As filed with the Securities and Exchange Commission on February 14, 2001.
Registration No. 333-48314
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EGAIN COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0466366
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
--------------------
455 W. Maude Avenue
Sunnyvale, California 94086
(408) 212-3400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
ASHUTOSH ROY
Chief Executive Officer
eGAIN COMMUNICATIONS CORPORATION
455 W. Maude Avenue
Sunnyvale, California 94086
(408) 212-3400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
STANLEY F. PIERSON
CHRISTINE K. TALARIDES
PILLSBURY WINTHROP LLP
2550 Hanover Street
Palo Alto, California 94304
(650) 233-4500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
TO THE PUBLIC: On a delayed or continuous
basis pursuant to Rule 415.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE OFFERING PRICE REGISTRATION FEE
============================================================================================================================
Common stock, $.001 par value per share.... 4,312,568 (1) $ 6.125 $ 26,414,479 $ 6,974 (1)
18,060,802 $ 3.719(2) $ 67,168,123(2) $16,792
============================================================================================================================
(1) Pursuant to Rule 457, the filing fee with respect to these shares was
previously calculated and paid in connection with the Registrant's initial
filing on October 20, 2000.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low sale
prices of eGain's common stock on the Nasdaq National Market on February
12, 2001.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+ The information in this prospectus is not complete and may be +
+ changed. The selling stockholders may not sell these securities until +
+ the registration statement filed with the Securities and Exchange +
+ Commission is effective. This prospectus is not an offer to sell +
+ these securities and it is not soliciting an offer to buy these +
+ securities in any state where the offer or sale is not permitted. +
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
22,373,370 SHARES
EGAIN COMMUNICATIONS CORPORATION
COMMON STOCK
This prospectus relates to the resale from time to time of 22,373,370
shares of common stock held by the selling stockholders. The offering is not
being underwritten.
The shares being offered by the selling stockholders include:
o 18,445,445 shares of common stock issued or issuable upon conversion
of the 6.75% series A cumulative convertible preferred stock;
o 3,826,322 shares of common stock issued or issuable upon the exercise
of warrants issued in connection with the sale of the 6.75% series A
cumulative convertible preferred stock; and
o 101,603 shares of common stock issuable upon the exercise of warrants
issued to the placement agent in connection with the private placement
of the 6.75% series A cumulative convertible preferred stock and the
related common stock purchase warrants.
The selling stockholders may offer and sell their shares in transactions
on the Nasdaq National Market, in negotiated transactions, or both. These sales
may occur at fixed prices that are subject to change, at prices that are
determined by prevailing market prices, or at negotiated prices.
The selling stockholders may sell shares to or through broker-dealers, who
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholders, the purchasers of the shares, or both. eGain will
not receive any of the proceeds from the sale of the shares.
eGain common stock is traded on the Nasdaq National Market under the
symbol "EGAN." On February 12, 2001, the last reported sale price of eGain
common stock reported on the Nasdaq National Market was $3.719 per share.
---------------
INVESTING IN EGAIN COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ AND CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
February 14, 2001
We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling stockholders are
offering to sell, and seeking offers to buy, only the shares of common stock
covered by this prospectus, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date, regardless of the time of delivery of this
prospectus or of any sale of the shares.
YOU SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS, AS WELL AS THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. ALL REFERENCES TO "WE," "US," "OUR" OR "EGAIN" IN THIS PROSPECTUS MEAN
EGAIN COMMUNICATIONS CORPORATION. AND ITS SUBSIDIARIES, EXCEPT WHERE IT IS MADE
CLEAR THAT THE TERM MEANS ONLY THE PARENT COMPANY.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words such
as "expect," "anticipate," "intend," "plan" and "will" and similar expressions.
Our results could differ materially from those discussed in these statements.
Factors that could contribute to such differences include, but are not limited
to, those discussed below under "Risk Factors," as well as those discussed
elsewhere in this prospectus and in the documents incorporated herein by
reference. These forward-looking statements speak only as of the date hereof.
--------------------
TABLE OF CONTENTS
PAGE
The Company....................................................................3
Risk Factors...................................................................3
Use of Proceeds...............................................................14
Income Tax Considerations.....................................................14
Selling Stockholders..........................................................15
Plan Of Distribution..........................................................17
Legal Matters.................................................................18
Experts.......................................................................18
Where You Can Find More Information...........................................18
Documents Incorporated by Reference...........................................18
2
THE COMPANY
eGain provides a multi-channel, online customer communications platform
designed to help companies meet the growing demands of Internet-based
communications. eGain markets software products that enable online customers to
communicate through each of the three main channels for online customer
communications-email, real-time and self service. These applications operate on
a platform that provides for shared work flow, routing, archiving, reporting and
knowledge management capabilities across these different channels. In addition,
eGain's platform integrates with leading call center systems, as well as other
customer communications, database and ecommerce software applications, to
provide comprehensive information about each customer while permitting companies
to leverage existing investments in installed systems.
eGain was incorporated in Delaware in September 1997. Our principal
executive office is located at 455 W. Maude Avenue, Sunnyvale, California 94086,
and our telephone number is (408) 212-3400.
RISK FACTORS
INVESTING IN EGAIN COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
READ AND CONSIDER CAREFULLY THE FOLLOWING FACTORS BEFORE MAKING AN INVESTMENT
DECISION.
EGAIN EXPECTS CONTINUING LOSSES AND MAY NEVER ACHIEVE PROFITABILITY, WHICH IN
TURN MAY HARM ITS FUTURE OPERATING PERFORMANCE AND MAY CAUSE THE MARKET PRICE OF
EGAIN COMMON STOCK TO DECLINE
eGain incurred net losses of approximately $56.0 million for the six
months ended December 31, 2000. As of December 31, 2000, eGain had an
accumulated deficit of approximately $136.7 million. eGain expects to continue
to incur net losses for the foreseeable future. eGain does not know when or if
it will become profitable. If eGain does not become profitable within the
timeframe expected by financial analysts or investors, the market price of eGain
common stock will likely decline. If eGain does achieve profitability, it may
not sustain or increase profitability in the future.
EGAIN'S OPERATING EXPENSES MAY INCREASE AS EGAIN BUILDS ITS BUSINESS, AND THIS
INCREASE MAY HARM ITS OPERATING RESULTS AND FINANCIAL CONDITION
eGain has spent heavily on technology and infrastructure development.
eGain expects to continue to spend substantial financial and other resources on
developing and introducing product and service offerings. Accordingly, if
eGain's revenue does not continue to increase, its business and operating
results could suffer.
eGain was incorporated in September 1997 and shipped its first product in
September 1998. Because of this limited operating history and other factors,
eGain's quarterly revenue and operating results are difficult to predict. In
addition, due to the emerging nature of the ecommerce customer communications
market and other factors, eGain's quarterly revenue and operating results may
fluctuate from quarter to quarter. It is possible that eGain's operating results
in some quarters will be below the expectations of financial analysts or
investors. In this event, the market price of eGain common stock is likely to
decline.
