EXHIBIT 1
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of
FEBRUARY 6, 2000
by and among
KANA COMMUNICATIONS, INC.,
PISTOL ACQUISITION CORP.
and
SILKNET SOFTWARE INC.
TABLE OF CONTENTS
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Page
ARTICLE I. THE MERGER............................................................ 2
Section 1.01 Effective Time Of The Merger................................ 2
Section 1.02 Closing..................................................... 2
Section 1.03 Effects Of The Merger....................................... 3
Section 1.04 Directors And Officers...................................... 3
ARTICLE II. CONVERSION OF SECURITIES............................................. 3
Section 2.01 Conversion Of Capital Stock................................. 3
Section 2.02 Exchange Of Certificates.................................... 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SILKNET........................... 7
Section 3.01 Organization of Silknet..................................... 7
Section 3.02 Silknet Capital Structure................................... 7
Section 3.03 Authority; No Conflict; Required Filings And Consents....... 9
Section 3.04 SEC Filings; Financial Statements........................... 10
Section 3.05 No Undisclosed Liabilities.................................. 10
Section 3.06 Absence Of Certain Changes Or Events........................ 11
Section 3.07 Taxes....................................................... 11
Section 3.08 Properties.................................................. 12
Section 3.09 Intellectual Property....................................... 12
Section 3.10 Agreements, Contracts And Commitments....................... 13
Section 3.11 Litigation.................................................. 13
Section 3.12 Environmental Matters....................................... 13
Section 3.13 Employee Benefit Plans...................................... 14
Section 3.14 Compliance With Laws........................................ 15
Section 3.15 Tax Matters................................................. 16
Section 3.16 Labor Matters............................................... 16
Section 3.17 Insurance................................................... 16
Section 3.18 No Existing Discussions..................................... 16
Section 3.19 Interested Party Transactions............................... 16
Section 3.20 Registration Statement; Joint Proxy Statement/Prospectus.... 16
Section 3.21 Payments Resulting from Mergers............................. 17
Section 3.22 Opinion Of Financial Advisor................................ 18
Section 3.23 Section 203 of the DGCL Not Applicable; Silknet Rights Plan. 18
Section 3.24 Voting Requirements......................................... 18
Section 3.25 Brokers..................................................... 18
Section 3.26 Certain Contracts........................................... 18
Section 3.27 Silknet Voting Agreement.................................... 19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF Kana............................... 19
Section 4.01 Organization Of Kana And Merger Sub......................... 19
Section 4.02 Kana Capital Structure...................................... 19
Section 4.03 Authority; No Conflict; Required Filings And Consents....... 20
Section 4.04 SEC Filings; Financial Statements........................... 21
Section 4.05 No Undisclosed Liabilities.................................. 22
Section 4.06 Absence Of Certain Changes Or Events........................ 22
Section 4.07 Taxes....................................................... 22
Section 4.08 Agreements, Contracts And Commitments....................... 23
Section 4.09 Litigation.................................................. 23
Section 4.10 Employee Benefit Plans...................................... 23
Section 4.11 Compliance With Laws........................................ 23
Section 4.12 Tax Matters................................................. 24
Section 4.13 Registration Statement; Joint Proxy Statement/Prospectus.... 24
Section 4.14 Opinion Of Financial Advisor................................ 24
Section 4.15 Voting Requirements......................................... 24
Section 4.16 Brokers..................................................... 24
Section 4.17 Kana Voting Agreement....................................... 25
Section 4.18 Intellectual Property....................................... 25
Section 4.19 Certain Contracts........................................... 26
ARTICLE V. CONDUCT OF BUSINESS................................................... 26
Section 5.01 Covenants Of Silknet........................................ 26
Section 5.02 Covenants Of Kana........................................... 28
Section 5.03 Cooperation................................................. 30
Section 5.04 Advice of Changes........................................... 30
ARTICLE VI. ADDITIONAL AGREEMENTS................................................ 30
Section 6.01 Proxy Statement/Prospectus; Registration Statement.......... 30
Section 6.02 No Solicitation by Silknet.................................. 31
Section 6.03 No Solicitation by Kana..................................... 33
Section 6.04 Nasdaq...................................................... 35
Section 6.05 Access To Information....................................... 35
Section 6.06 Stockholders Meetings....................................... 35
Section 6.07 Legal Conditions To Merger.................................. 39
Section 6.08 Public Disclosure........................................... 39
Section 6.09 Tax-Free Reorganization..................................... 40
Section 6.10 Nasdaq Quotation............................................ 40
Section 6.11 Stock Plans and Warrants.................................... 40
Section 6.12 Stock Option and Voting Agreements.......................... 43
Section 6.13 Board Composition........................................... 43
Section 6.14 Brokers Or Finders.......................................... 43
Section 6.15 Stand-Off Agreements........................................ 44
Section 6.16 Registration Rights......................................... 44
ii
Section 6.17 Indemnification............................................. 44
Section 6.18 Benefit Plans............................................... 45
Section 6.19 Registration Statement; Joint Proxy Statement/Prospectus.... 47
ARTICLE VII. CONDITIONS TO MERGER................................................ 47
Section 7.01 Conditions To Each Party's Obligation To Effect The Merger.. 47
Section 7.02 Additional Conditions To Obligations Of Kana And Merger Sub. 48
Section 7.03 Additional Conditions To Obligations Of Silknet............. 49
Section 7.04 Frustration of Closing Conditions........................... 50
ARTICLE VIII. TERMINATION AND AMENDMENT.......................................... 50
Section 8.01 Termination................................................. 50
Section 8.02 Effect of Termination....................................... 52
Section 8.03 Expenses and Termination Fees............................... 52
Section 8.04 Amendment................................................... 53
Section 8.05 Extension; Waiver........................................... 54
ARTICLE IX. MISCELLANEOUS........................................................ 54
Section 9.01 Nonsurvival Of Representations, Warranties And Agreements... 54
Section 9.02 Notices..................................................... 54
Section 9.03 Definitions................................................. 55
Section 9.04 Interpretation.............................................. 57
Section 9.05 Counterparts................................................ 57
Section 9.06 Entire Agreement; No Third Party Beneficiaries.............. 57
Section 9.07 Governing Law............................................... 57
Section 9.08 Assignment.................................................. 58
EXHIBITS
EXHIBIT A Silknet Stock Voting Agreement
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EXHIBIT B Kana Stock Voting Agreement
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EXHIBIT C Silknet Stock Option Agreement
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EXHIBIT D Kana Stock Option Agreement
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EXHIBIT E Stand-Off Agreement
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EXHIBIT F Rights Agreement Amendment
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iii
TABLE OF DEFINED TERMS
Terms Cross-Reference
----- in Agreement
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Agreement...................................................... Preamble
Bankruptcy and Equity Exception................................ Section 3.03(a)
Certificate of Merger.......................................... Section 1.01
Closing........................................................ Section 1.02
Closing Date................................................... Section 1.02
Confidentiality Agreement...................................... Section 9.01
Constituent Corporations....................................... Section 1.03
Costs.......................................................... Section 6.17(a)
Current Premium................................................ Section 6.17(b)
DGCL........................................................... Section 1.01
Effective Time................................................. Section 1.01
Environmental Law.............................................. Section 3.12(b)
ERISA.......................................................... Section 3.13(a)
ERISA Affiliate................................................ Section 3.13(a)
Exchange Act................................................... Section 3.03(c)
Exchange Agent................................................. Section 2.02(a)
Exchange Fund.................................................. Section 2.02(a)
Exchange Ratio................................................. Section 2.01(c)
