit in such Member's Capital Account in excess of any actual or deemed
obligation of such Member to restore deficits (as defined in Regulations section
1.704-1(b)(2)(ii)(c)), such Member shall be allocated items of income and gain
in an amount and manner as will eliminate such deficit balance as quickly as
possible; it being intended that this Section 6.4 shall constitute a "qualified
income offset" within the meaning of Regulations section
1.704-1(b)(2)(ii)(d)(3). Any allocations made under this Section 6.4 shall be
taken into account in making allocations under Section 6.1 above so that, to the
extent possible, and to the extent permitted by the Regulations, the cumulative
allocations of net profits, net losses and other items and allocations under
Section 6.1 and this Section 6.4 to each Member shall be equal to the net amount
that would have been allocated to each Member if the allocations under this
Section 6.4 had not been made.

6.5      TRANSFER DURING YEAR

         In the event of the transfer of all or any part of a Company Interest
(in accordance with the provisions of this Agreement) at any time other than the
end of a fiscal year, the share of income or loss (in respect of the Company
Interests so transferred) shall be allocated between the transferor and the
transferee in the same ratio as the number of days in such fiscal year before
and after such transfer. The provisions of this Section 6.5 shall not apply to
any profit or loss

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attributable to a sale or other disposition of all or substantially all of the
Company's assets, or to other extraordinary non-recurring items. Such profit
and loss shall be allocated to the owner of the Company Interests as of the
date of closing of the sale or other disposition, or, with respect to other
extraordinary non-recurring items, the date the profit is realized or the loss
is incurred, as the case may be.

                                   ARTICLE 7

                      MANAGEMENT AND OPERATIONS OF BUSINESS

7.1      POWERS OF MANAGERS

         (a) The Managers shall be appointed by the consent of the Members. The
Members agree that the initial Manager shall be Sarah Faux. A second Manager
will be appointed by the consent of the Members as soon as practicable. Managers
may be removed by the Investment Committee or the Members for any reason or no
reason with thirty (30) days written notice. Managers may resign at any time by
giving thirty (30) days written notice to the Investment Committee. Any such
removal or resignation of any Manager shall not affect any employment agreement
between the Manager and eLoyalty Corporation.

         (b) Except as otherwise expressly provided in this Agreement, including
without limitation the provisions of Section 7.3 of the Agreement, which require
the prior approval of the Investment Committee for certain actions, all
management powers over the business and affairs of the Company shall be vested
in the Managers. Any conflict between the Managers shall be resolved by a
majority of members of the Investment Committee. Subject to the terms of this
Agreement and to limitations imposed by law, including, without limiting the
foregoing, the Act, and provided the same shall not be prohibited under this
Agreement, the Managers shall have full power and authority to do all things and
perform all acts specified in this Agreement or otherwise deemed necessary or
desirable by it to conduct the business of the Company, to exercise all Company
powers set forth in Section 3.2 hereof and to effectuate the Company purposes
set forth in Section 3.1 hereof, including, without limitation, the full power
to:

             (i) sell, transfer, assign or otherwise dispose of all or any
portion of the assets of the Company (including a sale or other disposition of
all of the Company assets which is effectuated in the form of a sale and
conveyance of all the Company Interests), provided that a sale, transfer or
other disposition of all or substantially all of the assets of the Company shall
require the prior approval of the Investment Committee in accordance with
Section 7.3(b)(iii) hereof;

             (ii) employ executive, management or other agents, administrative
or secretarial personnel or other persons necessary for the operation,
management or development of the Company as the Managers deem necessary or
appropriate;

             (iii) cause the Company to establish and maintain working capital
reserves in such amounts as the Managers deem necessary or appropriate from time
to time;

                                       10

<PAGE>   16

             (iv)   except as prohibited in Section 7.14(e), in furtherance of
the Company's purposes and business, borrow money, whether on a secured or
unsecured basis, and/or guarantee the indebtedness of other entities in which
the Company has an ownership interest;

             (v)    enter into transactions with an Affiliate of a Member or
Investment Committee member, provided that the price and other terms of such
transactions are fair to the Company and are not less favorable to the Company
than those generally prevailing with respect to comparable transactions;

             (vi)   execute and deliver such documents on behalf of the Company
as the Managers may deem necessary or desirable for the Company's business,
including, without limitation, guaranties and indemnities;

             (vii)  perform, or cause to be performed, all of the Company's
obligations under any agreement to which the Company is a party;

             (viii) retain or engage attorneys and accountants, to the extent
such professional services are required during the term of the Company;

             (ix)   cause the Company to obtain and maintain liability insurance
for one or more of the Indemnitees hereunder, but only if the Managers determine
in their sole discretion to obtain such insurance;

             (x)    open and maintain bank accounts for the Company's funds and
make short-term investments of the Company's funds prior to the Company's
investment in other entities;

             (xi)   cause the Company to enter into a merger or consolidation
with any other Person or participate in a tax-free roll-up or convert, by merger
or otherwise, into a Code Subchapter C corporation or any other type of entity
merger, provided that the prior approval of the Investment Committee shall be
required in accordance with Section 7.3(b)(iv) hereof;

             (xii)  incur Start-Up Expenses, Operating Expenses, Investment
Expenses, debt service costs, litigation costs (including without limitation all
settlement costs), and indemnification costs; and

             (xiii) do any act which is necessary or desirable to carry out any
of the foregoing.

7.2      OFFICERS

(A) DESIGNATION OF OFFICERS. The Managers may delegate the powers, authorities
and duties reserved to them as set forth in Section 7.1 of this Agreement to
such Persons (each an "AUTHORIZED OFFICER") as the Managers may determine. The
Managers shall have the authority to remove any Authorized Officer of the
Company at any time for any reason or for no reason.

                                       11

<PAGE>   17

7.3      MAJOR DECISIONS

         (a)      SELECTION OF MANAGERS.  The Managers shall be appointed by
consent of a majority of the Investment Committee.

         (b)      INVESTMENT  COMMITTEE  APPROVAL.  Notwithstanding the
provisions of Section 7.1, without the prior approval of the Investment
Committee, the Managers shall not:

                  (i)      accept property as a Capital Contribution;

                  (ii)     invest in the securities of any companies on behalf
of the Company;

                  (iii)    sell, transfer or otherwise dispose of all or
substantially all of the assets of the Company;

                  (iv)     merge or consolidate with any other Person or
participate in a tax-free roll-up or convert, by merger or otherwise, into a
Code Subchapter C corporation or any other type of entity;

                  (v)      amend, modify, waive, cancel or consent to any
amendment, modification, waiver or cancellation of this Agreement (except as set
forth in Section 14.1(c) hereof);

                  (vi)     liquidate or wind up the Company;

                  (vii)    grant to any Member or other third party who brings
an investment opportunity to the Company, or who takes an active role in the
management or development of any investment opportunity for the Company, a
separate participation right in the investment opportunity through a direct or
indirect ownership interest (either through investment or options) in the
investment opportunity;

                  (viii)   enter into transactions with an Affiliate of a
Manager;

                  (ix) except as prohibited in Section 7.14(e), borrow money
(including without limitation a guarantee of indebtedness), whether on a secured
or an unsecured basis, if the total borrowings (including guarantees) of the
Company would exceed thirty-five percent (35%) of the aggregate Fair Market
Value of the assets of the Company; and

                  (x)      sell additional Company Interests of the Company
other than as permitted in Section 4.6 above.

