<PAGE>
As filed with the Securities and Exchange Commission on March 14, 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
of incorporation or organization) Identification No.)
740 Bay Road
Redwood City, California 94063
(Address of principal executive offices) (Zip Code)
------------------------
KANA COMMUNICATIONS, INC.
1999 SPECIAL STOCK OPTION PLAN
1999 STOCK INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
(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
Title of Maximum Proposed
Securities Amount Offering Maximum Amount of
to be to be Price Aggregate Registration
Registered Registered(1) per Share(2) Offering Price Fee
- ----------------------------------------------- ------------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Kana Communications, Inc. 1999 Special
Stock Option Plan 261,736 shares $144.47 $ 37,813,000 $ 9,983
Common Stock, $0.001 par value 738,264 shares $ 15 11,073,960 2,924
Kana Communications, Inc. 1999
Stock Incentive Plan 2,583,100 shares $144.47 $373,180,457 $ 98,520
Common Stock, $0.001 par value
Kana Communications, Inc. 1999 Employee
Stock Purchase Plan 455,841 shares $144.47 $65,855,349 $ 17,385
Common Stock, $0.001 par value
4,038,941 shares Aggregate Registration Fee $128,812
-------------------- ------------
=================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of the
Registrant's Common Stock that become issuable under the Kana
Communications, Inc. 1999 Special Stock Option Plan, 1999 Stock Incentive
Plan, and 1999 Employee Stock Purchase 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 that results in an increase in the
number of the Registrant's outstanding shares of Common Stock.
(2) 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 closing selling price on March 7, 2000, except as to 738,264 shares
subject to options granted in December 1999 under the 1999 Special Stock
Option Plan, for which the calculation is based on the options' exercise
price.
<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 Registration Statement No. 333-82587 on Form S-1
filed with the Commission on July 9, 1999, as amended on Forms S-1/A
filed with the Commission on August 16, 1999, August 24, 1999,
September 2, 1999 and September 21, 1999.
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999, filed with the Commission on November 15,
1999.
(c) The Registrant's Current Report on Form 8-K filed with the Commission
on December 14, 1999, as amended on Form 8-K/A filed on February 14,
2000, and Current Report on Form 8-K filed on February 7, 2000.
(d) The Registrant's prospectus filed with the Commission on September 22,
1999, pursuant to Rule 424(b) promulgated under the Securities Act of
1933, as amended (the "1933 Act"), in connection with the Registrant's
Registration Statement No. 333-82587, in which there is set forth the
audited financial statements for the Registrant's fiscal year ended
December 31, 1998.
(e) The Registrant's Registration Statement on Form 8-A12G filed with the
Commission on August 27, 1999, including any amendments or reports
filed for the purpose of updating such description, 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
II-1
<PAGE>
damages for breach of the directors' fiduciary duty as directors to the
Registrant and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the directors' fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's 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 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(e).
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 Kana Communications, Inc. 1999 Special Stock Option Plan.
99.2 Kana Communications, Inc. 1999 Special Stock Option Plan -- Form
of Nonstatutory Stock Option Agreement - 4-year vesting.
99.3 Kana Communications, Inc. 1999 Special Stock Option Plan -- Form
of Nonstatutory Stock Option Agreement - 30-month vesting.
99.4* Kana Communications, Inc. 1999 Stock Incentive Plan.
99.5** Kana Communications, Inc. 1999 Employee Stock Purchase Plan.
* Exhibit 99.4 is incorporated herein by reference to Appendix 10 of
Registrant's Registration Statement No. 333-32428 on Form S-4 filed with
the Commission on March 14, 2000.
** Exhibit 99.5 is incorporated herein by reference to Exhibit 99.11 of
Registrant's Registration Statement No. 333-87505 on Form S-8 filed with
the Commission on September 21, 1999, as amended by Form S-8 POS, filed on
September 24, 1999.