Governmental Entity............................................ Section 3.03(c)
Hazardous Substance............................................ Section 3.12(c)
Indemnified Parties............................................ Section 6.17(a)
Internal Revenue Code.......................................... Preamble
IRS............................................................ Section 3.07(b)
Joint Proxy Statement/Prospectus............................... Section 3.20
Kana Balance Sheet............................................. Section 4.04(b)
Kana Common Stock.............................................. Section 2.01(b)
Kana Disclosure Schedule....................................... Article IV
Kana Employee Plans............................................ Section 6.18(c)
Kana Entry Date................................................ Section 6.11(f)
Kana ESPP...................................................... Section 6.18(b)
Kana Intellectual Property Rights.............................. Section 4.18(a)
Kana Material Adverse Effect................................... Section 9.03(b)
Kana Material Contracts........................................ Section 4.08
Kana Preferred Stock........................................... Section 4.02(a)
Kana Principal Stockholders.................................... Preamble
Kana SEC Reports............................................... Section 4.04(a)
Kana Stock Option Agreement.................................... Preamble
Kana Stock Plans............................................... Section 4.02(a)
Kana Stockholders Agreement.................................... Preamble
iv
Terms Cross-Reference
----- in Agreement
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Kana Stockholders Meeting...................................... Section 3.20
Kana Superior Offer............................................ Section 6.06(d)
Kana Takeover Proposal......................................... Section 6.03(d)
Kana Voting Proposal........................................... Section 6.03(a)
Material Lease(s).............................................. Section 3.08(a)
Merger......................................................... Preamble
Merger Consideration........................................... Section 2.01(c)(c)
Merger Sub..................................................... Preamble
Order.......................................................... Section 6.07(b)
Other Filings.................................................. Section 6.01
Payment Period................................................. Section 3.02(c)
Registration Statement......................................... Section 3.20
Representatives................................................ Section 6.02(a)
Repurchase Options............................................. Section 6.11(a)
SEC............................................................ Section 3.03(c)
SEC Effective Date............................................. Section 6.01
Securities Act................................................. Section 3.04(a)
Stand-Off Agreement............................................ Section 6.15
Silknet Balance Sheet.......................................... Section 3.04(b)
Silknet Certificates........................................... Section 2.02(b)
Silknet Common Stock........................................... Section 2.01(b)
Silknet Disclosure Schedule.................................... Article III
Silknet Employee Plans......................................... Section 3.13(a)
Silknet ESPP................................................... Section 3.02(c)
Silknet Intellectual Property Rights........................... Section 3.09(a)
Silknet Material Adverse Effect................................ Section 9.03(a)
Silknet Material Contracts..................................... Section 3.10
Silknet Preferred Stock........................................ Section 3.02(a)
Silknet Principal Stockholders................................. Preamble
Silknet Rights Plan............................................ Section 3.23(b)
Silknet SEC Reports............................................ Section 3.04(a)
Silknet Stock Option........................................... Section 6.11
Silknet Stock Option Agreement................................. Preamble
Silknet Stock Plans............................................ Section 3.02(a)
Silknet Stockholder Approval................................... Section 3.24
Silknet Stockholders Agreement................................. Preamble
Silknet Stockholders Meeting................................... Section 3.20
Silknet Superior Offer......................................... Section 6.06(b)
Silknet Takeover Proposal...................................... Section 6.01(c)
Stock Option Agreements........................................ Preamble
Subsidiary..................................................... Section 3.01
Surviving Corporation.......................................... Section 1.03
Tax............................................................ Section 3.07(a)
v
Terms Cross-Reference
----- in Agreement
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Taxes.......................................................... Section 3.07(a)
Voting Agreements.............................................. Section 6.12
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AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
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February 6, 2000, by and among Kana Communications, Inc., a Delaware corporation
("Kana"), Pistol Acquisition Corp., a Delaware corporation and a direct, wholly-
----
owned subsidiary of Kana ("Merger Sub") and Silknet Software Inc., a Delaware
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corporation ("Silknet").
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WHEREAS, the Boards of Directors of Kana and Silknet deem it advisable
and in the best interests of each corporation and their respective stockholders
that Kana and Silknet combine in order to advance the long-term business
interests of Kana and Silknet;
WHEREAS, the respective Boards of Directors of Kana and Silknet have
each determined that the Merger and the other transactions contemplated hereby
are consistent with, and in furtherance of, their respective business strategies
and goals and that the products and services of Silknet will compliment and
enhance the products and services of Kana;
WHEREAS, the combination of Kana and Silknet shall be effected by the
terms of this Agreement through a merger in which the stockholders of Silknet
will become stockholders of Kana (the "Merger");
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WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Kana and
Merger Sub to enter into this Agreement, Kana and certain principal stockholders
of Silknet (the "Silknet Principal Stockholders") are entering into an agreement
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(the "Silknet Stockholders Agreement") pursuant to which the Silknet Principal
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Stockholders will agree to vote to approve this Agreement and to take certain
other actions in furtherance of the Merger upon the terms and subject to the
conditions set forth in the Silknet Stockholders Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Silknet to
enter into this Agreement, Silknet and certain directors, officers and principal
stockholders of Kana (the "Kana Principal Stockholders") are entering into an
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agreement (the "Kana Stockholders Agreement") pursuant to which the Kana
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Principal Stockholders will agree to vote to approve the transactions
contemplated by this Agreement and to take certain other actions in furtherance
of the Merger upon the terms and subject to the conditions set forth in the Kana
Stockholders Agreement;
WHEREAS, immediately following execution and delivery of this
Agreement, Silknet and Kana will enter into stock option agreements whereby
Silknet will grant Kana the option to purchase shares of Silknet Common Stock
(the "Silknet Stock Option Agreement") and Kana will grant Silknet the option to
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purchase shares of Kana Common Stock (the "Kana Stock Option Agreement")
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(collectively, the "Stock Option Agreements");
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WHEREAS, for federal income tax purposes, it is intended that (a) the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
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the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") and the rules and
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regulations promulgated thereunder, (b) this Agreement constitutes a plan of
reorganization, and (c) Kana, Merger Sub and Silknet will each be a party to
such reorganization within the meaning of Section 368(b) of the Code;
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WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a purchase; and
WHEREAS, Kana, Merger Sub and Silknet desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 Effective Time Of The Merger.
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Subject to the provisions of this Agreement, a certificate of merger
(the "Certificate of Merger") in such form as is required by the relevant
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provisions of the Delaware General Corporation Law ("DGCL") shall be duly
----
prepared, executed and acknowledged by the Surviving Corporation (as defined in
Section 1.03) and thereafter delivered to the Secretary of State of the State of
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Delaware for filing, as provided in the DGCL, as early as practicable on the
Closing Date (as defined in Section 1.02). The Merger shall become effective
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upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware (the "Effective Time").
