<PAGE>
As filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
KANA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0435679
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
740 BAY ROAD
REDWOOD CITY, CALIFORNIA 94063
(Address of principal executive offices) (Zip Code)
SILKNET SOFTWARE, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN(1)
SILKNET SOFTWARE, INC. 1999 STOCK OPTION AND STOCK INCENTIVE PLAN(1)
SILKNET SOFTWARE, INC. 1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN(1)
SILKNET SOFTWARE, INC. EMPLOYEE STOCK OPTION PLAN(1)
INSITE MARKETING TECHNOLOGY, INC. 1997 STOCK OPTION PLAN(1)
(Full title of the Plans)
----------
MICHAEL J. MCCLOSKEY
CHIEF EXECUTIVE OFFICER
KANA COMMUNICATIONS, INC.
740 BAY ROAD
REDWOOD CITY, CALIFORNIA 94063
(Name and address of agent for service)
(650) 298-9282
(Telephone number, including area code, of agent for service)
----------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(2) per Share Price Fee
---------- ----------------- ------------- ------------------ ------------
<S> <C> <C> <C> <C>
SILKNET SOFTWARE, INC. 1999
EMPLOYEE STOCK PURCHASE PLAN 50,000 shares $34.40(4) $ 1,720,000(4) $ 454.08
----------------------------
Common Stock, $0.001 par value
SILKNET SOFTWARE, INC. 1999
STOCK OPTION AND STOCK
INCENTIVE PLAN 1,710,000 shares $34.93(3) $59,730,300(3) $15,768.79
--------------
Common Stock, $0.001 par value
SILKNET SOFTWARE, INC. 1999
NON-EMPLOYEE DIRECTOR STOCK 83,000 shares $15.12(3) $ 1,254,960(3) $ 331.30
OPTION PLAN
-----------
Common Stock, $0.001 par value
SILKNET SOFTWARE, INC. EMPLOYEE
STOCK OPTION PLAN 1,840,000 shares $ 1.28(3) $ 2,355,200(3) $ 621.77
-----------------
Common Stock, $0.001 par value
INSITE MARKETING TECHNOLOGY,
INC. 1997 STOCK OPTION PLAN 57,500 shares $ 1.36(3) $ 78,200(3) $ 20.64
---------------------------
Common Stock, $0.001 par value
============================================================================================================
Aggregate Registration Fee: $17,196.59
============================================================================================================
</TABLE>
(1) Each of the Plans was assumed by Registrant in connection with Registrant's
acquisition of Silknet Software, Inc. pursuant to an Agreement and Plan of
Reorganization dated February 6, 2000.
(2) This Registration Statement shall also cover any additional shares of the
<PAGE>
Registrant's Common Stock which become issuable under the Silknet Software,
Inc. 1999 Employee Stock Purchase Plan, the Silknet Software, Inc. 1999
Stock Option and Stock Incentive Plan, the Silknet Software, Inc. 1999
Non-Employee Director Stock Option Plan, the Silknet Software, Inc.
Employee Stock Option Plan and/or the Insite Marketing Technology, Inc.
1997 Stock Option Plan with respect to the securities registered hereunder
by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the Registrant's receipt of
consideration which results in an increase in the number of the
Registrant's outstanding shares of Common Stock.
(3) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the weighted average
exercise price of the outstanding options under the assumed Plans.
(4) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling price per share of the Registrant's Common Stock on
April 24, 2000, as reported by the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Kana Communications, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 filed with the Commission on March 30, 2000 pursuant
to Section 13 of the Securities Exchange Act of 1934, as amended (the
"1934 Act");
(b) The Registrant's Current Report on Form 8-K dated February 6, 2000, as
filed with the Commission on February 7, 2000 and as amended on
February 14, 2000, the Registrant's Current Report on Form 8-K
dated March 29, 2000, as filed with the Commission on March 29, 2000
and as amended on March 30, 2000 and the Registrant's Current Report
on Form 8-K dated April 19, 2000, as filed with the Commission on
April 24, 2000;
(c) The Registrant's joint Proxy Statement and Prospectus on Form S-4
filed with the Commission on March 14, 2000, as amended on Form S-4/A
on March 22, 2000, in connection with the Registrant's acquisition of
Silknet Software, Inc.; and
(d) The Registrant's Registration Statement on Form 8-A filed with the
Commission on August 27, 1999, in which there is described the terms,
rights and provisions applicable to the Registrant's Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which de-registers all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit this
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. Article VII,
Section 6 of the Registrant's Bylaws provides for mandatory indemnification of
its directors and executive officers and permissible indemnification of
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant's Certificate of Incorporation provides
that, subject to Delaware law, its directors will not be personally liable for
monetary damages for breach of their fiduciary duty as directors to the
Registrant and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the director's fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware
II-1
<PAGE>
law. In addition, each director will continue to be subject to liability for
breach of his or her duty of loyalty to the Registrant or its stockholders, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into indemnification agreements with its officers and directors, a form
of which has been filed with the Commission as an Exhibit to the Registrant's
Registration Statement on Form S-1 (No. 333-82587), as amended (the
"Indemnification Agreements"). The Indemnification Agreements provide the
Registrant's executive officers and directors with further indemnification to
the maximum extent permitted by the Delaware General Corporation Law. Reference
is also made to Section 8 of the Underwriting Agreement contained in Exhibit 1.1
of the Registrant's Registration Statement on Form S-1 (No. 333-82587), as
amended, indemnifying officers and directors of the Registrant against certain
liabilities, and Section 1.10 of the Third Amended and Restated Investors'
Rights Agreement contained in Exhibit 4.2 of the Registrant's Registration
Statement on Form S-1 (No. 333-82587), as amended, indemnifying certain of the
Registrant's stockholders, including controlling stockholders, against certain
liabilities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
EXHIBIT NUMBER EXHIBIT
4 Instruments Defining the Rights of Stockholders.
Reference is made to Registrant's Registration Statement on
Form 8-A, together with any amendments and exhibits
thereto, which are incorporated herein by reference
pursuant to Item 3(d).
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Silknet Software, Inc. 1999 Employee Stock Purchase Plan.
99.2 Silknet Software, Inc. 1999 Stock Option and Stock
Incentive Plan.
99.3 Silknet Software, Inc. 1999 Non-Employee Director Stock
Option Plan.
99.4 Silknet Software, Inc. Employee Stock Option Plan.
99.5 Insite Marketing Technology, Inc. 1997 Stock Option Plan.
99.6 Form of Option Assumption Agreement.
99.7 Form of Option Assumption Agreement-Acceleration.
ITEM 9. UNDERTAKINGS
A. 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: (i) to include any prospectus required by
Section 10(a)(3) of the 1933 Act, (ii) 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 (iii) 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 clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 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; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered hereunder which remain unsold upon the termination of the
Silknet Software, Inc. 1999 Employee Stock Purchase Plan, the Silknet Software,
Inc. 1999 Stock Option and Stock Incentive Plan, the Silknet Software, Inc. 1999
Non-Employee Director Stock Option Plan, the Silknet Software, Inc. Employee
Stock Option Plan and/or the Insite Marketing Technology, Inc. 1997 Stock Option
Plan,
II-2
<PAGE>
as each of those plans have been assumed by the Registrant in connection with
its acquisition of Silknet Software, Inc.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement 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.
C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 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 1933 Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Redwood City, State of California on
this 19th day of April, 2000.
KANA COMMUNICATIONS, INC.
By:/s/ Michael J. McCloskey
--------------------------------
Michael J. McCloskey
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael J. McCloskey, Mark S. Gainey and
Brian K. Allen, and each of them, as such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his or her substitutes, may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Michael J. McCloskey
- -------------------------- Chief Executive Officer and April 19, 2000
Michael J. McCloskey Director (Principal Executive
Officer)
/s/ Brian K. Allen
- -------------------------- Chief Financial Officer April 19, 2000
Brian K. Allen (Principal Financial and
Accounting Officer)
/s/ Mark S. Gainey
- -------------------------- President and Chairman of April 19, 2000
Mark S. Gainey the Board of Directors
/s/ James C. Wood
- -------------------------- President and CEO of April 19, 2000
James C. Wood Silknet Software, Inc., Director
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ David M. Beirne
- -------------------------- Director April 19, 2000
David M. Beirne
/s/ Robert W. Frick
- -------------------------- Director April 19, 2000
Robert W. Frick
/s/ Eric A. Hahn
- -------------------------- Director April 19, 2000
Eric A. Hahn
/s/ Dr. Charles A. Holloway
- -------------------------- Director April 19, 2000
Dr. Charles A. Holloway
/s/ Steven T. Jurvetson
- -------------------------- Director April 19, 2000
Steven T. Jurvetson
/s/ Ariel Poler
- -------------------------- Director April 19, 2000
Ariel Poler
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT
4 Instruments Defining the Rights of Stockholders. Reference
is made to Registrant's Registration Statement on Form
8-A, together with any amendments and exhibits thereto,
which are incorporated herein by reference pursuant to
Item 3(d).
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Silknet Software, Inc. 1999 Employee Stock Purchase Plan.
99.2 Silknet Software, Inc. 1999 Stock Option and Stock
Incentive Plan.
99.3 Silknet Software, Inc. 1999 Non-Employee Director Stock
Option Plan.
99.4 Silknet Software, Inc. Employee Stock Option Plan.
99.5 Insite Marketing Technology, Inc. 1997 Stock Option Plan.
99.6 Form of Option Assumption Agreement.
99.7 Form of Option Assumption Agreement-Acceleration.
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
April 27, 2000
Kana Communications, Inc.
740 Bay Road
Redwood City, California 94063
Re: Kana Communications, Inc. - Registration Statement for
Offering of an Aggregate of 3,740,500 Shares of Common
Stock
Dear Ladies and Gentlemen:
We have acted as counsel to Kana Communications, Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
3,740,500 shares of the Company's common stock (the "Shares") issuable in the
aggregate under the (a) Silknet Software, Inc. 1999 Employee Stock Purchase Plan
(the "Purchase Plan"), (b) Silknet Software, Inc. 1999 Stock Option and Stock
Incentive Plan (the "Incentive Plan"), (c) Silknet Software, Inc. 1999
Non-Employee Director Stock Option Plan (the "Director Plan"), (d) Silknet
Software, Inc. Employee Stock Option Plan (the "Option Plan"), and (e) Insite
Marketing Technology, Inc. 1997 Stock Option Plan (the "Insite Option Plan")
(collectively, the "Plans"). The Plans, together with the outstanding options
under those plans, have been assumed by the Company in connection with the
Company's acquisition of Silknet Software, Inc. pursuant to an Agreement and
Plan of Reorganization dated February 6, 2000 (the "Plan of Reorganization")
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents, the Plan of
Reorganization and the corporate proceedings taken by the Company in connection
with the assumption of the Plans and the outstanding options thereunder. Based
on such review, we are of the opinion that if, as and when the Shares are issued
and sold (and the consideration therefor received) pursuant to the (a)
provisions of option agreements duly authorized under the Incentive Plan, the
Director Plan, the Option Plan and/or the Insite Option Plan and in accordance
with the Registration Statement, (b) duly authorized direct stock issuances
effected under the Incentive Plan and in accordance with the Registration
Statement, or (c) duly authorized purchase agreements under the Purchase Plan
and in accordance with the Registration Statement, such Shares will be duly
authorized, legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plans or the Shares.
Very truly yours,
/S/ BROBECK, PHLEGER & HARRISON LLP
----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
Kana Communications, Inc.:
We consent to incorporation by reference herein of our report dated January
20, 2000, except as to Note 8, which is as of February 11, 2000, relating to the
consolidated balance sheets of Kana Communications, Inc. and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations and comprehensive loss, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1999, and the related
financial statement schedule, which report appears in the December 31, 1999
annual report on Form 10-K of Kana Communications, Inc.
/s/ KPMG LLP
Mountain View, California
April 27, 2000
<PAGE>
EXHIBIT 99.1
SILKNET SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
- -------------------
This 1999 Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by all eligible employees of Silknet Software, Inc.
(the "Company"), a Delaware corporation, and its participating subsidiaries (as
defined in Article 17) so that they may share in the growth of the Company by
acquiring or increasing their proprietary interest in the Company. This Plan is
designed to encourage eligible employees to remain in the employ of the Company
and its participating subsidiaries. This Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
- --------------------------------------
This Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two non-employee members of the Company's Board of Directors. The
Board of Directors may from time to time remove members from, or add members to,
the Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors. The Committee may select one of its members as Chairman,
and shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
The interpretation and construction by the Committee of any provisions of
this Plan or of any option granted under it, shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out this Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer this Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors. The Compensation
Committee of the Board of Directors may also administer this Plan.
<PAGE>
- 2 -
ARTICLE 3 - ELIGIBLE EMPLOYEES.