A number of factors are likely to cause fluctuations in eGain's operating
results, including, but not limited to, the following:
o the growth rate of ecommerce;
o demand for ecommerce customer communications applications;
o eGain's ability to attract and retain customers and maintain customer
satisfaction;
o eGain's ability to upgrade, develop and maintain its systems and
infrastructure;
o eGain's ability to develop new products and services;
3
o the amount and timing of operating costs and capital expenditures
relating to expansion of eGain's business and infrastructure;
o technical difficulties or system outages;
o eGain's ability to attract and retain qualified personnel with
software and Internet industry expertise, particularly sales and
marketing personnel;
o the announcement or introduction of new or enhanced products and
services by eGain's competitors;
o changes in eGain's pricing policies and those of its competitors;
o litigation relating to proprietary rights;
o seasonal trends in technology purchases;
o timing of large contracts;
o integration of newly acquired businesses and technologies as planned;
o changes in market conditions limiting eGain's ability to raise
capital;
o general business conditions in the industry;
o failure to increase eGain's international sales; and
o governmental regulation regarding the Internet and ecommerce in
particular.
eGain bases its expense levels in part on its expectations regarding
future revenue levels. If eGain's revenue for a particular quarter is lower than
it expects, it may be unable to proportionately reduce its operating expenses
for that quarter. For example, eGain's hosting agreements are typically for a
period of one year and automatically renew unless terminated by either party
with 30 days' prior notice. In addition, some of eGain's hosting agreements give
the customer the right to terminate the contract at any time. Period-to-period
comparisons of eGain's operating results are not a good indication of its future
performance.
EGAIN MUST COMPETE SUCCESSFULLY IN THE ECOMMERCE CUSTOMER COMMUNICATIONS MARKET
The ecommerce customer communications market is relatively new, growing
rapidly, and intensely competitive. There are no substantial barriers to entry
in this market, and established or new entities may enter this market in the
near future. eGain competes with companies that develop and maintain internally
developed customer communications software applications. eGain also competes
directly with companies that provide licensed software products to assist in
handling customer communications, including AskJeeves, Inc., Broadbase Software,
Inc., E.Piphany, Inc., Kana Communications, Inc., Primus Knowledge Solutions,
Inc., and WebLine Communications Corp., a subsidiary of Cisco Systems, Inc. In
addition, some of eGain's competitors who currently offer licensed software
products are now beginning to offer hosted approaches. eGain also faces actual
or potential competition from larger, front office software companies such as
Clarify, Inc., a subsidiary of Nortel Networks Corp., PeopleSoft, Inc. and
Siebel Systems, Inc. Furthermore, established enterprise software companies,
including Hewlett-Packard Company, IBM, Microsoft Corporation and similar
companies, may seek to leverage their existing relationships and capabilities to
offer ecommerce customer communications applications.
EGAIN'S BUSINESS IS PREMISED ON A NOVEL BUSINESS MODEL THAT IS LARGELY UNTESTED
eGain's business is premised on novel business assumptions that are
largely untested. Customer communications historically have been conducted
primarily in person or over the telephone. eGain's business model assumes that
companies engaged in ecommerce will continue to elect to communicate with
customers mainly through the Internet rather than by telephone. eGain's business
model also assumes that many companies recognize
4
the benefits of a hosted delivery model and will seek to have their customer
communications applications hosted by eGain. If any of these assumptions is
incorrect, eGain's business will be seriously harmed.
EGAIN MAY ENGAGE IN FUTURE ACQUISITIONS OR INVESTMENTS THAT COULD DILUTE EGAIN'S
EXISTING STOCKHOLDERS, CAUSE EGAIN TO INCUR SIGNIFICANT EXPENSES OR HARM ITS
BUSINESS
eGain may review acquisition or investment prospects that might complement
its current business or enhance its technological capabilities. Integrating any
newly acquired businesses or their technologies or products may be expensive and
time-consuming. To finance any acquisitions, it may be necessary for eGain to
raise additional funds through public or private financings. Additional funds
may not be available on terms that are favorable to eGain, if at all, and, in
the case of equity financings, may result in dilution to eGain's existing
stockholders. eGain may not be able to operate acquired businesses profitably or
otherwise implement its growth strategy successfully. If eGain is unable to
integrate newly acquired entities or technologies effectively, eGain's operating
results could suffer. Future acquisitions by eGain could also result in large
and immediate write-offs, incurrence of debt and contingent liabilities, or
amortization of expenses related to goodwill and other intangibles, any of which
could harm eGain's operating results.
EGAIN COULD INCUR ADDITIONAL NON-CASH CHARGES ASSOCIATED WITH STOCK-BASED
COMPENSATION ARRANGEMENTS
eGain's operating results may be impacted if it incurs significant
non-cash charges associated with stock-based compensation arrangements with
employees and non-employees. eGain has issued options to non-employees which are
subject to various vesting schedules of up to 48 months. For deferred
compensation purposes, non-employee options are required to be remeasured at
each vesting date, which may require eGain to record additional non-cash
accounting expenses. These expenses may result in eGain incurring net losses or
increased net losses for a given period, and this could seriously harm eGain's
operating results and common stock price.
IF EGAIN FAILS TO EXPAND ITS SALES ACTIVITIES, IT MAY BE UNABLE TO EXPAND ITS
BUSINESS
If eGain does not successfully expand its sales activities, eGain may not
be able to expand its business, and eGain's common stock price could decline.
The complexity of eGain's ecommerce customer communications platform and related
products and services requires it to have highly trained sales personnel, to
educate prospective customers regarding the use and benefits of eGain's
services. With eGain's relatively brief operating history and its continued
growth, eGain has considerable need to recruit, train, and retain qualified
sales staff. Any delays or difficulties eGain encounters in these staffing
efforts could impair its ability to attract new customers and to enhance its
relationships with existing customers. This in turn would adversely affect the
timing and extent of eGain's revenue. Because many of eGain's current sales
personnel have recently joined eGain and have limited experience working
together, eGain's sales organization may not be able to compete successfully
against bigger and more experienced organizations of its competitors.
EGAIN MUST RECRUIT AND RETAIN ITS KEY EMPLOYEES TO EXPAND ITS BUSINESS
eGain's success will depend on the skills, experience and performance of
eGain's senior management, engineering, sales, marketing and other key
personnel, many of whom have worked together for only a short period of time.