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Section 1.02 Closing.
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The closing of the Merger (the "Closing") will take place at 10:00
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a.m., local time, on a date to be specified by Kana and Silknet, which shall be
no later than the second business day after satisfaction of the latest to occur
of the conditions set forth in Section 7.01, Section 7.02(b) (other than the
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delivery of the officers' certificate referred to therein) and Section 7.03(b)
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(other than the delivery of the officers' certificate referred to therein)
(provided that the other closing conditions set forth in Article VII have been
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met or waived as provided in Article VII at or prior to the Closing), (the
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"Closing Date"), at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, Palo Alto
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California, unless another date, place or time is agreed to in writing by Kana
and Silknet.
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Section 1.03 Effects Of The Merger.
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At the Effective Time (i) the separate existence of Merger Sub shall
cease and Merger Sub shall be merged with and into Silknet (Merger Sub and
Silknet are sometimes referred to below as the "Constituent Corporations" and
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Silknet following the Merger is sometimes referred to below as the "Surviving
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Corporation"), (ii) the Certificate of Incorporation of Silknet shall be amended
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so that Article Fourth of such Certificate of Incorporation reads in its
entirety as follows: "The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 1000, all of which shall
consist of Common Stock, par value $.001 per share," and, as so amended, such
Certificate of Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation, and (iii) the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation.
Section 1.04 Directors And Officers.
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(a) The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(b) Kana shall take such action so that, upon the Effective Time,
Xxxxx X. Xxxx shall become a director of Kana. Xxxxx X. Xxxx shall be nominated
for director of Kana at the next annual meeting of stockholders of Kana.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.01 Conversion Of Capital Stock.
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As of the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Silknet Common Stock or
capital stock of Merger Sub:
(a) Capital Stock Of Merger Sub. Each issued and outstanding share of
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the capital stock of Merger Sub shall be converted into and become one fully
paid and nonassessable share of Common Stock, par value $.001 per share, of the
Surviving Corporation.
(b) Cancellation Of Treasury Stock And Kana-Owned Stock. All shares of
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Common Stock, par value $.01 per share, of Silknet ("Silknet Common Stock") that
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are owned by Silknet as treasury stock and any shares of Silknet Common Stock
owned by Kana, Merger Sub or any other wholly-owned Subsidiary (as defined in
Section 3.01) of Kana shall be cancelled and retired and shall cease to exist
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and no stock of Kana or other consideration shall be delivered in exchange
therefor. All shares of Common Stock, par value $.001 per share, of Kana ("Kana
----
Common Stock") owned by Silknet shall be unaffected by the Merger.
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3
(c) Exchange Ratio For Silknet Common Stock. Subject to Section 2.02,
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each issued and outstanding share of Silknet Common Stock (other than shares to
be cancelled in accordance with Section 2.01(b)) shall be converted into the
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right to receive 0.83 of a duly authorized, validly issued, fully paid and
nonassessable share (the "Exchange Ratio") of Kana Common Stock (the "Merger
-------------- ------
Consideration"). As of the Effective Time, all such shares of Silknet Common
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Stock, when so converted, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of Kana Common Stock and
any cash in lieu of fractional shares of Kana Common Stock to be issued or paid
in consideration therefor upon the surrender of such certificate in accordance
with Section 2.02, without interest. In the event Kana changes (or establishes
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a record date for changing) the number of shares of Kana Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction with respect to the outstanding Kana Common
Stock and the record date therefor shall be prior to the Effective Time
(including the two-for-one stock dividend expected to be paid by Kana on
February 22, 2000), the Exchange Ratio shall be proportionately and equitably
adjusted to reflect such stock split, stock dividend, recapitalization,
subdivision, reclassification, combination, exchange of shares or similar
transaction.
Section 2.02 Exchange Of Certificates.
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The procedures for exchanging outstanding shares of Silknet Common
Stock for Kana Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Kana shall deposit with
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a bank or trust company designated by Kana and Silknet (the "Exchange Agent"),
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for the benefit of the holders of shares of Silknet Common Stock, for exchange
in accordance with this Section 2.02, through the Exchange Agent, certificates
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representing the shares of Kana Common Stock (such shares of Kana Common Stock,
together with any dividends or distributions with respect thereto issuable by
virtue of subsection (c) below, being hereinafter referred to as the "Exchange
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Fund") issuable pursuant to Section 2.01 in exchange for outstanding shares of
---- ------------
Silknet Common Stock and any cash payable in lieu of fractional shares of
Silknet Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Silknet Common Stock (the "Silknet
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Certificates") whose shares were converted pursuant to Section 2.01 into the
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right to receive the Merger Consideration (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Silknet Certificates shall pass, only upon delivery of the Silknet Certificates
to the Exchange Agent and shall be in such form and have such other provisions
as Kana and Silknet may reasonably specify) and (ii) instructions for effecting
the surrender of the Silknet Certificates in exchange for the Merger
Consideration (plus cash in lieu of fractional shares, if any, of Kana Common
Stock as provided below). Upon surrender of a Silknet Certificate for
cancellation to the Exchange Agent, together
4
with such letter of transmittal, duly executed, the holder of such Silknet
Certificate shall receive in exchange therefor a certificate representing that
number of whole shares of Kana Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II, certain dividends or
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other distributions in accordance with subsection (c) below, cash in lieu of any
fractional share of Kana Common Stock in accordance with subsection (e) below,
and the Silknet Certificate so surrendered shall immediately be cancelled. In
the event of a transfer of ownership of Silknet Common Stock which is not
registered in the transfer records of Silknet, a certificate representing the
proper number of shares of Kana Common Stock may be issued to a transferee if
the Silknet Certificate representing such Silknet Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each Silknet
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Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration and cash
in lieu of any fractional shares of Kana Common Stock as contemplated by this
Section 2.02.
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(c) Distributions With Respect To Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Kana Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Silknet Certificate with respect to the shares
of Kana Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to subsection (e)
below, and all such dividends, other distributions and cash in lieu of
fractional shares of Kana Common Stock shall be paid by Kana to the Exchange
Agent and shall be included in the Exchange Fund, in each case until the holder
of record of such Silknet Certificate shall surrender such Silknet Certificate.
Subject to the effect of applicable laws, following surrender of any such
Silknet Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Kana Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Kana Common Stock to which such
holder is entitled pursuant to subsection (e) below and the amount of dividends
or other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Kana Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Kana Common
Stock.
(d) No Further Ownership Rights In Silknet Common Stock. All shares of
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Kana Common Stock issued upon the surrender for exchange of Silknet Certificates
in accordance with the terms hereof (including any cash paid pursuant to
subsection (c) or subsection (e) of this Section 2.02) shall be deemed to have
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been issued in full satisfaction of all rights pertaining to such shares of
Silknet Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by Silknet
on such shares of Silknet Common Stock in accordance with the terms of this
Agreement (to the extent permitted under Section 5.01) prior to the date hereof
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and which remain unpaid at the Effective Time, and from and after the Effective
Time there shall be no further registration of transfers on the stock
5
transfer books of the Surviving Corporation of the shares of Silknet Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Silknet Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled and
exchanged as provided in this Section 2.02.