- ------------------------------
All employees of the Company or any of its participating subsidiaries whose
customary employment is more than twenty (20) hours per week and for more than
five (5) months in any calendar year and who have completed at least three
months of employment with the Company or its participating subsidiaries shall be
eligible to receive options under this Plan to purchase common stock of the
Company, and all eligible employees shall have the same rights and privileges
hereunder. Persons who are eligible employees on the first business day of any
Payment Period (as defined in Article 5) shall receive their options as of such
day. Persons who become eligible employees after any date on which options are
granted under this Plan shall be granted options on the first day of the next
succeeding Payment Period on which options are granted to eligible employees
under this Plan. Directors who are not employees of the Company shall not be
eligible to receive options under the Plan. In no event, however, may an
employee be granted an option if such employee, immediately after the option was
granted, would be treated as owning stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any parent corporation or subsidiary corporation, as the terms
"parent corporation" and "subsidiary corporation" are defined in Section 424(e)
and (f) of the Code. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply, and stock which
the employee may purchase under outstanding options shall be treated as stock
owned by the employee.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
- -------------------------------------
The stock subject to the options under this Plan shall be shares of the
Company's authorized but unissued Common Stock, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may be
issued pursuant to this Plan is 350,000 (after giving effect to a 1-for-2
reverse stock split in connection with the Company's reincorporation from the
State of New Hampshire to the State of Delaware), subject to adjustment as
provided in Article 12. If any option granted under this Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the unpurchased shares
subject thereto shall again be available under this Plan.
ARTICLE 5 - EFFECTIVENESS; PAYMENT PERIOD AND STOCK OPTIONS.
- -----------------------------------------------------------
The first Payment Period during which payroll deductions will be
accumulated under this Plan shall commence immediately upon the initial offering
of the Common Stock to the public (the `Offering"), and shall end on January 31,
2000 (the "First Payment Period"). For the remainder of the duration of this
Plan, Payment Periods shall consist of the six-month periods commencing on
February 1 and August 1 and ending on July 31 and January 31 of each calendar
year.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in this
Plan an option to purchase on the
<PAGE>
- 3 -
last day of such Payment Period, at the Option Price hereinafter provided
for, a maximum of five hundred (500) shares, on condition that such employee
remains eligible to participate in this Plan throughout the remainder of such
Payment Period. The participant shall be entitled to exercise the option so
granted only to the extent of the participant's accumulated payroll deductions
on the last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than 500 shares except for the 500-share limitation, the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the 500 shares shall be promptly refunded to the participant by the
Company, without interest. The option price per share for each Payment Period
shall be the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of the Payment Period and (ii) 85% of the average
market price of the Common Stock on the last business day of the Payment Period,
in either event rounded up to avoid fractions of a dollar other than 1/4, 1/2
and 3/4 (the "Option Price"). Notwithstanding the foregoing, with regard to the
First Payment Period, the Option Price shall be calculated as the lesser of (i)
85% of the price per share at which the Common Stock is sold to the underwriters
upon the Offering, without regard to any applicable discounts or commissions
provided to such underwriters, and (ii) 85% of the average market price of the
Common Stock on the last business day of the First Payment Period. The foregoing
limitation on the number of shares subject to options and the Option Price shall
be subject to adjustment as provided in Article 12.
For purposes of this Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the average of the closing bid and asked prices last quoted
(on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq Market; or (iv) if
the Common Stock is not publicly traded, the fair market value of the Common
Stock as determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm's length.
For purposes of this Plan, the term "business day" means a day on which
there is trading on the Nasdaq Market or the aforementioned national securities
exchange, whichever is applicable pursuant to the preceding paragraph; and if
neither is applicable, a day that is not a Saturday, Sunday or legal holiday in
the Commonwealth of Massachusetts.
No employee shall be granted an option which permits the employee's right
to purchase stock under this Plan, and under all other Section 423(b) employee
stock purchase plans of the Company and any parent or subsidiary corporations,
to accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code. If the participant's accumulated payroll deductions on the last day
of the Payment Period would otherwise enable the participant to purchase Common
Stock in excess of the Section 423(b)(8)
<PAGE>
- 4 -
limitation described in this paragraph, the excess of the amount of the
accumulated payroll deductions over the aggregate purchase price of the shares
actually purchased shall be promptly refunded to the participant by the Company,
without interest.
ARTICLE 6 - EXERCISE OF OPTION.
- ------------------------------
Each eligible employee who continues to be a participant in this Plan on
the last day of a Payment Period shall be deemed to have exercised his or her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of this Plan as
the participant's accumulated payroll deductions on such date will pay for at
the Option Price, subject to the 500-share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, then he or she shall not be
entitled to exercise his or her option and the amount of his or her payroll
deduction shall be refundable. Only full shares of Common Stock may be purchased
under this Plan. Unused payroll deductions remaining in a participant's account
at the end of a Payment Period by reason of the inability to purchase a
fractional share shall be carried forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
- -----------------------------------------------
An employee may elect to enter this Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the employee's
pay;
B. Authorizing the purchase of stock for the employee in each Payment
Period in accordance with the terms of this Plan; and
C. Specifying the exact name or names in which stock purchased for the
employee is to be issued as provided under Article 11 hereof.
Such authorization must be received by the Company at least ten (10)
business days before the first day of the next succeeding Payment Period and
shall take effect only if the employee is an eligible employee on the first
business day of such Payment Period.
Unless a participant files a new authorization or withdraws from this Plan,
the deductions and purchases under the authorization the participant has on file
under this Plan will continue from one Payment Period to succeeding Payment
Periods as long as this Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
<PAGE>
- 5 -
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
- ------------------------------------------------
An employee may authorize payroll deductions in an amount (expressed as a
whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation including base pay or salary
(excluding overtime, bonuses or commissions).
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
- ----------------------------------------
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from this Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
- -------------------------------------
A participant may withdraw from this Plan (in whole but not in part) at any
time prior to the last day of a Payment Period by delivering a withdrawal notice
to the Company, in which event the Company will promptly refund the entire
balance of the employee's deductions not previously used to purchase stock under
this Plan.
To re-enter this Plan, an employee who has previously withdrawn must file a
new authorization at least ten (10) business days before the first day of the
next Payment Period in which he or she wishes to participate. The employee's
re-entry into this Plan becomes effective at the beginning of such Payment
Period, provided that he or she is an eligible employee on the first business
day of the Payment Period.
ARTICLE 11 - ISSUANCE OF STOCK.
- ------------------------------
Certificates for stock issued to participants shall be delivered as soon as
practicable after each Payment Period by the Company's transfer agent.
Stock purchased under this Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
ARTICLE 12 - ADJUSTMENTS.
- ------------------------
Upon the happening of any of the following described events, a
participant's rights to options granted under this Plan shall be adjusted as
hereinafter provided:
A. In the event that the shares of Common Stock shall be subdivided
or combined into a greater or smaller number of shares or if, upon a
reorganization, split-up, liquidation, recapitalization or the like of the
Company, the shares of Common Stock shall be exchanged for other securities
of the Company, each participant shall be entitled, subject to the
conditions herein stated, to purchase such number of shares of Common Stock
or amount of other securities of the Company as were exchangeable for the
number of shares of Common Stock that such participant would have been
entitled to purchase except for
<PAGE>
- 6 -
such action, and appropriate adjustments shall be made in the purchase
price per share to reflect such subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares as a stock
dividend upon, or with respect to, the shares of stock of the class which
shall at the time be subject to options hereunder, each participant upon
exercising such an option shall be entitled to receive (for the purchase
price paid upon such exercise) the shares as to which the participant is
exercising his or her option and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such stock
dividend or dividends were declared or paid, and such amount of cash in
lieu of fractional shares, as is equal to the number of shares thereof and
the amount of cash in lieu of fractional shares, respectively, which the
participant would have received if the participant had been the holder of
the shares as to which the participant is exercising his or her option at
all times between the date of the granting of such option and the date of
its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are subject to options
which have been or may be granted under this Plan and the limitations set forth
in the second paragraph of Article 5 shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
If the Company is to be consolidated with or acquired by another entity in
a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor Board")
shall, with respect to options then outstanding under this Plan, either (i) make
appropriate provision for the continuation of such options by arranging for the
substitution on an equitable basis for the shares then subject to such options
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant's options in exchange for a cash payment
equal to the excess of (a) the fair market value on the date of the Acquisition
of the number of shares of Common Stock that the participant's accumulated
payroll deductions as of the date of the Acquisition could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period and subject to the 500-share, Code Section 423(b)(8)
and fractional-share limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such number of shares
by such option price.
<PAGE>
- 7 -
The Committee or Successor Board shall determine the adjustments to be made
under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
- -----------------------------------------------------------
An employee's rights under this Plan are the employee's alone and may not
be transferred or assigned to, or availed of by, any other person other than by
will or the laws of descent and distribution. Any option granted under this Plan
to an employee may be exercised, during the employee's lifetime, only by the
employee.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
- ---------------------------------------------
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under this Plan
shall immediately terminate, and the Company shall promptly refund, without
interest, the entire balance of his or her payroll deduction account under this
Plan. Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or, if longer than 90 days, for
so long as the participant's right to re-employment is guaranteed either by
statute or by contract.
If a participant's payroll deductions are interrupted by any legal process,
a withdrawal notice will be considered as having been received from the
participant on the day the interruption occurs.
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
- -----------------------------------------------
Unless terminated sooner as provided below, this Plan shall terminate on
December 31, 2009. This Plan may be terminated at any time by the Company's
Board of Directors but such termination shall not affect options then
outstanding under this Plan. It will terminate in any case when all or
substantially all of the unissued shares of stock reserved for the purposes of
this Plan have been purchased. If at any time shares of stock reserved for the
purpose of this Plan remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available shares shall
be apportioned among participants in proportion to the amount of payroll
deductions accumulated on behalf of each participant that would otherwise be
used to purchase stock, and this Plan shall terminate. Upon such termination or
any other termination of this Plan, all payroll deductions not used to purchase
stock will be refunded, without interest.
The Committee or the Board of Directors may from time to time adopt
amendments to this Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under this Plan; (ii) change the class of employees eligible to receive
options under this Plan, if such action would be treated as the adoption of a
new plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3
under the Securities Exchange Act of 1934 to become inapplicable to this Plan.
<PAGE>
- 8 -
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
- -------------------------------------------------------------
This Plan is intended to provide shares of Common Stock for investment and
not for resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his or her own affairs. An employee may,
therefore, sell stock purchased under this Plan at any time the employee
chooses, subject to compliance with any applicable Federal or state securities
laws and subject to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
- ---------------------------------------
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in this Plan. The Board of Directors shall have the power to make
such designation before or after this Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
- ---------------------------------------
Neither the granting of an option to an employee nor the deductions from
his or her pay shall constitute such employee a stockholder of the shares
covered by an option until such shares have been actually purchased by the
employee.
ARTICLE 19 - APPLICATION OF FUNDS.
- ---------------------------------
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under this Plan will be used for general corporate purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
- -----------------------------------------------------------
By electing to participate in this Plan, each participant agrees to notify
the Company in writing immediately after the participant transfers Common Stock
acquired under this Plan, if such transfer occurs within two years after the
first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
- ---------------------------------------------------
By electing to participate in this Plan, each participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the participant's compensation and
accumulated for the benefit of the participant
<PAGE>
- 9 -
under this Plan, and each participant agrees that the Company and its
participating subsidiaries may deduct additional amounts from the participant's
compensation, when amounts are added to the participant's account, used to
purchase Common Stock or refunded, in order to satisfy such withholding
obligations. Each participant further acknowledges that when Common Stock is
purchased under this Plan the Company and its participating subsidiaries may be
required to withhold taxes with respect to all or a portion of the difference
between the fair market value of the Common Stock purchased and its purchase
price, and each participant agrees that such taxes may be withheld from
compensation otherwise payable to such participant. It is intended that tax
withholding will be accomplished in such a manner that the full amount of
payroll deductions elected by the participant under Article 7 will be used to
purchase Common Stock. However, if amounts sufficient to satisfy applicable tax
withholding obligations have not been withheld from compensation otherwise
payable to any participant, then, notwithstanding any other provision of this
Plan, the Company may withhold such taxes from the participant's accumulated
payroll deductions and apply the net amount to the purchase of Common Stock,
unless the participant pays to the Company, prior to the exercise date, an
amount sufficient to satisfy such withholding obligations. Each participant
further acknowledges that the Company and its participating subsidiaries may be
required to withhold taxes in connection with the disposition of stock acquired
under this Plan and agrees that the Company or any participating subsidiary may
take whatever action it considers appropriate to satisfy such withholding
requirements, including deducting from compensation otherwise payable to such
participant an amount sufficient to satisfy such withholding requirements or
conditioning any disposition of Common Stock by the participant upon the payment
to the Company or such subsidiary of an amount sufficient to satisfy such
withholding requirements.
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
- -------------------------------------
The Company's obligation to sell and deliver shares of Common Stock under
this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to this Plan. For example, the Company may be required to
identify shares of Common Stock issued under this Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
- --------------------------
The validity and construction of this Plan shall be governed by the laws of
the State of Delaware, without giving effect to the principles of conflicts of
law thereof.
<PAGE>
EXHIBIT 99.2
SILKNET SOFTWARE, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE AND ELIGIBILITY
The purpose of this 1999 Stock Option and Incentive Plan (the "PLAN") of
Silknet Software, Inc. (the "COMPANY") is to provide incentive and non-qualified
stock options, stock issuances and other equity interests in the Company (each,
an "AWARD") to employees, officers, directors, consultants and advisors of the
Company and its Subsidiaries, all of whom are eligible to receive Awards under
the Plan. Any person to whom an Award has been granted under the Plan is called
a "PARTICIPANT". Additional definitions are contained in Section 11.