The loss of the services of any of eGain's senior management or other key
personnel, including eGain's Chief Executive Officer and co-founder, Ashutosh
Roy, and eGain's President and co-founder, Gunjan Sinha, could harm its
business. eGain does not have employment agreements with, or life insurance
policies on, most of its key employees. Most of these employees may terminate
their employment with eGain at any time. eGain's success also will depend on its
ability to recruit, retain and motivate other highly skilled engineering, sales,
marketing and other personnel. Competition for these personnel is intense,
especially in the San Francisco Bay Area, and eGain has had difficulty hiring
employees in its desired timeframes. In particular, eGain may be unable to hire
a sufficient number of qualified software engineers and information technology
professionals. If eGain fails to retain and recruit necessary engineering, sales
and marketing, customer support or other personnel, eGain's business and its
ability to develop new products and services and to provide acceptable levels of
customer service could suffer. In addition, companies in the software industry
whose employees accept positions with competitors frequently claim that
competitors have engaged in unfair hiring practices. eGain could incur
substantial costs in defending itself against any of these claims, regardless of
the merits of such claims.
5
EGAIN'S FAILURE TO EXPAND THIRD-PARTY DISTRIBUTION CHANNELS WOULD IMPEDE ITS
REVENUE GROWTH
To increase its revenue, eGain must increase the number of its marketing
and distribution partners, including software and hardware vendors and
resellers. eGain's existing or future marketing and distribution partners may
choose to devote greater resources to marketing and supporting the products of
competitors which could also harm eGain. eGain's failure to expand third-party
distribution channels would impede its revenue growth.
Similarly, to increase its revenue and implementation capabilities, eGain
must develop and expand relationships with systems integrators. eGain relies on
systems integrators to recommend eGain's products to their customers and to
install and support eGain's products for their customers. Systems integrators
may develop, market or recommend software applications that compete with eGain's
products. Moreover, if these firms fail to implement eGain's products
successfully for their customers, eGain may not have the resources to implement
its products on the schedule required by its customers.
UNKNOWN SOFTWARE DEFECTS COULD DISRUPT EGAIN'S PRODUCTS AND SERVICES, WHICH
COULD HARM EGAIN'S BUSINESS AND REPUTATION
eGain's product and service offerings depend on complex software, both
internally developed and licensed from third parties. Complex software often
contains defects, particularly when first introduced or when new versions are
released. eGain may not discover software defects that affect its new or current
services or enhancements until after they are deployed. It is possible that,
despite testing by eGain, defects may occur in the software. These defects could
result in damage to eGain's reputation, lost sales, product liability claims,
delays in or loss of market acceptance of eGain's products, product returns and
unexpected expenses and diversion of resources to remedy errors.
EGAIN MAY FACE LIABILITY ASSOCIATED WITH ITS MANAGEMENT OF SENSITIVE CUSTOMER
INFORMATION
eGain's applications manage sensitive customer information, and eGain may
be subject to claims associated with invasion of privacy or inappropriate
disclosure, use or loss of this information. Any imposition of liability,
particularly liability that is not covered by insurance or is in excess of
insurance coverage, could harm eGain's reputation and its business and operating
results.
IF EGAIN'S SYSTEM SECURITY IS BREACHED, EGAIN'S BUSINESS AND REPUTATION COULD
SUFFER
A fundamental requirement for online communications and transactions is
the secure transmission of confidential information over public networks. Third
parties may attempt to breach eGain's security or that of eGain's customers.
eGain may be liable to its customers for any breach in its security and any
breach could harm its business and reputation. Although eGain has implemented
network security measures, eGain's servers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss of data. eGain may be required to expend
significant capital and other resources to license encryption technology and
additional technologies to protect against security breaches or to alleviate
problems caused by any breach.
DUE TO LENGTHY SALES CYCLES AND THE COMPLEXITY OF EGAIN'S SALES CONTRACTS, IT
MAY BE DIFFICULT TO PREDICT OPERATING RESULTS AND EGAIN MAY MISS ITS REVENUE
EXPECTATIONS
eGain's sales cycle for its ecommerce customer communications applications
can be six months or more, and varies substantially from customer to customer.
While eGain's potential customers are evaluating eGain's products before
executing definitive agreements, eGain may incur substantial expenses and spend
significant management effort in connection with the potential customer. In
addition, eGain's multi-product offering and the increasingly complex needs of
its customers may make it more difficult for eGain to forecast when eGain may
recognize the corresponding revenue. Consequently, eGain may not meet its
revenue forecast and may incur significant expenses that are not offset by
corresponding revenue.
6
IF EGAIN DOES NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN THE EXPANSION OF
ITS INTERNATIONAL OPERATIONS, ITS BUSINESS COULD SUFFER
eGain intends to continue to expand into international markets and to
spend significant financial and managerial resources to do so. For example,
eGain has established subsidiaries in Europe, Asia Pacific and Japan. In
addition, eGain is expecting the pending acquisition of Nitmon Software Pvt.
Ltd., an ecommerce software development company in India, to close in the
quarter ended March 31, 2001. If eGain's revenue from international operations
does not exceed the expense associated with establishing and maintaining these
operations, eGain's business and operating results will suffer. eGain has
limited experience in international operations and may not be able to compete
effectively in international markets. eGain faces various risks inherent in
conducting business internationally, such as the following:
o unexpected changes in international regulatory requirements;
o difficulties and costs of staffing and managing international
operations;
o differing technology standards;
o difficulties in collecting accounts receivable and longer collection
periods;
o political and economic instability;
o fluctuations in currency exchange rates;
o imposition of currency exchange controls;
o potentially adverse tax consequences;
o reduced protection for intellectual property rights in foreign
countries; and
o general business conditions.
EGAIN'S RECENT GROWTH HAS PLACED A STRAIN ON ITS RESOURCES AND IF EGAIN FAILS TO
MANAGE ITS FUTURE GROWTH, ITS BUSINESS COULD SUFFER
eGain has expanded its operations rapidly. The completed acquisitions of
Inference and Big Science are two examples of this expansion. This rapid
expansion has placed, and is expected to continue to place, a significant strain
on eGain's managerial, operational and financial resources. To manage further
growth, eGain will need to improve or replace its existing operational, customer
support and financial systems, procedures and controls. Any failure by eGain to
properly manage these system and procedural transitions could impair its ability
to attract and service customers, and could cause it to incur higher operating
costs and delays in the execution of its business plan. eGain's management may
not be able to hire, train, retain, motivate and manage required personnel. In
addition, eGain's management may not be able to successfully identify, manage
and exploit existing and potential market opportunities.
EGAIN MAY NOT BE ABLE TO UPGRADE ITS SYSTEMS AND THE EGAIN HOSTED NETWORK TO
ACCOMMODATE GROWTH IN ECOMMERCE
eGain faces risks related to the ability of the eGain Hosted Network to
operate with higher activity levels while maintaining expected performance. As
the volume and complexity of ecommerce customer communications increase, eGain
will need to expand its systems and hosted network infrastructure. The expansion
and adaptation of eGain's network infrastructure will require substantial
financial, operational and management resources. Customer demand for eGain's
products and services could be greatly reduced if eGain fails to maintain high
capacity data transmission. In addition, as eGain upgrades its network, eGain is
likely to encounter equipment or software incompatibility. eGain may not be able
to expand or adapt the eGain Hosted Network to meet additional demand or eGain's
customers' changing requirements in a timely manner or at all.
