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Sample Business Contracts

Loan Note - eLoyalty (UK) Ltd. and Vaughan Thomas

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                                    LOAN NOTE


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

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

2.   PAYMENT TERMS.

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

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

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



<PAGE>   2

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

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

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

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

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

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

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

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

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

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

<PAGE>   3


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

4.   INTEREST.

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

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

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

6.   DEFAULTS.

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

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

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

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

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

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

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

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

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

         If to Borrower:

                  Vaughan Thomas

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

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

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


         If to Lender:

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

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

9.   ADDITIONAL PROVISIONS.

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

<PAGE>   5

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

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

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

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

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

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

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

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

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


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

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



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



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