SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
eLoyalty Corporation
------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
290151307
(CUSIP Number)
Carla S. Newell
c/o Technology Crossover Ventures
528 Ramona Street
Palo Alto, California 94301
(650) 614-8200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
COPY TO:
Peter Kerman
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025-1105
(650) 328-4600
December 19, 2001
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [X].
SCHEDULE 13D
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CUSIP No. 290151307 Page 1 of 16 Pages
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(1) Name of Reporting Person
TCV IV, L.P.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 2,035,518 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 2,035,518 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,035,518 SHARES OF COMMON STOCK (A)
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(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
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(13) Percent of Class Represented by Amount in Row (11)
20.0%
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(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 2 of 16 Pages
-------------------- --------------------
(1) Name of Reporting Person
TCV IV STRATEGIC PARTNERS, L.P.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 76,544 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 76,544 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
76,544 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.8%
---------------------------------------------------------------------
(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 3 of 16 Pages
-------------------- --------------------
(1) Name of Reporting Person
TECHNOLOGY CROSSOVER MANAGEMENT IV, L.L.C.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 2,112,062 SHARES OF COMMON STOCK(A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 2,112,062 SHARES OF COMMON STOCK(A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,112,062 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
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(13) Percent of Class Represented by Amount in Row (11)
20.7%
---------------------------------------------------------------------
(14) Type of Reporting Person
OO
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 4 of 16 Pages
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(1) Name of Reporting Person
TCV III (GP)
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 3,657 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 3,657 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
3,657 SHARES OF COMMON STOCK(A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
less than 0.1%
---------------------------------------------------------------------
(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 5 of 16 Pages
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(1) Name of Reporting Person
TCV III, L.P.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 17,375 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 17,375 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
17,375 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
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(13) Percent of Class Represented by Amount in Row (11)
0.2%
---------------------------------------------------------------------
(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 6 of 16 Pages
-------------------- --------------------
(1) Name of Reporting Person
TCV III (Q), L.P.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 461,840 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 461,840 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
461,840 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
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(13) Percent of Class Represented by Amount in Row (11)
4.5%
---------------------------------------------------------------------
(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 7 of 16 Pages
-------------------- --------------------
(1) Name of Reporting Person
TCV III STRATEGIC PARTNERS, L.P.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 20,907 SHARES OF COMMON STOCK (A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 20,907 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
20,907 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [X]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.2%
---------------------------------------------------------------------
(14) Type of Reporting Person
PN
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(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 8 of 16 Pages
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(1) Name of Reporting Person
TECHNOLOGY CROSSOVER MANAGEMENT III, L.L.C.
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF, OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 503,779 SHARES OF COMMON STOCK(A)
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0- SHARES OF COMMON STOCK
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 503,779 SHARES OF COMMON STOCK(A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0- SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
503,779 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
4.9%
---------------------------------------------------------------------
(14) Type of Reporting Person
OO
---------------------------------------------------------------------
(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 9 of 16 Pages
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(1) Name of Reporting Person
JAY C. HOAG
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds
AF,OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of -0- SHARES OF COMMON STOCK
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,615,841 SHARES OF COMMON STOCK(A)
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 2,615,841 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0-SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,615,841 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
25.7%
---------------------------------------------------------------------
(14) Type of Reporting Person
IN
---------------------------------------------------------------------
(A) Please see Item 5.
SCHEDULE 13D
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CUSIP No. 290151307 Page 10 of 16 Pages
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(1) Name of Reporting Person
RICHARD H. KIMBALL
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(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) Source of Funds
AF,OO
---------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of -0- SHARES OF COMMON STOCK
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,615,841 SHARES OF COMMON STOCK (A)
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 2,615,841 SHARES OF COMMON STOCK (A)
--------------------------------------------------------
(10) Shared Dispositive Power
-0-SHARES OF COMMON STOCK
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,615,841 SHARES OF COMMON STOCK (A)
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
25.7%
---------------------------------------------------------------------
(14) Type of Reporting Person
IN
---------------------------------------------------------------------
(A) Please see Item 5.