7
UNPLANNED SYSTEM INTERRUPTIONS AND CAPACITY CONSTRAINTS COULD REDUCE EGAIN'S
ABILITY TO PROVIDE HOSTING SERVICES AND COULD HARM ITS BUSINESS AND REPUTATION
eGain's customers have in the past experienced some interruptions with the
eGain Hosted Network. eGain believes that these interruptions will continue to
occur from time to time. These interruptions could be due to hardware and
operating system failures. eGain expects a substantial portion of its revenue to
be derived from customers who use the eGain Hosted Network. As a result, eGain's
business will suffer if it experiences frequent or long system interruptions
that result in the unavailability or reduced performance of the eGain Hosted
Network or reduce eGain's ability to provide remote management services. eGain
expects to experience occasional temporary capacity constraints due to sharply
increased traffic, which may cause unanticipated system disruptions, slower
response times, impaired quality and degradation in levels of customer service.
If this were to continue to happen, eGain's business and reputation could be
seriously harmed.
eGain's success largely depends on the efficient and uninterrupted
operation of its computer and communications hardware and network systems. Most
of eGain's computer and communications systems are located in Sunnyvale,
California. eGain's systems and operations are vulnerable to damage or
interruption from fire, earthquake, power loss, telecommunications failure and
similar events.
eGain has entered into service agreements with some of its customers that
require minimum performance standards, including standards regarding the
availability and response time of eGain's remote management services. If eGain
fails to meet these standards, eGain's customers could terminate their
relationships with eGain, and eGain could be subject to contractual monetary
penalties. Any unplanned interruption of services may harm eGain's ability to
attract and retain customers.
EGAIN RELIES ON RELATIONSHIPS WITH, AND THE SYSTEM INTEGRITY OF, HOSTING
PARTNERS FOR THE EGAIN HOSTED NETWORK
The eGain Hosted Network consists of virtual data centers co-located in
the physical data centers of eGain's hosting partners including AboveNet
Communications, a subsidiary of Metromedia Fiber Network, Inc. and Exodus
Communications. Accordingly, eGain relies on the speed and reliability of the
systems and networks of these hosting partners. If eGain's hosting partners
experience system interruptions or delays, or if eGain does not maintain or
develop relationships with reliable hosting partners, eGain's business could
suffer.
PROBLEMS ARISING FROM USE OF EGAIN'S PRODUCTS WITH OTHER VENDORS' PRODUCTS COULD
CAUSE EGAIN TO INCUR SIGNIFICANT COSTS, DIVERT ATTENTION FROM EGAIN'S PRODUCT
DEVELOPMENT EFFORTS AND CAUSE CUSTOMER RELATIONS PROBLEMS
eGain's customers generally use eGain products together with products from
other companies. As a result, when problems occur in the network, it may be
difficult to identify the source of the problem. Even when these problems are
not caused by eGain's products, they may cause it to incur significant warranty
and repair costs, divert the attention of eGain's engineering personnel from
product development efforts and cause significant customer relations problems.
EGAIN MAY BE UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
eGain regards its patents, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as critical to its success, and relies
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with eGain employees, customers and partners to
protect its proprietary rights. eGain has numerous registered trademarks and
trademark applications pending in the United States and internationally, as well
as common law trademark rights. In addition, eGain owns several patents in the
area of case-based reasoning, and has patents pending relating to various
technologies. eGain will seek additional trademark and patent protection in the
future. eGain does not know if its trademark and patent applications will be
granted, or whether they will provide the protection eGain desires, or whether
they will subsequently be challenged or invalidated. It is difficult to monitor
unauthorized use of technology, particularly in foreign countries, where the
laws may not protect eGain's proprietary rights as fully as in the United
States. Furthermore, eGain's competitors may independently develop technology
similar to eGain's technology.
8
Despite eGain's efforts to protect its proprietary rights through
confidentiality and license agreements, unauthorized parties may attempt to copy
or otherwise obtain and use eGain's products or technology. These precautions
may not prevent misappropriation or infringement of eGain's intellectual
property. In addition, eGain routinely requires its employees, customers, and
potential business partners to enter into confidentiality and nondisclosure
agreements before eGain will disclose any sensitive aspects of its products,
technology, or business plans. In addition, eGain requires employees to agree to
surrender to eGain any proprietary information, inventions or other intellectual
property they generate or come to possess while employed by eGain. Despite
eGain's efforts to protect its proprietary rights through confidentiality and
license agreements, unauthorized parties may attempt to copy or otherwise obtain
and use its products or technology. These precautions may not prevent
misappropriation or infringement of its intellectual property. In addition, some
of eGain's license agreements with certain customers and partners require eGain
to place the source code for its products into escrow. These agreements
typically provide that some party will have a limited, non-exclusive right to
access and use this code as authorized by the license agreement if there is a
bankruptcy proceeding instituted by or against eGain, or if eGain materially
breaches a contractual commitment to provide support and maintenance to the
party.
EGAIN MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO
DEFEND
Third parties may infringe or misappropriate eGain's copyrights,
trademarks and similar proprietary rights. In addition, other parties may assert
infringement claims against eGain. Although eGain has received no notice of any
alleged infringement, eGain's products may infringe issued patents that may
relate to its products. In addition, because the contents of patent applications
in the United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to eGain's software products.
eGain may be subject to legal proceedings and claims from time to time in the
ordinary course of its business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties. Intellectual
property litigation is expensive and time-consuming and could divert
management's attention away from running eGain's business. This litigation could
also require eGain to develop non-infringing technology or enter into royalty or
license agreements. These royalty or license agreements, if required, may not be
available on acceptable terms, if at all, in the event of a successful claim of
infringement. eGain's failure or inability to develop non-infringing technology
or license the proprietary rights on a timely basis would harm its business.
EGAIN MAY NEED TO LICENSE THIRD-PARTY TECHNOLOGIES AND MAY BE UNABLE TO DO SO
To the extent eGain needs to license third-party technologies, it may be
unable to do so on commercially reasonable terms or at all. In addition, eGain
may fail to successfully integrate any licensed technology into its products or
services. Third-party licenses may expose eGain to increased risks, including
risks associated with the integration of new technology, the diversion of
resources from the development of eGain's own proprietary technology, and
eGain's inability to generate revenue from new technology sufficient to offset
associated acquisition and maintenance costs. eGain's inability to obtain any of
these licenses could delay product and service development until equivalent
technology can be identified, licensed and integrated. This in turn would harm
eGain's business and operating results.