2. ADMINISTRATION
a. ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered
by the Board of Directors of the Company (the "BOARD"). The Board, in its sole
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. The Board shall have authority, subject to
the express limitations of the Plan, to construe and determine the respective
option agreement, Awards and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and any Awards, to determine the terms and
provisions of the respective option agreements and Awards, which need not be
identical, to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration and interpretation of
the Plan. The Board may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any option agreement or Award in the manner
and to the extent it shall deem expedient to carry the Plan, any option
agreement or Award into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be final and binding on all
interested persons. Neither the Company nor any member of the Board shall be
liable for any action or determination relating to the Plan.
b . APPOINTMENT OF COMMITTEE. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "COMMITTEE"). All references in
the Plan to the "BOARD" shall mean such Committee or the Board.
c. DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, PROVIDED THAT the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.
d. APPLICABILITY OF RULE 16b-3. Those provisions of the Plan which
makes express reference to Rule 16b-3 promulgated under the Securities and
Exchange Act of 1934 (the "EXCHANGE ACT") or, any successor rules ("RULE 16b-3")
or which are required in order for
<PAGE>
-2-
certain option transactions to qualify for exemption under Rule 16b-3 shall
apply only to such persons as are required to file reports under Section 16 (a)
of the Exchange Act (a "REPORTING PERSON").
e. APPLICABILITY OF SECTION 162 (m). Those provisions of the Plan
which are required by or make express reference to Section 1262 (m) of the
Internal Revenue Code or any regulations thereunder, or any successor section of
the Code or regulations thereunder ("SECTION 162 (m)") shall apply only upon the
Company's becoming a company that is subject to Section 162 (m). Notwithstanding
any provisions in this Plan to the contrary, whenever the Board is authorized to
exercise its discretion in the administration or amendment of this Plan or any
Award hereunder or otherwise, the Board may not exercise such discretion in a
manner that would cause any outstanding Award that would otherwise qualify as
performance-based compensation under Section 162 (m) to fail to so qualify under
Section 162 (m).
f. GRANT OF OPTIONS TO DIRECTORS. The selection of a director or an
officer (as the terms "director" and "officer" are defined for purposes of Rule
16b-3) as a participant, the timing of the option grant or Award, the exercise
price of the option or the sale price of the Award and the number of shares for
which an option or Award may be granted to such director or officer shall be
determined either (i) by the Board, of which all members shall be "disinterested
persons" (as hereinafter defined), or (ii) by a committee of two or more
directors having full authority to act in the matter, of which all members shall
be "disinterested persons." For the purposes of the Plan, a director shall be
deemed to be "disinterested" only if such person qualifies as a "disinterested
person" within the meaning of Rule 16b-3 of the Exchange Act, as such terms is
interpreted from time to time. From the date on which the Company first has its
Common Stock registered under the Exchange Act, non-employee directors of the
Company are not eligible to receive options or awards of restricted stock under
the Plan.
3. STOCK AVAILABLE FOR AWARDS
a. NUMBER OF SHARES. Subject to adjustment under Section 3(c), the
aggregate number of shares of Common Stock of the Company (the "COMMON STOCK")
that may be issued pursuant to the Plan is 1,000,000 shares (after giving effect
to a 1-for-2 reverse stock split in connection with the Company's
reincorporation from the State of New Hampshire to the State of Delaware), which
number shall automatically increase on January 1, 2000, January 1, 2001 and
January 1, 2002 by such number of shares as is equal to 5% of the number of
shares of Common Stock outstanding on December 31, 1999, December 31, 2000 and
December 31, 2001, respectively; PROVIDED, HOWEVER, that the cumulative number
of such shares that may be issued pursuant to the Plan will not exceed 3,500,000
shares (after giving effect to a 1-for-2 reverse stock split in connection with
the Company's reincorporation from the State of New Hampshire to the State of
Delaware). If any Award expires, or is terminated, surrendered or forfeited, in
whole or in part, the unissued Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan. If shares of Common Stock
issued pursuant to the Plan are repurchased by, or are surrendered or forfeited
to, the Company at no more than cost, such shares of Common Stock shall again be
available for the grant of Awards under the Plan. Shares issued under the Plan
may consist in whole or in part of authorized but unissued shares or treasury
<PAGE>
-3-
shares. Except as may be prohibited by Rule 16b-3, (i) if an Award granted under
the Plan shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject to such Award shall again be available
for subsequent option grants or Awards under the Plan, and (ii) if restricted
stock awarded under the Plan shall be repurchased by the Company, the
repurchased shares subject to such Award shall again be available for subsequent
option grants or Awards under the Plan.
b. PER-PARTICIPANT LIMIT. Subject to adjustment under Section 3(c), no
Participant may be granted Awards during any one fiscal year to purchase more
than 1,000,000 shares of Common Stock.
c. ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event, (i) the number and class of
securities available for Awards under the Plan and the per-Participant share
limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price
per security subject to repurchase, and (iv) the terms of each other outstanding
stock-based Award shall be adjusted by the Company (or substituted Awards may be
made) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is appropriate. If Section 7(f)(i) applies for any
event, this Section 3(c) shall not be applicable.
4. STOCK OPTIONS
a. GENERAL. The Board may grant options to purchase Common Stock
(each, an "OPTION") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.
b. INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "INCENTIVE
STOCK OPTION") shall be granted only to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "NONSTATUTORY STOCK OPTION" or
"NONQUALIFIED STOCK OPTION."
c. DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market (determined as of the
<PAGE>
-4-
respective date or dates of grant) of more than $100,000. The amount of
Incentive Stock Options which exceed such $100,000 limitation shall be deemed to
be Nonqualified Stock Options.
d. EXERCISE PRICE. The Board shall establish the exercise price (or
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify the exercise price in the applicable
option agreement.
e. DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
f. EXERCISE OF OPTION. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(g) or the option agreement for
the number of shares for which the Option is exercised.
g. PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of
an Option shall be paid for by one or any combination of the following forms of
payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable
option agreement, and only if the Common Stock is then publicly traded, delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Plan participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Plan Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.
The fair market value of any shares of the Company's Common Stock or
other non-cash consideration which may be delivered upon exercise of an option
shall be determined in such manner as may be prescribed by the Board.
h. ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its
sole discretion, include additional provisions in any Award granted under the
Plan, including without limitation restrictions in transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of Awards, or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board; PROVIDED THAT such additional provisions shall
not be inconsistent with any other term or condition of the Plan.
<PAGE>
-5-
i. ACCELERATION, EXTENSION, ETC. The Board may, in its sole
discretion, and in all instances subject to any relevant tax and accounting
considerations which may adversely impact or impair the Company, (i) accelerate
the date or dates on which all or any particular options or Awards granted under
the Plan any be exercised or (ii) extend the dates during which all or any
particular options or Awards granted under the Plan may be exercised.
j. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded under the
Exchange Act, "fair market value" shall be determined by the five-day or ten-day
trading average preceding the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the last business day
for which such prices or quotes are available prior to the date such Option is
granted (as the average of the five-day or ten-day trading period preceding the
grant) and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange for a five-day or ten-day trading period preceding the date
of grant; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq Market, if the Common Stock is not then traded on a national
securities exchange for a five-day or ten-day trading period preceding the date
of grant; or (iii) the average of the closing bid and asked prices last quoted
(on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq Market for a
five-day or ten-day trading period preceding the date of grant. The five-day or
ten-day trading period shall be selected by the Board at the time of the grant
based on trading volume, price fluctuations and flotation of publicly-traded
securities and other factors affecting volatility. However, if the Common Stock
is not publicly-traded at the time an Award is granted under the Plan, "FAIR
MARKET VALUE" shall be deemed to be the fair value of the Common Stock as
determined by the Board after taking into consideration all factors which it
deems appropriate, including, without limitation, recent sale and offer prices
of the Common Stock in private transactions negotiated at arm's length, revenues
and pre-tax earnings of the Company for the most recent twelve-month period,
projected revenues and pre-tax earnings of the Company for the next twelve-month
period, discounted positive cash flow of the Company, price/earnings multiples
of comparable publicly-traded companies (adjusted for any illiquidity associated
with the Company's Common Stock), appropriate discounts for illiquidity and
appropriate consideration of the senior rights, preferences and privileges of
other classes of preferred stock outstanding, and other pertinent factors
determined by the Board.
5. RESTRICTED STOCK
a. GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"RESTRICTED STOCK AWARD").
<PAGE>
-6-
b. TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "DESIGNATED BENEFICIARY"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including, without limitation, the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights, phantom stock awards or stock units.
7. GENERAL PROVISIONS APPLICABLE TO AWARDS
a. TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant; provided, however, that Nonstatutory Option
may be transferred pursuant to a qualified domestic relations order (as defined
in Rule 16b-3) or to a grantor-retained annuity trust ("GRANT") or a similar
estate-planning vehicle in which the trust is bound by all provisions of the
option which are applicable to the optionee. References to a Participant, to the
extent relevant in the context, shall include references to authorized
transferees.
b. DOCUMENTATION. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan, PROVIDED THAT such terms and conditions do not contravene the provisions
of the Plan.
c. BOARD DISCRETION. The terms of each type of Award need not be
identical, and the Board need not treat Participants uniformly.
d. ADDITIONAL AWARD PROVISIONS. The Board may, in its sole discretion,
include additional provisions in any Award granted under the Plan, including
without limitation commitments to pay cash bonuses, make, arrange for or
guarantee loans or transfer other property
<PAGE>
-7-
to recipients upon the grant of awards, or such other provisions as shall be
determined by the Board.
e. TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award, subject to applicable law and the provisions of the Code
related to Incentive Stock Options.
f. ACQUISITION OF THE COMPANY
(i) CONSEQUENCES OF AN ACQUISITION.
(A) ACQUISITION INTENDED TO BE ACCOUNTED FOR AS A
POOLING-OF-INTERESTS. Upon the consummation of an Acquisition intended to be
accounted for as a pooling of interests: (x) all outstanding Awards shall remain
the obligation of the Company or be assumed by the surviving or acquiring
entity, and there shall be automatically substituted for the shares of Common
Stock then subject to such Awards the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition and (y)
the vesting provisions of all Awards shall become accelerated by a period of one
year. In addition to the foregoing, on the first yearly anniversary of the
consummation of the Acquisition, with respect to Participants who remain
employees of the Company or the surviving or acquiring entity immediately
following the consummation of the Acquisition and who continuously remain as
such through first anniversary of the consummation of the Acquisition, on such
first anniversary date: (1) all Options then outstanding shall become
immediately exercisable in full and will terminate, to the extent unexercised,
on their scheduled expiration date, and if the shares of Common Stock subject to
such Options are subject to repurchase provisions then such repurchase
restrictions shall immediately lapse; (2) all Restricted Stock Awards then
outstanding shall become free of all repurchase provisions; and (3) all other
stock-based Awards shall become exercisable, realizable or vested in full, or
shall be free of all repurchase provisions, as the case may be. In the event
that any such Participant who remains an employee of the Company or the
acquiring or surviving entity immediately following the consummation of the
Acquisition is terminated "WITHOUT CAUSE" (as defined below) or terminates his
or her own employment "FOR GOOD REASON" (as defined below) prior to the first
anniversary of the consummation of the Acquisition, then the foregoing clauses
(1) through (3) shall be deemed to be immediately applicable to such employee on
such termination date.
Notwithstanding the foregoing paragraph, as to any Plan Participant,
the remaining unvested portion of any Option or Award held by such person shall
become vested and exercisable in the event of an Acquisition to be treated as a
pooling of interests, if the acceleration of such vesting is otherwise set forth
in any employment offer letter, employment agreement, option agreement or other
agreement with such person and such offer or agreement is executed at the time
of, or reasonably contemporaneous with, the initial employment of the
Participant.
<PAGE>
-8-
It shall be deemed to be a constructive termination "WITHOUT CAUSE" or
"FOR GOOD REASON" if: (i) the Participant's responsibilities and executive
authority are reduced or diluted in any material way without the Participant's
written consent; (ii) the Participant's annual salary or bonus arrangement is
reduced in any material way without written consent; (iii) the Participant is
relocated to another office or facility to a location outside of a radius of 25
miles from any Company facility at which the Participant was employed at the
time of the Acquisition and without the Participant's written consent; (iv)
there occurs a termination of Participant's rights to any benefits to which he
is entitled to or a reduction in scope or value thereof without the prior
written consent of the Participant; (v) there occurs an Acquisition, unless the
successor to which all or a significant portion of the Company's business and/or
assets have been transferred (directly or by operation of law) shall have
assumed all duties and obligations of the Company under this Plan.
