Document:

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                                                                   EXHIBIT 10.26

                            INDEMNIFICATION AGREEMENT

      INDEMNIFICATION AGREEMENT made effective as of the 17th day of December,
2004, between eLoyalty Corporation, a Delaware corporation (the "Company"), and
Christopher J. Danson (the "Indemnitee").

      WHEREAS, it is essential to the Company and its stockholders to attract
and retain qualified and capable directors, officers, employees, agents and
fiduciaries;

      WHEREAS, the Certificate of Incorporation of the Company (the "Certificate
of Incorporation") and the Company's Bylaws require the Company to indemnify and
advance expenses to its directors and officers to the extent not prohibited by
law;

      WHEREAS, historically, basic protection against undue risk of personal
liability of directors and officers has been provided through insurance coverage
affording reasonable protection at reasonable cost;

      WHEREAS, it is presently uncertain whether, and to what extent, such
insurance is or will continue to be available to the Company at a reasonable
cost for the protection of Indemnitee;

      WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to induce Indemnitee to serve or continue to serve
the Company in an effective manner, and, in the case of directors and officers,
to supplement the Company's directors' and officers' liability insurance
coverage, and in part to provide Indemnitee with specific contractual assurance
that the protection promised by the Certificate of Incorporation and Bylaws will
be available to Indemnitee (regardless of, among other things, any amendment to
or revocation of the Certificate of Incorporation and Bylaws or any change in
the composition of the Company's Board of Directors or any acquisition
transaction relating to the Company), the Company wishes to provide the
Indemnitee with the benefits contemplated by this Agreement; and

      WHEREAS, as a result of the provision of such benefits Indemnitee has
agreed to serve or to continue to serve the Company;

      NOW, THEREFORE, the parties hereto hereby agree as follows:

      1. Definitions. The following terms, as used herein, shall have the
following respective meanings:

      (a) Claim: means any threatened, pending or completed action, suit,
arbitration or proceeding, or any inquiry or investigation, whether brought by
or in the right of the Company or otherwise, that Indemnitee in good faith
believes might lead to the institution of any such action, suit, arbitration or
proceeding, whether civil, criminal, administrative, investigative or other, or
any appeal therefrom.

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      (b) D&O Insurance: means any valid directors' and officers' liability
insurance policy maintained by the Company for the benefit of the Indemnitee.

      (c) Company Determination: means a determination based on the facts known
at the time, by: (i) a majority vote of a quorum of disinterested directors of
the Company, or (ii) if such a quorum is not obtainable, or even if obtainable,
if a quorum of disinterested directors of the Company so directs, by independent
legal counsel in a written opinion, or (iii) a majority of the disinterested
stockholders of the Company.

      (d) Excluded Claim: means any payment for Losses or Expenses in connection
with any Claim: (i) based upon or attributable to Indemnitee gaining in fact any
personal profit or advantage to which Indemnitee is not entitled; or (ii) for
the return by Indemnitee of any remuneration paid to Indemnitee without the
previous approval of the stockholders of the Company which is illegal; or (iii)
for an accounting of profits in fact made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, or similar provisions of any state
law; or (iv) resulting from Indemnitee's knowingly fraudulent, dishonest or
willful misconduct; or (v) the payment of which by the Company under this
Agreement is not permitted by applicable law.

      (e) Expenses: means any reasonable expenses incurred by Indemnitee as a
result of a Claim or Claims by reason of (or arising in part out of)
Indemnifiable Events including, without limitation, attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in any Claim by
reason of (or arising in part out of) any Indemnifiable Event.

      (f) Fines: means any fine, penalty or, with respect to an employee benefit
plan, any excise tax or penalty assessed with respect thereto.

      (g) Indemnifiable Event: means any event or occurrence, occurring prior
to, on or after the date of this Agreement, related to the fact that Indemnitee
is, was or has agreed to serve as, a director or officer of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise; provided that the Indemnitee acted in good faith and
in a manner the Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, the Indemnitee had no reasonable cause to believe his conduct was
unlawful.

      (h) Judicial Determination: means a final nonappealable determination of a
court of competent jurisdiction.

      (i) Losses: means any amounts or sums which Indemnitee is or becomes
obligated to pay as a result of a Claim or Claims made against Indemnitee for
Indemnifiable Events including,
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without limitation, damages, judgments and sums or amounts paid in settlement of
a Claim or Claims, and Fines.

      2. Basic Indemnification Agreement. In consideration of, and as an
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event Indemnitee is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, a Claim by reason of ( or arising in part out of) an
Indemnifiable Event, the Company will indemnify Indemnitee to the fullest extent
authorized by law, against any and all Losses and Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Losses and Expenses) of such Claim, whether or not such Claim
proceeds to judgment or is settled or otherwise is brought to a final
disposition, subject in each case, to the further provisions of this Agreement.

      3. Limitations on Indemnification. Notwithstanding the provisions of
Section 2, Indemnitee shall not be indemnified and held harmless from any Losses
or Expenses (a) which have been determined by Judicial Determination to
constitute an Excluded Claim; (b) to the extent Indemnitee is indemnified by the
Company and has already received payment in full of all such Losses and Expenses
pursuant to the Certificate of Incorporation and Bylaws, D&O Insurance or
otherwise; or (c) other than pursuant to the last sentence of Section 4(d) or
Section 12, in connection with any claim initiated by Indemnitee, unless such
claim has been authorized by a Company Determination.

      4. Indemnification Procedures.

      (a) Promptly after receipt by Indemnitee of notice of any Claim,
Indemnitee shall, if indemnification with respect thereto may be sought from the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, that the failure to give such notice promptly shall not
affect or limit the Company's obligations with respect to the matters described
in the notice of such Claim, except to the extent that the Company is materially
prejudiced thereby. Indemnitee agrees further not to make any admission or
effect any settlement with respect to such Claim without the consent of the
Company, except any Claim with respect to which the Indemnitee has undertaken
the defense in accordance with the second to last sentence of Section 4(d).

      (b) If, at the time of the receipt of such notice, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement of
Claim to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
Losses and Expenses payable as a result of such Claim.

      (c) The Company shall pay the Expenses of any Claim in advance of the
final disposition thereof and the Company, if appropriate, shall be entitled to
assume the defense of such Claim, with counsel satisfactory to Indemnitee, upon
the delivery to Indemnitee of written

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notice of its election so to do. After the delivery of such notice, the Company
will not be liable to Indemnitee under this Agreement for any legal or other
Expenses subsequently incurred by Indemnitee in connection with such defense
other than reasonable Expenses of investigation; provided that Indemnitee shall
have the right to employ separate counsel in such Claim but the fees and
expenses of such counsel incurred after delivery of notice from the Company of
its assumption of such defense shall be at the Indemnitee's expense; provided
further that if: (i) the employment of counsel by Indemnitee has been previously
authorized by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such action, the reasonable fees and
expenses of counsel shall be at the expense of the Company.

      (d) All payments on account of the Company's indemnification obligations
under this Agreement shall be made within thirty (30) days of Indemnitee's
written request therefor unless a Company Determination is made that the Claims
giving rise to Indemnitee's request are Excluded Claims or otherwise not payable
under this Agreement, provided that all payments on account of the Company's
obligation to pay Expenses under Section 4(c) of this Agreement prior to the
final disposition of any Claim shall be made within 20 days of Indemnitee's
written request therefor and such obligation shall not be subject to Section
4(e) of this Agreement. In the event of a Company Determination that Indemnitee
is not entitled to indemnification in connection with the proposed settlement of
any Claim, Indemnitee shall have the right at his own expense to undertake
defense of any such Claim, insofar as such proceeding involves Claims against
the Indemnitee, by written notice given to the Company within 10 days after the
Company has notified Indemnitee in writing of its contention that Indemnitee is
not entitled to indemnification; provided, however, that the failure to give
such notice within such 10-day period shall not affect or limit the Company's
obligations with respect to any such Claim if such Claim is subsequently
determined not to be an Excluded Claim or otherwise to be payable under this
Agreement, except to the extent that the Company is materially prejudiced
thereby. If it is subsequently determined in connection with such proceeding
that the Claims are not Excluded Claims or that Indemnitee is otherwise entitled
to be indemnified under the provisions of Section 2 hereof, the Company shall
promptly indemnify Indemnitee in full against all Losses and Expenses arising
out of such Claims or Indemnifiable Events.

      (e) Indemnitee hereby expressly undertakes and agrees to reimburse the
Company for all Losses and Expenses paid by the Company in connection with any
Claim against Indemnitee in the event and only to the extent that a Judicial
Determination shall have been made that Indemnitee is not entitled to be
indemnified by the Company for such Losses and Expenses because the Claim is an
Excluded Claim or because Indemnitee is otherwise not entitled to payment under
applicable law.

      (f) In connection with any dispute as to whether Indemnitee is entitled to
be indemnified hereunder the presumption shall be that Indemnitee is so entitled
and the burden of proof shall be on the Company to establish that Indemnitee is
not so entitled.

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      5. Settlement. The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent. The Company shall not
settle any Claim in which it takes the position that Indemnitee is not entitled
to indemnification in connection with such settlement without the consent of
Indemnitee, nor shall the Company settle any Claim in any manner which would
impose any Fine, admission of wrongdoing or any obligation on Indemnitee,
without Indemnitee's written consent. Neither the Company nor Indemnitee shall
unreasonably withhold its or his consent to any proposed settlement.

      6. No Presumption. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.

      7. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Certificate of
Incorporation and Bylaws, the Company's By-laws, the Delaware General
Corporation Law, any vote of stockholders or disinterested directors or
otherwise, both as to action in Indemnitee's official capacity and as to action
in any other capacity by holding such office, and shall continue after
Indemnitee ceases to serve the Company as a director or officer for so long as
Indemnitee shall be subject to any Claim by reason of (or arising in part out
of) an Indemnifiable Event. To the extent that a change in the Delaware General
Corporation Law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the
Certificate of Incorporation and By-Laws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.