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(e) No Fractional Shares. No certificate or scrip representing fractional
--------------------
shares of Kana Common Stock shall be issued upon the surrender for exchange of
Silknet Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any other rights of a stockholder of Kana.
Notwithstanding any other provision of this Agreement, each holder of shares of
Silknet Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Kana Common Stock (after
taking into account all Silknet Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Kana Common Stock multiplied by the average of the
last reported sales prices of Kana Common Stock, as reported on the Nasdaq
National Market, on each of the ten (10) trading days immediately preceding the
date of the Effective Time.
(f) Termination Of Exchange Fund. Any portion of the Exchange Fund which
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remains undistributed to the holders of Silknet Certificates for one hundred
eighty (180) days after the Effective Time shall be delivered to Kana, upon
demand, and any holders of Silknet Certificates who have not previously complied
with this Section 2.02 shall thereafter look only to Kana for payment of their
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claim for Merger Consideration, any cash in lieu of fractional shares of Kana
Common Stock and any dividends or distributions with respect to Kana Common
Stock.
(g) No Liability. Neither Kana nor Silknet shall be liable to any holder
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of shares of Silknet Common Stock or Kana Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Withholding Rights. Each of Kana and the Surviving Corporation shall
------------------
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Silknet Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by Surviving
Corporation or Kana, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Silknet Common Stock in respect of which such deduction and
withholding was made by Surviving Corporation or Kana, as the case may be.
(i) Lost Silknet Certificates. If any Silknet Certificate shall have been
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lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Silknet Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Silknet
6
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Silknet Certificate the shares of Kana Common Stock and any cash in
lieu of fractional shares, and unpaid dividends and distributions on shares of
Kana Common Stock deliverable in respect thereof pursuant to this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SILKNET
Silknet represents and warrants to Kana and Merger Sub that the
statements contained in this Article III are true and correct except as set
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forth herein and in the disclosure schedule delivered by Silknet to Kana on or
before the date of this Agreement (the "Silknet Disclosure Schedule"). The
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Silknet Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered sections contained in this Article III and the disclosure
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in any paragraph shall qualify other sections in this Article III only to the
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extent that it is reasonably apparent from a reading of such disclosure that it
also qualifies or applies to such other sections.
Section 3.01 Organization of Silknet.
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Each of Silknet and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a Silknet Material Adverse Effect, as
defined in Section 9.03(a). Except as set forth in the Silknet SEC Reports (as
---------------
defined in Section 3.04) filed prior to the date hereof, neither Silknet nor any
------------
Subsidiary of Silknet directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
Silknet and comprising less than five percent (5%) of the outstanding stock of
such company. Each and every Subsidiary of Silknet and its place of
incorporation or organization is listed in Section 3.01 of the Silknet
Disclosure Schedule. As used in this Agreement, the word "Subsidiary" or
----------
"Subsidiaries" means, with respect to any party, any corporation or other
-------------
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
7
Section 3.02 Silknet Capital Structure.
---------------------------------------
(a) (a) The authorized capital stock of Silknet consists of
50,000,000 shares of Common Stock, $.01 par value, and 15,000,000 shares of
Preferred Stock, $.01 par value, ("Silknet Preferred Stock"). As of February 3,
-----------------------
2000, (i) 17,174,133 shares of Silknet Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable and (ii) no shares
of Silknet Common Stock were held in the treasury of Silknet or by its
Subsidiaries. The Silknet Disclosure Schedule shows the number of shares of
Silknet Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of February 3, 2000 and the plans under which such
options were granted (collectively, the "Silknet Stock Plans"). No material
-------------------
change in such capitalization has occurred between December 31, 2000 and the
date of this Agreement. As of the date of this Agreement, none of the shares of
Silknet Preferred Stock is issued and outstanding. All shares of Silknet Common
Stock subject to issuance as specified above are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of Silknet or its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Silknet
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other entity other than guarantees of bank
obligations of its Subsidiaries entered into in the ordinary course of business,
except for repurchase rights of Silknet under the Silknet stock option plans, or
under any stock option agreements pursuant to which options were granted under
these plans. All of the outstanding shares of capital stock of Silknet's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and all such shares (other than directors' qualifying shares in the case of
foreign Subsidiaries) are owned by Silknet or another Subsidiary free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
Silknet's voting rights, charges or other encumbrances of any nature.
(b) (b) Except as disclosed in Section 3.02 of the Silknet
------------
Disclosure Schedule or as set forth in this Section 3.02 or as reserved for
------------
future grants of options under the Silknet Stock Plans or the Silknet Stock
Option Agreement, there are no equity securities of any class of Silknet or its
Subsidiaries, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. There are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Silknet or any Subsidiary is a party or by which it is bound
obligating Silknet or any Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Silknet or any
Subsidiary or obligating Silknet or any Subsidiary to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement. There are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of capital stock
of Silknet and to which Silknet is a party. The terms of the Silknet Stock
Plans and the agreements evidencing the outstanding options thereunder will
permit the assumption of those options by Kana in the manner contemplated in
Section 6.11 of this Agreement, without the approval or consent of the holders
------------
of those options, the Silknet stockholders or other party.
8
(c) (c) The current "Payment Period" (as defined under the Silknet
Employee Purchase Plan (the "Silknet ESPP")) began on February 1, 2000, and will
------------
end on the date determined in accordance with Section 6.11(f) of this Agreement.
---------------
Except for the purchase rights granted under the Silknet ESPP on February 1,
2000, to the current participants in the Payment Period that commenced on that
date, there are no other purchase rights or options outstanding under the
Silknet ESPP.
Section 3.03 Authority; No Conflict; Required Filings And Consents.
-------------------------------------------------------------------
(a) Silknet has all requisite corporate power and authority to enter
into this Agreement and the Silknet Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Silknet Stock Option Agreement and the consummation of the
transactions contemplated by this Agreement and the Silknet Stock Option
Agreement by Silknet have been duly authorized by all necessary corporate action
on the part of Silknet, subject only to the approval of the Merger by Silknet
stockholders under the DGCL. This Agreement and the Silknet Stock Option
Agreement have been duly executed and delivered by Silknet and constitute the
valid and binding obligations of Silknet, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (the "Bankruptcy and
--------------
Equity Exception").
----------------
(b) The execution and delivery of this Agreement and the Silknet Stock
Option Agreement by Silknet does not, and the consummation of the transactions
contemplated by this Agreement and the Silknet Stock Option Agreement will not,
(i) conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Silknet, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Silknet or its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Silknet or any
Subsidiary or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which, individually or in the aggregate, would
not have a Silknet Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
-------------------
required by or with respect to Silknet or any of its Subsidiaries in connection
with the execution and delivery of this Agreement and the Silknet Stock Option
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Delaware Secretary of
State, (ii) the filing of the Joint Proxy Statement/Prospectus (as defined in
Section 3.20 below) with the Securities
------------
9
and Exchange Commission (the "SEC") in accordance with the Securities Exchange
---
Act of 1934, as amended (the "Exchange Act"), (iii) such consents, approvals,
------------
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the laws of any foreign
country and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Silknet Material Adverse Effect.