(B) ACQUISITION INTENDED TO BE ACCOUNTED FOR UNDER THE
PURCHASE METHOD. Unless otherwise expressly provided in the applicable Option or
Award, upon the occurrence of an Acquisition intended to be accounted for under
the purchase method, the Board or the board of directors of the surviving or
acquiring entity (as used in this Section 7(f)(i)(B), also the "BOARD"), shall,
as to outstanding Awards (on the same basis or on different bases, as the Board
shall specify), make appropriate provision for the continuation of such Awards
by the Company or the assumption of such Awards by the surviving or acquiring
entity and by substituting on an equitable basis for the shares then subject to
such Awards either (a) the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition, (b) shares of stock
of the surviving or acquiring corporation or (c) such other securities as the
Board deems appropriate, the fair market value of which (as determined by the
Board in its sole discretion) shall not materially differ from the fair market
value of the shares of Common Stock subject to such Awards immediately preceding
the Acquisition. In addition to or in lieu of the foregoing, with respect to
outstanding Options, the Board may, upon written notice to the affected
optionees, provide that one or more Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition, within a
specified number of days of the date of such notice, at the end of which period
such Options shall terminate; or terminate one or more Options in exchange for a
cash payment equal to the excess of the fair market value (as determined by the
Board in its sole discretion) of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the Acquisition)
over the exercise price thereof.
The Board or the board of directors of any entity assuming the
obligations of the Company hereunder, may, as to outstanding Options, also take
one or more of the following actions: (i) accelerate the date of exercise of
such Options or of any installment of any such Options; or (ii) terminate all
Options in exchange for the right to participate in any stock option or other
employee benefit plan of any successor corporation.
The foregoing provisions are subject in all instances to the approval
of the Board and any accounting considerations for any acquisition which is
intended to be treated as a "pooling of interests" transaction pursuant to the
Accounting Principles Board (APB) Opinion No. 16, if any
<PAGE>
-9-
discretionary action by the Board of Directors would otherwise violate the
accounting rules for treatment of the Acquisition as a "pooling of interests"
under APB No. 16.
g. ACQUISITION DEFINED. An "ACQUISITION" shall mean: (x) any merger,
consolidation or purchase of outstanding capital stock of the Company after
which the voting securities of the Company outstanding immediately prior thereto
represent (either by remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity) less than 50% of the combined
voting power of the voting securities of the Company or such surviving or
acquiring entity outstanding immediately after such event (other than as a
result of a financing transaction); or (y) any sale of all or substantially all
of the capital stock or assets of the Company (other than in a spin-off or
similar transaction).
h. ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. In connection with a
merger or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Board may grant Awards under the
Plan in substitution for stock and stock-based awards issued by such entity or
an affiliate thereof. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
i. POOLING-OF-INTERESTS ACCOUNTING. If the Company proposes to engage
in an Acquisition intended to be accounted for as a pooling-of-interests, and in
the event that the provisions of this Plan or of any Award hereunder, or any
actions of the Board taken in connection with such Acquisition, are determined
by the Company's or the acquiring company's independent public accountants to
cause such Acquisition to fail to be accounted for as a pooling-of-interests,
then such provisions or actions shall be amended or rescinded by the Board,
without the consent of any Participant, to be consistent with
pooling-of-interests accounting treatment for such Acquisition.
j. PARACHUTE PAYMENTS AND PARACHUTE AWARDS. Notwithstanding the
provisions of Section 7(f)(i)(A), if, in connection with an Acquisition
described therein, a tax under Section 4999 of the Code would be imposed on the
Participant (after taking into account the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code), then the number of Awards which shall
become exercisable, realizable or vested as provided in such section shall be
reduced (or delayed), to the minimum extent necessary, so that no such tax would
be imposed on the Participant (the Awards not becoming so accelerated,
realizable or vested, the "PARACHUTE AWARDS"); PROVIDED, HOWEVER, that if the
"AGGREGATE PRESENT VALUE" of the Parachute Awards would exceed the tax that, but
for this sentence, would be imposed on the Participant under Section 4999 of the
Code in connection with the Acquisition, then the Awards shall become
immediately exercisable, realizable and vested without regard to the provisions
of this sentence. For purposes of the preceding sentence, the "aggregate present
value" of an Award shall be calculated on an after-tax basis (other than taxes
imposed by Section 4999 of the Code) and shall be based on economic principles
rather than the principles set forth under Section 280G of the Code and the
regulations promulgated thereunder. All determinations required to be made under
this Section 7(j)(iv) shall be made by the Company.
<PAGE>
-10-
k. AMENDMENT OF AWARDS. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, PROVIDED THAT, except as otherwise provided in Section 7(i), the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
l. CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
m. ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of some or all restrictions, or that any other
stock-based Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.
8. WITHHOLDING
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an award any federal, state or
local taxes of any kind required by law to be withheld with respect to any
shares issues upon exercise of options under the Plan or the purchase of shares
subject to the award. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee or recipient of an
award may elect to satisfy such obligation, in whole or in part, (i) by causing
the Company to withhold shares of Common Stock otherwise issuable pursuant to
the exercise of an option or the purchase of shares subject to an award or (ii)
by delivering to the Company shares of Common Stock already owned by the
optionee or award recipient. The shares so delivered or withheld shall have a
fair market value of the shares used to satisfy such withholding obligation
shall be determined by the Company as of the date that the amount of tax to be
withheld is to be determined. An optionee or award recipient who has made an
election pursuant to this Section may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
<PAGE>
-11-
9. CANCELLATION AND NEW GRANT OF OPTIONS
The Board of Directors shall have the authority to effect, at any time
and may from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
canceled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
10. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR CAUSE
If the employment of the any Participant is terminated "FOR CAUSE,"
the Award may terminate, upon a determination of the Board, on the date of such
termination and the Option shall thereupon not be exercisable to any extent
whatsoever. For purposes of this Section 10, "FOR CAUSE" is conduct, as
determined by the Board of Directors, involving one or more of the following:
(i) gross misconduct by the Participant which is materially injurious to the
Company; or (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in material
economic loss, damage or injury to the Company; or (iii) the unauthorized
disclosure of any trade secret or confidential information of the Company (or
any customer, supplier or other third party who has a business relationship with
the Company) or the violation of any noncompetition covenant or assignment of
inventions obligation with the Company; or (iv) the commission of an act which
constitutes unfair competition with the Company or which induces any customer or
prospective customer of the Company to break a contract with the Company or to
decline to do business with the Company; or (v) the conviction of the
Participant of a felony, either in connection with the performance of his
obligations to the Company or which shall adversely affect the Participant's
ability to perform such obligations; or (vi) the commission of an act of fraud
or breach of fiduciary duty which results in loss, damage or injury to the
Company; (vii) the failure of the Participant to perform in a material respect
his or her employment obligations without proper cause. In making such
determination, the Board shall act fairly and in utmost good faith. The Board
may in its discretion waive or modify the provisions of this Section at a
meeting of the Board with respect to any individual Participant with regard to
the facts and circumstances of any particular situation involving a
determination under this Section.
11. MISCELLANEOUS
a. DEFINITIONS.
(i) "COMPANY," for purposes of eligibility under the Plan, shall
include any present or future subsidiary corporations of Silknet Software, Inc.,
as defined in Section 424(f) of the Code (a "SUBSIDIARY"), and any present or
future parent corporation of Silknet Software, Inc., as defined in Section
424(e) of the Code. For purposes of Awards other than Incentive Stock
<PAGE>
-12-
Options, the term "COMPANY" shall include any other business venture in which
the Company has a direct or indirect significant interest, as determined by the
Board in its sole discretion.
(ii) "CODE" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(iii) "EMPLOYEE" for purposes of eligibility under the Plan shall
include a person to whom an offer of employment has been extended by the
Company.
b. NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.
c. NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder thereof.
d. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.
e. AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time.
f. GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the state of incorporation of the Company (Delaware), without regard to any
applicable conflicts of law.
Adopted by the Board of Directors on:
February 23, 1999
Approved by the stockholders on:
February 23, 1999
<PAGE>
EXHIBIT 99.3
SILKNET SOFTWARE, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. This Non-Qualified Stock Option Plan, to be known as the 1999
Non-Employee Director Stock Option Plan (hereinafter, the "Plan") is intended to
promote the interests of Silknet Software, Inc. (hereinafter, the "Company") by
providing an inducement to obtain and retain the services of qualified persons
who are not employees or officers of the Company to serve as members of its
Board of Directors (the "Board").
2. AVAILABLE SHARES. The total number of shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") for which options may be
granted under this Plan shall not exceed 350,000 shares (after giving effect to
a 1-for-2 reverse stock split in connection with the Company's reincorporation
from the State of New Hampshire to the State of Delaware), subject to adjustment
in accordance with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under this Plan are
surrendered before exercise or lapse without exercise, in whole or in part, the
shares reserved therefor shall continue to be available under this Plan.
3. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
4. AUTOMATIC GRANT OF OPTIONS. The Plan shall first become effective upon
the date on which the Common Stock of the Company becomes registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the
availability of shares under this Plan, (a) each person who is or becomes a
member of the Board and who is not an employee or officer of the Company (a
"Non-Employee Director") shall be automatically granted on either (i) the date
such person is first elected to the Board or (ii) the date on which the Common
Stock of the Company becomes registered under the Exchange Act (the "Approval
Date") ((i) and (ii) collectively referred to as the "Grant Date"), without
further action by the Board, an option to purchase
<PAGE>
10,000 shares of the Common Stock ( the "Initial Options") and (b) each person
receiving an option pursuant to clause (a) hereof who remains a Non-Employee
Director through (i) the third anniversary of such person's Grant Date and (ii)
the third anniversary of the date of grant of any Additional Options (as
hereafter defined) (each, an "Additional Option Grant Date"), shall be
automatically granted on the anniversary of such person's Grant Date or
Additional Option Grant Date, as applicable, an option to purchase 10,000 shares
of Common Stock (the "Additional Options").
The options to be granted under this paragraph 4 shall be the only options ever
to be granted at any time to such member under this Plan. Notwithstanding
anything to the contrary set forth herein, if this Plan is not approved by a
majority of the Company's stockholders within 12 months of the Approval Date,
then the Plan and the options granted pursuant to this Section 4 shall terminate
and become void, and no further options shall be granted under this Plan.
5. OPTION PRICE. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
Market. If the Common Stock is not publicly traded at the time an option is
granted under the Plan, "fair market value" shall be deemed to be the fair value
of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length. Notwithstanding the foregoing the fair
market value of the Common Stock for the grant of an option on the date of the
Company's Prospectus in connection with its initial public offering (the
"Offering") shall be equal to the price per share at which the Common Stock is
sold to the underwriters upon the Offering, without regard to any applicable
discounts or commissions provided to such underwriters.
6. PERIOD OF OPTION. Unless sooner terminated in accordance with the
provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
2
<PAGE>
7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. (a) Options
granted under this Plan shall not be exercisable until they become vested.
Initial Options granted under paragraph 4 of this Plan shall vest in the
optionee and thus become exercisable in accordance with the following schedule,
provided that the optionee has continuously served as a member of the Board
through such vesting date, and subject also to subsection (b) of this paragraph
7:
NUMBER OF OPTION SHARES FOR WHICH
OPTION WILL BE EXERCISABLE DATE OF VESTING
-------------------------- ---------------
1/3 One year from the date of grant
1/3 Two year from the date of grant
1/3 Three years from the date of grant
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) Notwithstanding subsection (a) of this paragraph 7, if an optionee
attends less than 75% of the Board meetings held in any fiscal year (a "Default
Year"), then the optionee shall forfeit his exercise rights with respect to the
option installment which vested on the preceding annual vesting date, in
proportion to the percentage of Board meetings not attended by such optionee
during the Default Year, such forfeiture to be applied first to the options
which vested on the immediately preceding annual vesting date (the "Prior
Vesting Date"), and second, prorata to the options which vested on each annual
vesting date preceding the Prior Vesting Date (beginning with the annual vesting
date immediately preceding the Prior Vesting Date) until the forfeiture
obligation has been satisfied. In the event that the optionee does not own a
sufficient number of exercisable options to satisfy the forfeiture obligation
described above (the "Forfeiture Shortfall"), the optionee shall forfeit his
right to receive the next succeeding annual installment of all options in an
amount equal to the Forfeiture Shortfall, such shortfall to be applied prorata
to all options which vest on such date.
By way of illustration, if an optionee attends only 50% of the actual
meetings of the Board of Directors (whether regular or special) held in any
fiscal year, then the optionee shall forfeit the right to exercise 50% of the
option installment which became exercisable on the preceding annual vesting
date. If, however, the optionee had already exercised 75% of the preceding
option installment, and did not own any additional vested but unexercised
options available to satisfy the forfeiture obligation, the optionee would
forfeit the remaining 25% of the prior installment, and would also forfeit the
right to receive or exercise 25% of the next succeeding annual option
installment.
(c) TRANSFERABILITY. Any option granted pursuant to this Plan shall be
assignable or transferable by will, the laws of descent and distribution,
pursuant to a
3
<PAGE>
domestic relations order or in accordance with the terms of the optionee's
option agreement and only in compliance with the provisions of the Securities
Act of 1933, as amended (the "Securities Act").