      8. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee, if at any time an officer or director of the Company, shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any director or officer of the
Company.

      9. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.

      10. Partial Indemnity, Etc. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
Losses and Expenses of a Claim but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover,

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notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to any Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.

      11. Liability of Company. Indemnitee agrees that neither the stockholders
nor the directors nor any officer, employee, representative or agent of the
Company shall be personally liable for the satisfaction of the Company's
obligations under this Agreement and Indemnitee shall look solely to the assets
of the Company for satisfaction of any claims hereunder.

      12. Enforcement.

      (a) Indemnitee's right to indemnification and other rights under this
Agreement shall be specifically enforceable by Indemnitee and shall be
enforceable notwithstanding any adverse Company Determination and no such
Company Determination shall create a presumption that Indemnitee is not entitled
to be indemnified hereunder.

      (b) In the event that any action is instituted by Indemnitee under this
Agreement, or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and reasonable expenses,
including reasonable counsel fees, incurred by Indemnitee with respect to such
action, unless the court determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous.

      13. Severability. In the event that any provision of this Agreement is
determined by a court to require the Company to do or to fail to do an act which
is in violation of applicable law, such provision (including any provision
within a single section, paragraph or sentence) shall be limited or modified in
its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with their terms to the fullest extent
permitted by law.

      14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.

      15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consents to the jurisdiction of the courts of and in the States of
Delaware and Illinois for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agrees that any
action instituted under this Agreement shall be brought only in the state or
Federal courts of the States of Delaware and Illinois.

      16. Notices. All notices or other communications required or permitted
hereunder shall be sufficiently given for all purposes if in writing and
personally delivered, telegraphed,

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telexed, sent by facsimile transmission or sent by registered or certified mail,
return receipt requested, with postage prepaid addressed as follows, or to such
other address as the parties shall have given notice of pursuant hereto:

      (a) If to the Company, to:

                   eLoyalty Corporation
          150 Field Drive

          Suite 250
          Lake Forest, Illinois 60045
          Attention: General Counsel
          Facsimile: (847) 582-7002

      (b) If to Indemnitee, to his home address, as reflected in the
          Company's payroll records.

      17. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.

      18. Successors and Assigns. This Agreement shall be (i) binding upon all
successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii) binding
upon and inure to the benefit of any successors and assigns, heirs, and personal
or legal representatives of Indemnitee.

      19. Amendment; Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.

                            [Signature Page Follows]

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      IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement to be effective as of the day and year first above written.

                                      eLOYALTY CORPORATION

 /s/ Christopher J. Danson            By: /s/ Kelly D. Conway
--------------------------                -------------------
                                          Kelly D. Conway
                                          President and Chief Executive Officer

February 23, 2005                         February 23, 2005

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                                                                   EXHIBIT 10.27

                              EMPLOYMENT AGREEMENT

      eLoyalty Corporation, a Delaware corporation doing business as eLoyalty
("eLoyalty"), and Karen Bolton ("Employee") enter into this Employment Agreement
("Agreement") as of January 21, 2002 ("Effective Date").

      In consideration of the agreements and covenants contained in this
Agreement, eLoyalty and Employee agree as follows:

      1. EMPLOYMENT DUTIES: eLoyalty shall employ Employee as a Senior Vice
President. Employee shall have the normal responsibilities, duties and authority
of a Senior Vice President of eLoyalty and shall, at the direction of eLoyalty's
management, participate in the administration and execution of eLoyalty's
policies, business affairs and operations. eLoyalty's Board of Directors or
management may, from time to time, expand or contract such duties and
responsibilities and may change Employee's title or position. Employee shall
perform faithfully the duties assigned to Employee to the best of Employee's
ability and shall devote Employee's full and undivided business time and
attention to the transaction of eLoyalty's business.

      2. TERM OF EMPLOYMENT: The term of employment ("Initial Term of
Employment") covered by this Agreement shall commence as of the effective date
of this Agreement and continue until January 31 2004, subject to the provisions
of paragraph 3 below. This Agreement may be renewed for additional one-year
periods by the mutual written agreement of the parties ("Renewal Term"). The
Initial Term of Employment and any Renewal Terms shall be hereinafter referred
to as the "Term of Employment". If this Agreement is not renewed by the parties
upon the expiration of the Initial Term of Employment or upon the expiration of
any Renewal Term, eLoyalty shall, within 30 days from the expiration of the
Initial Term of Employment or the expiration of the Renewal Term, as the case
may be, pay to Employee a lump sum amount equivalent to six (6) months of
Employee's normal salary (but not bonus) as Employee's severance payment,
subject to ordinary tax and other withholdings in accordance with eLoyalty's
normal payroll practices. In addition to the foregoing, if Employee fails to
find reasonably comparable employment in the U.S., Australia or elsewhere by the
end of the sixth (6th) month after the expiration of the Initial Term of
Employment or the Renewal Term, as the case may be, eLoyalty hereby agrees to
pay a further severance payment equivalent of six months of employee's normal
salary (but not bonus and subject to ordinary tax and other withholdings),
payable in monthly installments, unless Employee begins comparable employment
with another employer during such time, in which case eLoyalty's obligations
shall cease immediately. For the purposes of this Agreement, the term
"comparable employment" shall mean any employment where Employee may earn annual
cash compensation that is comparable with the annual cash compensation earned by
Employee during the one year immediately prior to the termination of Employee's
employment. If the parties fail to renew the Agreement upon expiration of the
Initial

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Term of Employment, Employee agrees to use Employee's best efforts to secure
comparable employment as soon as reasonably possible after such expiration and
to notify eLoyalty in writing of such employment not later than one (1) business
day after securing the same. As a condition of receiving severance under this
Paragraph, Employee will be required to execute a general release and waiver,
including but not limited to, a release of any and all claims and for any and
all other damages resulting from Employee's termination from employment.

      3. TERMINATION: eLoyalty may terminate Employee's employment for any
reason upon written notice to Employee, provided that unless (a) such
termination is in the form of a non-renewal of this Agreement as described in
paragraph 2 above (in which case the severance provisions of such paragraph 2
shall apply) or (b) eLoyalty has terminated Employee's employment for Serious
Misconduct as described below, eLoyalty shall pay to Employee a lump sum amount
equivalent to twelve (12) months of Employee's normal salary (but not bonus) as
Employee's severance payment, subject to ordinary tax and other withholdings in
accordance with eLoyalty's normal payroll practices. In the event of a
termination requiring such a lump sum payment, eLoyalty will also continue
Employee's health insurance benefits for the lesser of twelve (12) months from
the effective date of termination (if Employee remains eligible under these
health insurance plans) or until Employee begins employment with another
employer during such time, at which time eLoyalty's obligations to continue
Employee's health insurance benefits shall cease immediately. Employee shall
notify eLoyalty in writing of such new employment not later than one (1)
business day after securing the same. In addition, eLoyalty may terminate
Employee's employment and this Agreement immediately without notice and with no
severance pay and no benefit continuation if Employee engages in "Serious
Misconduct." For purposes of this Agreement, "Serious Misconduct" means fraud,
embezzlement, misappropriation of corporate funds, any acts of dishonesty,
engaging in activities materially harmful to eLoyalty's reputation or business,
conviction of a crime, willful refusal to perform or substantial disregard of
Employee's assigned duties (including, but not limited to, refusal to travel or
work the requested hours), or any violation of any statutory or common law duty
of loyalty to eLoyalty. If Employee resigns from, or in any other way
terminates, her employment during the Initial Term of Employment or during any
subsequent Renewal Term, Employee shall not be entitled to any severance pay or
continuation of her salary or benefits.

      4. CHANGE IN CONTROL.

      (a) Notwithstanding anything contained in this Agreement, if following a
Change in Control (as defined in defined in Paragraph 4(b) below), (a)
Employee's title, position, duties or salary is diminished and Employee resigns
within 90 days after the diminishment becomes effective, or (b) Employee's
position is eliminated or Employee's employment otherwise is terminated for
reasons other than Serious Misconduct, eLoyalty shall pay to Employee a lump sum
amount equivalent to twelve (12) months of Employee's normal salary (but not
bonus) as Employee's severance payment, subject to ordinary tax and other
withholdings in accordance with eLoyalty's normal payroll practices. In the
event of a termination requiring such a lump sum payment, eLoyalty will

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also continue Employee's health insurance benefits for the lesser of twelve (12)
months from the effective date of termination (if Employee remains eligible
under these health insurance plans) or until Employee begins employment with
another employer during such time, at which time eLoyalty's obligations to
continue Employee's health insurance benefits shall cease immediately. Employee
shall notify eLoyalty in writing of such new employment not later than one (1)
business day after securing the same.

      (b) The term "Change in Control" for the purposes hereunder shall be as
defined in eLoyalty Corporation 2000 Stock Incentive Plan. Notwithstanding the
foregoing, the following events and other events reasonably related to them,
individually or in any aggregate combination, shall not be construed as a
"Change in Control" of eLoyalty: (i) the private placement of eLoyalty preferred
stock recently consummated between eLoyalty and affiliates of Technology
Crossover Ventures and Sutter Hill Ventures ("Financing"); (ii) any tender offer
made by eLoyalty to its employees pursuant to which employee stock options were
exchanged for common stock of eLoyalty, (iii) the rights offering authorized by
the eLoyalty's Board of Directors in conjunction with the Financing (the "Rights
Offering"); (iv) any conversion of the preferred stock issued pursuant to the
Financing and/or the Rights Offering into common stock of eLoyalty and (iv) the
1-10 reverse stock split authorized by eLoyalty's Board of Directors.