Section 3.04 SEC Filings; Financial Statements.
-----------------------------------------------
(a) Silknet has filed and made available to Kana all forms, reports
and documents required to be filed by Silknet with the SEC since May 5, 1999
other than registration statements on Form S-8 (collectively, the "Silknet SEC
-----------
Reports"). The Silknet SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
--------------
be, and (ii) did not at the time they were filed (or if amended or superseded by
a filing prior to the date of this Agreement, then as and on the date so amended
or superseded) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Silknet SEC Reports or necessary
in order to make the statements in such Silknet SEC Reports, in the light of the
circumstances under which they were made, not misleading. Silknet's Subsidiaries
are not required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Silknet SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of Silknet and its Subsidiaries as of the dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. The audited balance sheet of Silknet as of June 30, 1999 is referred
to herein as the "Silknet Balance Sheet."
---------------------
Section 3.05 No Undisclosed Liabilities.
----------------------------------------
Except as disclosed in the Silknet SEC Reports filed prior to the date
hereof, and except for normal or recurring liabilities incurred since December
31, 1999 in the ordinary course of business consistent with past practices,
Silknet and its Subsidiaries do not have any liabilities, either accrued,
contingent or otherwise (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), and
whether due or to become due, which individually or in the aggregate would have
a Silknet Material Adverse Effect.
10
Section 3.06 Absence Of Certain Changes Or Events.
--------------------------------------------------
Except as disclosed in the Silknet SEC Reports filed prior to the date
hereof or disclosed in writing by Silknet to Kana on or prior to the date
hereof, since the date of the Silknet Balance Sheet, Silknet and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any Silknet Material Adverse Effect; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to Silknet or any of its
Subsidiaries having a Silknet Material Adverse Effect; (iii) any material change
by Silknet in its accounting methods, principles or practices to which Kana has
not previously consented in writing; (iv) any revaluation by Silknet of any of
its assets having a Silknet Material Adverse Effect; or (v) any other action or
event that would have required the consent of Kana pursuant to Section 5.01 of
------------
this Agreement had such action or event occurred after the date of this
Agreement and that, individually or in the aggregate, has had a Silknet Material
Adverse Effect.
Section 3.07 Taxes.
-------------------
(a) For the purposes of this Agreement, the terms "Tax" and,
---
collectively, "Taxes" mean any and all material federal, state, local and
-----
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, gains, franchise, withholding, payroll, recapture, employment, excise,
unemployment insurance, social security, business license, occupation, business
organization, stamp, environmental and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Silknet and each of its Subsidiaries have (i) filed all federal,
state, local and foreign tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account extensions), (ii) paid
or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for
which a notice of assessment or collection has been received (other than amounts
being contested in good faith by appropriate proceedings), except in the case of
clause (i), (ii) or (iii) for any such filings, payments or accruals which are
not reasonably likely, individually or in the aggregate, to have a Silknet
Material Adverse Effect. Neither the Internal Revenue Service (the "IRS") nor
---
any other taxing authority has asserted any claim for taxes, or to the actual
knowledge of the executive officers of Silknet or any of its Subsidiaries, is
threatening to assert any claims for Taxes, which claims, individually or in the
aggregate, are reasonably likely to have a Silknet Material Adverse Effect.
Silknet and each of its Subsidiaries have withheld or collected and paid over to
the appropriate governmental authorities (or are properly holding for such
payment) all Taxes required by law to be withheld or collected, except for
amounts which are not reasonably likely, individually or in the aggregate, to
have a Silknet Material Adverse Effect. Neither Silknet nor any of its
Subsidiaries has made an election under Section 341(f) of the Internal Revenue
--------------
Code, except for any such election which shall not have a Silknet Material
Adverse Effect. There are no liens for Taxes upon the assets of Silknet or its
11
Subsidiaries (other than liens for Taxes that are not yet due or that are being
contested in good faith by appropriate proceedings), except for liens which
would not, individually or in the aggregate, have a Silknet Material Adverse
Effect.
Section 3.08 Properties.
------------------------
(a) Silknet has provided to Kana a true and complete list of all
material real property leased by Silknet or its Subsidiaries (collectively
"Material Lease(s)") and the location of the premises. Neither Silknet nor any
----------------
Subsidiary is in default under any such leases, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a Silknet Material Adverse Effect.
(b) Silknet owns no real property.
Section 3.09 Intellectual Property.
-----------------------------------
(a) Except as disclosed in Section 3.09 of the Silknet Disclosure
------------
Schedule, Silknet and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods schematics, technology, know how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Silknet
and its Subsidiaries as currently conducted or planned to be conducted by
Silknet and its Subsidiaries (the "Silknet Intellectual Property Rights").
------------------------------------
(b) Except as disclosed in Section 3.09 of the Silknet Disclosure
------------
Schedule, neither Silknet nor any of its Subsidiaries is, or will be as a result
of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Silknet Intellectual Property Rights or any
material license, sublicense or other agreement pursuant to which Silknet or any
of its Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are incorporated in or form a part of any
product of Silknet or any of its Subsidiaries that is material to the business
of Silknet and its Subsidiaries, taking Silknet and its Subsidiaries together as
a whole, and where such breach would have a Silknet Material Adverse Effect.
(c) Except as disclosed in Schedule 3.09 of the Silknet Disclosure
Schedule, (i) all patents, registered trademarks, service marks and copyrights
which are held by Silknet or any of its Subsidiaries, and which are material to
the business of Silknet and its Subsidiaries, taking Silknet and its
Subsidiaries together as a whole, are valid and subsisting; (ii) Silknet has not
been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; and (iii) the
manufacturing, marketing, licensing or sale of Silknet's products does not
infringe any patent, trademark, service xxxx, copyright, trade secret or other
12
proprietary right of any third party, which infringement, either individually or
in the aggregate, could reasonably be expected to have a Silknet Material
Adverse Effect.
(d) Silknet has taken all actions necessary and appropriate to assure
that there shall be no material adverse change in the delivery of Silknet's
products and services by reason of the advent of the year 2000, and warrants
that all of its products (including products currently under development) will,
without interruption or manual intervention, continue to consistently,
predictably and accurately record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will consistently, predictably and accurately calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as such products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates.
Section 3.10 Agreements, Contracts And Commitments.
---------------------------------------------------
Neither Silknet nor any of its Subsidiaries has breached, or received
in writing any claim or notice that it has breached, any of the terms or
conditions of any material agreement, contract or commitment to which it is a
party or by which any of its assets and properties are bound ("Silknet Material
----------------
Contracts") in such a manner as, individually or in the aggregate, is reasonably
---------
likely to have a Silknet Material Adverse Effect. Each Silknet Material Contract
that has not expired by its terms is in full force and effect and is not subject
to any material default thereunder of which Silknet is aware by any party
obligated to Silknet or any of its Subsidiaries pursuant to such Silknet
Material Contract.
Section 3.11 Litigation.