II-2
<PAGE>
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 which remain unsold at the termination of the Kana
Communications, Inc. 1999 Special Stock Option Plan, 1999 Stock Incentive Plan,
and 1999 Employee Stock Purchase Plan .
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 14th day of March, 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 Mark S. Gainey and Joseph D. McCarthy, 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:
Signature Title Date
- --------- ----- ----
/s/ Michael J. McCloskey Chief Executive Officer and March 14, 2000
- ---------------------------- Director (Principal Executive
Michael J. McCloskey Officer)
/s/ Joseph D. McCarthy Vice President, Finance and March 14, 2000
- ---------------------------- Operations (Principal Financial
Joseph D. McCarthy and Accounting Officer)
/s/ Mark S. Gainey President and Chairman of March 14, 2000
- ---------------------------- the Board of Directors
Mark S. Gainey
Director March 14, 2000
- ----------------------------
David M. Beirne
II-4
<PAGE>
/s/ Robert W. Frick Director March 14, 2000
- ----------------------------
Robert W. Frick
/s/ Eric A. Hahn Director March 14, 2000
- ----------------------------
Eric A. Hahn
/s/ Charles A. Holloway Director March 14, 2000
- ----------------------------
Dr. Charles A. Holloway
/s/ Steven T. Jurvetson Director March 14, 2000
- ----------------------------
Steven T. Jurvetson
Director March 14, 2000
- ----------------------------
Ariel Poler
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(e).
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 Kana Communications, Inc. 1999 Special Stock Option Plan.
99.2 Kana Communications, Inc. 1999 Special Stock Option Plan -- Form
of Nonstatutory Stock Option Agreement - 4-year vesting.
99.3 Kana Communications, Inc. 1999 Special Stock Option Plan -- Form
of Nonstatutory Stock Option Agreement - 30-month vesting.
99.4* Kana Communications, Inc. 1999 Stock Incentive Plan.
99.5** Kana Communications, Inc. 1999 Employee Stock Purchase Plan.
* Exhibit 99.4 is incorporated herein by reference to Appendix 10 of
Registrant's Registration Statement No. 333-32428 on Form S-4 filed with
the Commission on March 14, 2000.
** Exhibit 99.5 is incorporated herein by reference to Exhibit 99.11 of
Registrant's Registration Statement No. 333-87505 on Form S-8 filed with
the Commission on September 21, 1999, as amended by Form S-8 POS, filed on
September 24, 1999.
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
March 14, 2000
Kana Communications, Inc.
740 Bay Road
Redwood City, California 94063
Re: Kana Communications, Inc. - Registration Statement for Offering
of 4,038,941 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 4,038,941 shares of the Company's common stock (the "Shares") for issuance
in the aggregate under the Kana Communications, Inc. Special Stock Option
Plan, 1999 Stock Incentive Plan, and 1999 Employee Stock Purchase Plan(the
"Plans").
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 and the corporate
proceedings taken by the Company in connection with the establishment of the
Plans. 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 provisions of the stock option agreements, stock issuance agreements or
stock purchase agreements duly authorized under the Plans 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 that hereafter may be brought to our attention and that 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 and Stockholders
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,
which report appears in the Company's Form S-4 (333-32428) filed with the
Securities and Exchange Commission on March 14, 1999.
We also consent to incorporation by reference herein of our report
dated August 13, 1999, except as to Note 8, which is as of September 20, 1999,
and our report dated June 25, 1999, except as to Note 7, which is as of
September 20, 1999, relating to the supplemental and historical consolidated
balance sheets, respectively, of Kana Communications, Inc. and subsidiaries as
of December 31, 1998 and 1997 and the related supplemental and historical
consolidated statements of operations and comprehensive loss, stockholders'
equity, and cash flows for each of the years then ended, which reports appear in
the Company's Form S-1 (333-82587) as filed with the Securities and Exchange
Commission on September 21, 1999.