7.4      INVESTMENT COMMITTEE

         (a) The Members shall appoint an Investment Committee of not more than
seven (7) members. Each Member that holds at least a fifteen percent (15%)
Company Interest shall be entitled to appoint one member to the Investment
Committee. Any decision to remove a member of the Investment Committee or to
fill any vacancy created by the resignation or death

                                       12
<PAGE>   18

of a member of the Investment Committee shall be made by the Member that
appointed such member of the Investment Committee pursuant to this Section
7.4(a). The appointed member of eLoyalty Employee Investors, L.L.C. will be
appointed by eLoyalty Corporation. No more than one (1) member of the Investment
Committee may be an employee of eLoyalty Corporation. The Members agree that the
initial members of the Investment Committee will be Ed Brakeman, Kelly Conway,
Tench Coxe and Jay Hoag.

         (b) The Investment Committee will have the ultimate responsibility for
investment strategy and investment decisions and will approve all proposed
investments to be made by the Company. The Investment Committee will exercise
any and all voting and other rights associated with the Company's ownership
interest in any entity. At least a majority of the Investment Committee will
review and approve all portfolio valuations and investments made by the Company.

         (c) The presence, in person or by conference telephone or other similar
communications equipment of a majority of the members of the Investment
Committee shall constitute a quorum for the transaction of business of the
Investment Committee. Except as otherwise expressly required by statute, the
Certificate of Formation, as amended from time to time, or this Agreement, the
act of a majority of the members of the Investment Committee present at a
meeting at which a quorum is present shall be the act of the Investment
Committee. The Company shall reimburse each Investment Committee member for his
or her reasonable out-of-pocket expenses incurred in connection with attending
the Investment Committee meetings.

7.5      INTERPRETATION OF RIGHTS AND DUTIES OF MEMBERS, MEMBERS OF THE
         INVESTMENT COMMITTEE, MANAGERS AND AUTHORIZED OFFICERS

         To the fullest extent permitted by the Act and other applicable law,
and to the extent not inconsistent with the specific provisions of this
Agreement or the Certificate, it is the intention and agreement of the parties
that:

         (a) The Members in their respective capacities as such shall have the
rights, powers, authority, duties and responsibilities (if any) of stockholders
of a corporation organized and existing under the General Corporation Law of the
State of Delaware (the "DGCL").

         (b) Without limiting the powers of the Managers as set forth in
Section 7.1 hereof, the Managers of the Company shall have the statutory and
customary rights, powers, authority, duties and responsibility ("OFFICER
POWERS") of officers of a corporation organized and existing under DGCL and, to
the extent that such Officer Powers are delegated to an Authorized Officer of
the Company, such Authorized Officer in his or her capacity as such shall have
the statutory and customary rights, powers, authority, duties and
responsibilities of an officer with a similar title of a corporation organized
and existing under the DGCL. The members of the Investment Committee hereby
delegate to each officer of the Company such rights, powers and authority with
respect to the management of the business and affairs of the Company as may be
necessary or advisable to effectuate the provisions of this Section 7.6.

                                       13

<PAGE>   19

7.6      MEETINGS OF AND ACTIONS BY MEMBERS

         (a)      DATE, TIME AND PLACE OF MEETINGS OF MEMBERS. Annual meetings
of Members shall be held at such date, time and place as the Managers may fix
from time to time.

         (b)      POWER TO CALL MEETINGS.  Meetings of the Members may be
called by the Managers or the holders of a Majority of the Company Interests.

         (c) NOTICE OF MEETING. Written notice of a meeting of Members shall be
sent or otherwise given to each Member not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and the general nature of the business to be
transacted.

         (d)      MANNER OF GIVING NOTICE.  Notice of any  meeting of Members
shall be given in the manner prescribed by Section 15.2 hereof.

         (e) ACTION AT A MEETING. A quorum for the conducting of business at a
meeting of the Members shall consist of a Majority of the Members. The consent
of a Majority of the Members shall be required for any action to be taken by the
Members at a meeting.

         (f) ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action that may
be taken at a meeting of Members may be taken without a meeting, if a consent in
writing setting forth the action so taken is signed and delivered to the Company
by Members having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all Members
entitled to vote on that action at a meeting were present and voted.

         (g) TELEPHONIC PARTICIPATION BY MEMBER AT MEETINGS. Members may
participate in any Members' meeting through the use of any means of conference
telephones or similar communications equipment as long as all Members
participating can hear one another. A Member so participating is deemed to be
present in person at the Meeting.

7.7      CERTIFICATE OF FORMATION

         To the extent that such action is determined by the Managers to be
necessary or appropriate, the Company shall file amendments to and restatements
of the Certificate and do all things necessary or appropriate to maintain the
Company as a limited liability company under the laws of the State of Delaware
and each other jurisdiction in which the Company may elect to do business or own
property. Subject to the terms of Section 8.4(a) hereof, the Managers shall not
be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Member. The Managers shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the continuation,
qualification and operation of a limited liability company in the State of
Delaware and any other jurisdiction in which the Company may elect to do
business or own property.

7.8      INDEMNIFICATION

         (a) The Company shall indemnify each Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including, without limitation,

                                       14

<PAGE>   20

attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Company as set forth in this Agreement in
which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, unless it is established that (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceedings and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful.

         (b) The right to indemnification conferred in this Section 7.8 shall be
a contract right and shall include the right of each Indemnitee to be paid by
the Company the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that the payment of such expenses in
advance of the final disposition of a proceeding shall be made only upon
delivery to the Company of (i) a written affirmation of the Indemnitee of his or
her good faith belief that the standard of conduct necessary for indemnification
by the Company pursuant to this Section 7.8 has been met, and (ii) a written
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
if it shall ultimately be determined that the standard of conduct has not been
met.

         (c) The Company may purchase and maintain insurance, at its expense,
on its own behalf and on behalf of any Indemnitee and of such other Persons as
the Managers shall determine, against any liability (including expenses) that
may be asserted against and incurred by such Person in connection with the
Company's activities pursuant to this Agreement, whether or not the Company
would have the power to indemnify such Person against such liability under the
terms of this Agreement. In addition, the Company may enter into indemnification
agreements with one or more of the Indemnitees pursuant to which the Company
shall agree to indemnify such Indemnitee(s) to the fullest extent permitted by
law, and advance to such Indemnitee(s) all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted.

         (d) In no event may an Indemnitee subject any Member to personal
liability by reason of the indemnification provisions set forth in this
Agreement.

         (e) An Indemnitee shall not be denied indemnification in whole or in
part pursuant to this Section 7.8 because such Indemnitee has an interest in the
transaction to which the indemnification relates if the transaction otherwise
was permitted by the terms of this Agreement.

         (f) The provisions of this Section 7.8 are for the benefit of the
Indemnitees, their heirs, successors, assigns, executors and administrators, and
shall not be deemed to create any rights for the benefit of any other Person.
Any amendment, modification or repeal of this Section 7.8 or any provision
hereof shall be prospective only and shall not in any way affect the limitations
of the Company's liability to any Indemnitee under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

                                       15

<PAGE>   21

7.9      LIABILITY OF CERTAIN PARTIES

         (a) Notwithstanding anything to the contrary set forth in this
Agreement, no Manager, Member or Investment Committee Member, nor any officer,
employee or agent of the Company acting in such capacity shall be liable for
monetary damages to the Company or any Members for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or omission
unless such Person acted in bad faith.