------------------------
Except as described in the Silknet SEC Reports filed prior to the date
hereof, there is no action, suit or proceeding, claim, arbitration or
investigation against Silknet or any of its Subsidiaries pending or as to which
Silknet or any such Subsidiary has received any written notice of assertion,
which, individually or in the aggregate, if determined adversely to Silknet or
any such Subsidiary, would be reasonably likely to have a Silknet Material
Adverse Effect or would materially impair or delay the ability of Silknet to
consummate the transactions contemplated by this Agreement nor is there, to the
knowledge of Silknet, any claim, action, suit, proceeding or investigation
described in Section 6.17(d), or any basis therefor.
---------------
Section 3.12 Environmental Matters.
-----------------------------------
(a) Except as disclosed in the Silknet SEC Reports filed prior to the
date hereof: (i) Silknet and its Subsidiaries have complied with all applicable
Environmental Laws (as defined in Section 3.12(b)); (ii) the properties
---------------
currently owned or operated by Silknet and its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances (as defined in Section 3.12(c)); (iii) the
---------------
properties formerly owned or operated by Silknet or any of its Subsidiaries were
not contaminated with Hazardous Substances during the period of ownership or
operation by Silknet or its Subsidiaries; (iv) neither Silknet nor any of its
Subsidiaries is subject to liability for any Hazardous Substance
13
disposal or contamination on any third party property; (v) neither Silknet nor
any Subsidiary has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither Silknet nor any of its Subsidiaries has
received any notice, demand, letter, claim or request for information alleging
that Silknet or any of its Subsidiaries may be in violation of or liable under
any Environmental Law; (vii) neither Silknet nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving Silknet or any of its Subsidiaries that could reasonably be expected
to result in any claims, liability, investigations, costs or restrictions on the
ownership, use or transfer of any property of Silknet or its Subsidiaries
pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal,
-----------------
state, local or foreign law, regulation, order, decree, permit, authorization,
opinion, common law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment, health and safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any
-------------------
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
Section 3.13 Employee Benefit Plans.
------------------------------------
(a) Silknet has listed in Section 3.13 of the Silknet Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
-----
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Silknet or any trade or business
(whether or not incorporated) which is a member or which is under common control
with Silknet (an "ERISA Affiliate") within the meaning of Section 414 of the
---------------
Internal Revenue Code, or any Subsidiary of Silknet (together, the "Silknet
-------
Employee Plans").
--------------
(b) With respect to each Silknet Employee Plan, Silknet has made
available to Kana, a true and correct copy of (i) the most recent annual report
(Form 5500) filed with the IRS, (ii) such Silknet Employee Plan, (iii) each
trust agreement and group annuity contract, if any, relating to such Silknet
Employee Plan and (iv) the most recent actuarial report or valuation relating to
a Silknet Employee Plan subject to Title IV of ERISA.
(c) With respect to the Silknet Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of Silknet, there
exists no condition or
14
set of circumstances in connection with which Silknet could be subject to any
liability that is reasonably likely to have a Silknet Material Adverse Effect
under ERISA, the Internal Revenue Code or any other applicable law.
(d) With respect to the Silknet Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of Silknet, which obligations are reasonably likely to have
a Silknet Material Adverse Effect.
(e) Except as disclosed in Silknet SEC Reports filed prior to the
date of this Agreement or the Silknet Disclosure Schedule, and except as
provided for in this Agreement, neither Silknet nor any of its Subsidiaries is
a party to any oral or written (i) agreement with any officer or other key
employee of Silknet or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving Silknet of the nature contemplated by this
Agreement, (ii) agreement with any officer of Silknet or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof and for the
payment of compensation in excess of $200,000 per annum, or (iii) agreement or
plan, including any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreements or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, except that (a) the vesting date of each
outstanding option under the Silknet Stock Plans other than the 1999 Non-
Employee Director Stock Option Plan at the Effective Time shall immediately
accelerate by one year, and the vesting date of any unvested shares previously
purchased under any of the Silknet Stock Plans shall at the Effective Time
accelerate by one year, and (b) each outstanding option under the Silknet 1999
Non-Employee Director Stock Option Plan at the Effective Time shall
immediately become fully vested and exercisable following the Effective Time.
Section 3.14 Compliance With Laws.
----------------------------------
Silknet and each of its Subsidiaries has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which, individually or in the aggregate, have
not had and are not reasonably likely to have a Silknet Material Adverse Effect.
15
Section 3.15 Tax Matters.
-------------------------
To its knowledge, neither Silknet nor any of its Affiliates has taken
or agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Internal
Revenue Code.
Section 3.16 Labor Matters.
---------------------------
Neither Silknet nor any of its Subsidiaries is a party to or otherwise
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor, as of the date
hereof, is Silknet or any of its Subsidiaries the subject of any material
proceeding asserting that Silknet or any of its Subsidiaries has committed an
unfair labor practice or is seeking to compel it to bargain with any labor union
or labor organization nor, as of the date of this Agreement, is there pending
or, to the knowledge of Silknet, threatened, any material labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving Silknet or any of its
Subsidiaries.
Section 3.17 Insurance.
-----------------------
All material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by Silknet or any of its Subsidiaries are with reputable
insurance carriers, and copies or a summary of such policies have been made
available to Kana.
Section 3.18 No Existing Discussions.
-------------------------------------
As of the date hereof, Silknet is not engaged, directly or indirectly,
in any discussions or negotiations with any other party with respect to a
Silknet Takeover Proposal (as defined in Section 6.02(d)).
---------------
Section 3.19 Interested Party Transactions.
-------------------------------------------
Except as set forth in the Silknet SEC Reports or by virtue of the
Merger, no event has occurred that would be required to be reported by Silknet
as a Certain Relationship or Related Transaction pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
Section 3.20 Registration Statement; Joint Proxy Statement/Prospectus.
----------------------------------------------------------------------
The information supplied by Silknet for inclusion in the registration
statement of Kana on Form S-4 pursuant to which shares of Kana Common Stock
issued in the Merger will be registered with the SEC (the "Registration
------------
Statement") shall not contain, at the time the Registration Statement is
---------
declared effective by the SEC, any untrue statement of a material fact or omit
to state any material fact required to be stated in the Registration Statement
or necessary in order to make the statements in the Registration Statement, in
light of the circumstances under with they were made, not misleading. The
information supplied by Silknet for inclusion in the joint proxy
statement/prospectus (the "Joint Proxy Statement/Prospectus") to be sent to the
--------------------------------
16
stockholders of Silknet in connection with the special meeting of Silknet
stockholders to consider this Agreement and the Merger (the "Silknet
-------
Stockholders Meeting") and to the stockholders of Kana in connection with the
--------------------
special meeting of Kana stockholders to consider the issuance of Kana Common
Stock in connection with the Merger (the "Kana Stockholders Meeting") shall not,
-------------------------
on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders
of Kana and Silknet, at the time of the Silknet Stockholders Meeting, at the
time of the Kana Stockholders Meeting or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
was made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Joint Proxy Statement/Prospectus not false or misleading or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Kana Stockholders Meeting or
the Silknet Stockholders Meeting which has become false or misleading. If at
any time prior to the Effective Time any event relating to Silknet or any of its
affiliates should be discovered by Silknet which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, Silknet shall promptly inform Kana.
Section 3.21 Payments Resulting from Mergers.