/s/ KPMG LLP
Mountain View, California
March 14, 2000
<PAGE>
EXHIBIT 99.1
KANA COMMUNICATIONS, INC.
SPECIAL STOCK OPTION PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This Special Option Plan is intended to promote the interests of Kana
Communications, Inc., a Delaware corporation, by providing eligible persons in
the Corporation's service with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
All share numbers reflect the 2-for-1 split of the Common Stock that
was effected on February 22, 2000.
II. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Plan. However, the Board may appoint a Secondary Committee to
have separate but concurrent jurisdiction with the Primary Committee to make
option grants under the Plan within such parameters as the Board may prescribe.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the provisions of the
Plan and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan or any stock option thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such
<PAGE>
committee. No member of the Primary Committee or the Secondary Committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option grants or stock issuances under the Plan.
III. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees (other than Section 16 Insiders), and
(ii) any other individuals (including Section 16 Insiders)
who are to receive option grants under this Plan solely in connection with
their commencement to Employee status, whether as a result of an
acquisition of their former employer by the Corporation or any Parent or
Subsidiary or by reason of their initial hire by the Corporation or such
Parent or Subsidiary.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine
which eligible persons are to receive the option grants under the Plan, the time
or times when those grants are to be made, the number of shares to be covered by
each such grant, the time or times when each option is to become exercisable,
the vesting schedule (if any) applicable to the option shares and the maximum
term for which the option is to remain outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock reserved
for issuance over the term of the Plan shall not exceed One Million (1,000,000)
shares. Such share reserve shall be in addition to the Nine Million Four Hundred
Thousand (9,400,000) shares of Common Stock reserved for issuance under the
Corporation's 1999 Stock Incentive Plan. Accordingly, Common Stock issuances
under the 1999 Stock Incentive Plan shall not reduce the number of shares of
Common Stock available for issuance under this Plan, and Common Stock issuances
under this Plan shall not affect the number of shares of Common Stock available
for issuance under the 1999 Stock Incentive Plan.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Should the
exercise price of an option under the Plan be paid with shares of Common Stock
or should shares of Common Stock otherwise issuable under the Plan be withheld
by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an outstanding option under the Plan, then the
number of shares of Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is exercised, and not
by the net number of shares of Common Stock issued to the holder of such option.
2
<PAGE>
C. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of rights
and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
3
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each option granted under the Plan
shall be a Non-Statutory Option for Federal income tax purposes.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator in its sole discretion and may be less than the Fair Market Value
per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(iii) through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and
(b) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
4
<PAGE>
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. Accordingly, options may be granted under the Plan which do not
become exercisable in whole or in part prior to a specified date, unless certain
prescribed performance milestones or service requirements are satisfied or
attained prior to that date. However, no option shall have a term in excess of
ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any option held by the Optionee at the time of death
may be subsequently exercised, to the extent provided in the agreement
evidencing such option, by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance or by the
Optionee's designated beneficiary or beneficiaries of that option.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of shares of Common Stock for which such option is exercisable at
the time of the Optionee's cessation of Service but also with respect to
one or more additional installments for which the option would have become
exercisable had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
5
<PAGE>
E. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, the option may be assigned in whole or
in part during the Optionee's lifetime to one or more members of the Optionee's
family or to a trust established exclusively for one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under the Plan, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) any limited time period for the exercise of that option
following the Optionee's death.
II. CORPORATE TRANSACTION
A. Each option outstanding under the Plan at the time of a Corporate
Transaction shall automatically accelerate so that each such option shall,
immediately prior to the effective date of that Corporate Transaction, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. However, an outstanding option shall not become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise or vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also
6
<PAGE>
be made to the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same. To the extent the actual holders of the Corporation's outstanding
Common Stock receive cash consideration for their Common Stock in consummation
of the Corporate Transaction, the successor corporation may, in connection with
the assumption of the outstanding options under this Plan, substitute one or
more shares of its own common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Corporate Transaction.
D. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Plan so that those options
shall, immediately prior to the effective date of a Corporate Transaction,
become exercisable for all or a portion of the shares of Common Stock at the
time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock, whether or not those options are
to be assumed in the Corporate Transaction.
E. The Plan Administrator shall also have full power and authority
to structure one or more outstanding options under the Plan so that those
options shall immediately become exercisable for all or a portion of the shares
of Common Stock at the time subject to those options in the event the Optionee's
Service is subsequently terminated by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of a Corporate Transaction in which those options are assumed and
do not otherwise accelerate.
F. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7
<PAGE>
ARTICLE THREE
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee to pay the exercise
price for any outstanding option under the Plan by delivering a full-recourse,
interest bearing promissory note payable in one or more installments. The terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. In no event may the maximum credit available to the Optionee exceed
the sum of (i) the aggregate option exercise price payable for the purchased
shares (less the par value of such shares) plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee in connection
with the option exercise.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their
options. Such right may be provided to any such holder in either or both of the
following formats:
Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised, one or more shares of Common
Stock previously acquired by such holder (other than in connection with the
option exercise or share vesting triggering the Withholding Taxes) with an
aggregate Fair Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
8
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon adoption by the
Board. The Plan shall terminate upon the earliest to occur of (i) December 15,
2009, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Should the Plan
terminate on December 15, 2009, then all option grants outstanding at that time
shall continue to have force and effect in accordance with the provisions of the
documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options at the time outstanding under the Plan unless the Optionee
consents to such amendment or modification.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock upon the exercise
of any granted option shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the shares of Common Stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
9
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Code shall mean the Internal Revenue Code of 1986, as amended.
C. Common Stock shall mean the Corporation's common stock.
D. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
E. Corporation shall mean Kana Communications, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Kana Communications, Inc. which shall by appropriate
action adopt the Plan.
F. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
G. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
H. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
<PAGE>
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
I. Involuntary Termination shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her duties and responsibilities or the level of management to which
he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and percentage target bonus under
any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
J. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).
K. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
L. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
M. Optionee shall mean any person to whom an option is granted under
the Plan.
A-2
<PAGE>
N. Parent shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. Plan shall mean the Corporation's Special Stock Option Plan, as
set forth in this document.
P. Plan Administrator shall mean the particular entity, whether the
Primary Committee or the Secondary Committee, which is authorized to administer
the Plan with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under the Plan with
respect to the persons under its jurisdiction.
Q. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to have primary responsibility
for the administration of the Plan.
R. Secondary Committee shall mean a committee of one or more Board
members appointed by the Board to have secondary responsibility for the
administration of the Plan.
S. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
T. Service shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
U. Stock Exchange shall mean either the American Stock Exchange or
the New York Stock Exchange.
V. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
W. Withholding Taxes shall mean the Federal, state and local income
and employment withholding taxes to which the holder of Non-Statutory Options
may become subject in connection with the exercise of those options.
A-3
<PAGE>
EXHIBIT 99.2
4-YEAR VESTING
KANA COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT made as of the ____________, day of December
1999 by and between Kana Communications, Inc., a Delaware corporation (the
"Corporation"), and ___________________________, the recipient of a stock option
grant (the "Optionee") under the Corporation's Special Stock Option Plan (the
"Plan").
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected individuals in the employ of the Corporation (or any Parent
or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to ____________ shares of Common Stock
(the "Option Shares"). The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the price of $__________ per
share (the "Exercise Price").
2. Option Term. This option shall have a maximum term of ten (10)
years measured from December ________, 1999 (the "Grant Date") and shall
accordingly expire at the close of business on December ________, 2009 (the
"Expiration Date"), unless sooner terminated in accordance with Paragraph 5.