Item 1. Security and Issuer.
This statement relates to shares of common stock, par value $0.01
per share (the "Common Stock"), of eLoyalty Corporation, a Delaware corporation
("eLoyalty" or the "Company"). The Company's principal executive offices are
located at 150 Field Drive, Suite 250, Lake Forest, Illinois 60045. All share
numbers in this Schedule 13D give effect to the 1-for-10 reverse stock split
effected by the Company on December 19, 2001.
Item 2. Identity and Background.
(a)-(c), (f). This statement is being filed by (1) TCV IV, L.P., a
Delaware limited partnership ("TCV IV"), (2) TCV IV Strategic Partners, L.P., a
Delaware limited partnership ("Strategic Partners IV"), (3) Technology Crossover
Management IV, L.L.C., a Delaware limited liability company ("Management IV"),
(4) TCV III (GP), a Delaware general partnership ("TCV III (GP)"), (5) TCV III,
L.P., a Delaware limited partnership ("TCV III"), (6) TCV III (Q), L.P., a
Delaware limited partnership ("TCV III (Q)"), (7) TCV III Strategic Partners,
L.P., a Delaware limited partnership ("Strategic Partners III"), (8) Technology
Crossover Management III, L.L.C., a Delaware limited liability company
("Management III"), (9) Jay C. Hoag ("Mr. Hoag") and (10) Richard H. Kimball
("Mr. Kimball"). TCV IV, Strategic Partners IV, Management IV, TCV III (GP), TCV
III, TCV III (Q), Strategic Partners III, Management III, Mr. Hoag and Mr.
Kimball are sometimes collectively referred to herein as the "Reporting
Persons." The agreement among the Reporting Persons relating to the joint filing
of this statement is attached as Exhibit 1 hereto.
TCV IV, Strategic Partners IV, Management IV, TCV III (GP), TCV III,
TCV III (Q), Strategic Partners III and Management III are each principally
engaged in the business of investing in securities of the Company and other
companies. Management IV is the general partner of TCV IV and Strategic Partners
IV. Management III is the managing general partner of TCV III (GP) and the sole
general partner of TCV III, TCV III (Q) and Strategic Partners III. The address
of the principal business and office of each of TCV IV, Strategic Partners IV,
Management IV, TCV III (GP), TCV III, TCV III (Q), Strategic Partners III and
Management III is 528 Ramona Street, Palo Alto, California 94301.
Mr. Hoag and Mr. Kimball are the managing members of Management IV
and Management III. Mr. Hoag and Mr. Kimball are each United States citizens,
and the present principal occupation or employment of each is as a managing
member of Management IV, Management III and related entities. The business
address of each of Mr. Hoag and Mr. Kimball is 528 Ramona Street, Palo Alto,
California 94301.
(d), (e). During the last five years, none of TCV IV, Strategic
Partners IV, Management IV, TCV III (GP), TCV III, TCV III (Q), Strategic
Partners III, Management III, Mr. Hoag or Mr. Kimball has (1) been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(2) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
From April 27, 1999 through May 4, 1999, TCV III (GP), TCV III, TCV III
(Q) and Strategic Partners III purchased the following shares of the common
stock of Technology Solutions Company ("TSC") in the open market for an average
weighted per share purchase price of $79.97 (the "TSC Initial Shares"):
Name Shares Acquired
----------- ---------------
TCV III (GP) 20
TCV III 99
TCV III (Q) 2,635
Page 11 of 16 Pages
Strategic Partners III 119
The source of funds for the acquisition of the TSC Initial Shares by TCV III
(GP), TCV III, TCV III (Q) and Strategic Partners III was capital contributions
from their respective partners.