---------------------------------------------
(a) The consummation or announcement of any transaction contemplated
by this Agreement or the Silknet Stock Option Agreement will not (either alone
or upon the occurrence of any additional or further acts or events) result in
any (i) payment (whether of severance pay or otherwise) becoming due from
Silknet or any of its Subsidiaries to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement pursuant to any management, employment, deferred compensation,
severance (including any payment, right or benefit resulting from a change in
control), bonus or other contract for personal services with any officer,
director or employee or any plan agreement or understanding similar to any of
the foregoing, or (ii) benefit under any Silknet benefit plan being established
or becoming accelerated, vested or payable.
(b) Xxxxx X. Xxxx has agreed to enter into an amendment to his
employment agreement providing for the waiver of any benefits that would
otherwise be due Xx. Xxxx (including severance payments) as a result of the
Merger. Xxxxx Xxxxxxx has agreed to deliver a written acknowledgement that the
Merger, and his subsequent employment by Kana, will not result in any benefits
becoming due to Xx. Xxxxxxx. Xxxxxxx X. Xxxxxxxx, has agreed to amend his
current employment agreement to provide for the waiver of any cash payments as a
result of the Merger, and to provide that his employment agreement will be
amended so that he will continue providing services to Kana for 180 days after
the date hereof, on which date Xx. Xxxxxxxx will be entitled to the benefits
under his employment agreement (including acceleration of his then unvested
options and severance payments equal to one year's salary).
17
Section 3.22 Opinion Of Financial Advisor.
------------------------------------------
The financial advisor of Silknet, Credit Suisse First Boston, has
delivered to Silknet an opinion dated the date of this Agreement to the effect
that the Exchange Ratio is fair to the holders of Silknet Common Stock from a
financial point of view.
Section 3.23 Section 203 of the DGCL Not Applicable; Silknet Rights Plan.
-------------------------------------------------------------------------
(a) Section 203 of the DGCL is not applicable to Silknet or (by reason
of Silknet's participation therein) the Merger. No other "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation is applicable to Silknet or (by reason of Silknet's participation
therein) the Merger or the other transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement and the
Silknet Stock Option Agreement and the consummation of the Merger will not cause
any change, effect or result under any stockholder rights plan which is or will
as of the Effective Time be in effect (a "Silknet Rights Plan") which is adverse
-------------------
to the interests of Kana.
Section 3.24 Voting Requirements.
---------------------------------
The affirmative vote at the Silknet Stockholders Meeting of the
holders of a majority of the voting power of all outstanding shares of Silknet
Common Stock to adopt this Agreement (the "Silknet Stockholder Approval") is the
----------------------------
only vote of the holders of any class or series of Silknet 's capital stock
necessary to approve and adopt this Agreement, the Silknet Stock Option
Agreement and the transactions contemplated hereby and thereby.
Section 3.25 Brokers.
---------------------
No broker, investment banker, financial advisor or other person, other
than Credit Suisse First Boston Corporation, the fees and expenses of which will
be paid by Silknet, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement and the Stock Option Agreements based upon
arrangements made by or on behalf of Silknet. Silknet has furnished to Kana
true and complete copies of all agreements under which any such fees or expenses
are payable and all indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
Section 3.26 Certain Contracts.
-------------------------------
Neither Silknet nor any of its Subsidiaries is a party to or bound by
any non-competition agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, all or any material portion of the business of Silknet and its
Subsidiaries, taken as a whole, is conducted.
18
Section 3.27 Silknet Voting Agreement.
--------------------------------------
Each officer, director and affiliate under the control of Silknet is
listed on Schedule 3.27 and has executed and delivered to Kana a voting
agreement, substantially in the form of Exhibit A hereto.
---------
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF KANA
Kana and Merger Sub represent and warrant to Silknet that the
statements contained in this Article IV are true and correct, except as set
----------
forth in the disclosure schedule delivered by Kana to Silknet on or before the
date of this Agreement (the "Kana Disclosure Schedule"). The Kana Disclosure
------------------------
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered sections contained in this Article IV and the disclosure in any
----------
paragraph shall qualify other sections in this Article IV only to the extent
----------
that it is reasonably apparent from a reading of such document that it also
qualifies or applies to such other sections.
Section 4.01 Organization Of Kana And Merger Sub.
-------------------------------------------------
Each of Kana and Merger Sub and Kana's other Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a Kana Material Adverse Effect as
defined in Section 9.03(b). Except as set forth in the Kana SEC Reports (as
---------------
defined in Section 4.04) filed prior to the date hereof, neither Kana nor any of
------------
its Subsidiaries directly or indirectly owns any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by Kana
and comprising less than five percent (5%) of the outstanding stock of such
company.
Section 4.02 Kana Capital Structure.
------------------------------------
(a) The authorized capital stock of Kana consists of 100,000,000
shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred
Stock, $.001 par value ("Kana Preferred Stock"). As of February 3, 2000, (i)
--------------------
30,391,355 shares of Kana Common Stock were issued and outstanding, all of which
are validly issued, fully paid and nonassessable, and (ii) no shares of Kana
Common Stock were held in the treasury of Kana or by Subsidiaries of Kana. The
Kana Disclosure Schedule shows the number of shares of Kana Common Stock
reserved for future issuance pursuant to stock options granted and outstanding
as of February 3, 2000 and the plans under which such options were granted
(collectively, the "Kana Stock Plans"). No material change in such
----------------
capitalization has occurred between December 31, 2000 and the date of this
Agreement. As of the date of this Agreement, none of the shares of Kana
19
Preferred Stock is issued and outstanding. All shares of Kana Common Stock
subject to issuance as specified above are duly authorized and, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be validly issued, fully paid and nonassessable. There are no
obligations, contingent or otherwise, of Kana to repurchase, redeem or otherwise
acquire any shares of Kana Common Stock or the capital stock of any of its
Subsidiaries or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of bank obligations of Subsidiaries entered
into in the ordinary course of business, except for repurchase rights of Kana
under the Kana stock option plans, or under any stock option agreements pursuant
to which options were granted under these plans. All of the outstanding shares
of capital stock of each of Kana's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and all such shares (other than directors'
qualifying shares in the case of foreign Subsidiaries) are owned by Kana or
another Subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Kana's voting rights, charges or other
encumbrances of any nature.
(b) Except and as disclosed in Section 4.02 of the Kana Disclosure
------------
Schedule or as set forth in this Section 4.02 or as reserved for future grants
------------
of options under the Kana Stock Plans or the Kana Stock Option Agreement, there
are no equity securities of any class of Kana or any of its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. There are no voting trusts, proxies or
other voting agreements or understandings with respect to the shares of capital
stock of Kana and to which Kana is a party.
Section 4.03 Authority; No Conflict; Required Filings And Consents.