         (b) The Managers may exercise any of the powers granted to them by this
Agreement and perform any of the duties imposed upon them hereunder either
directly or by or through their officers, employees, and agents. The Managers
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the Managers in good faith.

        (c) Any amendment, modification or repeal of this Section 7.9 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability of any Person to the Company and the other Members
under this Section 7.9 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.

7.10     OTHER MATTERS CONCERNING THE MANAGERS

         (a) The Managers and each Authorized Officer of the Company may rely,
and shall be protected in acting or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by him, her or it to
be genuine and to have been signed or presented by the proper party or parties.

         (b) The Managers and any Authorized Officer may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisers selected by the Managers or any Authorized
Officer, and any act taken or omitted to be taken in reliance upon the opinion
of such Persons as to matters that the Managers or any Authorized Officer
reasonably believe to be within such Person's professional or expert competence
shall be conclusively presumed to have been done or omitted in good faith.

7.11     TITLE TO COMPANY ASSETS

         Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively, shall have any ownership interest
in such Company assets or any portion thereof. Title to any or all of the
Company assets shall be held in the name of the Company.

7.12     RELIANCE BY THIRD PARTIES

         Any Person dealing with the Company shall be entitled to assume that
the Managers or any Authorized Officer have full power and authority to acquire,
sell or otherwise deal with the assets of the Company and to enter into any
contracts on behalf of the Company. Each and every

                                       16
<PAGE>   22

certificate, document or other instrument executed on behalf of the Company by
the Managers or any Authorized Officer shall be conclusive evidence in favor of
any and every Person relying thereon or claiming thereunder that (i) at the time
of the execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Company, and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Company.

7.13     COVENANTS REGARDING OPERATIONS; INVESTMENT RESTRICTIONS

         (a) The Company shall use reasonable best efforts not to engage in any
activities which could cause the Company to be engaged in a trade or business
any income of which would (i) be taxable to any tax-exempt Member (or any
tax-exempt partner or member of a Member) as "unrelated business taxable income"
within the meaning of sections 511-514 of the Code, or (ii) be treated by any
foreign Member (or any foreign partner or member of a Member) as income
effectively connected with a United States trade or business under sections
871(a)or 881(a) of the Code.

         (b) The Company will not invest in the securities of any portfolio
company if the ownership of such securities would cause the Company to be
treated as engaged in a trade or business any income from which would (i) be
taxable to any tax-exempt Member (or any tax-exempt partner or member of a
Member) as "unrelated business taxable income" within the meaning of sections
511-514 of the Code, or (ii) be treated by any foreign Member (or any foreign
partner or member of a Member) as income effectively connected with a United
States trade or business under sections 871(a) or 881(a) of the Code.

         (c) The Company shall use its reasonable best efforts to ensure that
all of its gross income is from dividends, interest, and capital gains and
losses from the disposition of property, and rents and royalties, but only such
rents and royalties as are excluded, pursuant to sections 512(b)(2) and (3) of
the Code in calculating unrelated business taxable income to ensure that (a) the
Company will not constitute a "business enterprise" for purposes of the excess
business holdings provisions of section 4943 of the Code, and (b) no tax-exempt
Member, or any member or partner of any Member, shall be deemed to have
unrelated business taxable income. The Company shall use its reasonable best
efforts to ensure that the Company not enter into any transaction that would
constitute participation by the Company or any Member in a "prohibited
transaction" under section 4975 of the Code or in an "excess benefit
transaction" under section 4958 of the Code. In no event shall this Section
7.13(c) be interpreted as preventing (or limiting in any respect) the Managers
or the Company from participating in those activities that are customarily
associated with the acquisition, holding of capital appreciation, and sale or
distribution by a professionally managed investment fund of portfolio company
securities, including taking an active role in founding or serving on the boards
of directors of portfolio companies.

         (d) The Company will use its reasonable best efforts to conduct the
affairs of the Company so as to avoid having the Company treated as engaged in a
trade or business within the United States for purposes of sections 875, 882,
884, and 1446 of the Code, so as to avoid

                                       17

<PAGE>   23

any Member (or any partner or member of a Member) realizing gain or loss treated
as effectively connected with a U.S. trade or business under section 897 of the
Code and so as to avoid "effectively connected income" within the meaning of
section 864 of the Code. In no event shall this Section 7.13(d) be interpreted
as preventing (or limiting in any respect) the Manager or the Company from
participating in those activities that are customarily associated with the
acquisition, holding of capital appreciation, and sale or distribution by a
professionally managed investment fund of portfolio company securities,
including taking an active role in founding or serving on the boards of
directors of portfolio companies.

         (e) The Company shall not borrow money or otherwise incur indebtedness,
or guaranty indebtedness of portfolio companies in if in the judgement of the
Managers, based upon advice of counsel, the Members would be required to
recognize unrelated debt-financed income under section 514 of the Code as a
result thereof.

         (f) In the event that the Company's activities or investments give
rise to any income which would be taxable to any tax-exempt Member (or any
tax-exempt partner or member of a Member) as "unrelated business taxable income"
within the meaning of sections 511-514 of the Code, the Company shall furnish to
such Member as soon as practicable following the Company's awareness of such
event, all information regarding such income as may be reasonably requested by
such Member for the preparation of reports to its partners or members and its
Federal income tax return.

                                   ARTICLE 8

                        RIGHTS AND OBLIGATIONS OF MEMBERS

8.1      LIMITATION OF LIABILITY

         The Members shall have no liability under this Agreement except as
expressly provided in this Agreement or under the Act.

8.2      MANAGEMENT OF BUSINESS

         No Member (other than a Member acting in the capacity of a Manager or
an officer, employee or agent of the Company) shall take part in the operation,
management or control (within the meaning of the Act) of the Company's business,
transact any business in the Company's name or have the power to sign documents
for or otherwise bind the Company. The transaction of any such business by any
Manager or any officer, employee or agent of the Company, in their capacity as
such, shall not affect, impair or eliminate the limitations on the liability of
the Members under this Agreement.

8.3      RETURN OF CAPITAL

         No Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. No Member shall
have priority over any other Member either as to the return of Capital
Contributions or, except to the extent otherwise expressly provided in this
Agreement, as to profits, losses or distributions.

                                       18

<PAGE>   24

8.4      RIGHTS OF MEMBERS RELATING TO THE COMPANY

         (a) In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.4(b) hereof, each Member shall have the
right, for a purpose reasonably related to such Member's interest as a Member in
the Company, upon written demand with a statement of the purpose of such demand
and at such Member's own expense, to obtain from the Company the information set
forth in Section 18-305 of the Act; provided, however, that the Managers may
require, as a condition of providing such information to the Member, that the
Member confirm in writing to the Managers that all such information will be held
in strictest confidence and no distribution of such information will be made.

         (b) Notwithstanding any other provision of this Section 8.4, the
Managers may keep confidential from the Members, for such period of time as the
Managers determine in their sole and absolute discretion to be reasonable, any
information that (i) the Managers believe to be in the nature of trade secrets
or other information the disclosure of which the Managers in good faith believe
is not in the best interests of the Company, or (ii) the Company is required by
law or by agreements with other parties to keep confidential.