Pursuant to the terms of the Common Stock Purchase and Sale Agreement,
dated as of August 13, 1999 (the "August Purchase Agreement"), by and among TSC,
the Company, TCV III (GP), TCV III, TCV III (Q), Strategic Partners III and the
other persons listed on the signature pages thereto, TSC issued and sold to the
Reporting Persons, and the Reporting Persons purchased from TSC, the following
shares of the common stock of TSC in a private placement for a per share
purchase price of $90.13 (the "TSC Private Placement Shares"):
Name Shares Acquired
----- ---------------
TCV III (GP) 181
TCV III 862
TCV III (Q) 22,918
Strategic Partners III 1,037
The source of funds for the acquisition of the TSC Private Placement Shares by
TCV III (GP), TCV III, TCV III (Q) and Strategic Partners III was capital
contributions from their respective partners.
On August 27, 1999, TCV III (GP), TCV III, TCV III (Q) and Strategic
Partners III purchased the following shares of the common stock of TSC in the
open market for an average weighted per share purchase price of $120.63 (the
"TSC Subsequent Shares"):
Name Shares Acquired
----- ---------------
TCV III (GP) 108
TCV III 517
TCV III (Q) 13,751
Strategic Partners III 622
The source of funds for the acquisition of the TSC Subsequent Shares by TCV III
(GP), TCV III, TCV III (Q) and Strategic Partners III was capital contributions
from their respective partners.
In connection with the spinoff of the Company from TSC completed on
February 15, 2000 (the "Spinoff"), each stockholder of TSC received one share of
Common Stock for each share of common stock of TSC. One share of Common Stock
was received for each TSC Initial Share, TSC Private Placement Share and TSC
Subsequent Share. The shares of Common Stock received in connection with the
Spinoff are referred to herein as the "TSC Shares."
Immediately prior to the Spinoff on February 15, 2000, TCV III (GP), TCV
III, TCV III (Q) and Strategic Partners III purchased the following shares of
Common Stock in a private placement for a per share purchase price of $33.10
(the "2000 Private Placement Shares"):
Name Shares Acquired
----- ---------------
TCV III (GP) 922
TCV III 4,380
TCV III (Q) 116,424
Strategic Partners III 5,272
The source of funds for the acquisition of the 2000 Private Placement Shares by
TCV III (GP), TCV III, TCV III (Q) and Strategic Partners III was capital
contributions from their respective partners.
Pursuant to the terms of the Common Stock Purchase Agreement, dated as
of May 26, 2000 (the "May Purchase Agreement"), by and among the Company, TCV
IV, Strategic Partners IV, TCV III (GP), TCV III, TCV III (Q), Strategic
Partners III and the other persons listed on the signature pages thereto, the
Company issued and sold to the Reporting Persons, and the Reporting Persons
purchased from the Company, the following shares of Common Stock for a per share
purchase price of $135.00 (the "May Shares"):
Name Shares Acquired
----- ---------------
TCV IV 183,051
Strategic Partners IV 6,948
TCV III (GP) 72
TCV III 344
TCV III (Q) 9,167
Strategic Partners III 415
The source of funds for the acquisition of the May Shares by TCV IV, Strategic
Partners IV, TCV III (GP), TCV III, TCV III (Q) and Strategic Partners III was
capital contributions from their respective partners.
From August 10, 2000 through June 5, 2001, TCV IV and Strategic Partners
IV purchased the following shares of Common Stock in the open market for an
average weighted per share purchase price of $65.80 and TCV III (GP), TCV III,
TCV III (Q) and Strategic Partners III purchased the following shares of Common
Stock in the open market for an average weighted per share purchase price of
$96.85 (the "Market Shares" and, collectively with the TSC Shares, the 2000
Private Placement Shares and the May Shares, the "Shares"):
Page 12 of 16 Pages
Name Shares Acquired
----- ---------------
TCV IV 350,794
Strategic Partners IV 13,080
TCV III (GP) 67
TCV III 320
TCV III (Q) 8,522
Strategic Partners III 384
The source of funds for the acquisition of the Market Shares by TCV IV,
Strategic Partners IV, TCV III (GP), TCV III, TCV III (Q) and Strategic Partners
III was capital contributions from their respective partners.