8. TERMINATION OF OPTION RIGHTS.
(a) Except as otherwise specified in the agreement relating to an
option, in the event an optionee ceases to be a member of the Board for any
reason other than death or permanent disability, any then unexercised portion of
options granted to such optionee shall, to the extent not then vested,
immediately terminate and become void; any portion of an option which is then
vested but has not been exercised at the time the optionee so ceases to be a
member of the Board may be exercised, to the extent it is then vested, by the
optionee at any time prior to the scheduled expiration date of the option.
(b) In the event that an optionee ceases to be a member of the Board
by reason of his or her death or permanent disability, any option granted to
such optionee shall be immediately and automatically accelerated and become
fully vested. All unexercised options which are then exercisable (including
those options which become exercisable pursuant to the first sentence of this
Section 8(b)) but have not been exercised at the time the optionee so ceases to
be a member of the Board of Directors may be exercised, to the extent any
portion of such options are then exercisable, by the optionee (or by the
optionee's personal representative, heir or legatee, in the event of death) for
a period of three years thereafter.
(c) No portion of an option may be exercised if the optionee is
removed from the Board of Directors for any one of the following reasons: (i)
disloyalty, gross negligence, dishonesty or breach of fiduciary duty to the
Company; or (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in loss, damage
or injury to the Company, whether directly or indirectly; or (iii) the
unauthorized disclosure of any trade secret or confidential information of the
Company; or (iv) the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company to break a
contract with the Company; or (v) the conduct of any activity on behalf of any
organization or entity which is a competitor of the Company (unless such conduct
is approved by a majority of the members of the Board of Directors).
4
<PAGE>
9. EXERCISE OF OPTION. Subject to the terms and conditions of this Plan and
the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail, facsimile or in person addressed to Silknet Software, Inc., at
its principal executive offices, stating the number of shares with respect to
which the option is being exercised, accompanied by payment in full for such
shares. Payment may be (a) in United States dollars in cash or by check, (b) in
whole or in part in shares of the Common Stock of the Company already owned by
the person or persons exercising the option or shares subject to the option
being exercised (subject to such restrictions and guidelines as the Board may
adopt from time to time), valued at fair market value determined in accordance
with the provisions of paragraph 5 or (c) consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at the time of
exercise. There shall be no such exercise at any one time as to fewer than one
hundred (100) shares or all of the remaining shares then purchasable by the
person or persons exercising the option if fewer than one hundred (100) shares.
The Company's transfer agent shall, on behalf of the Company, prepare a
certificate or certificates representing such shares acquired pursuant to
exercise of the option, shall register the optionee as the owner of such shares
on the books of the Company and shall cause the fully executed certificate(s)
representing such shares to be delivered to the optionee as soon as practicable
after payment of the option price in full. The holder of an option shall not
have any rights of a stockholder with respect to the shares covered by the
option, except to the extent that one or more certificates for such shares shall
be delivered to him or her upon the due exercise of the option.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of options shall be appropriately increased
or decreased proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision, combination or
stock dividend.
(b) RECAPITALIZATION ADJUSTMENTS. In the event of an Acquisition, each
option granted under this Plan which is outstanding but unvested as of the
effective date of such event shall become exercisable in full immediately
prior to the effective date of such event. In the event of a
reorganization, recapitalization, merger, consolidation, or any other
change in the corporate structure or shares of the Company, to the extent
permitted by Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule
16b-3"), adjustments in the number and kind of shares authorized by this
Plan and in the
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number and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the proportionate
interest of the optionee and preserve, without exceeding, the value of such
option, shall be made. Notwithstanding the foregoing, no such adjustment
shall be made which would, within the meaning of any applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), constitute a
modification, extension or renewal of any Option or a grant of additional
benefits to the holder of an Option. For purposes of this paragraph 10, An
"ACQUISITION" shall mean: (x) any merger, consolidation or purchase of
outstanding capital stock of the Company after which the voting securities
of the Company outstanding immediately prior thereto represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined voting power
of the voting securities of the Company or such surviving or acquiring
entity outstanding immediately after such event (other than as a result of
a financing transaction); or (y) any sale of all or substantially all of
the capital stock or assets of the Company (other than in a spin-off or
similar transaction).
(c) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(d) ADJUSTMENTS. Upon the happening of any of the foregoing events, the
class and aggregate number of shares set forth in paragraph 2 of this Plan
that are subject to options which previously have been or subsequently may
be granted under this Plan shall also be appropriately adjusted to reflect
such events. The Board shall determine the specific adjustments to be made
under this paragraph 10 and its determination shall be conclusive.
11. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(a) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively registered
under applicable Federal and state securities laws as now in force or
hereafter amended; or
(b) Counsel for the Company shall have given an opinion that the issuance
of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation all
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regulations required by any stock exchange upon which the Company's
outstanding Common Stock is then listed.
12. LEGEND ON CERTIFICATES. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act, as
amended, or any state securities laws.
13. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act).
14. OPTION AGREEMENT. Each option granted under the provisions of this Plan
shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
15. TERMINATION AND AMENDMENT OF PLAN. Options may no longer be granted
under this Plan after 10 years from the Approval Date, and this Plan shall
terminate when all options granted or to be granted hereunder are no longer
outstanding. The Board may at any time terminate this Plan or make such
modification or amendment thereof as it deems advisable; PROVIDED, HOWEVER, that
the Board may not, without approval by the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and voting
on such matter at a meeting, (a) increase the maximum number of shares for which
options may be granted under this Plan (except by adjustment pursuant to Section
10), (b) materially modify the requirements as to eligibility to participate in
this Plan, or (c) materially increase benefits accruing to option holders under
this Plan. Termination or any modification or amendment of this Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
16. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Code, may require the
optionee to pay withholding taxes in respect of amounts considered to be
compensation includible in the optionee's gross income.
17. COMPLIANCE WITH REGULATIONS. It is the Company's intent that this Plan
comply in all respects with Rule 16b-3 (or any successor or amended provision
thereof) and any applicable Securities and Exchange Commission interpretations
thereof. If any
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provision of this Plan is deemed not to be in compliance with Rule 16b-3, the
provision shall be null and void.
18. GOVERNING LAW. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
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EXHIBIT 99.4
SILKNET SOFTWARE, INC.
EMPLOYEE STOCK OPTION PLAN
THIS EMPLOYEE STOCK OPTION PLAN (this "PLAN"), dated August 8, 1995
(the "EFFECTIVE DATE"), established by and for the benefit of Silknet Software,
Inc., a New Hampshire corporation (the "COMPANY").
RECITALS:
This Plan is intended to provide employees of Company, and its parent
and subsidiary corporations (each, a "RELATED CORPORATION"), if any, with
opportunities to purchase stock in Company pursuant to options granted under
this Plan. Certain of those options may qualify as "incentive stock options"
("ISO" or "ISOS") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and certain of those options may not qualify as ISOs and
thereby be treated as nonqualified options ("NQO" or "NQOs"). Both ISOs and NQOs
are referred to in this Plan individually as an "OPTION" and collectively as
"OPTIONS".
1. SHARES SUBJECT TO PLAN.
(a) The maximum aggregate number of shares (the "SHARES") of Company's
common stock, no par value per share (the "STOCK"), for which Options may be
granted under this Plan is Two Million Three Hundred Ninety-One Thousand Nine
Hundred (2,391,900) (the "AGGREGATE NUMBER OF Shares"). The Aggregate Number of
Shares is subject to adjustment pursuant to the provisions of Section 6(f).
(b) The Board of Directors of Company (the "BOARD"), shall make such
Shares available from authorized but unissued shares of Stock.
2. ELIGIBILITY. The persons eligible to be granted Options under this
Plan shall consist of such employees of Company and its Related Corporations, if
any, as may be designated from time to time by the Board. Such eligible
employees may include employees who are also officers, directors, or
shareholders of Company or its Related Corporations, if any, and/or employees
who have previously been granted one or more Options under this Plan.
3. ADMINISTRATION OF PLAN.
(a) This Plan shall be supervised and administered by the Board. Without
limiting the generality of the foregoing, the Board shall, subject to the
provisions of this Plan, have the authority to determine:
(i) the employees of Company or its Related Corporations, if
any, to whom Options may be granted;
(ii) the time or times at which options may be granted;
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(iii) the option price of the Shares subject to each Option;
(iv) whether each Option granted shall be an ISO or an NQO;
(v) the time or times when each Option shall be exercisable and
the manner of exercise; and
(vi) what restrictions, if any, shall be imposed on the Shares
subject to each Option and the nature of any such restrictions.
(b) The Board shall be responsible for interpreting and construing the
provisions of this Plan, and the Board may adopt, amend, and rescind such rules
and regulations for the administration of this Plan as the Board may deem
necessary or desirable.
(c) No member of the Board shall vote on the grant of an Option to such
member or any other decision taken by the Board with respect to any Option
granted to such member; provided, that any such member may (i) be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to any Option granted to such member, and (ii) sign
a consent vote signed by all of the members of the Board.
(d) All actions taken by the Board in the administration of this Plan
shall be final and binding on all interested persons. No director or officer of
Company or any Related Corporation shall be liable for any action or
determination made in good faith with respect to this Plan or any Option granted
under this Plan.
4. ISO PROVISIONS. To the extent that the following provisions are
necessary in order to qualify an Option as an "incentive stock option" under the
Code, and then only to the extent of such necessity, each Employee Stock Option
Agreement (as defined in Section 5) covering an ISO granted by Company shall
include the following provisions:
(a) Each ISO must be granted within ten (10) years from the Effective
Date.
(b) No ISO shall be exercisable after the expiration of ten (10) years
from the date such ISO is granted.
(c) The option price of each Share under each ISO shall not be less than
the Fair Market Value (as defined below) of such Share at the time such ISO is
granted. For purposes hereof, the "FAIR MARKET VALUE" of a Share shall, if the
Stock is publicly traded, be determined as of the last business day for which
the prices or quotes discussed in this sentence are available prior to the date
such ISO is granted and shall mean (i) the average (on that date) of the high
and low per share prices of the Stock on the principal national securities
exchange on which the Stock is traded, if the Stock is then traded on a national
securities exchange; or (ii) the last reported sale price per share (on that
date) of the Stock on the NASDAQ National Market List, if the Stock is not then
traded on a national securities exchange; or (iii) the closing per share bid
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price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Stock is not reported
on the NASDAQ National Market List. However, if the Stock is not publicly traded
at the time an Option is granted under this Plan, Fair Market Value shall be
deemed to be the per share fair value of the Stock as determined by the Board
after taking into consideration all factors which it deems appropriate
(including, without limitation, any recent sale and offer prices of the Stock in
private transactions negotiated at arm's length).
(d) Notwithstanding the provisions of subsections (b) and (c) above, in
the case of an ISO to be granted to an employee who, applying the rules of
attribution set forth in Section 424(d) of the Code, owns shares of Stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of Company (or, if applicable, of the Related Corporation who
employs such employee), (i) the per share option price shall not be less than
one hundred ten percent (110%) of the per share Fair Market Value of the Stock
at the time such ISO is granted, and (ii) the ISO shall not be exercisable after
the expiration of five (5) years from the date such ISO is granted.
(e) No ISO shall be transferable by the optionee otherwise than by will or
the laws of descent and distribution, and each ISO shall be exercisable, during
the optionee's lifetime, only by the optionee.
5. EMPLOYEE STOCK OPTION AGREEMENT. The grant of each Option shall be
evidenced by the execution and delivery by Company and the optionee of an option
agreement ("EMPLOYEE STOCK OPTION AGREEMENT") containing such terms and
conditions, subject to the provisions of this Plan, as may be determined by the
Board or by one or more officers of Company designated by the Board. Without
limiting the generality of the foregoing:
(a) the provisions of the Employee Stock Option Agreements need not
be the same;
(b) the provisions of this Plan (including, without limitation, Section 4)
shall not prohibit the inclusion of other restrictions or more restrictive
provisions in the Employee Stock Option Agreement for any Option; and
(c) the provisions of Section 4 shall not prohibit the inclusion of one or
more of the restrictions set forth therein in the Employee Stock Option
Agreement for any NQO (or, in the event that at the time of the grant of an
Option intended to qualify as an "incentive stock option" under the Code any
such restriction is not required by the Code, for any such option).
6. ADJUSTMENTS. Upon the occurrence of any of the following events,
an optionee's rights with respect to any Option granted to such optionee under
this Plan shall, subject to the provisions of Section 7 and except as may
otherwise be specifically provided in the Employee Stock Option Agreement
relating to such Option, be adjusted as follows:
(a) If the outstanding shares of Stock shall be subdivided or combined
into a greater or smaller number of shares or if Company shall issue any shares
of Stock as a stock dividend on
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its outstanding Stock, the number of shares of Stock deliverable upon the
exercise of such Option shall be proportionately increased or decreased (as the
case may be), and appropriate adjustments shall be made in the option price per
share to reflect such subdivision, combination, or stock dividend. Such changes
shall be made in such manner as the Board may reasonably determine to be
equitable, and any such changes so made by the Board shall be final and binding
upon such optionee.
(b) In the event of a merger, consolidation, acquisition,
recapitalization, or other reorganization involving Company pursuant to which
securities of Company or of another corporation are issued with respect to the
outstanding shares of the Stock, the optionee, upon exercising such Option,
shall be entitled to receive for the option price paid upon such exercise the
securities the optionee would have received if the optionee had exercised such
Option immediately prior to such event.