THE CONVERSION OF THE SERIES A PREFERRED SHARES AND THE EXERCISE OF THE RELATED
WARRANTS COULD RESULT IN SUBSTANTIAL NUMBERS OF ADDITIONAL SHARES BEING ISSUED
IF THE MARKET PRICE OF EGAIN COMMON STOCK DECLINES.
On August 8, 2000, eGain issued 35.11 shares of 6.75% series A cumulative
convertible preferred stock and 849.89 shares of 6.75% series B cumulative
convertible preferred stock, and warrants to purchase approximately 3.8 million
shares of eGain common stock with a current exercise price of $9.2517 per share.
The series B preferred shares automatically converted into series A preferred
shares on a one-for-one basis on November 20, 2000 upon receiving stockholder
approval for the conversion at the annual stockholders meeting held that day.
The series A preferred shares have a liquidation preference which accretes and
cumulates on a daily basis at an annual rate of 6.75% and is compounded on a
semi-annual basis. The series A preferred shares are convertible into common
stock (including all amounts accreted from August 8, 2000) at a conversion price
of $9.2517 per share. By way of illustration, at the current conversion price of
$9.2517 per share, as of January 31, 2001 the series A preferred shares would be
convertible into 9,878,628 shares of common stock.
The conversion price will be adjusted to a price equal to 122% of the
average market price of eGain common stock for the 20 trading days preceding
August 8, 2001 in the event that such adjusted price would be less than
9
$9.2517. However, the Certificate of Designation for the series A preferred
shares provides that the conversion price will not be adjusted to less than
$5.6875 per share. A decrease in the price of eGain common stock in August 2001
will increase the number of shares of common stock issuable upon conversion of
the preferred stock.
To the extent that the series A preferred shares are converted into common
stock (including all amounts accreted from August 8, 2000), a significant number
of shares of common stock may be sold into the market and such sales could
decrease the price of our common stock and encourage short sales by selling
securityholders (subject to the price floor described in the preceding
paragraph) or others. Any such short sales could place further downward pressure
on the price of eGain common stock, requiring the issuance of a greater number
of shares of eGain common stock upon future conversions of the preferred shares.
EGAIN'S STOCK PRICE MAY BE VOLATILE
The price at which eGain common stock will trade has been and will likely
continue to be highly volatile and fluctuate substantially due to factors such
as the following:
o actual or anticipated fluctuations in eGain's operating results;
o changes in or failure to meet securities analysts' expectations;
o announcements of technological innovations;
o introduction of new services by eGain or its competitors;
o developments with respect to intellectual property rights;
o conditions and trends in the Internet and other technology industries;
and
o general market conditions.
EGAIN MAY BECOME INVOLVED IN SECURITIES CLASS ACTION LITIGATION WHICH COULD
DIVERT MANAGEMENT'S ATTENTION AND HARM ITS BUSINESS
The stock market has from time to time experienced significant price and
volume fluctuations that have affected the market prices for the common stocks
of technology companies, particularly Internet companies. These broad market
fluctuations may cause the market price of eGain common stock to decline. In the
past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been brought
against that company. eGain may become involved in this type of litigation in
the future. Litigation is often expensive and diverts management's attention and
resources, which could harm eGain business and operating results.
EGAIN MAY NEED ADDITIONAL CAPITAL, AND RAISING ADDITIONAL CAPITAL MAY DILUTE
EXISTING STOCKHOLDERS
eGain believes that its existing capital resources will enable it to
maintain its current and planned operations at least through December 31, 2001.
However, eGain may choose to, or be required to, raise additional funds due to
unforeseen circumstances. If eGain's capital requirements vary materially from
those currently planned, it may require additional financing sooner than
anticipated. This financing may not be available in sufficient amounts or on
terms acceptable to eGain and may be dilutive to existing stockholders.
eGain believes competition will increase as its current competitors
increase the sophistication of their offerings and as new participants enter the
market. Many of eGain's current and potential competitors have:
o longer operating histories;
o larger customer bases;
10
o greater brand recognition;
o more diversified lines of products and services; and
o significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships
with larger, more established and better-financed companies. These competitors
may be able to:
o undertake more extensive marketing campaigns;
o adopt more aggressive pricing policies; and
o make more attractive offers to businesses to induce them to use their
products or services.
Further, any delays in the general market acceptance of eGain's ecommerce
customer communications applications would likely harm its competitive position.
Any delay would allow eGain's competitors additional time to improve their
service or product offerings, and also provide time for new competitors to
develop ecommerce customer communications applications and solicit prospective
customers within eGain's target markets. Increased competition could result in
pricing pressures, reduced operating margins and loss of market share.
EGAIN DEPENDS ON BROAD MARKET ACCEPTANCE OF WEB-BASED ECOMMERCE CUSTOMER
COMMUNICATIONS APPLICATIONS
eGain depends on the widespread acceptance and use of Web-based customer
communications applications as an effective solution for businesses seeking to
manage high volumes of customer communication over the Internet. eGain cannot
estimate the size or growth rate of the potential market for its product and
service offerings, and does not know whether its products and services will
achieve broad market acceptance. The market for Web-based ecommerce customer
communications is new and rapidly evolving, and concerns over the security and
reliability of online transactions, the privacy of users and quality of service
or other issues may inhibit the growth of the Internet and commercial online
services. If the market for ecommerce customer communications applications fails
to grow or grows more slowly than eGain currently anticipates, its business will
be seriously harmed.
EGAIN MAY BE UNABLE TO DEVELOP OR ENHANCE PRODUCTS OR SERVICES THAT ADDRESS THE
CHANGING NEEDS OF THE ECOMMERCE CUSTOMER COMMUNICATIONS MARKET
To be competitive in the ecommerce customer communications market, eGain
must continually improve the performance, features and reliability of eGain
products and services, including eGain's existing ecommerce customer
communications applications, and develop new products, services, functionality
and technology that address changing industry standards and customer needs. If
eGain cannot bring new or enhanced products to market in a timely and effective
way, its business and operating results will suffer. More generally, if eGain
cannot adapt or respond in a cost-effective and timely manner to changing
industry standards, market conditions or customer requirements, eGain's business
and operating results will suffer.
EGAIN WILL ONLY BE ABLE TO EXECUTE ITS BUSINESS PLAN IF INTERNET USAGE CONTINUES
TO GROW
eGain's business will be seriously harmed if Internet usage does not
continue to grow or grows at significantly lower rates compared to current
trends. The continued growth of the Internet depends on various factors, most of
which are outside eGain's control. These factors include the following:
o the Internet infrastructure may be unable to support the demands
placed on it;
o the performance and reliability of the Internet may decline as usage
grows;
o security and authentication concerns with respect to transmission over
the Internet of confidential information, such as credit card numbers,
and attempts by unauthorized computer users, so-called hackers, to
penetrate online security systems; and
11
o privacy concerns, including those related to the ability of Web sites
to gather user information without the user's knowledge or consent.