8.5      CONFIDENTIALITY OBLIGATION OF MEMBERS

         Any information received by a Member from any Manager, orally or in
writing, that such Manager indicates is nonpublic and needs to remain
confidential (including, but not limited to, information that the Company is
required by law or by agreements with other parties to keep confidential or
information that prevents the Company from trading while the information remains
nonpublic) shall be treated as confidential by such Member until such Member is
advised by such Manager that any such restriction is no longer applicable. Each
Member recognizes the importance of this confidentiality obligation to the
Company and the other Members. Each Member acknowledges that this Agreement is
proprietary to the Company and shall be kept confidential and not disclosed to
any party, except that each Member may provide a copy of the Agreement to his,
her or its attorneys, accountants, and other advisors so long as such advisors
agree that the Agreement shall be kept confidential and not disclosed to other
parties.

8.6      WAIVER OF ACTION

         Each Member irrevocably waives during the term of the Company any right
that it may have to maintain any action for breach of fiduciary duty with
respect to the actions of the Managers and the Investment Committee unless such
person or persons acted in bad faith.

                                   ARTICLE 9

                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

9.1      RECORDS AND ACCOUNTING

         The Managers shall keep or cause to be kept at the principal office of
the Company appropriate books and records with respect to the Company's
business, including, without limitation, all books and records necessary to
provide to the Members any information, lists and copies of documents required
to be provided pursuant to Section 8.4 hereof.

                                       19

<PAGE>   25

9.2      FISCAL YEAR

         The fiscal year of the Company shall be the calendar year.

9.3      REPORTS

         The Managers shall cause to be provided to the Members (i) annual
reports, which shall include audited financial statements and summaries of the
operations and investments of the Company, (ii) unaudited quarterly financial
statements and summaries of the operations and investments of the Company, and
(iii) information necessary for inclusion on each Member's tax return.

                                   ARTICLE 10

                                   TAX MATTERS

10.1     PREPARATION OF TAX RETURNS

         The Managers shall arrange for the preparation and timely filing of all
returns of Company income, gains, deductions, losses and other items required of
the Company for federal, state and local income tax purposes, and the delivery
to the Members of all tax information reasonably required by the Members for
federal, state and local income tax reporting purposes.

10.2     TAX ELECTIONS

         The Managers shall, in their sole and absolute discretion, determine
whether to make any available election (including, without limitation, the
election under section 754 of the Code) or choose any available reporting method
pursuant to the Code or state or local tax law. The Managers shall in their sole
and absolute discretion have the right to seek to revoke any such election
(including, without limitation, the election under section 754 of the Code) or
change any reporting method.

10.3     TAX MATTERS PARTNER

         (a)      Sarah Faux shall be the initial "tax matters partner" of the
Company for federal income tax purposes. Pursuant to section 6223(c)(3) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Company, the tax matters partner shall furnish
the IRS with the name, address and profits interest of each of the Members,
provided that such information is provided to the Company by the Members.

         (b)      The tax matters partner is authorized, but not required:

                  (i) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the adjustment of Company items
required to be taken into account by a Member for income tax purposes (such
administrative proceedings being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review"), and in the settlement
agreement the tax matters partner may expressly state that such agreement shall
bind all Members, except that such settlement agreement shall not bind any
Member (x)

                                       20

<PAGE>   26

who (within the time prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Member or (y)
who is a "notice partner" (as defined in section 6231 of the Code) or a member
of a "notice group" (as defined in section 6223(b)(2) of the Code);

                  (ii) in the event that a notice of a final administrative
adjustment at the Company level of any item required to be taken into account by
a Member for tax purposes (a "FINAL ADJUSTMENT") is mailed to the tax matters
partner, to seek judicial review of such final adjustment, including the filing
of a petition for readjustment with the Tax Court or the United States Claims
Court, or the filing of a complaint for refund with the District Court of the
United States for the district in which the Company's principal place of
business is located;

                  (iii) to intervene in any action brought by any other Member
for judicial review of a final adjustment;

                  (iv) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is not allowed by the IRS,
to file an appropriate pleading (petition or complaint) for judicial review with
respect to such request;

                  (v) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item required to be
taken into account by a Member for tax purposes, or an item affected by such
item; and

                  (vi) to take any other action on behalf of the Members of the
Company in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.

         The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification set forth in
Section 7.8 of this Agreement shall be fully applicable to the tax matters
partner in its capacity as such.

         (c) The tax matters partner shall receive no compensation for his or
her services as tax partner. All third party costs and expenses incurred by the
tax matters partner in performing its duties as such (including legal and
accounting fees) shall be borne by the Company. Nothing herein shall be
construed to restrict the Company from engaging an accounting firm to assist the
tax matters partner in discharging its duties hereunder.

10.4     WITHHOLDING

         Each Member hereby authorizes the Company to withhold from or pay on
behalf of or with respect to such Member any amount of federal, state, local, or
foreign taxes that the Managers determine that the Company is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to sections 1441, 1442,
1445, or 1446 of the Code. Any amount paid on behalf of or with respect to a
Member shall constitute a loan by the Company to such Member, which loan shall
be repaid by such

                                       21

<PAGE>   27

Member within fifteen (15) days after notice from the Managers that such payment
must be made unless (i) the Company withholds such payment from a distribution
which would otherwise be made to the Member, or (ii) the Managers determine, in
their sole and absolute discretion, that such payment may be satisfied out of
the available funds of the Company which would, but for such payment, be
distributed to the Member. Any amounts withheld pursuant to the foregoing
clauses (i) or (ii) shall be treated as having been distributed to such Member.
Each Member hereby unconditionally and irrevocably grants to the Company a
security interest in such Member's Company Interests to secure such Member's
obligation to pay to the Company any amounts required to be paid pursuant to
this Section 10.4 and agrees to take such actions as the Managers shall request
in order to perfect or enforce the security interest created hereunder. In the
event that a Member fails to pay any amounts owed to the Company pursuant to
this Section 10.4 when due (i.e., fifteen (15) days after demand), the Company
may exercise any and all rights and remedies the Company may have against such
Member, including foreclosing on its security interest and/or instituting a
lawsuit to collect the unpaid amount (together with interest thereon from the
date such amount is due (i.e., fifteen (15) days after demand) calculated at
five (5) percentage points over the Prime Rate, but not in excess of the highest
rate permitted by law).

                                   ARTICLE 11

                          TRANSFER OF COMPANY INTERESTS

11.1     TRANSFER OF COMPANY INTERESTS

         (a)      VOLUNTARY TRANSFERS. No Member may Transfer his, her or its
Company Interests unless the Investment Committee in its discretion consents to
such Transfer. Such consent by the Investment Committee will not be unreasonably
withheld. The Investment Committee shall determine any Transfer restrictions
(including without limitation "tag-along" restrictions) on the Company
Interests.

         (b)      INVOLUNTARY TRANSFERS.  Upon any involuntary Transfer of a
Company Interest (e.g., due to death or dissolution), the Member or his, her or
its personal representative shall promptly send written notice thereof to the
Company. The Investment Committee shall determine any Transfer restrictions on
the Company Interests.

                  (i) Notwithstanding anything to the contrary contained above
in this Section 11.1, no Transfer of a Company Interest may be made to any
Person that lacks the legal right, power or capacity to own a Company Interest.
In addition, no Transfer of a Company Interest may be made unless the
transferring Member provides evidence satisfactory to the Investment Committee
that such Transfer is being made in compliance with all applicable federal and
state securities laws and regulations.