(c) In the event of the sale of all or substantially all of the assets of
Company, the dissolution of Company, or the adoption of a plan of liquidation of
Company, such option will terminate immediately prior to the consummation of the
proposed action or at such other time and subject to such other conditions as
shall be determined by the Board.
(d) Except as expressly provided in this Section, no issuance by Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of the Shares subject to any Options
granted under this Plan. Furthermore, no adjustments shall be made for dividends
paid in cash or in property other than securities of company.
(e) No fractional shares shall be issued under this Plan, and the optionee
shall receive from Company cash in lieu of any such fractional shares.
(f) Upon the happening of any of the events described in subsections (a)
or (b) above, the Aggregate Number of Shares shall also be appropriately
adjusted.
(g) If any employee owning restricted Shares obtained by exercise of an
Option granted under this Plan receives additional shares or other securities in
connection with a transaction described in subsections (a) or (b) above as a
result of owning such restricted Shares, then, unless otherwise determined by
the Board, such additional shares or other securities shall be subject to all of
the terms, conditions, and restrictions applicable to the restricted Shares with
respect to which such additional shares or other securities were issued.
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<PAGE>
7. ACCELERATION OF OPTION EXERCISE DATE UPON ACQUISITION
(a) Consequences of an Acquisition.
(i) ACQUISITION INTENDED TO BE ACCOUNTED FOR AS A
POOLING-OF-INTERESTS. Upon the consummation of an Acquisition intended to be
accounted for as a pooling of interests: (x) all outstanding Options shall
remain the obligation of the Company or be assumed by the surviving or acquiring
entity, and there shall be automatically substituted for the shares of Stock
then subject to such Options the consideration payable with respect to the
outstanding shares of Stock in connection with the Acquisition and (y) the
vesting provisions of all Options shall become accelerated by an amount which
represents twenty-five percent (25%) of the remaining unvested portion of any
outstanding Options. In addition to the foregoing, on the first yearly
anniversary of the consummation of the Acquisition, with respect to employees
who remain employees of the Company or the surviving or acquiring entity
immediately following the consummation of the Acquisition and who continuously
remain as such through first anniversary of the consummation of the Acquisition,
on such first anniversary date, all Options then outstanding shall become
immediately exercisable in full and will terminate, to the extent unexercised,
on their scheduled expiration date.. In the event that any such employee who
remains an employee of the Company or the acquiring or surviving entity
immediately following the consummation of the Acquisition is terminated "WITHOUT
CAUSE" (as defined below) or terminates his or her own employment "FOR GOOD
REASON" (as defined below) prior to the first anniversary of the consummation of
the Acquisition, then the foregoing sentence shall be deemed to be immediately
applicable to such employee on such termination date.
Notwithstanding the foregoing paragraph, as to any employee, the remaining
unvested portion of any Option held by such person shall become vested and
exercisable in the event of an Acquisition to be treated as a pooling of
interests, if the acceleration of such vesting is otherwise set forth in any
employment offer letter, employment agreement, option agreement or other
agreement with such person and such offer or agreement is executed at the time
of, or reasonably contemporaneous with, the initial employment of the employee.
It shall be deemed to be a constructive termination "WITHOUT CAUSE" or
"FOR GOOD REASON" if: (i) the optionee's responsibilities and executive
authority are reduced or diluted in any material way without the optionee's
written consent; (ii) the optionee's annual salary or bonus arrangement is
reduced in any material way without written consent; (iii) the optionee is
relocated to another office or facility to a location outside of a radius of 25
miles from any Company facility at which the optionee was employed at the time
of the Acquisition and without the optionee's written consent; (iv) there occurs
a termination of optionee's rights to any benefits to which he is entitled to or
a reduction in scope or value thereof without the prior written consent of the
optionee; (v) there occurs an Acquisition, unless the successor to which all or
a significant portion of the Company's business and/or assets have been
transferred (directly or by operation of law) shall have assumed all duties and
obligations of the Company under this Plan.
(ii) ACQUISITION INTENDED TO BE ACCOUNTED FOR UNDER THE PURCHASE
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<PAGE>
METHOD. Unless otherwise expressly provided in the applicable Option, upon the
occurrence of an Acquisition intended to be accounted for under the purchase
method, the Board or the board of directors of the surviving or acquiring entity
(as used in this Section 7(a)(ii), also the "BOARD"), shall, as to outstanding
Options (on the same basis or on different bases, as the Board shall specify),
make appropriate provision for the continuation of such Options by the Company
or the assumption of such Options by the surviving or acquiring entity and by
substituting on an equitable basis for the shares then subject to such Options
either (A) the consideration payable with respect to the outstanding shares of
Stock in connection with the Acquisition, (B) shares of stock of the surviving
or acquiring corporation or (C) such other securities as the Board deems
appropriate, the fair market value of which (as determined by the Board in its
sole discretion) shall not materially differ from the fair market value of the
shares of Stock subject to such Options immediately preceding the Acquisition.
In addition to or in lieu of the foregoing, with respect to outstanding Options,
the Board may, upon written notice to the affected optionees, provide that one
or more Options must be exercised, to the extent then exercisable or to be
exercisable as a result of the Acquisition, within a specified number of days of
the date of such notice, at the end of which period such Options shall
terminate; or terminate one or more Options in exchange for a cash payment equal
to the excess of the fair market value (as determined by the Board in its sole
discretion) of the shares subject to such Options (to the extent then
exercisable or to be exercisable as a result of the Acquisition) over the
exercise price thereof.
The Board or the board of directors of any entity assuming the obligations
of the Company hereunder, may, as to outstanding Options, also take one or more
of the following actions: (i) accelerate the date of exercise of such Options or
of any installment of any such Options; or (ii) terminate all Options in
exchange for the right to participate in any stock option or other employee
benefit plan of any successor corporation.
The foregoing provisions are subject in all instances to the approval of
the Board and any accounting considerations for any acquisition which is
intended to be treated as a "pooling of interests" transaction pursuant to the
Accounting Principles Board (APB) Opinion No. 16, if any discretionary action by
the Board of Directors would otherwise violate the accounting rules for
treatment of the Acquisition as a "pooling of interests" under APB No. 16.
B. ACQUISITION DEFINED. An "ACQUISITION" shall mean: (x) any merger,
consolidation or purchase of outstanding capital stock of the Company after
which the voting securities of the Company outstanding immediately prior thereto
represent (either by remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity) less than 50% of the combined
voting power of the voting securities of the Company or such surviving or
acquiring entity outstanding immediately after such event (other than as a
result of a financing transaction); or (y) any sale of all or substantially all
of the capital stock or assets of the Company (other than in a spin-off or
similar transaction).
C. POOLING-OF-INTERESTS ACCOUNTING. If the Company proposes to engage
in an Acquisition intended to be accounted for as a pooling-of-interests, and in
the event that the provisions of this Plan or of any Option hereunder, or any
actions of the Board taken in connection with such Acquisition, are determined
by the Company's or the acquiring company's
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<PAGE>
independent public accountants to cause such Acquisition to fail to be accounted
for as a pooling-of-interests, then such provisions or actions shall be amended
or rescinded by the Board, without the consent of any optionee, to be consistent
with pooling-of-interests accounting treatment for such Acquisition.
D. PARACHUTE PAYMENTS AND PARACHUTE AWARDS. Notwithstanding the
provisions of Section 7(a)(i), if, in connection with an Acquisition described
therein, a tax under Section 4999 of the Code would be imposed on the
Participant (after taking into account the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code), then the number of Options which shall
become exercisable, realizable or vested as provided in such section shall be
reduced (or delayed), to the minimum extent necessary, so that no such tax would
be imposed on the optionee (the Options not becoming so accelerated, realizable
or vested, the "PARACHUTE AWARDS"); PROVIDED, HOWEVER, that if the "AGGREGATE
PRESENT VALUE" of the Parachute Options would exceed the tax that, but for this
sentence, would be imposed on the optionee under Section 4999 of the Code in
connection with the Acquisition, then the Options shall become immediately
exercisable, realizable and vested without regard to the provisions of this
sentence. For purposes of the preceding sentence, the "AGGREGATE PRESENT VALUE"
of an Option shall be calculated on an after-tax basis (other than taxes imposed
by Section 4999 of the Code) and shall be based on economic principles rather
than the principles set forth under Section 280G of the Code and the regulations
promulgated thereunder. All determinations required to be made under this
Section 7(d) shall be made by the Company.
E. AMENDMENT OF AWARDS. The Board may amend, modify or terminate any
outstanding Option including, but not limited to, substituting therefor another
Option of the same or a different type, changing the date of exercise or
realization, and converting an ISO to a NQO, PROVIDED THAT, except as otherwise
provided in Section 7(c), the optionee's consent to such action shall be
required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the optionee.
F. CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Option have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the optionee has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
G. ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, or otherwise realizable
in full or in part, as the case may be, despite the fact that the foregoing
actions may (i) cause the application of Sections 280G and 4999 of the Code if a
change in control of the Company occurs, or (ii) disqualify all or part of the
Option as an ISO.
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<PAGE>
8. EMPLOYMENT STATUS. Nothing in this Plan shall be deemed to confer
upon any optionee any right with respect to employment or continued employment
by Company or any Related Corporation for any period of time. Neither the grant
of any Option or the exercise thereof shall interfere in any way with the right
of Company or any Related Corporation at any time to terminate the employment of
any optionee.
9. EXPIRATION OR TERMINATION OF OPTIONS. If any Option granted under
this Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part,
then the unpurchased Shares subject to such Option shall again be available for
grants of Options under this Plan.
10. AMENDMENT, SUSPENSION, TERMINATION, OR WAIVER. The Board may at any
time amend, suspend, or terminate this Plan or waive the benefit of any of the
rights afforded to Company under any Option granted pursuant to this Plan;
provided, that the Board may not increase the Aggregate Number of Shares unless
such increase is approved by the shareholders of Company within twelve (12)
months after the Board adopts a resolution authorizing such increase.
11. CONVERSION OF ISOS. The Board, in its sole discretion following
receipt of a written request by any optionee, may take such actions as may be
necessary to convert any outstanding ISO (or any remaining installment or other
portion thereof) previously granted to such optionee into an NQO at any time
prior to the expiration of such ISO, regardless of whether the optionee is an
employee of Company or a Related Corporation at the time of such conversion.
Such actions may include, but not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments) of such Option.
At the time of such conversion, the Board may impose such conditions on the
exercise of any resulting NQO as the Board in its discretion may determine, so
long as such conditions are not inconsistent with this Plan. Nothing in this
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into NQOs, and no such conversion shall occur unless and until the
Board takes appropriate action.
12. APPLICATION OF FUNDS. The proceeds received by Company from the sale
of Shares pursuant to Options granted under this Plan shall be used for
Company's general corporate purposes.
13. GOVERNMENTAL REGULATION. Company's obligation to sell and deliver
Shares under this Plan or under any Employee Stock Option Agreement is subject
to Company obtaining all required approvals of all governmental authorities
having jurisdiction over the authorization, issuance, or sale of such Shares.
14. GOVERNING LAW. This Plan, and all Employee Stock Option Agreements
executed and delivered pursuant hereto, shall be governed by and construed in
accordance with the laws of the State of New Hampshire.
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15. DURATION OF PLAN. This Plan shall terminate at the expiration of
ten(10) years from the Effective Date unless this Plan is sooner terminated by
the Board. Any Option outstanding under this Plan at the time of the termination
or suspension of this Plan shall remain in effect until such Option shall have
been exercised or shall have expired in accordance with the terms and conditions
of the Employee Stock Option Agreement relating to such Option.
* * * *
Register of Amendments
DATE SECTION AFFECTED CHANGE
April 1, 1999 1 Revised par value and shares
authorized to be issued under
the Plan
April 13, 1999 7 Deleted in its entirety and
replaced
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<PAGE>
EXHIBIT 99.5
INSITE MARKETING TECHNOLOGY, INC.
1997 STOCK OPTION PLAN
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for InSite Marketing
Technology, Inc. (the "Company") and its shareholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 shall apply only to Incentive Stock Options (as that
term is defined in the Plan).
2. TYPES OF OPTIONS AND ADMINISTRATION.
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan ("Options")
shall be authorized by action of the Board of Directors of the Company and may
be either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or non-statutory Options which are not
intended to meet the requirements of Section 422 of the Code. All Options when
granted are intended to be non-statutory Options, unless the applicable Option
Agreement (as defined below) explicitly states that the Option is intended to be
an Incentive Stock Option. If an Option is intended to be an Incentive Stock
Option, and if for any reason such Option (or any portion thereof) shall not
qualify as an Incentive Stock Option, then, to the extent of such
nonqualification, such Option (or portion thereof) shall be regarded as a
non-statutory Option appropriately granted under the Plan provided that such
Option (or portion thereof) otherwise meets the Plan's requirements relating to
non-statutory Options.