BECAUSE EGAIN PROVIDES ITS CUSTOMER COMMUNICATIONS APPLICATIONS TO COMPANIES
CONDUCTING BUSINESS OVER THE INTERNET, EGAIN'S BUSINESS COULD SUFFER IF
EFFICIENT TRANSMISSION OF DATA OVER THE INTERNET IS INTERRUPTED
The recent growth in the use of the Internet has caused frequent
interruptions and delays in accessing the Internet and transmitting data over
the Internet. Because eGain provides Internet-based ecommerce customer
communications applications, interruptions or delays in Internet transmissions
will harm eGain customers' ability to receive and respond to email messages.
Therefore, eGain's market depends on improvements being made to the entire
Internet infrastructure to alleviate overloading and congestion.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR THE GROWTH OF THE
INTERNET AND DECREASE DEMAND FOR EGAIN'S SERVICES OR INCREASE EGAIN'S COST OF
DOING BUSINESS
Governmental regulation may impair the growth of the Internet or
commercial online services. This could decrease the demand for eGain's products
and services, increase its cost of doing business or otherwise harm its business
and operating results. Although there are currently few laws and regulations
directly applicable to the Internet and the use of the Internet as a commercial
medium, a number of laws have been proposed involving the Internet. These
proposed laws include laws addressing user privacy, pricing, content,
copyrights, distribution, antitrust, and characteristics and quality of products
and services. Further, the growth and development of the market for commercial
online transactions may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies engaged in ecommerce.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.
EGAIN MAY BE LIABLE FOR ACTIVITIES OF ITS CUSTOMERS OR OTHERS USING THE EGAIN
HOSTED NETWORK
As a provider of ecommerce customer communications applications, eGain
faces potential liability for defamation, negligence, copyright, patent or
trademark infringement and other claims based on the actions of eGain customers
or others using the eGain Hosted Network. This liability could result from the
nature and content of the communications transmitted by eGain customers through
the eGain Hosted Network. eGain does not and cannot screen all of the
communications generated by its customers, and eGain could be exposed to
liability with respect to this content. Furthermore, some foreign governments
have enforced laws and regulations related to content distributed over the
Internet that are more strict than those currently in place in the United
States.
EGAIN HAS NOT PAID AND DOES NOT PRESENTLY INTEND TO PAY CASH DIVIDENDS ON EGAIN
COMMON STOCK
eGain has never declared or paid a cash dividend on eGain common stock.
eGain currently anticipates that eGain will retain all available funds for use
in the operation of eGain's business, including possible acquisitions, and eGain
does not intend to pay any cash dividends in the foreseeable future. The payment
of any future dividends will be at the discretion of the board of directors and
will depend upon, among other factors:
o future earnings and cash flow;
o operations;
o capital requirements;
o acquisitions and strategic investment opportunities;
o our general financial condition; and
o general business conditions.
12
Further, eGain's ability to pay cash dividends is currently restricted by the
terms of eGain's bank line credit agreement. The terms of future credit
facilities or other agreements may also contain similar restrictions. In
addition, the Certificate of Designation for the series A preferred shares
prohibits the payment of dividends on eGain common stock unless and until
dividends are paid on the series A preferred shares in accordance with its
terms.
EGAIN'S CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS WHICH COULD
DELAY OR PREVENT A CHANGE IN CONTROL EVEN IF THE CHANGE IN CONTROL WOULD BE
BENEFICIAL TO EGAIN'S STOCKHOLDERS
eGain's certificate of incorporation and bylaws contain provisions that
could delay or prevent a change in control of eGain. These provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. Some of these provisions:
o authorize the issuance of preferred stock that can be created and
issued by the board of directors without prior stockholder approval,
commonly referred to as "blank check" preferred stock, with rights
senior to those of common stock; and
o prohibit stockholder action by written consent.
13
USE OF PROCEEDS
eGain will not receive any proceeds from the sale of the shares by the
selling stockholders. All proceeds from the sale of the shares will be for the
account of the selling stockholders.
INCOME TAX CONSIDERATIONS
Each prospective purchaser should consult his or her own tax advisor with
respect to the income tax issues and consequences of holding and disposing of
eGain common stock.
14
SELLING STOCKHOLDERS
The 22,373,370 shares of common stock being offered by the selling
stockholders include:
o 15,560,439 shares of common stock issuable upon conversion of the
6.75% series A cumulative convertible preferred stock, assuming the
conversion price in effect on January 31, 2001 of $9.2517 per share is
reset to the lowest possible conversion price of $5.6875 per share on
August 8, 2001;
o 2,885,006 shares of common stock issuable upon conversion of the
amount by which the 6.75% series A cumulative convertible preferred
stock accrues from August 8, 2000 through February 28, 2003, assuming
the lowest possible conversion price of $5.6875 per share; and
o 3,927,925 shares of common stock issuable upon the exercise of the
warrants.
The following table sets forth certain information regarding the
beneficial ownership of eGain common stock by each of the selling stockholders
and the shares offered by this prospectus by those persons.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)
------------------------- SHARES BEING ---------------------------
NUMBER(2) PERCENT(3) OFFERED(4) NUMBER PERCENT(2)
----------- ------------ ------------- ----------- -------------
Oak Hill Capital Partners, L.P. (5)..... 4,907,069 13.55% 7,974,425 -- --
Oak Hill Venture Fund I, L.P. (6)....... 929,149 2.57% 1,509,950 -- --
FW Investors V, L.P. (7)................ 1,626,012 4.49% 2,642,414 -- --
Oak Hill Capital Management Partners,
L.P.(8).............................. 125,823 * 204,473 -- --
Granite Private Equity III, LLC (9)..... 1,316,295 3.63% 2,139,096 -- --
Deutsche Bank AG........................ 1,172,437 3.24% 1,887,438 11,000 *
Halifax Fund L.P. (10).................. 774,292 2.14% 1,258,292 -- --
Societe Generale, Paris................. 154,858 * 251,658 -- --
Elliott Associates, L.P. (11)........... 775,142 2.14% 1,258,292 850 *
Elliott International, L.P.(12)......... 775,142 2.14% 1,258,292 850 *
David and Silke Henkel-Wallace Family
Trust dated November 8, 1999 (13).... 387,145 1.07% 629,145 -- --
Gunjan Sinha (14)....................... 5,396,243 14.90% 1,258,292 4,621,951 12.69%
Robertson Stephens, Inc................. 101,603 * 101,603 -- --
-------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon information
obtained from the selling stockholders and from our transfer agent. Unless
otherwise indicated, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially
owned, subject to community property laws, where applicable. Shares of our
common stock receivable upon conversion of 6.75% series A cumulative
convertible preferred stock or upon exercise of warrants that are
currently exercisable or exercisable within 60 days of January 31, 2001
are deemed to be outstanding and to be beneficially owned by the person,
presently entitled to exercise the right of conversion or exercise for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) This column lists, for each selling stockholder, the number of shares of
common stock, based on its ownership of series A preferred shares and the
related warrants, that would have been issuable to the selling
stockholders as of January 31, 2001, assuming conversion of all of the
outstanding series A preferred shares, including the accrued liquidation
preference, at the conversion price of $9.2517 in effect on January 31,
2001 and assuming the exercise of the related warrants.