                  (ii) Notwithstanding anything to the contrary contained above
in this Section 11.1, the Investment Committee shall have the authority to
impose additional limits on Transfers of Company Interests to the extent that
the Investment Committee deems such limitations to be necessary or desirable in
order to ensure that the Company will not be treated as a "publicly traded
partnership" within the meaning of Code section 7704 and the Regulations

                                       22
<PAGE>   28

issued thereunder or become subject to registration under the Investment Company
Act of 1940, as amended.

                                   ARTICLE 12

                              ADMISSION OF MEMBERS

12.1     ADMISSION OF SUBSTITUTED OR ADDITIONAL MEMBERS

         No Person not a Member on the date of this Agreement shall become a
Member here-under under any of the provisions hereof unless such Person shall
expressly assume and agree to be bound by all of the terms and conditions of
this Agreement. Each such Person shall also cause to be delivered to the
Company, at his, her or its sole cost and expense such documents or instruments
as may be required in the discretion of the Investment Committee in order to
effect such Person's admission as an additional Member. Upon compliance with all
provisions hereof applicable to such Person becoming a Member, all other Members
agree to execute and deliver such amendments hereto as are necessary to
constitute such person or entity a Member of the Company. Any transferee of a
Company Interest that has not been admitted as a substituted Member shall be an
"assignee," entitled only to allocations of net profits, net losses and other
tax items of the Company and to distributions from the Company, and shall not be
entitled to vote or participate in the affairs and management of the Company.
The Company Interests of any assignee shall be deemed to be voted on all matters
in the same proportion as the remaining Company Interests in such class of
Company Interests were voted.

12.2     AMENDMENT OF AGREEMENT AND CERTIFICATE OF FORMATION

         For the admission to the Company of any Member in accordance with the
provisions of this Agreement, the Managers shall take all steps necessary and
appropriate under the Act to amend the records of the Company and, if necessary,
to prepare as soon as practical an amendment of this Agreement (including an
amendment of Exhibit A) and, if required by law, shall prepare and file an
amendment to the Certificate.

                                   ARTICLE 13

                           DISSOLUTION AND LIQUIDATION

13.1     DISSOLUTION

         The Company shall not be dissolved by the withdrawal of any Member or
by the admission of any additional or substituted Member in accordance with the
terms of this Agreement. The Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following ("LIQUIDATING
EVENTS"):

         (a) July 15, 2010, subject to an extension of up to three (3) years by
the Company for the limited purpose of holding and liquidating illiquid
securities then in the Company's portfolio;

                                       23

<PAGE>   29

         (b) an election to dissolve the Company made in writing by the
Managers; provided, however, that the Managers shall obtain the prior approval
of the Members prior to making any such election;

         (c) entry of a decree of judicial dissolution of the Company pursuant
to the provisions of the Act; or

         (d) the sale of all or substantially all of the assets and properties
of the Company, unless the Investment Committee elects to continue the Company
business for the purpose of the receipt and the collection of indebtedness or
the collection of other consideration to be received in exchange for the assets
of the Company (which activities shall be deemed to be part of the winding up of
the Company).

13.2     WINDING UP

         Upon the occurrence of a Liquidating Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members.
No Member shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Company's business and affairs. The
Managers (or, in the event there is no Manager, any Person selected by the
Investment Committee) (the "LIQUIDATOR") shall be responsible for overseeing the
winding up and dissolution of the Company and shall take full account of the
Company's liabilities and property. The Company property shall be liquidated as
promptly as is consistent with obtaining the fair market value thereof (provided
that the Liquidator in its discretion may distribute assets in kind in lieu of
liquidating the assets of the Company), and the proceeds therefrom shall be
applied and distributed in the following order:

         (a) First, to the payment and discharge of all of the Company's debts
and liabilities to creditors other than the Members;

         (b) Second, to the payment and discharge of all of the Company's debts
and liabilities to the Members; and

         (c) The balance, if any, to the Members in accordance with their
positive Capital Account balances, after giving effect to all contributions,
distributions, and allocations for all periods.

13.3     COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS

         In the event the Company is "liquidated" within the meaning of
Regulations section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the Members who have positive Capital Accounts in
compliance with Regulations section 1.704-1(b)(2)(ii)(b)(2). If any Member has a
deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Member shall have no
obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit shall not be considered a debt owed to the
Company or to any other Person for any purpose whatsoever. In the discretion

                                       24

<PAGE>   30

of the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Members pursuant to this Article 13 may be:

         (a) distributed to a trust established for the benefit of the Members
for the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company arising out of or in connection with the Company. The assets of any
such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the Liquidator, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed
to the Members pursuant to this Agreement; or

         (b) withheld to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Company, provided that such withheld amounts
shall be distributed to the Members as soon as practicable.

13.4     RIGHTS OF MEMBERS

         Except as otherwise provided in this Agreement, each Member shall look
solely to the assets of the Company for the return of its Capital Contribution
and shall have no right or power to demand or receive property other than cash
from the Company. No Member shall have priority over any other Member as to the
return of its Capital Contributions, distributions, or allocations, except as
expressly provided in this Agreement.

13.5     DOCUMENTATION OF LIQUIDATION

         Upon the completion of the liquidation of the Company cash and property
as provided in Section 13.2 hereof, the Company shall be terminated and the
Certificate and all qualifications of the Company as a foreign limited liability
company in jurisdictions shall be canceled and such other actions as may be
necessary to terminate the Company shall be taken. The Liquidator shall have the
authority to execute and record any and all documents or instruments required to
effect the dissolution, liquidation and termination of the Company.

13.6     REASONABLE TIME FOR WINDING-UP

         A reasonable time of no more than three (3) years shall be allowed for
the orderly winding-up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect between the Members during the period of
liquidation.

13.7     LIABILITY OF THE LIQUIDATOR

         The Liquidator shall be indemnified and held harmless by the Company
from and against any and all claims, demands, liabilities, costs, damages and
causes of action of any nature whatsoever arising out of or incidental to the
Liquidator's taking of any action authorized under or within the scope of this
Agreement; provided, however, that the Liquidator shall not be

                                       25

<PAGE>   31

entitled to indemnification, and shall not be held harmless, where the claim,
demand, liability, cost, damage or cause of action at issue arises out of:

         (a)      a matter entirely unrelated to the Liquidator's action or
conduct pursuant to the provisions of this Agreement; or

         (b)      the willful misconduct or gross negligence of the Liquidator.

13.8     WAIVER OF PARTITION

         Each Member hereby waives any right to partition of the Company
property.

                                   ARTICLE 14

                        AMENDMENT OF OPERATING AGREEMENT

14.1     AMENDMENTS

         (a) Amendments to this Agreement may be proposed by a Majority of the
Members or the Managers. Except as provided in Sections 14.1(b) and (c), a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the Managers and a Majority of the Members.

         (b) Notwithstanding anything to the contrary contained in Section
14.1(a) hereof, this Agreement shall not be amended without the prior written
consent of each Member adversely affected if such amendment would (i) modify the
limited liability of a Member, (ii) increase the amount of the Capital
Contributions required from such Member or (iii) adversely affect the timing,
amount or level of priority of distributions to be received by such Member.