(b) ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's common
stock, $.01 par value ("Common Stock"), and issue shares upon exercise of such
Options as provided in the Plan. The Board shall have authority, subject to the
express provisions of the Plan, to construe the respective Option Agreements and
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective Option Agreements,
which need not be identical, and to make all other determinations in the
judgment of the Board of Directors necessary or desirable for the administration
of the Plan. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option Agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. No director
or person acting pursuant to authority delegated by the Board of Directors shall
be liable for any action or determination under the Plan made in good faith. The
Board of Directors may, to the full extent permitted by or consistent with
applicable laws or regulations (including, without limitation, applicable state
law, delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
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<PAGE>
3. ELIGIBILITY.
Options may be granted to persons who are, at the time of such grant,
employees, officers or directors of, or consultants or advisors to, the Company;
PROVIDED, that the class of persons to whom Incentive Stock Options may be
granted shall be limited to employees of the Company.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 14 below, the maximum
number of shares of Common Stock of the Company which may be issued under the
Plan is 150,000 shares. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject to such
Option shall again be available for subsequent Option grants under the Plan. If
shares issued upon exercise of an Option are tendered to the Company in payment
of the exercise price of an Option, such tendered shares shall again be
available for subsequent Option grants under the Plan; provided that in no event
shall the total number of shares issued pursuant to the exercise of Incentive
Stock Options under the Plan, on a cumulative basis, exceed the number of shares
authorized for issuance under the Plan, exclusive of shares made available for
issuance pursuant to this sentence.
5. FORMS OF OPTION AGREEMENTS.
(a) OPTION AGREEMENT. As a condition to the grant of an Option, each
recipient of an Option shall execute an option agreement ("Option Agreement") in
such form not inconsistent with the Plan as may be approved by the Board of
Directors. Such Option Agreements may differ among recipients.
(b) "STAND-OFF" AGREEMENT. Unless the Board of Directors specifies
otherwise, each Option Agreement shall provide that upon the request of the
Company or the managing Underwriter(s), the holder of any Option shall, in
connection with an initial public offering of the Company's common stock, agree
in writing that for a period of time (not to exceed 180 days) from the effective
date of the Securities and Exchange Commission registration statement for such
offering, the holder or purchaser will not sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any shares of the
Company's common stock owned or controlled by him.
6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of stock deliverable upon the
exercise of an Option shall be determined by the Board of Directors, PROVIDED,
HOWEVER, that in the case of an Incentive Stock Option, the exercise price shall
not be less than 100% of the fair market value of such stock, as determined by
the Board of Directors at the time of grant of such Option, or less than 110% of
such fair market value in the case of Options described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Option Agreements may provide for the
payment of the exercise price by delivery of cash or a check to the order of the
Company in an amount equal to the exercise price of such Options, or, to the
extent provided in the applicable Option Agreement, (i) by delivery to the
Company of shares of Common Stock of the Company then owned by the optionee
having a fair market value equal in amount to the exercise price of the Options
being exercised, (ii) by any other means (including, without limitation, by
delivery of a promissory note of the optionee payable on such terms as are
specified by the Board of Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable laws and
regulations, or (iii) by any combination of such methods of payment. The fair
market value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an Option shall be
determined by the Board of Directors.
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<PAGE>
7. OPTION PERIOD.
Each Option and all rights thereunder shall expire on such date as
shall be set forth in the applicable Option Agreement, PROVIDED that, in any
event, in the case of an Incentive Stock Option, such date shall not be later
than 10 years after the date on which the Option is granted (or five years in
the case of Options described in Section 11(b)) and, in the case of
non-statutory Options, not later than 10 years after the dates on which the
Option is granted, and, in either case, shall be subject to earlier termination
as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each Option shall be exercisable either in full or in installments at
such time or times and during such period as shall be set forth in the agreement
evidencing such Option, subject to the provisions of the Plan.
9. NONTRANSFERABILITY OF OPTIONS.
No Option shall be assignable or transferable by the person to whom it
is granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution. During the life an optionee, an Option held by
him or her shall be exercisable only by the optionee. Notwithstanding the
foregoing, non-statutory Options may be transferred pursuant to a qualified
domestic relations order (as defined in SEC Rule 16b-3).
10. EFFECT OF TERMINATION.
No Incentive Stock Option may be exercised unless, at the time of such
exercise, the optionee is, and has continuously since the date of grant of his
or her Incentive Stock Option, been employed by the Company except that, unless
the Option Agreement expressly provides otherwise:
(a) except as provided in paragraphs (b) and (c) below, the
Incentive Stock Option may be exercised within the period of thirty (30) days
after the date the optionee ceases to be an employee of the Company for any
reason other than termination of the optionee's employment voluntarily by the
optionee or by the Company for cause (as determined by the Company) or within
thirty (30) days after the optionee's retirement in good standing from the
Company for reasons of age under the then established rules of the Company;
(b) if the optionee dies while in the employ of the Company,
the Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the period of
one year after the date of death (or within such lesser period as may be
specified in the applicable Option Agreement); and
(c) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date the optionee ceases to be such an employee
because of such disability (or within such lesser period as may be specified in
the applicable Option Agreement); PROVIDED, HOWEVER, that (i) any Incentive
Stock Option may only be exercised to the extent such Option was exercisable by
the optionee on the date of termination of the optionee's employment with the
Company and (ii) in no event may any Incentive Stock Option be exercised after
the expiration date of the Incentive Stock Option. For all purposes of the Plan
and any Incentive Stock Option granted hereunder, "employment" shall be defined
in accordance with the provisions of Section 1.421-7(h) of the Income Tax
Regulations (or any successor regulations).
Unless the applicable Option Agreement expressly provides otherwise, a
non-statutory Option granted to an employee shall be subject to the foregoing
provisions of this Section 10 as if it were an Incentive Stock Option, but a
non-statutory Option may also be exercised so long as the optionee maintains a
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<PAGE>
relationship with the Company as a director, consultant, or adviser.
11. INCENTIVE STOCK OPTIONS.
Options which are intended to be Incentive Stock Options shall be
subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options shall, at the time
of grant, be specifically designated as such in the Option Agreement covering
such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option
is to be granted is, at the time of the grant of such Option, the owner of stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (after taking into account the attribution of stock
ownership rules of Section 424(d) of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years
from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide,
Options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
12. ADDITIONAL PROVISIONS.
(a) ADDITIONAL PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in Option Agreements, including
without limitation restrictions on transfer, rights of the Company to repurchase
shares of Common Stock acquired upon exercise of Options or rights of first
refusal of the Company with respect to such shares, commitments to pay cash
bonuses, to make, arrange for or guaranty loans or to transfer other property to
optionees upon exercise of Options, or such other provisions as shall be
determined by the Board of Directors; PROVIDED THAT such additional provisions
shall not be inconsistent with any other term or condition of the Plan and such
additional provisions shall not be such as to cause any Incentive Stock Option
to fail to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its
sole discretion, (i) accelerate the date or dates on which all or any particular
Option or Options may be exercised or (ii) extend the dates during which all, or
any particular, Option or Options may be exercised; PROVIDED, HOWEVER, that no
such extension shall be permitted if it would cause the Plan to fail to comply
with Section 422 of the Code.
13. RIGHTS AS A SHAREHOLDER.
The holder of an Option shall have no rights as a shareholder with
respect to any shares covered by the Option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
-4-
<PAGE>
14. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger, consolidation,
sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding Options, and (z)
the price for each share subject to any then outstanding Options, without
changing the aggregate purchase price as to which such Options remain
exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 14 if such adjustment would cause the Plan to fail to comply
with Section 422 of the Code.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 14 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
15. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of all
or substantially all of the stock or assets of the Company in which outstanding
shares of Common Stock are exchanged for securities, cash or other property of
any other corporation or business entity or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to some or all outstanding
Options (and need not take the same action as to each such Option: (i) provide
that such Options shall be assumed, or equivalent Options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), PROVIDED
that any such Options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written notice to the
optionees, provide that all unexercised Options will terminate immediately prior
to the consummation of such transaction unless exercised by the optionee within
a specified period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding Options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding Options in exchange for the
termination of such Options, and (iv) provide that all or any outstanding
Options shall become exercisable in full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant Options in substitution
for Options held by employees of another corporation who become employees of the
Company, or a subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or a subsidiary of
the Company, or as a result of the acquisition by the Company, or one of its
subsidiaries, of property or stock of the employing corporation. The Company may
direct that substitute Options be granted on such terms and conditions as the
Board of Directors considers appropriate in the circumstances.
16. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any Option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the
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<PAGE>
Company at any time to terminate such employment or to increase or decrease the
compensation of the optionee.
17. OTHER EMPLOYEE BENEFITS.
The amount of any compensation deemed to be received by an employee as
a result of the grant or exercise of an Option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
18. AMENDMENT OF THE PLAN.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the shareholders of the Company is required under Section 422 of the Code or
any successor provision with respect to Incentive Stock Options, the Board of
Directors may not effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
Option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding Option Agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify the terms and provisions of the Plan and of any
outstanding Incentive Stock Options to the extent necessary to qualify any or
all such Options for such favorable federal income tax treatment (including
deferral of taxation upon exercise) as may be afforded incentive stock options
under Section 422 of the Code.
19. WITHHOLDING.
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to issuance of any shares upon
exercise of Options. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the obligor may elect to satisfy
such obligations, in whole or in part, (i) by causing the Company to withhold
shares of Common Stock otherwise issuable or (ii) by delivering to the Company
shares of Common Stock already owned by the obligor. The shares so delivered or
withheld shall have a fair market value equal to such withholding obligation.
The fair market value of the shares used to satisfy such withholding obligation
shall be determined by the Company as of the date that the amount of tax to be
withheld is to be determined. A person who has made an election pursuant to this
Section 19 may only satisfy his or her withholding obligation with shares of
Common Stock which are not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.
20. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option shall become exercisable
unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no Options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan not
requiring shareholder approval shall become effective when adopted by the Board
of Directors; amendments requiring shareholder approval (as provided in Section
18) shall become effective when adopted by the Board of Directors, but no
Incentive Stock Option granted after the date of such amendment shall become
exercisable (to the extent that such amendment to the Plan was required to
enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or
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<PAGE>
after the date of such amendment shall terminate to the extent that such
amendment to the Plan was required to enable the Company to grant such Option to
a particular optionee. Subject to this limitation, Options may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 15
or by the Board of Directors the Plan shall terminate upon the close of business
on the day next preceding the tenth anniversary of the date of its adoption by
the Board of Directors. Options outstanding on such date shall continue in force
and effect in accordance with the provisions of the Plan and those Option
Agreements.
21. RESTRICTION ON TRANSFER OR EXERCISE TO PRESERVE THE COMPANY'S
S-CORPORATION STATUS.
In addition to any other restriction on the transfer or encumbrance of
Common Stock acquired upon exercise of an Option, no holder thereof may transfer
any shares of such Common Stock whether by sale, gift, bequest, operation of
law, or otherwise, if, in the opinion of legal counsel to the Company, transfer
might result in the termination of the Company's S-corporation status for any
reason (including by reason of creating more than the allowed number of
shareholders under Section 1361 of the Code). No such holder may encumber Common
Stock of the Company acquired upon exercise of any Option if, in the opinion of
legal counsel to the Company, a possible result thereof might be a subsequent
transfer prohibited under the immediately preceding sentence. Any such transfer
or encumbrance in violation of this Section 21 shall be null and void and shall
not be recognized on the books and records of the Company, and the holder making
the purported transfer shall retain the right to vote and receive distributions
and shall continue to report the share of income or loss allocated by the
Company to such holder for tax purposes.
No Option granted hereunder may be exercised if, in the opinion of
legal counsel to the Company, such exercise might result in termination of the
Company's S-corporation status for any reason (including by reason of creating
more than the allowed number of shareholders under Section 1361 of the Code),
except that this provision shall not postpone the right of exercise of any
Option beyond its expiration.
22. PROVISION FOR FOREIGN PARTICIPANTS.
The Board of Directors may, without amending the Plan, modify the terms
of Option Agreements to differ from those specified in the Plan with respect to
participants who are foreign nationals or employed outside the United States to
recognize differences in laws, rules, regulations or customs of such foreign
jurisdictions with respect to tax, securities, currency, employee benefit or
other matters.
* * *
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<PAGE>
EXHIBIT 99.6
KANA COMMUNICATIONS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SILKNET SOFTWARE, INC.
EMPLOYEE STOCK OPTION PLAN
1999 STOCK OPTION AND STOCK INCENTIVE PLAN
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
INSITE MARKETING TECHNOLOGY, INC. 1997 STOCK OPTION PLAN
OPTIONEE: (First Name) (Last Name),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 6th day of
February, 2000.
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Silknet Software,
Inc., a Delaware corporation ("Silknet"), which were granted to Optionee under
one or more of the following stock option plans (the "Plans"): the Silknet
Employee Stock Option Plan, 1999 Stock Option and Stock Incentive Plan, 1999
Non-Employee Director Stock Option Plan, or the Insite Marketing Technology,
Inc. 1997 Stock Option Plan, as previously assumed by Silknet.
WHEREAS, each of those options is evidenced by a Stock Option
Agreement (the "Option Agreement") issued to Optionee under the applicable Plan.