Pursuant to the terms of the Share Purchase Agreement, dated as of
September 24, 2001 (the "September Purchase Agreement"), by and among the
Company, TCV IV, Strategic Partners IV, TCV III (GP), TCV III, TCV III (Q),
Strategic Partners III and the other persons listed on the signature pages
thereto, the Company issued and sold to the Reporting Persons, and the Reporting
Persons purchased from the Company, the following shares of the Company's 7%
Series B Convertible Preferred Stock (the "Preferred Stock") for a per share
purchase price of $5.10 (the "Preferred Shares" and, collectively with the
Common Shares, the "Shares"):
Name Shares Acquired
----- ---------------
TCV IV 1,501,673
Strategic Partners IV 56,516
TCV III (GP) 2,285
TCV III 10,852
TCV III (Q) 288,422
Strategic Partners III 13,057
The Preferred Shares are convertible into shares of Common Stock on a
share-for-share basis, subject to adjustment for stock splits, combinations and
similar events, at any time after the six-month anniversary of the original date
of issuance of the Preferred Shares. The rights, preferences, privileges,
restrictions and other matters relating to the Preferred Stock are set forth in
the form of Certificate of Designations of Series B Convertible Preferred Stock
(the "Certificate of Designations"). The source of funds for the acquisition of
the Preferred Shares by TCV IV, Strategic Partners IV, TCV III (GP), TCV III,
TCV III (Q) and Strategic Partners III was capital contributions from their
respective partners.
Item 4. Purpose of Transaction.
Investor Rights Agreement
Page 13 of 16 Pages
Pursuant to the May Purchase Agreement, the Company, TCV III (GP),
TCV III, TCV III (Q), Strategic Partners III, TCV IV and Strategic Partners IV
entered into an Investor Rights Agreement, dated as of May 26, 2000. Pursuant
to the September Purchase Agreement, the Investor Rights Agreement was restated
in the form of the Amended and Restated Investor Rights Agreement, dated as of
December 19, 2001 (the "Investor Rights Agreement"). Pursuant to the Investor
Rights Agreement, the Company has agreed to register the Common Shares and the
shares of Common Stock issuable upon conversion of the Preferred Shares, subject
to certain exceptions. The Company is obligated to pay all expenses incurred in
connection with such registrations (other than underwriting discounts, selling
commissions and stock transfer taxes). The Company has agreed to indemnify the
Reporting Persons and related persons against certain liabilities under the
securities laws in connection with the sale of securities under such
registrations.
Amendment to Rights Agreement
In connection with the September Purchase Agreement, the Company
amended the Rights Agreement, dated as of March 17, 2000, by and between the
Company and Mellon Investor Services LLC (the "Rights Agreement Amendment").
The Reporting Persons acquired the Shares for investment purposes.
Depending on the factors discussed herein, the Reporting Persons may, from time
to time, investigate, evaluate, discuss, negotiate or agree to acquire and so
acquire additional shares of Common Stock, Preferred Stock or other equity
securities of the Company in the open market, in privately negotiated
transactions from the Company or third parties, or otherwise and/or investigate,
evaluate, discuss, negotiate or agree to sell, exchange or dispose of and so
sell, exchange or dispose of all or a portion of the Shares and/or Common Stock
issued upon conversion of the Shares in the open market, in privately negotiated
transactions, in change of control transactions or otherwise. Any actions the
Reporting Persons might undertake will be dependent upon the Reporting Persons'
review of numerous factors, including, among other things, the following: the
price levels of the Common Stock; general market and economic conditions;
ongoing evaluation of the Company's business, financial condition, operations
and prospects; the relative attractiveness of alternative business and
investment opportunities; and other future developments.
Mr. Hoag is a member of the Board of Directors of the Company.