                                   ARTICLE 15

                               GENERAL PROVISIONS

15.1     POWER OF ATTORNEY

     (a) Each of the Members hereby irrevocably constitutes and appoints the
Managers, with full power of substitution, to be his, her or its true and lawful
attorney-in-fact, in his, her or its name, place and stead to make, execute,
certify, acknowledge, deliver, file and record the following documents relating
to the Company and such Member's Company Interests therein (i) any certificate
or other instruments, or amendments or modifications thereof, which may be
required to be filed by the Company under applicable law, (ii) any documents,
certificates or other instruments, including any and all modifications and
amendments to this Agreement and the Certificate which may be required or deemed
desirable by the Managers (1) to effectuate the provisions of any part of this
Agreement, (2) to effectuate any amendment of this Agreement made in accordance
with the terms hereof (including without limitation amendments to reflect the
admission, substitution, termination or withdrawal of Members made

                                       26

<PAGE>   32
in accordance with the provisions of this Agreement), (3) to effectuate any
sale or other disposition which is in the form of a sale and conveyance of the
Company Interests pursuant to the terms of this Agreement, and (4) by way of
extension and not in limitation, to do all such other things as shall be
necessary to continue and to carry on the business of the Company; and (iii) all
documents, certificates or other instruments which may be required to effectuate
the dissolution and termination of the Company; provided that the power of
attorney granted herein shall be fully subject to all the terms and conditions
of this Agreement.

         (b) Each of the Members hereby acknowledges that the power of attorney
granted herein (i) is coupled with an interest, (ii) shall be irrevocable, and
(iii) shall survive the incompetence or adjudication of insanity of any such
Member who is an individual.

15.2     ADDRESSES AND NOTICE

         All notices, requests, demands and other communications hereunder to a
Member shall be in writing and shall be deemed to have been duly given if
delivered by hand or if sent by certified mail, return receipt requested,
properly addressed and postage prepaid, or transmitted by commercial overnight
courier to the Member at the address set forth in Exhibit A or at such other
address as the Member shall notify the Managers in writing. Such communications
shall be deemed sufficiently given, served, sent or received for all purposes at
such time as delivered to the addressee (with the return receipt or delivery
receipt being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.

15.3     TITLES AND CAPTIONS

         All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, (i) references to "Articles" and
"Sections" are to Articles and Sections of this Agreement, and (ii) references
to "Exhibits" are to the Exhibits attached to this Agreement. Each Exhibit
attached hereto and referred to herein is hereby incorporated by reference.

15.4     PRONOUNS AND PLURALS

         Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa. Any references in this Agreement to "including" shall be deemed to mean
"including without limitation."

15.5     FURTHER ACTION

         The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purpose of this Agreement.

                                       27

<PAGE>   33

15.6     BINDING EFFECT

         This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

15.7     CREDITORS

         None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Company.

15.8     WAIVER

         No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.

15.9     NO AGENCY

         Nothing contained herein shall be construed to constitute any Member
the agent of another Member, except as specifically provided herein, or in any
manner to limit the Members in the carrying on of their own respective
businesses or activities.

15.10    ENTIRE UNDERSTANDING

         This Agreement constitutes the entire agreement and understanding among
the Members and supersedes any prior understanding and/or written or oral
agreements among them respecting the subject matter herein.

15.11    COUNTERPARTS

         This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.

15.12    APPLICABLE LAW

         This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts
of law.

15.13    INVALIDITY OF PROVISIONS

         If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respects, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.

                                       28

<PAGE>   34

15.14    SECURITIES LAW REPRESENTATIONS, WARRANTIES AND AGREEMENTS

         (a)      Each Member represents and warrants to the Company and the
other Members as follows:

                  (i)      Such Member has such knowledge and experience in
financial and business matters that he, she or it is capable of evaluating the
merits and risks of the investment involved in the purchase of a Company
Interest in the Company and he, she or it has so evaluated this purchase.

                  (ii)     Such Member is aware that this investment is
speculative and represents a substantial risk of loss.

                  (iii)    Such Member is able to bear the economic risk of
this investment.

                  (iv) In connection with the purchase of his, her or its
Company Interests, such Member has been fully informed as to the circumstances
under which he, she or it is required to take and hold the Company Interests
pursuant to the requirements of the Securities Act and applicable state
securities laws.

                  (v) Such Member understands that the Company Interests are
not registered under the Securities Act or any state securities laws and may not
be transferred, assigned or otherwise disposed of unless his, her or its
partnership interest is so registered or unless an exemption from registration
is available.

         (b)      Each Member agrees as follows:

                  (i) The Company is not under any obligation to register any
Company Interest under the Securities Act or any state securities laws.

                  (ii) The Company will not be required to supply any Member or
other Person with any information necessary to enable any Member to make a sale
of its partnership interest under Rule 144 under the Securities Act or any
corresponding rule under any state securities law.

         (c) Each Member shall indemnify and hold harmless the Company and the
other Members from and against any and all loss, damage, liability, cost or
expense, including costs of defense and attorneys' fees, arising or resulting
from or attributable to any breach of such Member's representations, warranties
or agreements set forth in this Section 15.14.

     15.15 CO-INVESTMENT.

         In the event that the Company or eLoyalty Corporation identifies a
company or other entity as an investment opportunity, and the Company or
eLoyalty Corporation has an initial contact with such company or entity prior to
any contact between such company or entity and any of the other Members, then
the rights of the Members to invest in such company or entity shall be subject
to the following restrictions (which shall also apply to all subsequent rounds
of financing for such company or entity): (a) the proposed co-investment shall
have been first offered to the Company and the Company shall have (as determined
by the Investment Committee) either declined all or part of such prospective
co-investment, and (b) any

                                       29
<PAGE>   35

available balance of the proposed co-investment shall be made available to all
of the Members (in accordance with their relative holdings of Company Interests)
on the same terms and conditions as have been made available to the Company. Any
disputes regarding matters related to this Section 15.15 shall be resolved by
the Investment Committee.

     15.16 FREEDOM TO PURSUE OPPORTUNITIES, ETC.

         In anticipation that the Company and the Members (or one or more
affiliates, associated investment funds or portfolio companies of any of the
Members) may engage in the same or similar activities or lines of business and
have an interest in the same areas of corporate opportunities, and in
recognition of the difficulties which may confront any Member who desires and
endeavors fully to satisfy such Member's duties in determining the full scope of
such duties in any particular situation, the provisions of this 15.16 are set
forth to regulate, define and guide the conduct of certain affairs of the
Company as they may involve the Members. Except as any of the Members may
otherwise agree in writing after the date hereof:

         (a) Each Member shall have the right to, and shall have no duty
(contractual or otherwise) not to, directly or indirectly, (i) engage in the
same or similar business activities or lines of business as the Company,
including those competing with the Company, and (ii) conduct business (directly
or through its affiliates) with any portfolio company of the Company;

         (b) No Member shall be liable to the Company or its affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities
of or the participation of such Member or its affiliates therein; and

         (c) In the event that a Member acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both the Company
and such Member, its affiliates or any other person, such Member shall have no
duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Company and, notwithstanding any provision of this Agreement
to the contrary, shall not be liable to the Company or its affiliates for breach
of any duty (contractual or otherwise) by reason of the fact that such Member
directly or indirectly pursues or acquires such opportunity for itself or its
affiliates, directs such opportunity to another person, or does not present such
opportunity to the Company.