      5. SALARY: As compensation for Employee's services, eLoyalty shall pay
Employee a base salary in the amount listed in EXHIBIT A to this Agreement.
Employee's base salary shall be subject to annual review and may, at the
discretion of eLoyalty's management, be adjusted from that listed in EXHIBIT A
according to Employee's responsibilities, capabilities and performance during
the preceding year.

      6. BONUSES: eLoyalty may elect to pay Employee annual bonuses. Payment of
such bonuses, if any, shall be at the sole discretion of eLoyalty.

      7. EMPLOYEE BENEFITS: During the Term of Employment, Employee shall be
entitled to participate in such employee benefit plans, including group pension,
life and health insurance and other medical benefits, and shall receive all
other fringe benefits as eLoyalty may make available generally to its Senior
Vice Presidents. Subject to the eligibility requirements for such insurance,
Employee's coverage for Accidental Death, Dismemberment, Short-Term and Long
term Disability, Business Travel Accident Insurance and Life Insurance will
begin on the Effective Date in accordance with the terms of eLoyalty's standard
policy afforded to all its U.S.-based Senior Vice Presidents. eLoyalty agrees
that it will, to the extent not in violation under the applicable laws, waive
the one-year employment eligibility requirement under the Family and Medical
Leave Act of 1993 in order to allow Employee to be immediately eligible for up
to twelve-weeks of unpaid leave for certain family and medical reasons permitted
such Act. Notwithstanding the foregoing, eLoyalty reserves the right to enforce
all other eligibility requirements under the Family and Medical Leave Act of
1993.

      8. BUSINESS EXPENSES: eLoyalty shall reimburse Employee for all reasonable
and necessary business expenses incurred by Employee in performing Employee's
duties. Employee shall provide eLoyalty with supporting documentation

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sufficient to satisfy reporting requirements of the Internal Revenue Service and
eLoyalty. eLoyalty's determination as to reasonableness and necessary shall be
final.

      9. RELOCATION EXPENSES: During the Initial Term of Employment under this
Agreement, eLoyalty shall reimburse Employee for those re-location expenses, and
pay Employee for certain allowances, as specifically described in EXHIBIT B
attached hereto.

      10. VACATION AND SICK DAYS: Employee will be entitled to vacation time in
accordance with eLoyalty's standard policy for U.S.-based Senior Vice
Presidents. In addition to the foregoing, Employee will also be entitled to use
any of Employee's current unused vacation time from Employee's employment with
eLoyalty Corporation (Australia) Pty. Ltd. ("eLoyalty Australia") which has been
accrued up to the Effective Date and which was not paid out in any manner by
eLoyalty Australia to Employee upon Employee's termination of employment with
eLoyalty Australia. Any vacation time used by Employee on and after the
Effective Date will first be counted against the unused vacation time
transferred from eLoyalty Australia. Employee acknowledges that eLoyalty will
not be paying any long service leave to Employee under the applicable Australian
laws.

      11. NONCOMPETITION AND NONDISCLOSURE: Employee acknowledges that the
successful development and marketing of eLoyalty's professional services and
products require substantial time and expense. Such efforts generate for
eLoyalty valuable and proprietary information ("Confidential Information") which
gives eLoyalty a business advantage over others who do not have such
information. Confidential Information of eLoyalty and its clients and prospects
includes, but is not limited to, the following: business strategies and plans;
proposals; deliverables; prospects and customer lists; methodologies; training
materials; and computer software. Employee acknowledges that during the Term of
Employment, Employee will obtain knowledge of such Confidential Information.
Accordingly, Employee agrees to undertake the following obligations which
Employee acknowledges to be reasonably designed to protect eLoyalty's legitimate
business interests without unnecessarily or unreasonably restricting Employee's
post-employment opportunities:

      (a) Upon termination of the Term of Employment for any reason, Employee
shall return all eLoyalty property, including but not limited to computer
programs, files, notes, records, charts, or other documents or things containing
in whole or in part any of eLoyalty's Confidential Information;

      (b) During the Term of Employment and subsequent to termination, Employee
agrees to treat all such Confidential Information as confidential and to take
all necessary precautions against disclosure of such information to third
parties during and after Employee's employment with eLoyalty . Employee shall
refrain from using or disclosing to any person, without the prior written
approval of eLoyalty's Chief Executive Officer any Confidential Information
unless at that time the information has become generally and lawfully known to
eLoyalty's competitors;

                                       4

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      (c) Without limiting the obligations of paragraph 11(b), Employee shall
not, for a period of one year following Employee's termination of employment for
any reason, for Employee's self or as an agent, partner or employee of any
person, firm or corporation, engage in the practice of consulting or related
services for (1) any client of eLoyalty, for whom Employee performed services,
or (2) any prospective eLoyalty client to whom Employee submitted, or assisted
in the submission of a proposal during the one year period preceding Employee's
termination of employment, provided however, that unless eLoyalty decides to
re-establish its business in Australia, Employee shall not be deemed to be in
breach of this provision if Employee engages in such restricted activities in
Australia as described in this sub-clause (c);

      (d) During a one year period immediately following Employee's termination
of employment for any reason, Employee shall not induce or assist in the
inducement of any eLoyalty employee away from eLoyalty's employ or from the
faithful discharge of such employee's contractual and fiduciary obligations to
serve eLoyalty's interests with undivided loyalty;

      12. REMEDIES: Employee recognizes and agrees that a breach of any or all
of the provisions of paragraph 11 will constitute immediate and irreparable harm
to eLoyalty's business advantage, including but not limited to eLoyalty's
valuable business relations, for which damages cannot be readily calculated and
for which damages are an inadequate remedy. Accordingly, Employee acknowledges
that eLoyalty shall therefore be entitled to an order enjoining any further
breaches by the Employee. Employee agrees to reimburse eLoyalty for all costs
and expenses, including reasonable attorneys' fees incurred by eLoyalty in
connection with the enforcement of its rights under any provision of this
Agreement.

      13. INTELLECTUAL PROPERTY: During the Term of Employment, Employee shall
disclose to eLoyalty all ideas, inventions and business plans which Employee
develops during the course of Employee's employment with eLoyalty, which relate
directly or indirectly to eLoyalty's business, including but not limited to any
computer programs, processes, products or procedures which may or may not, upon
application, be protected by patent or copyright. Employee agrees that any such
ideas, inventions or business plans shall be the property of eLoyalty and that
Employee shall, at eLoyalty's request and cost, provide eLoyalty with such
assurances as is necessary to secure a patent or copyright.

      14. ASSIGNMENT: Employee acknowledges that the services to be rendered
pursuant to this Agreement are unique and personal. Accordingly, Employee may
not assign any of Employee's rights or delegate any of Employee's duties or
obligations under this Agreement. eLoyalty may assign its rights, duties or
obligations under this Agreement to a subsidiary or affiliated company of
eLoyalty or purchaser or transferee of a majority of eLoyalty's outstanding
capital stock or a purchaser of all, or substantially all, of the assets of
eLoyalty.

      15. NOTICES: All notices shall be in writing, except for notice of
termination of employment, which may be oral if confirmed in writing within 14
days. Notices

                                       5

<PAGE>

intended for eLoyalty shall be sent by registered or certified mail addressed to
it at c/o eLoyalty's General Counsel, 150 Field Drive, Suite 250, Lake Forest,
Illinois 60045 or its current principal office, and notices intended for
Employee shall be either delivered personally to Employee or sent by registered
or certified mail addressed to Employee's last known address.

      16. ENTIRE AGREEMENT: This Agreement and Exhibits A and B attached hereto
constitute the entire agreement between eLoyalty and Employee. Neither Employee
nor eLoyalty may modify this Agreement by oral agreements, promises or
representations. The parties may modify this Agreement only by a written
instrument signed by the parties.

      17. APPLICABLE LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.

      18. MEDIATION OF DISPUTES: Neither party shall initiate arbitration or
other legal proceedings (except for any claim under Paragraph 11 of this
Agreement), against the other party, or, in the case of eLoyalty, any of its
directors, officers, employees, agents, or representatives, relating in any way
to this Agreement, to Employee's employment with eLoyalty, the termination of
Employee's employment or any or all other claims that one party might have
against the other party until 30 days after the party against whom the claim[s]
is made ("Respondent") receives written notice from the claiming party of the
specific nature of any purported claim and the amount of any purported damages.
Employee and eLoyalty further agree that if Respondent submits the claiming
party's claim to JAMS/Endispute, for nonbinding mediation, in Chicago, Illinois,
prior to the expiration of such 30 day period, the claiming party may not
institute arbitration or other legal proceedings against Respondent until the
earlier of (i) the completion of nonbinding mediation efforts, or (ii) 90 days
after the date on which the Respondent received written notice of the claimant's
claim.

      19. BINDING ARBITRATION: Employee and eLoyalty agree that all claims or
disputes relating to Employee's employment with eLoyalty or the termination of
such employment, and any and all other claims that Employee might have against
eLoyalty, any eLoyalty director, officer, employee, agent, or representative,
and any and all claims or disputes that eLoyalty might have against Employee
(except for any claims under Paragraph 11 of this Agreement) shall be resolved
under the Expedited Commercial Rules of the American Arbitration Association in
Illinois. If either party pursues a claim and such claim results in an
Arbitrator's decision, both parties agree to accept such decision as final and
binding. eLoyalty and Employee agree that any litigation under Paragraph 10 of
this Agreement shall be brought in a relevant court, state or federal, in
Illinois.