Except as set forth above, the Reporting Persons have no present
plans or intentions which would result in or relate to any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a), (b). As of the close of business on December 19, 2001, TCV IV,
Strategic Partners IV, TCV III (GP), TCV III, TCV III (Q) and Strategic Partners
III owned directly an aggregate of 2,615,841 Shares as follows:
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Name of Investor Number of Total Shares Percentage of Outstanding Shares (a)
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TCV IV 2,035,518 20.0%
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Strategic Partners IV 76,544 0.8%
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TCV III (GP) 3,657 less than 0.1%
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TCV III 17,375 0.2%
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TCV III (Q) 461,840 4.5%
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Strategic Partners III 20,907 0.2%
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(a) Based on 5,629,661 shares of Common Stock outstanding as of the close of
business on December 19, 2001 and assuming the conversion into shares of Common
Stock of 4,562,372 shares of Preferred Stock outstanding as of the close of
business on December 19, 2001.
Page 14 of 16 Pages
Each of TCV IV and Strategic Partners IV has the sole power to dispose or direct
the disposition of the Shares held by it and to direct the vote of such Shares.
Management IV is the general partner of TCV IV and Strategic Partners IV and in
such capacity may be deemed to have the sole power to dispose or direct the
disposition of the Shares held by such entities and to direct the vote of such
Shares. Management IV disclaims beneficial ownership of the securities owned by
TCV IV and Strategic Partners IV except to the extent of its pecuniary interest
therein.
Each of TCV III (GP), TCV III, TCV III (Q) and Strategic Partners
III has the sole power to dispose or direct the disposition of the Shares held
by it and to direct the vote of such Shares. Management III is the managing
general partner of TCV III (GP) and the sole general partner of each of TCV III,
TCV III (Q) and Strategic Partners III and in such capacity may be deemed to
have the sole power to dispose or direct the disposition of the Shares held by
such entities and to direct the vote of such Shares. Management III disclaims
beneficial ownership of the securities owned by TCV III (GP), TCV III, TCV III
(Q) and Strategic Partners III except to the extent of its pecuniary interest
therein.
Messrs. Hoag and Kimball are the managing members of Management III
and Management IV. Under the operating agreements of Management III and
Management IV, each of Messrs. Hoag and Kimball have the independent power to
cause the funds managed by Management III and Management IV to buy and sell
securities of publicly traded portfolio companies, however, in general, they
must act by unanimous consent with respect to all other matters, including
directing the voting of such securities. As a result, each of Messrs. Hoag and
Kimball may be deemed to each have the sole power to dispose or direct the
disposition of the Shares held by TCV IV, Strategic Partners IV, TCV III (GP),
TCV III, TCV III (Q) and Strategic Partners III and the shared power to direct
the vote of such Shares. Messrs. Hoag and Kimball disclaim beneficial ownership
of the securities owned by TCV IV, Strategic Partners IV, TCV III (GP), TCV III,
TCV III (Q) and Strategic Partners III except to the extent of their pecuniary
interest therein.
The Reporting Persons may be deemed to be acting as a group in
relation to their respective holdings in the Company but do not affirm the
existence of any such group.
Except as set forth in this Item 5(a) - (b), each of the Reporting
Persons disclaims beneficial ownership of any Common Stock owned beneficially or
of record by any other Reporting Person.
(c). Except as set forth herein, none of the Reporting Persons has
effected any transaction in the Common Stock during the past 60 days.
(d). Not applicable.