                            [SIGNATURE PAGE FOLLOWS]

                                       30
<PAGE>   36

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                              ELOYALTY EMPLOYEE INVESTORS, L.L.C.

                              By:_____________________________________
                              Name:___________________________________
                              Title:____________________________________

                              BROOKSIDE CAPITAL PARTNERS FUND LP

                              By:_____________________________________
                              Name:___________________________________
                              Title:____________________________________

                              SUTTER HILL VENTURES L.P.

                              By:_____________________________________
                              Name:___________________________________
                              Title:____________________________________

                              TCV IV, L.P. & TCV STRATEGIC PARTNERS IV, L.P.

                              By: Technology Crossover Management IV, LLC,
                              as General Partner

                              By:_____________________________________
                              Name: Carla Newell
                              Title:  Attorney-in-Fact

<PAGE>   37

                                    EXHIBIT A

              MEMBERS, CAPITAL CONTRIBUTIONS AND COMPANY INTERESTS

   NAME AND ADDRESS OF        INITIAL CAPITAL    TOTAL COMMITTED    COMPANY
        MEMBER                 CONTRIBUTION           CAPITAL       INTERESTS

Brookside Capital Partners          $0             $ 5,100,000         17%
Fund LP

eLoyalty Employee                   $0             $14,700,000         49%
Investors, L.L.C

Sutter Hill Ventures L.P.           $0             $ 5,100,000         17%

TCV IV, L.P. & TCV                  $0             $ 5,100,000         17%
Strategic Partners, L.P.<PAGE>   1
                                                                    EXHIBIT 10.3

                                    LOAN NOTE

US$1,200,000                                             Loan Date: July 1, 2000

1.   PROMISE TO PAY. For value received, the undersigned ("Borrower") hereby
     unconditionally promises to pay to the order of eLoyalty (UK) Ltd, a
     company incorporated in England and Wales (registered no. 2422314) whose
     registered office is situated at Regina House, 5 Queen Street, London EC4N
     1SP ("Lender"), in immediately available funds, the principal sum of One
     Million Two Hundred Thousand United States Dollars (US$1,200,000) together
     with interest on the principal balance from time to time outstanding at a
     rate equal to the official rate of interest from time to time for the
     purposes of section 160 Income and Corporation Taxes Act 1988 (the "Note
     Rate")

2.   PAYMENT TERMS.

     a.   REPAYMENT: The Borrower agrees to repay the principal amount of One
          Million Two Hundred Thousand United States Dollars (US$1,200,000)
          together with interest on the principal balance as follows:

          (I)     The Borrower agrees that One Million United States Dollars
                  (US$1,000,000) of the principal indebtedness (the "First Loan
                  Portion") evidenced hereby, together with interest as
                  aforesaid, shall be immediately due and payable within
                  twenty-four months from the Loan Date (the "First Portion
                  Payment Date"); provided, however, that for each calendar
                  month that the Borrower is employed by Lender, or any parent
                  or subsidiary company of Lender after the Loan Date, Lender
                  will forgive and discharge, per each such calendar month after
                  the Loan Date, Forty-One Thousand Six Hundred and Sixty-Six
                  United States Dollars and 67/00 (US$41,666.67) of the
                  principal amount of the First Loan Portion plus accompanying
                  interest.

          (II)    The Borrower agrees that the remaining Two Hundred Thousand
                  United States Dollars ($200,000) of the principal indebtedness
                  (the "Second Loan Portion") evidenced hereby, together with
                  interest as aforesaid, shall be immediately due and payable
                  twelve months after the First Portion Payment Date (the
                  "Second Portion Payment Date" and together with the First
                  Payment Date, may be referred to hereinafter as the "Payment
                  Date"); provided, however, that for each calendar month that
                  the Borrower is employed by Lender, or any parent or
                  subsidiary company of Lender after the First Portion Payment
                  Date, the Lender will forgive and discharge, per each such
                  calendar month after the First Portion Payment Date, Sixteen
                  Thousand Six Hundred and Sixty-Six United States Dollars and
                  67/00 (US$16,666.67) of the principal amount of the Second
                  Loan Portion plus accompanying interest.

<PAGE>   2

     b.   TERMINATION OF EMPLOYMENT. The following terms shall apply in the
          event of termination of Borrower's employment with Lender:

          (I)     Notwithstanding any of the foregoing, in the event that
                  Borrower terminates his employment with Lender of Borrower's
                  own accord on or prior to the Second Portion Payment Date, or
                  if Borrower's employment with Lender is terminated for "Good
                  Cause" on or prior to the Second Portion Payment Date, then
                  the remaining amount of the outstanding principal of One
                  Million Two Hundred Thousand United States Dollars
                  (US$1,200,000) plus accrued interest which was not already
                  forgiven and discharged as described in subsection (a) above
                  shall immediately become due and payable without presentment,
                  demand, protest or any notice of any kind, all of which are
                  hereby expressly waived by Borrower.

          (II)    In the event that Borrower's employment with Lender terminates
                  for any reason other than for Good Cause or of Borrower's own
                  accord prior to the Second Portion Payment Date, then the
                  entire principal indebtedness described herein and
                  accompanying interest shall be immediately discharged and
                  forgiven by Lender and shall no longer be due.

          (III)   For purposes of this Note, "Good Cause" means:

                  (i)   Employee is guilty of any serious misconduct or material
                        or persistent breach of any of the terms or conditions
                        of this Note;

                  (ii)  Employee, in a material or persistent manner, wilfully
                        neglects or refuses to carry out any of the Employee's
                        duties or to comply with any lawful and reasonable
                        written instruction given to the EMPLOYEE by Senior
                        Management (as defined in Employee's Employment
                        Agreement executed with Lender);

                  (iii) Employee has a bankruptcy order made against the
                        Employee or compounds with or enters into any voluntary
                        arrangements with the Employee's creditors; or

                  (iv)  Employee is convicted of any criminal offence other than
                        an offence under the Road Traffic Acts for which a
                        penalty of imprisonment is not imposed.

     c.   TAXES. Notwithstanding anything contained in this Note, Borrower shall
          in all cases be responsible for income tax on the principal plus
          interest, if and when they are recognized as income, which may be
          withheld by Lender.

3.   PREPAYMENT. Borrower may prepay this Note, in whole or in part, at any time
     without penalty. Amounts prepaid may not be reborrowed. Any amounts prepaid
     will be applied first to interest due and then to principal due. Interest
     will be adjusted from the date of any principal prepayment. Borrower's

<PAGE>   3

     payments to Lender on this Note must be made without set-off or
     counterclaim and without any deduction unless Borrower is compelled by law
     to make any deductions for taxes or otherwise, in which case Borrower will
     make the minimum deduction required by law and pay such sums as after
     deduction ensure receipt by Lender of the full amount which Lender would
     have received had no deduction been made.

4.   INTEREST.

     a.   If Borrower fails to pay any sum on its due date for payment under the
          terms of this Note, Borrower will pay interest on such sum on demand
          from that date up to the date of actual payment (before as well as
          after judgment). Such interest will be calculated at the Note Rate.

     b.   All interest and other payments of an annual nature under this Note
          will accrue from day to day, compounded annually and be calculated on
          the basis of actual days elapsed and a 365 day year.