      20. SEVERABILITY: Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement 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,

                                       6

<PAGE>

without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

      21. WORK AUTHORIZATION. This Agreement and eLoyalty's obligations
hereunder are subject to Employee's receipt of the appropriate U.S. work
authorization from the U.S. Immigration and Naturalization Office (INS) and to
Employee's maintenance of such appropriate U.S. work authorization during the
Term of Employment. If Employee fails to obtain the appropriate U.S. work
authorization from the INS before the Effective Date, or fails to maintain the
appropriate U.S. work authorization from the INS during the Term of Employment,
eLoyalty shall have the right to, notwithstanding anything contained in Section
3 hereunder, immediately terminate this Agreement upon written notice to
Employee without any further liability to Employee.

      22. ACCELERATION OF EQUITY INCENTIVE AWARDS.

      (a)   OUTSTANDING EQUITY INCENTIVE AWARDS. Subject to the approval of
            eLoyalty's Board of Directors and the terms and conditions of the
            eLoyalty Corporation 1999 Stock Incentive Plan and/or the eLoyalty
            Corporation 2000 Stock Incentive Plan, as applicable, the Offer to
            Exchange Certain Outstanding Stock Options for the Right to Receive
            Shares of Common Stock (the "Offer to Exchange"), and the applicable
            Stock Option Agreement(s) and/or Installment Stock Award
            Agreement(s), as separately amended by the parties, eLoyalty agrees
            that:

            (I)   if Employee completes the Initial Term of Employment (that is,
                  Employee has not resigned or been terminated by eLoyalty for
                  any reason during such Initial Term of Employment): (i) the
                  stock options granted by eLoyalty to Employee prior to the
                  Effective Date hereunder and listed in EXHIBIT A hereto will
                  become immediately exercisable at the expiration of the
                  Initial Term of Employment with respect to any or all of the
                  remaining shares subject thereto; and (ii) any or all of the
                  shares remaining subject to the installment stock awards
                  granted by eLoyalty to Employee prior to the Effective Date
                  hereunder and listed in EXHIBIT A hereto will become issuable
                  at the expiration of the Initial Term of Employment; or

            (II)  if the parties renew this Agreement for any additional Renewal
                  Terms, then in lieu of Section 22(a)(I) above, (i) the stock
                  options granted by eLoyalty to Employee prior to the Effective
                  Date hereunder and listed in EXHIBIT A hereto will become
                  immediately exercisable at the earlier of the termination of
                  Employee's employment during such Renewal Term (other than
                  termination by eLoyalty for Serious Misconduct) or expiration
                  of such Renewal Term with respect to any or all of the
                  remaining shares subject thereto; and (ii) any or all of the
                  shares remaining subject to the installment stock awards
                  granted by eLoyalty to Employee prior to

                                       7

<PAGE>

                  the Effective Date hereunder and listed in EXHIBIT A hereto
                  will become issuable at the earlier of the termination of
                  Employee's employment during such Renewal Term (other than
                  termination by eLoyalty for Serious Misconduct) or expiration
                  of such Renewal Term. If Employee's employment is terminated
                  by eLoyalty during the Renewal Term for Serious Misconduct,
                  any stock option or installment stock award that remains
                  outstanding but unvested will terminate in its entirety upon
                  the effective date of Employee's termination of employment.

            The accelerated vesting of any stock options described in this
            Section 22(a) shall not otherwise alter any other terms and
            conditions of the stock options set forth in Employee's applicable
            stock option agreement(s).

      (b)   FUTURE EQUITY INCENTIVE AWARDS. Subject to the approval of
            eLoyalty's Board of Directors and the terms and conditions of the
            eLoyalty Corporation 1999 Stock Incentive Plan and/or the eLoyalty
            Corporation 2000 Stock Incentive Plan, as applicable, and any stock
            option agreements and/or restricted stock agreements entered into by
            Employee and eLoyalty, in the event eLoyalty grants Employee options
            to purchase eLoyalty's common stock after the Effective Date
            hereunder ("Future Option Grants) or additional restricted shares of
            eLoyalty common stock after the Effective Date hereunder ("Future
            Restricted Stock Awards") , eLoyalty agrees to accelerate the
            vesting of such Future Option Grants and Future Restricted Stock
            Awards as set forth below:

            (I)   Upon Employee's completion of the Initial Term of Employment
                  (that is, Employee has not resigned or been terminated by
                  eLoyalty for any reason during such Initial Term of
                  Employment):

                  i.    any outstanding Future Options Grants will become
                        immediately exercisable on January 31, 2004 with respect
                        to the portion of shares of eLoyalty common stock
                        remaining subject thereto for which the Future Option
                        Grants otherwise would become exercisable as of June 30,
                        2004 if Employee were to continue in the employ of
                        eLoyalty through June 30, 2004; and

                  ii.   any outstanding Future Restricted Stock Awards will
                        become immediately vested on January 31, 2004 with
                        respect to the portion of restricted shares of eLoyalty
                        common stock remaining subject thereto that would have
                        vested as of June 30, 2004 if Employee were to continue
                        in the employ of eLoyalty through June 30, 2004.

                                       8

<PAGE>

            (II)  If this Agreement is renewed by the mutual written agreement
                  of the parties for an additional one year period after the
                  Initial Term of Employment, upon Employee's completion of such
                  additional one-year Renewal Term (that is, Employee has not
                  resigned or been terminated by eLoyalty for any reason during
                  such Renewal Term):

                  i.    any outstanding Future Options Grants will become
                        immediately exercisable on January 31, 2005 with respect
                        to the portion of shares of eLoyalty common stock
                        remaining subject thereto for which the Future Option
                        Grants otherwise would become exercisable as of January
                        31, 2006 if Employee were to continue in the employ of
                        eLoyalty through January 31, 2006; and

                  ii.   any Future Restricted Stock Awards will become
                        immediately vested on January 31, 2005 with respect to
                        the portion of restricted shares of eLoyalty common
                        stock remaining subject thereto that would have vested
                        as of January 31, 2006 if Employee were to continue in
                        the employ of eLoyalty through January 31, 2006.

      23. Employee acknowledges that Employee has read, understood and accepts
the provisions of this Agreement.

eLoyalty Corporation                            Karen Bolton

By: /s/ Steven Pollema                          /s/ Karen Bolton
    ---------------------------                 ----------------------

Position: Senior Vice President
          ---------------------

Date: February 1, 2002                          Date: January 31, 2002

                                       9

<PAGE>

                                    EXHIBIT A
                           BASE SALARY, EFFECTIVE DATE
                                       AND
             OUTSTANDING STOCK OPTIONS AND INSTALLMENT STOCK AWARDS
                        GRANTED PRIOR TO EFFECTIVE DATE

EMPLOYEE:         Karen Bolton

POSITION:         Senior Vice President

BASE SALARY:      US$250,000

EFFECTIVE DATE:   January 21, 2002

NUMBER OF SHARES (AFTER TAKING INTO ACCOUNT ELOYALTY'S 1-10 REVERSE STOCK SPLIT)
SUBJECT TO OUTSTANDING STOCK OPTIONS GRANTED BY ELOYALTY TO EMPLOYEE PRIOR TO
THE EFFECTIVE DATE (AS DESCRIBED IN PARAGRAPH 22(A) OF THE AGREEMENT): 2,000
(this includes shares subject to both vested and unvested stock options as of
the Effective Date)

NUMBER OF SHARES (AFTER TAKING INTO ACCOUNT ELOYALTY'S 1-10 REVERSE STOCK SPLIT)
SUBJECT TO OUTSTANDING INSTALLMENT STOCK AWARDS GRANTED BY ELOYALTY TO EMPLOYEE
PRIOR TO THE EFFECTIVE DATE (AS DESCRIBED IN PARAGRAPH 22(A) OF THE AGREEMENT):
6,099

                                                ________________________________
                                                Karen Bolton

                                                ________________________________
                                                Date

                                                ________________________________
                                                eLoyalty Corporation

                                                ________________________________
                                                Date

                                       10

<PAGE>

                                    EXHIBIT B
                        REIMBURSABLE RELOCATION EXPENSES

(I)   GENERAL RELOCATION RULES:

Employee acknowledges and agrees that:

      (a) The terms of this Exhibit B shall apply only during the Initial Term
of Employment. In the event that Employee desires for the Agreement to be
extended for one or more Renewal Terms, then, not later that thirty (30) days
prior to the expiration of the Initial Term of Employment, Employee shall
initiate discussions with eLoyalty regarding the reimbursement and allowance
obligations of eLoyalty that will apply during any such Renewal Term and the
parties will negotiate in good faith to reach agreement regarding such
obligations, to be set forth in a substitute Exhibit B.

      (b) If Employee resigns from her employment with eLoyalty, or is
terminated by eLoyalty for Serious Misconduct at anytime during the Term of
Employment, Employee's rights to receive reimbursement of all relocation
expenses and payment of any all allowances, if any, described hereunder
(collectively, "Relocation Costs") will terminate immediately, including,
without limitation, Employee's rights to receive any reimbursement for the final
return trip as set forth in Paragraph 2(d) below, reimbursement for the return
moving costs as set forth in Paragraph 3(c) below and to receive outplacement
assistance as set forth in Paragraph 11 below. In such event, Employee will be
solely responsible for any costs or expenses incurred by Employee after the
termination of Employee's employment, including without limitation, any monthly
payments required for Employee's housing or automobile leased by Employee as a
result of Employee's relocation to the U.S. Employee will indemnify and hold
harmless eLoyalty (and its subsidiaries, parent and sister companies and their
agents, employees, officers and directors) from any and all liabilities, costs
and expenses (included, but not limited to, attorney's fees) arising in
connection with any claims by third parties against eLoyalty with respect to any
such costs or expenses incurred by Employee after the date of Employee's
termination of employment.