3. Limited Transferability.
(a) This option shall be neither transferable nor assignable by
Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, this option may be assigned in whole or in part during Optionee's
lifetime to one or more members of Optionee's family or to a trust established
for the exclusive benefit of one or more such family members or to Optionee's
former spouse, to the extent such assignment is in connection with the
Optionee's estate plan or pursuant to a domestic relations order. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
<PAGE>
(b) Notwithstanding the provisions of Paragraph 3(a), Optionee
shall have the right to designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement.
4. Dates of Exercise.
(a) This option shall become exercisable for the Option Shares
on July 1, 2009, whether or not Optionee continues in Service through such date,
and once the option becomes so exercisable, Optionee may exercise this option
for any or all of the Option Shares at any time on or before the specified
Expiration Date.
(b) This option may become exercisable for one or more
installments of the Option Shares on an accelerated basis during Optionee's
period of Service as follows:
(i) The option shall become exercisable for twenty-five
percent (25%) of the Option Shares upon the Optionee's continuation in
Service through December __________, 2000.
(ii) The option shall become exercisable for an additional
two and eight hundredths percent (2.08%) of the Option Shares upon the
Optionee's completion of each additional month of Service over the thirty-
six (36)-month period measured from December _____, 2000.
(c) As the option becomes exercisable for one or more
installments in accordance with the acceleration provisions of Paragraph 4(b),
those installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of
the option term under Paragraph 5.
5. Special Acceleration of Option.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. However, this option shall
not become exercisable on such an accelerated basis, if and to the extent: (i)
this option is, in connection with the Corporate Transaction, to be assumed by
the successor corporation (or parent thereof) or (ii) this option is to be
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same option exercise schedule for those Option Shares set
forth in Paragraphs 4(a) and 4(b) of this Agreement.
2
<PAGE>
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
6. Adjustment in Option Shares. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
7. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
8. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable
pursuant to the provisions of Paragraph 4, Optionee (or any other person or
persons exercising the option) must take the following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
3
<PAGE>
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 12;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (ii) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
4
<PAGE>
9. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
10. Successors and Assigns. Except to the extent otherwise provided
in Paragraphs 3 and 5, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.
11. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
12. Financing. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares (to the extent such Exercise Price is in excess
of the par value of those shares) by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
13. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
14. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
------------------
I hereby notify Kana Communications, Inc. (the "Corporation") that I
elect to purchase ______________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's Special Stock Option Plan on December _____, 1999.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
- -------------------, ----
Date
---------------------------------------
Optionee
Address:
-------------------------------
---------------------------------------
Print name in exact manner it is
to appear on the stock certificate:
---------------------------------------
Address to which certificate is to
be sent, if different from
address above:
---------------------------------------
---------------------------------------
Social Security Number:
---------------------------------------
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Common Stock shall mean shares of the Corporation's common stock.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean Kana Communications, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Kana Communications, Inc. which shall by appropriate
action adopt the Plan.
G. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per Option Share as
specified in Paragraph 1 of the Agreement.
J. Expiration Date shall mean the date on which the option expires as
specified in Paragraph 2 of the Agreement.
K. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists, or
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
L. Grant Date shall mean the date of grant of the option specified in
Paragraph 1 of the Agreement.
M. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
N. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
O. Option Shares shall mean the number of shares of Common Stock subject
to the option as specified in Paragraph 1 of the Agreement.
P. Optionee shall mean the person to whom the option is granted pursuant
to the Agreement.
Q. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. Plan shall mean the Corporation's Special Stock Option Plan.
S. Plan Administrator shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
T. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
A-2
<PAGE>
U. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
V. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3
<PAGE>
EXHIBIT 99.3
30-MONTH VESTING
KANA COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT made as of the ____________, day of December
1999 by and between Kana Communications, Inc., a Delaware corporation (the
"Corporation"), and ___________________________, the recipient of a stock option
grant (the "Optionee") under the Corporation's Special Stock Option Plan (the
"Plan").
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected individuals in the employ of the Corporation (or any Parent
or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to ____________ shares of Common Stock
(the "Option Shares"). The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the price of $__________ per
share (the "Exercise Price").