5.   PLACE OF PAYMENT. All payments of principal and interest under this Note
     will be made by Borrower to Lender at Lender's registered office as set
     forth above, or at such other place as Lender may from time to time
     designate in writing.

6.   DEFAULTS.

     a.   The occurrence or existence of one or more of the following events
          will constitute an event of default ("Default") under this Note:

                  i.    Borrower fails to pay when due any principal or interest
                        payable hereunder;

                  ii.   (I) Borrower becomes generally unable to pay Borrower's
                        debts as they become due, (II) Borrower makes an
                        assignment for the benefit of creditors, (III) Borrower
                        calls a meeting of creditors for the composition or
                        scheme of voluntary arrangement for debts, (IV) a
                        proceeding or petition under any bankruptcy,
                        reorganisation, arrangement of debt, insolvency,
                        readjustment of debt, or receivership law or statute is
                        filed by or against Borrower, (V) a trustee in
                        bankruptcy, custodian, receiver or agent is appointed or
                        authorised to take charge of any of Borrower's
                        properties, or (VI) Borrower takes any action to
                        authorise any of the foregoing;

                  iii.  Borrower no longer remains an employee of Lender, or any
                        direct or indirect subsidiary, parent or sister of
                        Lender prior to the Second Portion Payment Date because
                        of termination due to Good Cause or because of
                        Borrower's own accord; or

                  iv.   any judgment or judgments in an aggregate amount in
                        excess of (pound)20,000.00 is or are entered against
                        Borrower unless the amounts of such judgment or
                        judgments are covered by insurance and liability under
                        such coverage has been admitted by the issuer thereof.

     b.   If a Default occurs, Lender may, by notice to Borrower, declare all
          the indebtedness evidenced by this Note (being the principal and such
          interest as

<PAGE>   4
          has accrued by the date of such notice) to be, and thereupon such
          indebtedness will become, immediately due and payable, without
          presentment, demand, protest or further notice of any kind, all of
          which are hereby expressly waived by Borrower, except that (1) if the
          Default specified in clause (ii) in subsection (a) above occurs, the
          indebtedness evidenced by this Note will automatically become due and
          payable, without presentment, demand, protest or any notice of any
          kind, all of which are hereby expressly waived by Borrower, or (2) if
          the Default specified in clause (iii) in subsection (a) above occurs,
          the provision of Section 2(b)(I) shall apply.

7.   BUSINESS DAYS. If payment hereunder becomes due and payable on a day which
     is not a "Business Day" (as defined below), the due date thereof will be
     extended to the next succeeding Business Day, and interest will be payable
     thereon during such extension at the rate specified above. "Business Day"
     will mean a day other than a Saturday or Sunday on which banks in London
     are open for the transaction of banking business.

8.   NOTICES. Any notice hereunder will be sufficiently given if in writing and
     delivered in person or mailed by first class mail addressed as follows:

         If to Borrower:

                  Vaughan Thomas

                  -----------------

                  -----------------

                  -----------------

         If to Lender:

                  eLoyalty (U.K.) Ltd
                  Regina House
                  5 Queen Street
                  London EC4N 1SP

     Every notice, request, demand or other communication will, except as
     otherwise provided in this Note, be deemed to have been received when
     delivered personally or seven days after it has been put on the post.
     Borrower and Lender may each designate different addresses for purposes of
     this Note by notice to the other party as provided herein.

9.   ADDITIONAL PROVISIONS.

     a.   Lender will be under no obligation to marshal any assets in favour of
          Borrower in payment of any or all of Borrower's liabilities hereunder.
          If Borrower makes a payment or payments to Lender, and such payment or
          payments or any part thereof are subsequently invalidated, declared to
          be fraudulent or preferential, set aside or required to be repaid to a
          trustee in bankruptcy, receiver or any other party under any
          bankruptcy law, common law or equitable cause, then to the extent of
          such recovery, the obligation or part thereof originally intended to

<PAGE>   5

          be satisfied will be revived and continued in full force and effect as
          if such payment had not been made.

     b.   The validity and construction of this Note will be governed by English
          law.

     c.   For the benefit of Lender, Borrower irrevocably agrees that the
          English courts have jurisdiction to settle any disputes which may
          arise out of or in connection with this Note and that accordingly any
          suit, action or proceedings ("Proceedings") arising out of or in
          connection with this Note may be brought in such courts.

     d.   Nothing contained in this Section 9 will limit the right of Lender to
          take proceedings against Borrower in any other court of competent
          jurisdiction, nor will the taking of Proceedings in any one or more
          jurisdictions preclude the taking or Proceedings in any other
          jurisdiction, whether concurrently or not, to the extent permitted by
          applicable law.

     e.   Borrower agrees that in any Proceedings against Borrower's property in
          connection with this Note no immunity from such Proceedings will be
          claimed by or on behalf of Borrower or with respect of Borrower's
          property, and Borrower irrevocably waives any such right of immunity
          which Borrower's property may have or hereafter acquire or which may
          be attributed to Borrower's property and consents generally in respect
          of any such Proceedings to the giving of any relief or the issue of
          any process in connection with such Proceedings including, without
          limitation, the making, enforcement or execution against any property
          whatsoever (irrespective of its use or intended use) of any order or
          judgment which may be made or given in such Proceedings.

     f.   Lender may, without notice to Borrower and without prejudice to any of
          Lender's other rights or remedies, set-off all or any amounts payable
          by Borrower to Lender hereunder which are due and unpaid against any
          obligation (whether or not matured) owed by Lender to Borrower,
          regardless of the place of payment and, for that purpose, Lender may
          convert one currency into another currency at the rate of exchange
          determined by Lender in its absolute discretion to be prevailing at
          the date of set-off.

     g.   Whenever possible, each provision of this Note will be interpreted in
          such manner as to be effective and valid under applicable law, but if
          any provision of this Note is held to be prohibited by or invalid
          under applicable law, such provision will be ineffective only to the
          extent of such prohibition or invalidity, without invalidating the
          remainder of such provision or the remaining provisions of this Note.

     h.   Lender may at any time upon written notice to Borrower assign all or
          any part of its rights under this Note. This Note is not negotiable,
          and Borrower may not assign nor transfer any of Borrower's rights or
          obligations under this Note.

     i.   Whenever in this Note reference is made to Lender, such reference will
          be deemed to include, as applicable, a reference to its respective
          successors and

<PAGE>   6
          assigns, and the provisions of this Note will be binding upon and will
          inure to the benefit of said successors and assigns. Any reference to
          Borrower will include, without limitation, a receiver and manager,
          trustee in bankruptcy of or for Borrower.

     j.   No delay or omission on the part of Lender in exercising any right
          hereunder will operate as a waiver of such right or of any other right
          under this Note. No waiver of any right or amendment hereto will be
          effective unless in writing and signed by Lender nor will a waiver on
          one occasion be construed as a bar to or waiver of any such right on
          any future occasion. Without limiting the generality of the foregoing,
          the acceptance by Lender of any late payment will not be deemed to be
          a waiver of the Default arising as a consequence thereof.

 Signed by:
             ---------------------------------------------------
      Name:  Vaughan Thomas, Borrower

 Signed by:
             ---------------------------------------------------
      Name and Title: Kelly Conway, Chief Executive Officer
      On behalf of Lender:  eLoyalty (U.K.) Ltd

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