(3) Based on 36,216,659 shares of our common stock outstanding as of December
31, 2000.
(4) This column lists, for each selling stockholder, the number of shares of
common stock, based on its ownership of series A preferred shares and the
related warrants, being offered by this prospectus. We determined the
number of shares of common stock to be offered for resale by this
prospectus by agreement with the selling stockholders in order to
adequately cover the maximum increase in the number of shares required
over the next two years and assumes the one time reset of the conversion
price occurs on August 8, 2001. Our calculation of the number of shares of
common stock underlying the series A preferred shares and the accrued
liquidation preference to be offered for resale assumes a conversion price
of $5.6875, which is the lowest possible conversion price for the series A
preferred shares into common stock upon the one
15
time reset of the conversion price on August 8, 2001, and assumes all of
the series A preferred shares, together with the accrued liquidation
preference for such two year period, have converted. Because the
conversion of the series A shares into common stock is based upon a
formula that depends upon the market price of our common stock, the number
of shares that will actually be issued upon conversion may be less than
the 22,373,370 shares being offered by this prospectus. The 22,373,370
shares reflect the highest number of shares of common stock that can be
sold under this prospectus over the next two years through February 28,
2003. The last column of this chart assumes the sale of all of the shares
offered by each selling stockholder.
(5) OHCP MGP, LLC, a Delaware limited liability company, is the general
partner of OHCP GenPar, L.P., a Delaware limited partnership, which is the
general partner of Oak Hill Capital Partners, L.P., a Delaware limited
partnership, and consequently has voting control and investment discretion
over securities held by Oak Hill Capital Partners, L.P. OHCP MGP, LLC
disclaims beneficial ownership of the shares held by Oak Hill Capital
Partners, L.P. Mark Wolfson, a director of eGain, is a vice president of
Oak Hill Capital Management, Inc., a Delaware corporation, which provides
management and consulting services to Oak Hill Capital Partners, L.P.
(6) OHVF MGP I, L.L.C., a Delaware limited liability company, is the general
partner of OHVF Genpar I, L.P., a Delaware limited partnership, which is
the general partner of Oak Hill Venture Fund I, L.P., a Delaware limited
partnership, and consequently has voting control and investment discretion
over securities held by Oak Hill Venture Fund I, L.P. OHVF MGP I, L.L.C.
disclaims beneficial ownership of the shares held by Oak Hill Venture Fund
I, L.P. David G. Brown, a director of eGain, is a managing principal of
Oak Hill Venture Partners, L.P., a Delaware limited partnership which
advises Oak Hill Venture Fund I, L.P.
(7) FW Management II, L.L.C. , a Delaware limited liability company is the
general partner of FW Investors V, L.P., a Delaware limited partnership
and consequently has voting control and investment discretion over
securities held by FW Investors V, L.P. FW Management II, L.L.C. disclaims
beneficial ownership of the shares held by FW Investors V, L.P. J. Taylor
Crandall is the sole member of FW Management II, L.L.C.
(8) OHCP MGP, LLC, a Delaware limited liability company, is the general
partner of OHCP GenPar, L.P., a Delaware limited partnership, which is the
general partner of Oak Hill Capital Management Partners, L.P., a Delaware
limited partnership and consequently has voting control and investment
discretion over securities held by Oak Hill Capital Management Partners,
L.P. OHCP MGP, LLC disclaims beneficial ownership of the shares held by
Oak Hill Capital Management Partners, L.P. Mark Wolfson, a director of
eGain, is a vice president of Oak Hill Capital Management, Inc., a
Delaware corporation, which provides management and consulting services to
Oak Hill Capital Management Partners, L.P.
(9) Alan Gerry is the managing member of Gerry Holding Co. II, LLC, which is
the managing member of Granite Private Equity III, LLC and consequently
has voting control and investment discretion over securities held by
Granite Private Equity III, LLC.
(10) Yarmouth Investments Ltd, a Cayman Islands exempted company, is the
general partner of Halifax Fund L.P., a Cayman Islands limited
partnership. Jeffrey Devers is the managing member of Yarmouth Investments
Ltd.. Palladin Group, L.P., a Texas limited partnership provides
investment advice to Halifax Fund, L.P. and Mr. Devers is the managing
director of Palladin Group, L.P., and consequently they may share voting
control and investment discretion over securities held by Halifax Fund
L.P.
(11) Paul E. Singer is the general partner of Elliott Associates, L.P. and
consequently has voting control and investment discretion over securities
held by Elliott Associates, L.P.
(12) Elliott International Capital Advisors, Inc, is attorney-in-fact for
Elliott International, L.P. (formerly known as Westgate International,
L.P.) and consequently has voting control and investment discretion over
securities held by Elliott International, L.P. Paul E. Singer is the
President of Elliott International Capital Advisors, Inc.
(13) David Henkel-Wallace and Silke Henkel-Wallace are the sole trustees and
beneficiaries of the David and Silke Henkel-Wallace Family Trust dated
November 8, 1999.
(14) Mr. Sinha is President and a director of eGain.
Because a selling stockholder may offer by this prospectus all or some
part of the common stock which he or she holds, no estimate can be given as of
the date hereof as to the amount of common stock actually to be offered for sale
by a selling stockholder or as to the amount of common stock that will be held
by a selling stockholder upon the termination of such offering. However, the
last column of this chart assumes the sale of all of the shares offered by each
selling stockholder.
16
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. As used in this prospectus, the term "selling
stockholders" includes donees, pledgees, transferees or other
successors-in-interest selling shares received from a named selling stockholder
as a gift, partnership distribution, or other non-sale-related transfer after
the date of this prospectus. The selling stockholders will act independently of
eGain in making decisions with respect to the timing, manner and size of each
sale. Sales of the shares may be effected by or for the account of the selling
stockholders in transactions on the Nasdaq National Market, the over-the-counter
market, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or in negotiated transactions. The shares may be sold by means of one or more of
the following methods:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by that
broker-dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions in which the broker solicits
purchasers;
o in connection with short sales, in which the shares are redelivered to
close out short positions;
o in connection with the loan or pledge of shares covered by this
prospectus to a broker-dealer, and the sale of the shares so loaned or
the sale of the shares so pledged upon a default;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options;
o privately negotiated transactions; or
o in a combination of any of the above methods.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in resales. Broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders or from the purchasers of the shares or from both. This
compensation may exceed customary commissions.