      (c) Unless specifically set forth otherwise below, if Employee resigns
from eLoyalty's employment on or before January 31, 2003, or is terminated by
eLoyalty for Serious Misconduct on or before January 31, 2003, Employee will be
required to repay eLoyalty a pro-rata portion of all Relocation Costs paid by
eLoyalty to Employee hereunder, amounting to 1/12 of the Relocation Costs for
each month between the effective date of termination of Employee's employment
and January 31, 2003. Employee will not be obligated to repay eLoyalty for
Relocation Costs reimbursed or paid by eLoyalty hereunder if Employee is
terminated by eLoyalty for any reason other than Serious Misconduct on or before
January 31, 2003. If Employee resigns or if Employee is terminated by eLoyalty
for any reason (including Serious Misconduct) after January 31, 2003, Employee
will not be obligated to repay eLoyalty for any Relocation Costs reimbursed or
paid by eLoyalty hereunder which were incurred by Employee after January 31,
2003.

                                       11

<PAGE>

      (d) If Employee is terminated by eLoyalty for any reason other than for
Serious Misconduct during the Term of Employment, Employee's rights to receive
reimbursement of all Relocation Costs, if any, will also terminate immediately,
except for: (i) reimbursement of monthly housing lease payments under the Lease
until January 31, 2004 as described in Section (II)(4)(a) hereunder; (ii)
reimbursement of monthly auto lease payments under the Auto Lease until January
31, 2004 as described in Section (II)(6)(a) hereunder; (iii) reimbursement for
the final return trip as set forth in Paragraph 2(d) below; (iv) reimbursement
for the return moving costs as set forth in Paragraph 3(c) below; and (v)
outplacement assistance as set forth in Paragraph 11 below.

      (e) If permitted under applicable laws, eLoyalty reserves the right to
offset all repayments due from Employee hereunder against amounts payable by
eLoyalty to Employee under this Agreement, if any, upon termination or
expiration of the Term of Employment.

      (f) eLoyalty shall have the right to proceed against Employee or
Employee's property in a court in any location to enable eLoyalty to enforce a
judgment or other court order entered in favor of eLoyalty. Employee waives any
objection that Employee may have to the location of the court in which eLoyalty
has commenced a proceeding.

      (g) Employee must submit original receipts for all expense reimbursement
set forth herein.

(II)  REIMBURSABLE RELOCATION EXPENSES AND ALLOWANCES:

Subject to the provisions of Section (I) above and in consideration of
Employee's relocation from Australia to the United States to work as an employee
of eLoyalty for the Initial Term of Employment, eLoyalty agrees to reimburse
Employee for those relocation costs listed below:

1.    House-hunting Trip.

      (a)   House-hunting Expenses: eLoyalty will reimburse Employee for
            Employee's reasonable expenses incurred in a one-week house-hunting
            trip in the U.S not to exceed Twenty-Five Thousand United States
            Dollars (US$25,000), provided that Employee complies with eLoyalty's
            current expense policy. Such expenses reimbursable by eLoyalty will
            include: (1) a roundtrip business class airfare for each of
            Employee, Employee's spouse and Employee's child for such
            house-hunting trip, (2) reasonable hotel accommodations for a week
            and (3) rental car and other reasonable travel expenses incurred in
            connection with Employee's house hunting activities.

      (b)   Relocation Consultant: Employee may use the services of an
            independent relocation consultant approved by eLoyalty in connection

                                       12

<PAGE>

            with Employee's house hunting activities, and eLoyalty will, at its
            sole discretion, either directly pay to such relocation consultant,
            or reimburse Employee, for the reasonable costs of such services,
            provided such costs do not exceed One Thousand United States Dollars
            (US$1,000).

2.    Airfares.

      (a)   Initial Trip: eLoyalty will reimburse Employee for the purchase of
            one business-class airfare for each of Employee, Employee's spouse
            and Employee's child associated with Employee's final move from
            Sydney, Australia to Chicago, Illinois. Such travel expenses will be
            reimbursed based on the most direct route.

      (b)   Annual Trips: As long as Employee remains in the employ of eLoyalty,
            eLoyalty will, during the Initial Term of Employment, reimburse
            Employee for Employee's purchase of roundtrip airfares from the
            United States to Australia, for Employee, Employee's spouse,
            Employee's child and/or Employee's spouse's parents, provided that
            such reimbursement shall not exceed the net amount of Fifty-Six
            Thousand United States Dollars (US$56,000) per year ("Annual Airfare
            Budget"). The parties agree to review the Annual Airfare Budget
            promptly after December 31, 2002 to determine if the Annual Airfare
            Budget of Fifty-Six Thousand United States Dollars (US$56,000) would
            be sufficient to cover two round-trip business class airfares for
            each of Employee, Employee's spouse, Employee's child and one
            round-trip business class airfare for each of Employee's spouse's
            parents for the calendar year of 2003. If the parties mutually agree
            that such Annual Airfare Budget of Fifty-Six Thousand United States
            Dollars (US$56,000) would be materially insufficient, the parties
            will negotiate in good faith for an equitable adjustment to such
            Annual Airfare Budget for the calendar year of 2003.

      (c)   Emergency Trips: As long as Employee remains in the employ of
            eLoyalty, eLoyalty will, during the Initial Term of Employment,
            reimburse Employee for the purchase of business class airfare for
            Employee's emergency trips back to Australia, provided that eLoyalty
            shall have the final determination in its sole discretion as to
            whether any such trips proposed to be undertaken by Employee qualify
            as an "emergency trip".

      (d)   Final Return Trip: If at the expiration of any Term or if Employee
            is terminated by eLoyalty during the Term of Employment for any
            reason other than for Serious Misconduct and Employee decides to
            return back to Australia within twelve (12) months after such
            termination or expiration of the Term of Employment, eLoyalty will
            purchase for each of Employee, Employee's spouse and Employee's
            child a business class airfare for a one-way trip from the U.S. to
            NSW, Australia. This trip may be direct or

                                       13

<PAGE>

            indirect, provided that the total cost is no greater than the cost
            of a direct one-way trip from the U.S. to NSW, Australia.

3.    Shipment of Household Goods and/or Personal Effects:

      (a)   Initial Moving Costs: eLoyalty will directly pay for the initial
            shipment of Employee's furnishings and personal effects from
            Employee's primary residence in Australia to the State of Illinois,
            U.S., provided that Employee has obtained eLoyalty's prior approval
            of such shipping costs payable by eLoyalty.

      (b)   Temporary Furniture Rental Pending Shipment: If there is an interim
            period that Employee requires furnishings in the U.S. while waiting
            for the arrival of Employee's furnishings that were shipped from
            Australia to the U.S. as described in Paragraph 1(a) above, eLoyalty
            will, as long as Employee remains in the employ of eLoyalty during
            such interim period, reimburse Employee for the reasonable costs
            incurred by Employee during this interim period for the rental of
            any such temporary furnishings in the U.S., provided that Employee
            has obtained eLoyalty's prior approval of such temporary furniture
            rental costs reimbursable by eLoyalty.

      (c)   Return Moving Costs. If at the expiration of any Term or if Employee
            is terminated by eLoyalty during the Term of Employment for any
            reason other than for Serious Misconduct and Employee decides to
            return back to Australia within twelve (12) months after such
            termination or expiration of the Term of Employment, eLoyalty shall
            directly pay for the reasonable costs of shipping Employee's
            furnishings and personal effects from the State of Illinois, U.S. to
            Employee's primary residence in Australia, provided that Employee
            has obtained eLoyalty's prior approval of such return shipping costs
            payable by eLoyalty.

4.    Monthly Housing Allowance; Lease Deposit; and Utilities Setup Charges.

      (a)   Monthly Housing Allowance.

            -     In connection with Employee's relocation to the U.S.
                  hereunder, Employee has executed a written lease ("Lease")
                  with Howard Kaplan and Louis Natanshon (collectively,
                  "Lessor") for housing in the U.S. for a period of two years,
                  commencing from February 1, 2002 ("Lease Effective Date") and
                  expiring on January 31, 2004 ("Lease Expiration Date").

            -     eLoyalty has directly paid to Lessor the net amount of Five
                  Thousand Dollars (U.S.$5,000) representing payment for the
                  first month (the month of February 2002) under the lease
                  ("First Month Payment") and the net amount of Five Thousand
                  Five Hundred Dollars (U.S.$5,500)

                                       14

<PAGE>

                  representing payment for the final month (the month of January
                  2004) under the Lease ("Last Month Prepayment").

            -     In addition, as long as Employee remains in the employ of
                  eLoyalty until January 31, 2004, eLoyalty will, at eLoyalty's
                  sole discretion, either pay to Employee or directly to Lessor:
                  (i) the net amount of Five Thousand United States Dollars
                  (US$5,000) a month to be applied against Employee's monthly
                  payments required under the Lease from March 1, 2002 to
                  January 31, 2003, and (ii) the net amount of Five Thousand
                  Five Hundred United States Dollars (US$5,500) a month to be
                  applied against Employee's monthly payments required under the
                  Lease from February 1, 2003 to December 31, 2003. Such monthly
                  housing allowance will be paid by eLoyalty, at eLoyalty's sole
                  discretion, to Employee or the Lessor no later than the first
                  of each month from March 1, 2002.

            -     If eLoyalty is a guarantor of such Lease and Employee fails to
                  remit to Lessor any such monthly lease payments made by
                  eLoyalty to Employee hereunder, Employee will indemnify and
                  hold harmless eLoyalty (and its subsidiaries, parent and
                  sister companies and their agents, employees, officers and
                  directors) from any and all liabilities, costs and expenses
                  (included, but not limited to, attorney's fees) arising in
                  connection with any claims by Lessor or any third parties
                  against eLoyalty for such monthly payments due under the Lease
                  which have been paid by eLoyalty to Employee. If eLoyalty is a
                  guarantor of such Lease, Employee may not renew the Lease at
                  the Lease Expiration Date without eLoyalty's prior written
                  consent.