(e). Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Items 3 and 4 above summarize certain provisions of the August
Purchase Agreeement, the May Purchase Agreement, the September Purchase
Agreement, the Certificate of Designations, the Investor Rights Agreement and
the Rights Agreement Amendment. The August Purchase Agreement is incorporated
herein by reference to Exhibit 10.3 to the Registration Statement on Form S-1 of
the Company (Registration No. 333-94293). The May Purchase Agreement is
incorporated herein by reference to Exhibit 10.1 to the Report on Form 10-Q of
the Company for the quarter ended June 30, 2000. The September Purchase
Agreement is incorporated herein by reference to Exhibit 10.1 to the Report on
Form 8-K of the Company dated September 25, 2001. The form of Certificate of
Designations is incorporated herein by reference to Exhibit 4.1 to the Report on
Form 8-K of the Company dated September 25, 2001. The form of Investor Rights
Agreement is incorporated herein by reference to Exhibit 10.2 to the Report on
Form 8-K of the Company dated September 25, 2001. The Rights Agreement Amendment
is incorporated herein by reference to Exhibit 4.2 to the Report on Form 8-K of
the Company dated September 25, 2001.
Item 7. Material to be Filed as Exhibits.
Page 15 of 16 Pages
Exhibit 1 Joint Filing Agreement, dated as of December 28,
2001, by and among TCV IV, L.P., TCV IV Strategic
Partners L.P., Technology Crossover Management IV,
L.L.C., TCV III (GP), TCV III L.P., TCV III (Q),
L.P., TCV III Strategic Partners, L.P., Technology
Crossover Management III, L.L.C. Jay C. Hoag and
Richard H. Kimball.
Exhibit 2 Common Stock Purchase and Sale Agreement, dated as
of August 13, 1999, by and among Technology
Solutions Company, eLoyalty Corporation, TCV III
(GP), TCV III, L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.3
to the Registration Statement on Form S-1 of
eLoyalty Corporation (Registration No.
333-94293)).
Exhibit 3 Common Stock Purchase Agreement, dated as of May
26, 2000, by and among eLoyalty Corporation, TCV
IV, L.P., TCV IV Strategic Partners, L.P., TCV III
(GP), TCV III, L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.1
to the Report on Form 10-Q of eLoyalty Corporation
for the quarter ended June 30, 2000).
Exhibit 4 Share Purchase Agreement, dated as of September
24, 2001, by and among eLoyalty Corporation, TCV
IV, L.P., TCV IV Strategic Partners, L.P., TCV III
(GP), TCV III L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.1
to the Report on Form 8-K of eLoyalty Corporation
dated September 25, 2001).
Exhibit 5 Certificate of Designations of Series B
Convertible Preferred Stock (incorporated herein
by reference to Exhibit 4.1 to the Report on Form
8-K of eLoyalty Corporation dated September 25,
2001).
Exhibit 6 Form of Amended and Restated Investor Rights
Agreement, dated as of December 19, 2001, by and
among eLoyalty Corporation, TCV IV, L.P., TCV IV
Strategic Partners, L.P., TCV III (GP), TCV III,
L.P., TCV III (Q), L.P., TCV III Strategic
Partners, L.P. and the other persons listed on the
signature pages thereto (incorporated herein by
reference to Exhibit 10.2 to the Report on Form
8-K of eLoyalty Corporation dated September 25,
2001).
Exhibit 7 Amendment to Rights Agreement, dated as of
September 24, 2001, between eLoyalty Corporation
and Mellon Investor Services LLC (incorporated
herein by reference to Exhibit 4.2 to the Report
on Form 8-K of eLoyalty Corporation dated
September 25, 2001).
Exhibit 8 Statement Appointing Designated Filer and
Authorized Signatories dated February 22, 2000
(incorporated herein by reference to Exhibit F to
the Schedule 13G relating to the common stock of
eLoyalty Corporation filed on June 5, 2000).
Exhibit 9 Statement Appointing Designated Filer and
Authorized Signatories dated June 1, 2000
(incorporated herein by reference to Exhibit C to
the Schedule 13G relating to the common stock of
eLoyalty Corporation filed on December 5, 2001).
Page 16 of 16 Pages
SIGNATURES
After reasonable inquiry and to the best of each of the
undersigned's knowledge and belief, each of the undersigned certifies that the
information set forth in this statement is true, complete and correct.
Dated: December 28, 2001
TCV IV, L.P.