2. Option Term. This option shall have a maximum term of ten (10)
years measured from December ________, 1999 (the "Grant Date") and shall
accordingly expire at the close of business on December ________, 2009 (the
"Expiration Date"), unless sooner terminated in accordance with Paragraph 5.
3. Limited Transferability.
(a) This option shall be neither transferable nor assignable by
Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, this option may be assigned in whole or in part during Optionee's
lifetime to one or more members of Optionee's family or to a trust established
for the exclusive benefit of one or more such family members or to Optionee's
former spouse, to the extent such assignment is in connection with the
Optionee's estate plan or pursuant to a domestic relations order. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
<PAGE>
(b) Notwithstanding the provisions of Paragraph 3(a), Optionee
shall have the right to designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement.
4. Dates of Exercise.
(a) This option shall become exercisable for the Option Shares
on July 1, 2009, whether or not Optionee continues in Service through such date,
and once the option becomes so exercisable, Optionee may exercise this option
for any or all of the Option Shares at any time on or before the specified
Expiration Date.
(b) This option may become exercisable for one or more
installments of the Option Shares on an accelerated basis during Optionee's
period of Service as follows:
(i) The option shall become exercisable for fifty percent
(50%) of the Option Shares upon the Optionee's continuation in Service
through March ____, 2001.
(ii) The option shall become exercisable for the remaining
fifty percent (50%) of the Option Shares upon the Optionee's continuation
in Service through June ___, 2002.
(c) As the option becomes exercisable for one or more
installments in accordance with the acceleration provisions of Paragraph 4(b),
those installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of
the option term under Paragraph 5.
5. Special Acceleration of Option.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. However, this option shall
not become exercisable on such an accelerated basis, if and to the extent: (i)
this option is, in connection with the Corporate Transaction, to be assumed by
the successor corporation (or parent thereof) or (ii) this option is to be
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same option exercise schedule for those Option Shares set
forth in Paragraphs 4(a) and 4(b) of this Agreement.
2
<PAGE>
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
6. Adjustment in Option Shares. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
7. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
8. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable
pursuant to the provisions of Paragraph 4, Optionee (or any other person or
persons exercising the option) must take the following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
3
<PAGE>
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 12;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (ii) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
4
<PAGE>
9. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
10. Successors and Assigns. Except to the extent otherwise provided
in Paragraphs 3 and 5, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.
11. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
12. Financing. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares (to the extent such Exercise Price is in excess
of the par value of those shares) by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
13. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
14. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
------------------
I hereby notify Kana Communications, Inc. (the "Corporation") that I
elect to purchase ______________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's Special Stock Option Plan on December _____, 1999.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
,
- -------------------- ----
Date
--------------------------------------
Optionee
Address:
------------------------------
--------------------------------------
Print name in exact manner it is
to appear on the stock certificate:
--------------------------------------
Address to which certificate is to
be sent, if different from
address above:
--------------------------------------
--------------------------------------
Social Security Number:
--------------------------------------
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Common Stock shall mean shares of the Corporation's common stock.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean Kana Communications, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Kana Communications, Inc. which shall by appropriate
action adopt the Plan.
G. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per Option Share as
specified in Paragraph 1 of the Agreement.
J. Expiration Date shall mean the date on which the option expires as
specified in Paragraph 2 of the Agreement.
K. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists, or
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
L. Grant Date shall mean the date of grant of the option specified in
Paragraph 1 of the Agreement.
M. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
N. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
O. Option Shares shall mean the number of shares of Common Stock subject
to the option as specified in Paragraph 1 of the Agreement.
P. Optionee shall mean the person to whom the option is granted pursuant
to the Agreement.
Q. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. Plan shall mean the Corporation's Special Stock Option Plan.
S. Plan Administrator shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
T. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
A-2
<PAGE>
U. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
V. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3