The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933. Any commissions paid or any discounts or concessions allowed to any of
those persons, and any profits received on the resale of the shares purchased by
them, may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933.
eGain has agreed to bear all expenses of registration of the shares (other
than fees and expenses, if any, of counsel or other advisors to the selling
stockholders). Any commissions, discounts, concessions or other fees, if any,
payable to broker-dealers in connection with any sale of the shares will be
borne by the selling stockholders selling those shares.
17
LEGAL MATTERS
Selected legal matters with respect to the legality of the common stock
offered by this prospectus are being passed upon for eGain by Pillsbury Winthrop
LLP, Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended June 30, 2000, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet website at WWW.SEC.GOV that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission.
We have filed with the Commission a registration statement on Form S-3
under the Securities Act of 1933. The registration statement relates to the
common stock offered by the selling stockholders. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. Please refer to the
registration statement and its exhibits and schedules for further information
with respect to eGain and the common stock. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, we refer you to the copy of that
contract or document filed as an exhibit to the registration statement. You may
read and obtain a copy of the registration statement and its exhibits and
schedules from the Commission, as described in the preceding paragraph.
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act or 1934 until this offering is completed. The documents
we incorporate by reference are:
o Our Annual Report on Form 10-K, as amended, for the fiscal year ended
June 30, 2000;
o Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2000;
o Our Quarterly Report on Form 10-Q for the quarter ended December 31,
2000;
o Our Current Report on Form 8-K filed with the Commission on August 9,
2000;
o Our Current Report on Form 8-K filed with the Commission on August 15,
2000; and
o The description of our capital stock contained in our registration
statement on Form S-4 (Registration Statement No. 333-34848),
originally filed with the Commission on April 14, 2000, including any
amendments and reports filed for the purpose of updating such
description.
18
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number:
eGain Communications Corporation
455 W. Maude Avenue
Sunnyvale, California 94086
Attn: Chief Financial Officer
Telephone: (408) 212-3400
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by eGain in connection
with the sale and distribution of the securities being registered hereby. The
selling stockholders will not share in the payment of any portion of these
expenses. The table omits any applicable selling commissions or discounts, which
are payable solely by the selling stockholders. All the amounts shown are
estimates, except for the SEC registration fee.
SEC registration fee.................... $ 23,766.00
Printing expenses....................... 1,000.00
Legal fees and expenses................. 35,000.00
Accounting fees and expenses............ 50,000.00
Transfer agent and registrar fees....... 1,000.00
Miscellaneous........................... 1,000.00
--------------
Total...................... $ 111,766.00
==============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VI of eGain's Amended
and Restated Certificate of Incorporation and Article XII of eGain's Amended and
Restated Bylaws provide for indemnification of eGain's directors, officers,
employees and other agents to the extent and under the circumstances permitted
by the Delaware General Corporation Law. eGain has also entered into agreements
with its directors and officers that will require eGain, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers to the fullest extent not prohibited
by law.
ITEM 16. EXHIBITS
Exhibit
Number Description of Document
------ -----------------------
3(i)(a) Amended and Restated Certificate of Incorporation of eGain
Communications Corporation, filed as Exhibit 3(i)(a) to
eGain's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000, filed with the Commission on February 14,
2001, and incorporated by reference herein.
3(i)(b) Certificate of Designation, Preferences and Rights of the
eGain's 6.75% Series A Cumulative Convertible Preferred
Stock, filed as Exhibit 3(i)(a) to eGain's Current Report on
Form 8-K filed August 15, 2000, and incorporated by
reference herein.
3(ii) Amended and Restated Bylaws of eGain Communications
Corporation, filed as Exhibit 3.4 to eGain's Registration
Statement on Form S-1, No. 333-83439, originally filed with
the Commission on July 22, 1999, as subsequently amended,
and incorporated by reference herein.
4.1 Form of Common Stock Purchase Warrant, filed as Exhibit 4.1
to eGain's Current Report on Form 8-K filed August 15, 2000,
and incorporated by reference herein.
5.1 Opinion of Pillsbury Winthrop LLP.
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23.1 Consent of Pillsbury Winthrop LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
24 Powers of Attorney.*
--------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(c) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(a) and (1)(b) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new
II-2
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California on February 13, 2001.
eGAIN COMMUNICATIONS CORPORATION
By /S/ ASHUTOSH ROY
-------------------------------------
Ashutosh Roy
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ ASHUTOSH ROY Chief Executive Officer and Director February 13, 2001
----------------------------------------------- (Principal Executive Officer)
Ashutosh Roy
/S/ GUNJAN SINHA* President and Director February 13, 2001
-----------------------------------------------
Gunjan Sinha
/S/ HARPREET GREWAL* Chief Financial Officer February 13, 2001
----------------------------------------------- (Principal Financial Officer)
Harpreet Grewal
/S/ ERIC N. SMIT* Vice President-Finance and February 13, 2001
----------------------------------------------- Administration (Principal Accounting
Eric N. Smit Officer)
Director February 13, 2001
-----------------------------------------------
David G. Brown
Director February 13, 2001
-----------------------------------------------
Phiroz P. Darukhanavala
/S/ MARK A. WOLFSON* Director February 13, 2001
-----------------------------------------------
Mark A. Wolfson
* By ASHUTOSH ROY
-----------------------------------------------
Attorney-in-fact
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EXHIBIT INDEX
Exhibit
Number Description of Document
------ -----------------------
3(i)(a) Amended and Restated Certificate of Incorporation of eGain
Communications Corporation, filed as Exhibit 3(i)(a) to
eGain's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000 as filed with the Commission on February
14, 2001 and incorporated by reference herein.
3(i)(b) Certificate of Designation, Preferences and Rights of the
eGain's 6.75% Series A Cumulative Convertible Preferred
Stock, filed as Exhibit 3(i)(a) to eGain's Current Report on
Form 8-K dated August 15, 2000, and incorporated by
reference herein.
3(ii) Amended and Restated Bylaws of eGain Communications
Corporation, filed as Exhibit 3.4 to eGain's Registration
Statement on Form S-1, No. 333-83439, originally filed with
the Commission on July 22, 1999, as subsequently amended,
and incorporated by reference herein.
4.1 Form of Common Stock Purchase Warrant, filed as Exhibit 4.1
to eGain's Current Report on Form 8-K filed August 15, 2000,
and incorporated by reference herein.
5.1 Opinion of Pillsbury Winthrop LLP.
23.1 Consent of Pillsbury Winthrop LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
24 Powers of Attorney.*
---------------------
* Previously filed.
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