WHEREAS, Silknet has been acquired by Kana Communications, Inc., a
Delaware corporation ("Kana") through the merger of Silknet with and into Kana
(the "Merger") pursuant to the Agreement and Plan of Reorganization, by and
between Kana and Silknet, dated February 6, 2000 (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of Silknet under each outstanding option under the Plans to be
assumed by Kana at the consummation of the Merger and the holder of each
outstanding option to be issued an agreement evidencing the assumption of such
option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 1.66 of a
share of Kana common stock ("Kana Stock") for each outstanding share of Silknet
common stock ("Silknet Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption
by Kana of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to those options which have become necessary in connection with
their assumption by Kana in the Merger.
<PAGE>
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Silknet Stock subject to the options held
by Optionee immediately prior to the Effective Time (the "Silknet Options") and
the exercise price payable per share are set forth below. Kana hereby assumes,
as of the Effective Time, all the duties and obligations of Silknet under each
of the Silknet Options. In connection with such assumption, the number of shares
of Kana Stock purchasable under each Silknet Option hereby assumed and the
exercise price payable thereunder have been adjusted to reflect the Exchange
Ratio. Accordingly, the number of shares of Kana Stock subject to each Silknet
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of Kana Stock under the assumed
Silknet Option shall also be as indicated for that option below.
<TABLE>
<CAPTION>
- ------------------------------------------------- -----------------------------------------------
SILKNET STOCK OPTIONS KANA ASSUMED OPTIONS
- ------------------------------------------------- -----------------------------------------------
- -------------------------- ---------------------- -------------------- --------------------------
<S> <C> <C> <C>
# of Shares
# of Shares of Silknet Exercise Price of Kana Adjusted Exercise
Common Stock per Share Common Stock Price per Share
- -------------------------- ---------------------- -------------------- --------------------------
Silknet Shares $Silknet Price (Kana Shares) $(Kana Price)
- -------------------------- ---------------------- -------------------- --------------------------
</TABLE>
2. The intent of the foregoing adjustments to each assumed Silknet
Option is to assure that the spread between the aggregate fair market value of
the shares of Kana Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will not, immediately
after the consummation of the Merger, be greater than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the Silknet Stock subject to the Silknet Option and the aggregate exercise price
in effect at such time under the Option Agreement. Such adjustments are also
intended to preserve, immediately after the Merger, on a per share basis, the
same ratio of exercise price per option share to fair market value per share
which existed under the Silknet Option immediately prior to the Merger.
3. Each Silknet Option shall continue to have a maximum term of ten
(10) years from the date of grant, subject to earlier termination (as provided
in the applicable Option Agreement) following Optionee's cessation of service or
employment.
4. The following provisions shall govern each Silknet Option hereby
assumed by Kana:
(a) Unless the context otherwise requires, all references in
each Option Agreement and the applicable Plan (to the extent
incorporated into such Option Agreement) shall be adjusted as follows:
(i) all references to the "Company" shall mean Kana, (ii) all
references to "Stock," "Common Stock" or "Shares" shall mean shares of
Kana Stock, (iii) all references to the "Board" shall mean the Board
of Directors of Kana and (iv) all references to the "Committee" shall
mean the Compensation Committee of the Kana Board of Directors.
2
<PAGE>
(b) Except as modified by this Agreement, the grant date and
the expiration date of each assumed Silknet Option and all other
provisions which govern either the exercise or the termination of the
assumed Silknet Option shall remain the same as set forth in the
Option Agreement applicable to that option, and the provisions of the
applicable Plan and the Option Agreement shall accordingly govern and
control Optionee's rights under this Agreement to purchase Kana Stock
under the assumed Silknet Option.
(c) Each Silknet Option assumed by Kana which was originally
designated as an Incentive Stock Option under the federal tax laws
shall retain such Incentive Stock Option status to the maximum extent
allowed by law.
(d) Each Silknet Option hereby assumed by Kana shall
continue to vest and become exercisable in accordance with the same
installment vesting schedule in effect for that option under the
applicable Option Agreement immediately prior to the Effective Time;
except, that the number of shares subject to each such installment
shall be adjusted to reflect the Exchange Ratio.
(e) For purposes of applying any and all provisions of the
Option Agreement and the applicable Plan relating to Optionee's status
as an employee or a consultant of Silknet, Optionee shall be deemed to
continue in such status as an employee or a consultant for so long as
Optionee renders services as an employee or a consultant to Kana or
any present or future majority-owned Kana subsidiary. Accordingly, the
provisions of the Option Agreement governing the termination of the
assumed Silknet Options upon Optionee's cessation of service as an
employee or a consultant of Silknet shall hereafter be applied on the
basis of Optionee's cessation of employee or consultant status with
Kana and its subsidiaries, and each assumed Silknet Option shall
accordingly terminate, within the designated time period in effect
under the Option Agreement for that option, following such cessation
of employee or consultant status.
(f) The adjusted exercise price payable for the Kana Stock
subject to each assumed Silknet Option shall be payable in any of the
forms authorized under the Option Agreement applicable to that option.
For purposes of determining the holding period of any shares of Kana
Stock delivered in payment of such adjusted exercise price, the period
for which such shares were held as Silknet Stock prior to the Merger
shall be taken into account.
(g) In order to exercise each assumed Silknet Option,
Optionee must deliver to Kana a written notice of exercise in which
the number of shares of Kana Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of Kana Stock
and should be delivered to Kana at the following address:
3
<PAGE>
Kana Communications, Inc.
740 Bay Road
Redwood City, CA 94063
Attention: Stephanie Kuo
5. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
IN WITNESS WHEREOF, Kana Communications, Inc. has caused this Stock
Option Assumption Agreement to be executed on its behalf by its duly-authorized
officer as of the 6th day of February, 2000.
KANA COMMUNICATIONS, INC.
By:
----------------------------------------
Frank Huang, VP, General Counsel
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Silknet Options hereby assumed by Kana are as set
forth in the Option Agreement, the applicable Plan and such Stock Option
Assumption Agreement.
---------------------------------------
(First Name) (Last Name), OPTIONEE
DATED: __________________, 2000
4
<PAGE>
EXHIBIT 99.7
12 MONTHS ACCELERATION
KANA COMMUNICATIONS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SILKNET SOFTWARE, INC.
EMPLOYEE STOCK OPTION PLAN
1999 STOCK OPTION AND STOCK INCENTIVE PLAN
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
INSITE MARKETING TECHNOLOGY, INC. 1997 STOCK OPTION PLAN
OPTIONEE: (First Name) (Last Name),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 6th day of February,
2000.
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Silknet Software,
Inc., a Delaware corporation ("Silknet"), which were granted to Optionee under
one or more of the following stock option plans (the "Plans"): the Silknet
Employee Stock Option Plan, 1999 Stock Option and Stock Incentive Plan, 1999
Non-Employee Director Stock Option Plan, or the Insite Marketing Technology,
Inc. 1997 Stock Option Plan, as previously assumed by Silknet.
WHEREAS, each of those options is evidenced by a Stock Option Agreement
(the "Option Agreement") issued to Optionee under the applicable Plan.
WHEREAS, Silknet has been acquired by Kana Communications, Inc., a Delaware
corporation ("Kana") through the merger of Silknet with and into Kana (the
"Merger") pursuant to the Agreement and Plan of Reorganization, by and between
Kana and Silknet, dated February 6, 2000 (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the obligations of
Silknet under each outstanding option under the Plans to be assumed by Kana at
the consummation of the Merger and the holder of each outstanding option to be
issued an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the exchange
ratio (the "Exchange Ratio") in effect for the Merger is 1.66 of a share of Kana
common stock ("Kana Stock") for each outstanding share of Silknet common stock
("Silknet Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption by
Kana of the outstanding options held by Optionee at the time of the consummation
of the Merger (the "Effective Time") and to reflect certain adjustments to those
options which have become necessary in connection with their assumption by Kana
in the Merger.
<PAGE>
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Silknet Stock subject to the options held by
Optionee immediately prior to the Effective Time (the "Silknet Options") and the
exercise price payable per share are set forth below. Kana hereby assumes, as of
the Effective Time, all the duties and obligations of Silknet under each of the
Silknet Options. In connection with such assumption, the number of shares of
Kana Stock purchasable under each Silknet Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Kana Stock subject to each Silknet Option
hereby assumed shall be as specified for that option below, and the adjusted
exercise price payable per share of Kana Stock under the assumed Silknet Option
shall also be as indicated for that option below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SILKNET STOCK OPTIONS KANA ASSUMED OPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
# of Shares of # of Shares
Silknet Exercise Price of Kana Adjusted Exercise
Common Stock per Share Common Stock Price per Share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Silknet Shares $Silknet Price (Kana Shares) $(Kana Price)
- --------------------------------------------------------------------------------
</TABLE>
2. The intent of the foregoing adjustments to each assumed Silknet Option
is to assure that the spread between the aggregate fair market value of the
shares of Kana Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will not, immediately
after the consummation of the Merger, be greater than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the Silknet Stock subject to the Silknet Option and the aggregate exercise price
in effect at such time under the Option Agreement. Such adjustments are also
intended to preserve, immediately after the Merger, on a per share basis, the
same ratio of exercise price per option share to fair market value per share
which existed under the Silknet Option immediately prior to the Merger.
3. Each Silknet Option shall continue to have a maximum term of ten (10)
years from the date of grant, subject to earlier termination (as provided in the
applicable Option Agreement) following Optionee's cessation of service or
employment.
4. The following provisions shall govern each Silknet Option hereby assumed
by Kana:
(a) Unless the context otherwise requires, all references in each
Option Agreement and the applicable Plan (to the extent incorporated into
such Option Agreement) shall be adjusted as follows: (i) all references to
the "Company" shall mean Kana, (ii) all references to "Stock," "Common
Stock" or "Shares" shall mean shares of Kana Stock, (iii) all references to
the "Board" shall
2
<PAGE>
mean the Board of Directors of Kana and (iv) all references to the
"Committee" shall mean the Compensation Committee of the Kana Board of
Directors.
(b) Except as modified by this Agreement, the grant date and the
expiration date of each assumed Silknet Option and all other provisions
which govern either the exercise or the termination of the assumed Silknet
Option shall remain the same as set forth in the Option Agreement
applicable to that option, and the provisions of the applicable Plan and
the Option Agreement shall accordingly govern and control Optionee's rights
under this Agreement to purchase Kana Stock under the assumed Silknet
Option.
(c) Each Silknet Option assumed by Kana which were originally
designated as Incentive Stock Options shall remain Incentive Stock Options
to the maximum extent allowed by law.
(d) Each Silknet Option hereby assumed by Kana shall continue to vest
and become exercisable in accordance with the same installment vesting
schedule in effect for that option under the applicable Option Agreement
immediately prior to the Effective Time, except that: (i) Optionee shall,
for purposes of such vesting schedule, be immediately credited with an
additional twelve (12) months of service as of the Effective Time so that
the vesting of each installment under the assumed Silknet Option shall be
accelerated by twelve (12) months and (ii) the number of shares subject to
each such installment shall be adjusted to reflect the Exchange Ratio.
(e) For purposes of applying any and all provisions of the Option
Agreement and the applicable Plan relating to Optionee's status as an
employee or a consultant of Silknet, Optionee shall be deemed to continue
in such status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to Kana or any present or
future majority-owned Kana subsidiary. Accordingly, the provisions of the
Option Agreement governing the termination of the assumed Silknet Options
upon Optionee's cessation of service as an employee or a consultant of
Silknet shall hereafter be applied on the basis of Optionee's cessation of
employee or consultant status with Kana and its subsidiaries, and each
assumed Silknet Option shall accordingly terminate, within the designated
time period in effect under the Option Agreement for that option, following
such cessation of employee or consultant status.
3
<PAGE>
(f) The adjusted exercise price payable for the Kana Stock subject to
each assumed Silknet Option shall be payable in any of the forms authorized
under the Option Agreement applicable to that option. For purposes of
determining the holding period of any shares of Kana Stock delivered in
payment of such adjusted exercise price, the period for which such shares
were held as Silknet Stock prior to the Merger shall be taken into account.
(g) In order to exercise each assumed Silknet Option, Optionee must
deliver to Kana a written notice of exercise in which the number of shares
of Kana Stock to be purchased thereunder must be indicated. The exercise
notice must be accompanied by payment of the adjusted exercise price
payable for the purchased shares of Kana Stock and should be delivered to
Kana at the following address:
Kana Communications, Inc.
740 Bay Road
Redwood City, CA 94063
Attention: Stephanie Kuo
5. Except to the extent specifically modified by this Option Assumption
Agreement, all of the terms and conditions of each Option Agreement as in effect
immediately prior to the Merger shall continue in full force and effect and
shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.
IN WITNESS WHEREOF, Kana Communications, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 6th day of February, 2000.
KANA COMMUNICATIONS, INC.
By:
--------------------------------
Frank Huang, VP, General Counsel
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Silknet Options hereby assumed by Kana are as set
forth in the Option Agreement, the applicable Plans and such Stock Option
Assumption Agreement.
-------------------------------------
(FIRST NAME) (LAST NAME), OPTIONEE
DATED: __________________, 2000
4