            -     Consistent with Section (I)(b) (General Relocation Rules), all
                  such monthly lease payments under this Paragraph 4(a) will
                  cease immediately if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time and Employee will
                  be solely responsible for all payments due under the Lease
                  after the date of such termination or resignation. In such
                  event, Employee will indemnify and hold harmless eLoyalty (and
                  its subsidiaries, parent and sister companies and their
                  agents, employees, officers and directors) from any and all
                  liabilities, costs and expenses (included, but not limited to,
                  attorney's fees) arising in connection with any claims by
                  Lessor or any third parties against eLoyalty for such payments
                  due under the Lease after the date of such termination or
                  resignation.

            -     In addition, if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time prior to January
                  31, 2003, Employee will repay to eLoyalty a pro-rata portion
                  of all monthly lease payments (including, without limitation,
                  a pro-rata portion of the First Month Payment and the Last
                  Month Prepayment) paid by eLoyalty to

                                       15

<PAGE>

                  Employee and/or Lessor hereunder as further described under
                  Section (I)(c) (General Relocation Rules).

            -     If Employee is terminated by eLoyalty for any reason other
                  than for Serious Misconduct during the Initial Term of
                  Employment, eLoyalty will, at its sole discretion, either
                  reimburse Employee, or pay the Lessor, for all monthly
                  payments remaining under the Lease from Employee's date of
                  termination to the Lease Expiration Date, provided that at
                  eLoyalty's request, Employee will fully cooperate with
                  eLoyalty in negotiating the early termination of the Lease
                  with Lessor.

      (b)   Lease Deposit. eLoyalty has paid directly to the Lessor, a one-time
            security deposit ("Deposit") in the amount of one month's rent
            required under the Lease. Employee will ensure that eLoyalty
            receives a full refund of such Deposit upon the termination or
            expiration of such Lease. Employee agrees that it will immediately
            remit to eLoyalty all such Deposit proceeds refunded by the Lessor
            to Employee. Notwithstanding anything contained in this Agreement,
            if Employee resigns or is terminated by eLoyalty prior to January
            31, 2004, Employee will immediately repay to eLoyalty all such
            Deposit (not any pro-rata portion) paid by eLoyalty and Employee
            shall be entitled to retain any such Deposit proceeds refunded by
            the Lessor to Employee at the termination or expiration of such
            Lease. eLoyalty reserves the right to offset its loss of any portion
            of such Deposit against any amounts payable by eLoyalty to Employee
            upon termination or expiration of the Term of Employment.

      (c)   Initial Utilities Set-Up Charges. Employee will be reimbursed for
            all actual and reasonable one-time costs charged by the various
            utility companies for the initial set up of the necessary utilities
            (such as telephone, electric, gas, etc.) in Employee's first leased
            home in the U.S. during the Initial Term of Employment.

5.    Appliances. In the event that the first home Employee leases in the U.S.
      does not have any necessary major appliances such as a washer, dryer or
      dish washer, eLoyalty will, during the Initial Term of Employment,
      reimburse Employee for Employee's purchase of such necessary major
      appliances, provided that Employee remains in the employ of eLoyalty
      during such Initial Term of Employment. eLoyalty will also, during the
      Initial Term of the Agreement, either purchase or rent miscellaneous small
      electrical appliances for Employee's use that are deemed reasonable and
      necessary by eLoyalty, such as toaster, hair dryer, alarm clock,
      microwave, or television, provided that Employee remains in the employ of
      eLoyalty during such Initial Term of Employment. The aggregate amount of
      such purchase and/or lease of the reasonably necessary major appliances
      and small electrical appliances reimbursable by eLoyalty during the
      Initial Term of the Agreement shall not exceed Seven Thousand Five Hundred
      United States Dollars (US$7,500).

                                       16

<PAGE>

6.    Automobile Lease Allowance; Automobile Registration Costs; Sale of
      Australia Automobiles

      (a)   Automobile Lease Allowance.

            -     During the Initial Term of Employment, eLoyalty will, at
                  eLoyalty's sole discretion, pay to Employee or directly to the
                  applicable automobile leasing company ("Auto Lessor"), the net
                  amount of Seven Hundred and Fifteen United States Dollars
                  (US$715) per month to be applied against Employee's monthly
                  payments required for Employee's lease of an automobile in the
                  U.S ("Automobile Lease") until January 31, 2004 ("Automobile
                  Lease Expiration Date"). In addition to the foregoing,
                  eLoyalty has paid directly to the Auto Lessor, a one-time
                  lease acquisition payment ("Acquisition Payment") of One
                  Thousand Dollars (US$1,000), which covers the costs of
                  acquiring the necessary registration and license plates to
                  operate the leased automobile in the U.S. as well as other
                  related local governmental fees charged. In no event shall
                  eLoyalty be responsible for reimbursing or paying Employee or
                  Auto Lessor any other associated costs of operating such
                  leased automobile (e.g. gasoline, car insurance, repairs and
                  maintenance, renewal registration, vehicle stickers, etc.)

            -     Consistent with Section (I)(b) (General Relocation Rules), all
                  such monthly lease payments under this Paragraph 6(a) will
                  cease immediately if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time during the Initial
                  Term of Employment, and Employee will be solely responsible
                  for all payments due under the Automobile Lease after the date
                  of such termination or resignation. In such event, Employee
                  will indemnify and hold harmless eLoyalty (and its
                  subsidiaries, parent and sister companies and their agents,
                  employees, officers and directors) from any and all
                  liabilities, costs and expenses (included, but not limited to,
                  attorney's fees) arising in connection with any claims by the
                  Auto Lessor or any third parties against eLoyalty for such
                  payments due under the Automobile Lease after the date of such
                  termination or resignation.

            -     In addition, if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time prior to January
                  31, 2003, Employee will repay to eLoyalty a pro-rata portion
                  of all monthly lease payments paid by eLoyalty to Employee
                  hereunder as further described under Section (I)(c) (General
                  Relocation Rules).

                                       17

<PAGE>

            -     If Employee is terminated by eLoyalty for any reason other
                  than for Serious Misconduct during the Initial Term of
                  Employment, eLoyalty will, at its sole discretion, and either
                  reimburse Employee, or pay to the Auto Lessor, for all monthly
                  payments remaining under the Automobile Lease from Employee's
                  date of termination to the Automobile Lease Expiration Date,
                  provided that at eLoyalty's request, Employee will fully
                  cooperate with eLoyalty in negotiating the early termination
                  of the Auto Lease with Auto Lessor.

      (b)   Sale of Employee's Automobiles in Australia. eLoyalty will reimburse
            Employee for losses that Employee incurs as a result of the sale of
            two automobiles owned by Employee in Australia in connection with
            Employee's relocation to the U.S., provided that such reimbursement
            by eLoyalty shall not exceed Sixteen Thousand United Stated Dollars
            (US$16,000) for both vehicles and Employee must have used Employee's
            best efforts to mitigate any such losses.

7.    Land Tax. As long as Employee remains in the employ of eLoyalty, eLoyalty
      will, during the Initial Term of Employment, reimburse Employee for the
      reasonable annual cost of Employee's land tax bill on Employee's current
      primary residence in Australia (which is the special tax incurred by
      Employee as Employee will not be living at such primary residence in
      Australia), which are above and beyond the normal real estate taxes
      Employee pays on such primary residence and which solely are attributable
      to Employee's absence from such residence as a result of Employee's
      relocation to the U.S. to work for eLoyalty. Employee estimates that as of
      the Effective Date of this Agreement, such amount reimbursable by eLoyalty
      is approximately US$4,000 and that the first installment would be payable
      in July 2002.

8.    Visa Processing. As long as Employee remains in the employ of eLoyalty,
      eLoyalty will, during the Initial Term of Employment, pay, or reimburse
      Employee, for reasonable costs to obtain the proper work authorization
      from the U.S. Immigration and Naturalization Office (INS) for Employee's
      U.S. relocation and any necessary dependent U.S. visas required for
      Employee's spouse and Employee's child in connection with their relocation
      to the U.S. as a result of Employee's employment by eLoyalty in the U.S.

9.    Taxes.

      (a)   Grossing up for Taxes. As long as Employee remains in the employ of
            eLoyalty, eLoyalty will, during the Initial Term of Employment,
            reimburse Employee for any incremental taxes actually incurred by
            Employee (both US and foreign) under the items set forth in
            Paragraphs 1 through 8 above. eLoyalty will calculate any
            incremental tax resulting from these items and gross-up Employee's
            compensation in an amount adequate to offset the increased tax cost.

                                       18

<PAGE>

      (b)   Tax Returns Preparation Costs. As long as Employee remains in the
            employ of eLoyalty, eLoyalty will, during the Initial Term of
            Employment, pay PriceWaterhouseCoopers (PWC) to prepare both
            Employee's annual U.S. and Australian income tax returns.

10.   Outplacement Assistance. If Employee's employment is terminated by
      eLoyalty for any reason other than for Serious Misconduct, eLoyalty will
      provide Employee with up to ninety (90) days of reasonable outplacement
      assistance, in the geography elected by the Employee, from the
      outplacement firm of Drake Beam (or another similar outplacement firm
      designated by eLoyalty) as such services are generally provided to
      terminated eLoyalty employees.

                                       19
<PAGE>

                               FIRST AMENDMENT TO
                              EMPLOYMENT AGREEMENT

      THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made
and entered into as of the 20th day of October, 2003, by and between eLoyalty
Corporation, a Delaware corporation ("eLoyalty"), and Karen Bolton, a resident
of the State of Illinois ("Employee").

                                    RECITALS

      A. eLoyalty and Employee are parties to that certain Employment Agreement,
dated as of January 21, 2002 (the "Agreement"), setting forth the terms and
conditions of Employee's employment with eLoyalty.