By: Technology Crossover Management IV,
L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TCV IV STRATEGIC PARTNERS, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TECHNOLOGY CROSSOVER
MANAGEMENT IV, L.L.C.
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TCV III (GP)
By: Technology Crossover Management III, L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TCV III, L.P.
By: Technology Crossover Management III, L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
S-1
TCV III STRATEGIC PARTNERS, L.P.
By: Technology Crossover Management III, L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TCV III (Q), L.P.
By: Technology Crossover Management III, L.L.C.
Its: General Partner
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
TECHNOLOGY CROSSOVER
MANAGEMENT III, L.L.C.
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
Its: Attorney in Fact
JAY C. HOAG
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
His: Authorized Signatory
RICHARD H. KIMBALL
By: /s/ Carla S. Newell
----------------------------------------------
Name: Carla S. Newell
His: Authorized Signatory
S-2
EXHIBIT INDEX
Exhibit 1 Joint Filing Agreement, dated as of December 28,
2001, by and among TCV IV, L.P., TCV IV Strategic
Partners L.P., Technology Crossover Management IV,
L.L.C., TCV III (GP), TCV III L.P., TCV III (Q),
L.P., TCV III Strategic Partners, L.P., Technology
Crossover Management III, L.L.C. Jay C. Hoag and
Richard H. Kimball.
Exhibit 2 Common Stock Purchase and Sale Agreement, dated as
of August 13, 1999, by and among Technology
Solutions Company, eLoyalty Corporation, TCV III
(GP), TCV III, L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.3
to the Registration Statement on Form S-1 of
eLoyalty Corporation (Registration No. 333-94293)).
Exhibit 3 Common Stock Purchase Agreement, dated as of May
26, 2000, by and among eLoyalty Corporation, TCV
IV, L.P., TCV IV Strategic Partners, L.P., TCV III
(GP), TCV III, L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.1
to the Report on Form 10-Q of eLoyalty Corporation
for the quarter ended June 30, 2000).
Exhibit 4 Share Purchase Agreement, dated as of September
24, 2001, by and among eLoyalty Corporation, TCV
IV, L.P., TCV IV Strategic Partners, L.P., TCV III
(GP), TCV III L.P., TCV III (Q), L.P., TCV III
Strategic Partners, L.P. and the other persons
listed on the signature pages thereto
(incorporated herein by reference to Exhibit 10.1
to the Report on Form 8-K of eLoyalty Corporation
dated September 25, 2001).
Exhibit 5 Certificate of Designations of Series B Convertible
Preferred Stock (incorporated herein by reference
to Exhibit 4.1 to the Report on Form 8-K of
eLoyalty Corporation dated September 25, 2001).
Exhibit 6 Form of Amended and Restated Investor Rights
Agreement, dated as of December 19, 2001, by and
among eLoyalty Corporation, TCV IV, L.P., TCV IV
Strategic Partners, L.P., TCV III (GP), TCV III,
L.P., TCV III (Q), L.P., TCV III Strategic
Partners, L.P. and the other persons listed on the
signature pages thereto (incorporated herein by
reference to Exhibit 10.2 to the Report on Form
8-K of eLoyalty Corporation dated September 25,
2001).
Exhibit 7 Amendment to Rights Agreement, dated as of
September 24, 2001, between eLoyalty Corporation
and Mellon Investor Services LLC (incorporated
herein by reference to Exhibit 4.2 to the Report
on Form 8-K of eLoyalty Corporation dated
September 25, 2001).
Exhibit 8 Statement Appointing Designated Filer and
Authorized Signatories dated February 22, 2000
(incorporated herein by reference to Exhibit F to
the Schedule 13G relating to the common stock of
eLoyalty Corporation filed on June 5, 2000).
Exhibit 9 Statement Appointing Designated Filer and
Authorized Signatories dated June 1, 2000
(incorporated herein by reference to Exhibit C to
the Schedule 13G relating to the common stock of
eLoyalty Corporation filed on December 5, 2001).