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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 24, 2001
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eLOYALTY CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
0-27975 36-4304577
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(Commission File Number) (I.R.S. Employer Identification No.)
150 Field Drive, Suite 250, Lake Forest, Illinois 60045
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(Address of principal executive offices) (Zip Code)
(847) 582-7000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On September 24, 2001, eLoyalty Corporation (the "Company") announced
that it had entered into a Share Purchase Agreement, dated as of September 24,
2001 (the "Share Purchase Agreement"), with several funds managed by Technology
Crossover Ventures and several funds managed by Sutter Hill Ventures (the
"Investors") pursuant to which the Investors have agreed to purchase up to $25.0
million of Series B convertible preferred stock of the Company in a private
placement (the "Private Placement"). A copy of the Share Purchase Agreement is
filed as Exhibit 10.1 hereto. The rights, preferences and privileges of the
Series B convertible preferred stock will be set forth in a Certificate of
Designations to be filed with the Delaware Secretary of State, the form of which
is filed as Exhibit 4.1 hereto. The closing of the Private Placement is
conditioned upon stockholder approval and other conditions specified in the
Share Purchase Agreement. The closing of the Private Placement is also
conditioned upon the closing of the Rights Offering (as defined below) and
approval by the Company's stockholders of a proposed one-for-ten reverse split
of the Company's common stock that was also announced on September 24, 2001.
In connection with the closing of the Private Placement, the Company
will enter into an Amended and Restated Investor Rights Agreement with the
Investors pursuant to which the Company will agree to register the shares of
common stock issuable upon conversion of the Series B convertible preferred
stock, along with certain other shares of common stock held by the Investors,
under the Securities Act of 1933, as amended, within 180 days after the closing
of the Private Placement. A copy of the form of Amended and Restated Investor
Rights Agreement is filed as Exhibit 10.2 hereto.
The Company also announced that its Board of Directors has authorized
the Company to conduct a rights offering (the "Rights Offering") to allow
stockholders as of the record date for the rights offering to purchase shares of
Series B convertible preferred stock at the same price as the Investors in the
Private Placement. The record date has been set as October 8, 2001. The
distribution of the rights is conditioned on the Company's ability to distribute
the rights within 60 days of the record date. If the Company is unable to
distribute the rights by December 7, 2001, the original distribution of rights
will be cancelled and the Company will declare a new distribution of rights
(with identical terms) and a new record date. To exercise the rights,
stockholders must own at least one pre-split share of common stock on the
closing date of the Rights Offering for each right that is exercised. The terms
of the Rights Offering are set forth in the Company's Registration Statement on
Form S-3 (SEC file no. 333-70078), filed with the SEC on September 25, 2001.
The Company also announced that it intends to offer eligible officers
and employees an opportunity to exchange stock options with an exercise price,
on a pre-split basis, of $3.00 or more per share for shares of restricted stock
on a one-for-one basis.
A copy of the Company's press release regarding these actions is filed
as Exhibit 99.1 hereto.
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In connection with the Private Placement, the Company also amended its
Rights Agreement, dated as of March 17, 2000, with Mellon Investor Services LLC
(formerly ChaseMellon Shareholder Services, L.L.C.), as rights agent, to
provide, among other things, that (i) Technology Crossover Ventures shall not
become an "Acquiring Person" for purposes of the Rights Agreement so long as
Technology Crossover Ventures and its affiliates do not own more than 35% of the
Company's outstanding common stock, and (ii) Sutter Hill Ventures shall not
become an "Acquiring Person" for purposes of the Rights Agreement so long as
Sutter Hill Ventures and its affiliates do not own more than 20% of the
Company's outstanding common stock. A copy of the amendment is filed as Exhibit
4.2 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
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Exhibit No. Exhibit
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4.1 Form of Certificate of Designations of Series B
Convertible Preferred Stock
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4.2 Amendment, dated September 24, 2001, to Rights
Agreement dated March 17, 2000
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10.1 Share Purchase Agreement, dated September 24, 2001
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10.2 Form of Amended and Restated Investor Rights
Agreement
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99.1 Press release issued September 24, 2001
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
eLOYALTY CORPORATION
Date: September 25, 2001 By: /s/ Timothy J. Cunningham
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Name: Timothy J. Cunningham
Title: Senior Vice President
and Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Exhibit
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4.1 Form of Certificate of Designations of Series B Convertible
Preferred Stock
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4.2 Amendment, dated September 24, 2001, to Rights Agreement
dated March 17, 2000
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10.1 Share Purchase Agreement, dated September 24, 2001
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10.2 Form of Amended and Restated Investor Rights Agreement
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99.1 Press release issued September 24, 2001
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