      B. The parties desire to amend the Agreement as set forth herein to
reflect the changes in the terms and conditions of Employee's employment
resulting the mutual decision to extend the term of Employee's employment.

      NOW, THEREFORE, in consideration of the Recitals, the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

      1. All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement.

      2. The Term of Employment is hereby extended for a period of three (3)
successive Renewal Terms (the third such Renewal Term being a partial term of
eleven (11) months), ending on December 31, 2006.

      3. The Agreement hereby is amended by deleting Exhibit B attached thereto
and inserting in lieu thereof Attachment 1 attached hereto.

      4. The Agreement shall remain unmodified other than as expressly set forth
herein and, as so modified, shall remain in full force and effect.

      5. This Amendment shall be governed in all respects by the laws of the
State of Illinois.

      6. This Amendment shall be effective only upon approval hereof by the
Compensation Committee of eLoyalty's Board of Directors, which approval shall be
sought at the next regular meeting of such committee, currently scheduled for
November 6, 2003.

<PAGE>

IN WITNESS WHEREOF, Employee and the duly authorized officer of eLoyalty have
executed this Amendment as of the date set forth above.

Employee                              eLoyalty Corporation

/s/ Karen Bolton                      By: /s/ Kelly D. Conway
----------------                          -------------------
    Karen Bolton                      Title: President & Chief Executive Officer

                                       2

<PAGE>

                                  ATTACHMENT 1

                                    EXHIBIT B
                        REIMBURSABLE RELOCATION EXPENSES

(I)   GENERAL RELOCATION RULES:

Employee acknowledges and agrees that:

      (a) The terms of this Exhibit B shall apply only during the Initial Term
of Employment and the first three (3) Renewal Terms (the third such Renewal Term
being a partial term of eleven (11) months) (collectively, the "Applicable
Term"). In the event that Employee desires for the Agreement to be extended for
one or more additional Renewal Terms, then, not later that thirty (30) days
prior to the expiration of the Applicable Term, Employee shall initiate
discussions with eLoyalty regarding the reimbursement and allowance obligations
of eLoyalty that will apply during any such Renewal Term and the parties will
negotiate in good faith to reach agreement regarding such obligations, to be set
forth in a substitute Exhibit B.

      (b) If Employee resigns from her employment with eLoyalty, or is
terminated by eLoyalty for Serious Misconduct at anytime during the Term of
Employment, Employee's rights to receive reimbursement of all relocation
expenses and payment of any all allowances, if any, described hereunder
(collectively, "Relocation Costs") will terminate immediately, including,
without limitation, Employee's rights to receive any reimbursement for the final
return trip as set forth in Section II, Paragraph 1(c) below, reimbursement for
the return moving costs as set forth in Section II, Paragraph 2 below and to
receive outplacement assistance as set forth in Section II, Paragraph 8 below.
In such event, Employee will be solely responsible for any costs or expenses
incurred by Employee after the termination of Employee's employment, including
without limitation, any monthly payments required for Employee's housing as a
result of Employee's relocation to the U.S. Employee will indemnify and hold
harmless eLoyalty (and its subsidiaries, parent and sister companies and their
agents, employees, officers and directors) from any and all liabilities, costs
and expenses (included, but not limited to, attorney's fees) arising in
connection with any claims by third parties against eLoyalty with respect to any
such costs or expenses incurred by Employee after the date of Employee's
termination of employment.

      (c) If Employee is terminated by eLoyalty for any reason other than for
Serious Misconduct during the Term of Employment, Employee's rights to receive
reimbursement of all Relocation Costs, if any, will also terminate immediately,
except for: (i) reimbursement of monthly housing payments until December 31,
2006 as described in Section II, Paragraph (3)(a) hereunder; (ii) reimbursement
for the final return trip as set forth in Section II, Paragraph 1(c) below;
(iii) reimbursement for the return moving costs as set forth in Section II,
Paragraph 2 below; (iv) payment of the Equity Protection Payment (to the extent
payable in accordance with the terms thereof) set forth

                                       1

<PAGE>

in Section II, Paragraph 3(c) below, and (v) outplacement assistance as set
forth in Section II, Paragraph 8 below.

      (d) If permitted under applicable laws, eLoyalty reserves the right to
offset all repayments due from Employee hereunder against amounts payable by
eLoyalty to Employee under this Agreement, if any, upon termination or
expiration of the Term of Employment.

      (e) eLoyalty shall have the right to proceed against Employee or
Employee's property in a court in any location to enable eLoyalty to enforce a
judgment or other court order entered in favor of eLoyalty. Employee waives any
objection that Employee may have to the location of the court in which eLoyalty
has commenced a proceeding.

      (f) Employee must submit original receipts for all expense reimbursement
set forth herein.

(II)  REIMBURSABLE RELOCATION EXPENSES AND ALLOWANCES:

Subject to the provisions of Section I above, eLoyalty agrees to reimburse
Employee for those relocation costs listed below:

1.    Airfares.

      (a)   Annual Trips: As long as Employee remains in the employ of eLoyalty
            , eLoyalty will, during the Applicable Term, reimburse Employee for
            Employee's purchase of roundtrip airfares from the United States to
            Australia, for Employee, Employee's spouse, Employee's child and/or
            Employee's spouse's parents, provided that such reimbursement shall
            not exceed the net amount of Fifty-Six Thousand United States
            Dollars (US$56,000) per year ("Annual Airfare Budget").

      (b)   Emergency Trips: As long as Employee remains in the employ of
            eLoyalty, eLoyalty will, during the Applicable Term, reimburse
            Employee for the purchase of business class airfare for Employee's
            emergency trips back to Australia, provided that eLoyalty shall have
            the final determination in its sole discretion as to whether any
            such trips proposed to be undertaken by Employee qualify as an
            "emergency trip".

      (c)   Final Return Trip: If at the expiration of the Term of Employment or
            if Employee is terminated by eLoyalty during the Term of Employment
            for any reason other than for Serious Misconduct and Employee
            decides to return back to Australia within twelve (12) months after
            such termination or expiration of the Term of Employment, eLoyalty
            will purchase for each of Employee, Employee's spouse and Employee's
            child a business class airfare for a one-way trip from the U.S. to
            NSW, Australia. This trip may

                                       2

<PAGE>

            be direct or indirect, provided that the total cost is no greater
            than the cost of a direct one-way trip from the U.S. to NSW,
            Australia.

2.    Return Shipment of Household Goods and/or Personal Effects. If at the
expiration of the Term of Employment or if Employee is terminated by eLoyalty
during the Term of Employment for any reason other than for Serious Misconduct
and Employee decides to return back to Australia within twelve (12) months after
such termination or expiration of the Term of Employment, eLoyalty shall
directly pay for the reasonable costs of shipping Employee's furnishings and
personal effects from the State of Illinois, U.S. to Employee's primary
residence in Australia, provided that Employee has obtained eLoyalty's prior
approval of such return shipping costs payable by eLoyalty.

3.    Monthly Housing Allowance; Lease Deposit; and Principal Protection.

      (a)   Monthly Housing Allowance.

            -     In connection with Employee's relocation to the U.S.
                  hereunder, Employee has executed a written lease ("Lease")
                  with Howard Kaplan and Louis Natanshon (collectively,
                  "Lessor") for housing in the U.S. for a period of two years,
                  commencing from February 1, 2002 ("Lease Effective Date") and
                  expiring on January 31, 2004 ("Lease Expiration Date").

            -     eLoyalty has directly paid to Lessor the net amount of Five
                  Thousand Five Hundred Dollars (U.S.$5,500) representing
                  payment for the final month (the month of January 2004) under
                  the Lease ("Last Month Prepayment").

            -     Employee has contracted to purchase a home located at 641 S.
                  Waukegan Road, Lake Forest, Illinois 60045, to serve as her
                  primary residence through at least December 31, 2006 (the
                  "Purchased Residence").

            -     As long as Employee remains in the employ of eLoyalty until
                  December 31, 2006, eLoyalty will pay to Employee the net
                  amount of Five Thousand Five Hundred United States Dollars
                  (US$5,500) a month to be applied against either (i) Employee's
                  monthly payments required under the Lease or (ii) Employee's
                  financing payments for the Purchased Residence. Such monthly
                  housing allowance will be paid by eLoyalty to Employee no
                  later than the first of each month. eLoyalty will not be
                  obligated to make such payment for the month of January 2004,
                  as eLoyalty already has made the Last Month Prepayment.

            -     If eLoyalty is a guarantor of such Lease and Employee fails to
                  remit to Lessor any such monthly lease payments made by
                  eLoyalty to

                                       3

<PAGE>

                  Employee hereunder, Employee will indemnify and hold harmless
                  eLoyalty (and its subsidiaries, parent and sister companies
                  and their agents, employees, officers and directors) from any
                  and all liabilities, costs and expenses (included, but not
                  limited to, attorney's fees) arising in connection with any
                  claims by Lessor or any third parties against eLoyalty for
                  such monthly payments due under the Lease which have been paid
                  by eLoyalty to Employee. If eLoyalty is a guarantor of such
                  Lease, Employee may not renew the Lease at the Lease
                  Expiration Date without eLoyalty's prior written consent.

            -     Consistent with Section I, Paragraph (b), all such monthly
                  housing payments under this Paragraph 4(a) will cease
                  immediately if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time and Employee will
                  have no claim against eLoyalty therefor after the date of such
                  termination or resignation. In such event, Employee will
                  indemnify and hold harmless eLoyalty (and its subsidiaries,
                  parent and sister companies and their agents, employees,
                  officers and directors) from any and all liabilities, costs
                  and expenses (included, but not limited to, attorney's fees)
                  arising in connection with any claims by Lessor or any third
                  parties against eLoyalty for any payments due under the Lease
                  after the date of such termination or resignation.

            -     If Employee is terminated by eLoyalty for any reason other
                  than for Serious Misconduct during the Applicable Term,
                  eLoyalty will continue to pay Employee her monthly housing
                  allowance until the earliest of (i) the date that Employee
                  both sells the Purchased Residence and makes her final return
                  trip to Australia, (ii) twelve (12) months following the
                  effective date of termination and (iii) the end of the
                  Applicable Term.

      (b)   Lease Deposit. eLoyalty has paid directly to the Lessor, a one-time
            security deposit ("Deposit") in the amount of one month's rent
            required under the Lease. Employee will ensure that eLoyalty
            receives a full refund of such Deposit upon the termination or
            expiration of such Lease. Employee agrees that it will immediately
            remit to eLoyalty all such Deposit proceeds refunded by the Lessor
            to Employee. Notwithstanding anything contained in this Agreement,
            if Employee resigns or is terminated by eLoyalty prior to January
            31, 2004, Employee will immediately repay to eLoyalty all such
            Deposit (not any pro-rata portion) paid by eLoyalty and Employee
            shall be entitled to retain any such Deposit proceeds refunded by
            the Lessor to Employee at the termination or expiration of such
            Lease. eLoyalty reserves the right to offset its loss of any portion
            of such Deposit against any amounts payable by eLoyalty to Employee
            upon termination or expiration of the Term of Employment.

                                       4

<PAGE>

      (c)   Initial Equity Protection.

            -     In connection with the purchase of the Purchased Residence,
                  Employee has made an Initial Equity Investment of $276,000,
                  being equal to the difference between (i) the contract
                  purchase price for the Purchased Residence (the "Purchase
                  Price") minus (ii) the original principal amount of the
                  mortgage loan for the Purchased Residence (the "Equity
                  Investment").

            -     In the event that, within twelve (12) months following the
                  earlier of (i) expiration of the Applicable Term and (ii)
                  termination of Employee's employment by eLoyalty, other than
                  for Serious Misconduct, Employee sells the Purchased Residence
                  after making a reasonable, good faith effort to maximize the
                  sales price therefor, and the contract sale price, less real
                  estate broker's commission payable by Employee with respect to
                  such sale, but including real property tax pro ration
                  allocations (the "Sale Price"), is such that Employee will not
                  receive amounts in connection with such sale equal to or in
                  excess of the Initial Equity Investment, then eLoyalty shall
                  pay to Employee, within ten (10) days following the closing of
                  such sale and written notification of the Sale Price, an
                  amount equal to the difference between the Initial Equity
                  Investment and the amount so received by Employee (such
                  payment hereinafter referred to as the "Equity Protection
                  Payment").

            -     eLoyalty's obligation to make the Equity Protection Payment
                  shall be subject to the following conditions:

                        -     Employee shall make all reasonable, good faith
                              efforts to maximize the Sale Price.

                        -     Employee shall maintain the Purchased Residence at
                              all times in good condition, ordinary wear and
                              tear excepted.

                        -     Employee shall undertake no voluntary act with
                              respect to the Purchased Residence, including,
                              without limitation, any modification thereto, that
                              has the effect of reducing the market value
                              thereof.

                        -     Employee shall maintain adequate insurance on the
                              Purchased Residence and, in the event of a loss
                              that reduces the value of Purchased Residence at
                              the time of its sale, the Sale Price shall be
                              deemed increased by the amount of any applicable
                              insurance recovery and the payment of the Equity
                              Protection Payment will be delayed until such
                              amount is reasonably determinable.

                                       5

<PAGE>

                        -     Employee shall provide eLoyalty with prior written
                              notice (as promptly as is practicable and in no
                              event later than one business day prior to the
                              following described event) of (i) her intent to
                              enter into a sale contract for the Purchased
                              Residence that would result in an Equity
                              Protection Payment and (ii) any amendment or
                              modification to such a sale contract that would
                              increase the amount of any Equity Protection
                              Payment.

      (d)   Moving Costs. eLoyalty shall reimburse Employee for all costs
            incurred by her and associated with her relocation to the Purchased
            Residence, up to a maximum of Five Thousand Dollars ($5,000) and
            subject to the presentation of appropriate documentation of the
            incurrence thereof.

4.    Automobile Lease Allowance; Automobile Registration Costs;

      (a)   Automobile Lease Allowance.

            -     During the Initial Term of Employment, eLoyalty will, at
                  eLoyalty's sole discretion, pay to Employee or directly to the
                  applicable automobile leasing company ("Auto Lessor"), the net
                  amount of Seven Hundred and Fifteen United States Dollars
                  (US$715) per month to be applied against Employee's monthly
                  payments required for Employee's lease of an automobile (the
                  "Leased Automobile") in the U.S ("Automobile Lease") until
                  January 31, 2004 ("Automobile Lease Expiration Date"). In
                  addition to the foregoing, eLoyalty has paid directly to the
                  Auto Lessor, a one-time lease acquisition payment
                  ("Acquisition Payment") of One Thousand Dollars (US$1,000),
                  which covers the costs of acquiring the necessary registration
                  and license plates to operate the Leased Automobile in the
                  U.S. as well as other related local governmental fees charged.
                  In no event shall eLoyalty be responsible for reimbursing or
                  paying Employee or Auto Lessor any other associated costs of
                  operating such Leased Automobile (e.g. gasoline, car
                  insurance, repairs and maintenance, renewal registration,
                  vehicle stickers, etc.)

            -     Consistent with Section (I)(b) (General Relocation Rules), all
                  such monthly lease payments under this Paragraph 6(a) will
                  cease immediately if eLoyalty terminates Employee for Serious
                  Misconduct or Employee resigns at any time prior to the
                  Automobile Lease Expiration Date, and Employee will be solely
                  responsible for all payments due under the Automobile Lease
                  after the date of such termination or resignation and the
                  Buy-Out Payment described below shall not be made.. In such
                  event, Employee will indemnify and hold

                                       6

<PAGE>

                  harmless eLoyalty (and its subsidiaries, parent and sister
                  companies and their agents, employees, officers and directors)
                  from any and all liabilities, costs and expenses (included,
                  but not limited to, attorney's fees) arising in connection
                  with any claims by the Auto Lessor or any third parties
                  against eLoyalty for such payments due under the Automobile
                  Lease after the date of such termination or resignation.

            -     If Employee is terminated by eLoyalty for any reason other
                  than for Serious Misconduct prior to the Automobile Lease
                  Expiration Date, eLoyalty will, at its sole discretion, either
                  reimburse Employee, or pay to the Auto Lessor, for all monthly
                  payments remaining under the Automobile Lease from Employee's
                  date of termination to the Automobile Lease Expiration Date,
                  provided that at eLoyalty's request, Employee will fully
                  cooperate with eLoyalty in negotiating the early termination
                  of the Auto Lease with Auto Lessor.

            -     On or prior, as mutually determined by eLoyalty and Employee,
                  the Automobile Lease Expiration Date, eLoyalty shall pay to
                  Employee an amount equal to the lesser of (i) the amount
                  necessary to purchase the Leased Automobile under the
                  Automobile Lease and (ii) the portion of Employee's Annual
                  Airfare Budget for 2003, which amount Employee shall pay to
                  Auto Lessor or its designee in order to purchase the Leased
                  Automobile.

            -     Upon any sale of the Leased Automobile by Employee, Employee
                  shall use commercially reasonable efforts to maximize the sale
                  proceeds thereof and shall promptly remit such proceeds to
                  eLoyalty.

5.    Land Tax. As long as Employee remains in the employ of eLoyalty, eLoyalty
      will, during the Applicable Term, reimburse Employee for the reasonable
      annual cost of Employee's land tax bill on Employee's current primary
      residence in Australia (which is the special tax incurred by Employee as
      Employee will not be living at such primary residence in Australia), which
      are above and beyond the normal real estate taxes Employee pays on such
      primary residence and which solely are attributable to Employee's absence
      from such residence as a result of Employee's relocation to the U.S. to
      work for eLoyalty.

6.    Visa Processing. As long as Employee remains in the employ of eLoyalty,
      eLoyalty will, during the Applicable Term, pay, or reimburse Employee, for
      reasonable costs to obtain the proper work authorization from the U.S.
      Immigration and Naturalization Office (INS) for Employee's U.S. relocation
      and any necessary dependent U.S. visas required for Employee's spouse and
      Employee's child in connection with their relocation to the U.S. as a
      result of Employee's employment by eLoyalty in the U.S.

                                       7

<PAGE>

7.    Taxes.

      (a)   Grossing up for Taxes. As long as Employee remains in the employ of
            eLoyalty, eLoyalty will, during the Initial Term of Employment,
            reimburse Employee for any incremental taxes actually incurred by
            Employee (both US and foreign) under the items set forth in
            Paragraphs 1 through 8 above. eLoyalty will calculate any
            incremental tax resulting from these items and gross-up Employee's
            compensation in an amount adequate to offset the increased tax cost.

      (b)   Tax Returns Preparation Costs. As long as Employee remains in the
            employ of eLoyalty, eLoyalty will, during the Initial Term of
            Employment, pay PriceWaterhouseCoopers (PWC) to prepare both
            Employee's annual U.S. and Australian income tax returns.

8.    Outplacement Assistance. If Employee's employment is terminated by
      eLoyalty for any reason other than for Serious Misconduct, eLoyalty will
      provide Employee with up to ninety (90) days of reasonable outplacement
      assistance, in the geography elected by the Employee, from the
      outplacement firm of Drake Beam (or another similar outplacement firm
      designated by eLoyalty) as such services are generally provided to
      terminated eLoyalty employees.

                                       8

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