-------------------------------------------------------------------
(a) Each of Kana and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and the Kana Stock Option Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Kana Stock Option Agreement and the
consummation of the transactions contemplated by this Agreement and by the Kana
Stock Option Agreement by Kana and Merger Sub have been duly authorized by all
necessary corporate action on the part of each of Kana and Merger Sub (including
the approval of the Merger by Kana as the sole stockholder of Merger Sub),
subject only to the approval of the Kana Voting Proposal (as defined in Section
-------
6.03(a) by Kana stockholders. This Agreement and the Kana Stock Option
-------
Agreement have been duly executed and delivered by each of Kana and, in the case
of this Agreement, Merger Sub constitute the valid and binding obligations of
each of Kana and Merger Sub, enforceable in accordance with their terms, subject
to the Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement and the Kana Stock
Option Agreement by each of Kana and Merger Sub does not, and the consummation
of the transactions contemplated by this Agreement and the Kana Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Kana or the
Certificate of Incorporation or Bylaws of Merger Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default
20
(or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Kana or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound, or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Kana or any of
its Subsidiaries or any of its or their properties or assets, except in the case
of (ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which, individually or in the aggregate, would
have a Kana Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Kana or any of its Subsidiaries in connection with the execution and
delivery of this Agreement and the Kana Stock Option Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Registration Statement with the SEC in accordance with the Securities
Act, (ii) the filing of the Certificate of Merger with the Delaware Secretary of
State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC in
accordance with the Exchange Act, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and (v)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not be reasonably likely to have a Kana Material
Adverse Effect.
Section 4.04 SEC Filings; Financial Statements.
-----------------------------------------------
(a) Kana has filed and made available to Silknet all forms, reports
and documents required to be filed by Kana with the SEC since September 21, 1999
other than registration statements on Form S-8 (collectively, the "Kana SEC
--------
Reports"). The Kana SEC Reports (i) at the time filed, complied in all material
-------
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then as
and on the date so amended or superseded) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Kana SEC Reports or necessary in order to make the statements in such Kana SEC
Reports, in the light of the circumstances under which they were made, not
misleading. Kana's Subsidiaries are not required to file any forms, reports or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Kana SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly presented the consolidated financial position of Kana and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, except that
21
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. The audited balance sheet of Kana as of December 31, 1999 is referred
to herein as the "Kana Balance Sheet."
------------------
Section 4.05 No Undisclosed Liabilities.
----------------------------------------
Except as disclosed in the Kana SEC Reports filed prior to the date
hereof, and except for normal or recurring liabilities incurred since December
31, 1999 in the ordinary course of business consistent with past practices, Kana
and its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate, would have a Kana Material
Adverse Effect.
Section 4.06 Absence Of Certain Changes Or Events.
--------------------------------------------------
Except as disclosed in the Kana SEC Reports filed prior to the date
hereof or disclosed in writing by Kana to Silknet on or prior to the date
hereof, since the date of the Kana Balance Sheet, Kana and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
Kana Material Adverse Effect; (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to Kana or any of its Subsidiaries having
a Kana Material Adverse Effect; (iii) any material change by Kana in its
accounting methods, principles or practices to which Silknet has not previously
consented in writing; (iv) any revaluation by Kana of any of its assets having a
Kana Material Adverse Effect; or (v) any other action or event that would have
required the consent of Silknet pursuant to Section 5.01 of this Agreement had
------------
such action or event occurred after the date of this Agreement and that,
individually or in the aggregate, has had a Kana Material Adverse Effect.
Section 4.07 Taxes.
-------------------
Kana and each of its Subsidiaries have (i) filed all federal, state,
local and foreign tax returns and reports required to be filed by them prior to
the date of this Agreement (taking into account extensions), (ii) paid or
accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which
a notice of assessment or collection has been received (other than amounts being
contested in good faith by appropriate proceedings), except in the case of
clause (i), (ii) or (iii) for any such filings, payments or accruals which are
not reasonably likely, individually or in the aggregate, to have a Kana Material
Adverse Effect. Neither the IRS nor any other taxing authority has asserted any
claim for Taxes, or to the actual knowledge of the executive officers of Kana or
any of its Subsidiaries, is threatening to assert any claims for Taxes, which
claims, individually or in the aggregate, are reasonably likely to have a Kana
Material Adverse Effect. Kana and each of its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by law to be withheld or
collected, except for amounts which are not reasonably likely, individually or
in the aggregate, to have a Kana Material Adverse Effect. Neither Kana nor any
of its Subsidiaries has made an election under Section 341(f) of the Internal
Revenue Code, except for any such
22
election which shall not have a Kana Material Adverse Effect. There are no liens
for Taxes upon the assets of Kana or any of its Subsidiaries (other than liens
for Taxes that are not yet due or that are being contested in good faith by
appropriate proceedings), except for liens which are not reasonably likely,
individually or in the aggregate, to have a Kana Material Adverse Effect.
Section 4.08 Agreements, Contracts And Commitments.
---------------------------------------------------
Neither Kana nor any of its Subsidiaries has breached, or received in
writing any claim or notice that it has breached, any of the terms or conditions
of any material agreement, contract or commitment to which it is a party or by
which any of its assets or properties are bound ("Kana Material Contracts") in
-----------------------
such a manner as, individually or in the aggregate, is reasonably likely to have
a Kana Material Adverse Effect. Each Kana Material Contract that has not expired
by its terms is in full force and effect and is not subject to any material
default thereunder of which Kana is aware by any party obligated to Kana or any
of its Subsidiaries pursuant to such Kana Material Contract.
Section 4.09 Litigation.
------------------------
Except as described in the Kana SEC Reports filed prior to the date
hereof, there is no action, suit or proceeding, claim, arbitration or
investigation against Kana or any of its Subsidiaries pending or as to which
Kana or any of its Subsidiaries has received any written notice of assertion,
which, individually or in the aggregate, if determined adversely to Kana or any
such Subsidiary, would be reasonably likely to have a Kana Material Adverse
Effect or would materially impair or delay the ability of Kana to consummate the
transactions contemplated by this Agreement.
Section 4.10 Employee Benefit Plans.
------------------------------------
(a) With respect to the Kana Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Kana, which obligations are reasonably likely to have a Kana
Material Adverse Effect.
Section 4.11 Compliance With Laws.
----------------------------------
Kana and each of its Subsidiaries has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which, individually or in the aggregate, have
not had and are not reasonably likely to have a Kana Material Adverse Effect.
23
Section 4.12 Tax Matters.
-------------------------
To its knowledge, neither Kana nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Internal
Revenue Code.
Section 4.13 Registration Statement; Joint Proxy Statement/Prospectus.
----------------------------------------------------------------------
The information supplied by Kana for inclusion in the Registration
Statement shall not contain, at the time the Registration Statement is declared
effective by the SEC, any untrue statement of a material fact or omit to state
any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement, in
light of the circumstances under with they were made, not misleading. The
information supplied by Kana for inclusion in the Joint Proxy
Statement/Prospectus to be sent to the stockholders of Silknet in connection
with the Silknet Stockholders Meeting and to the stockholders of Kana in
connection with the Kana Stockholders Meeting shall not, on the date the Joint
Proxy Statement/Prospectus is first mailed to stockholders of Kana and Silknet,
at the time of the Silknet Stockholders Meeting, at the time of the Kana
Stockholders Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it was made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy
Statement/Prospectus not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Kana Stockholders Meeting or the Silknet
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to Kana or any of its affiliates should
be discovered by Kana which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Kana shall promptly inform Silknet.
Section 4.14 Opinion Of Financial Advisor.
------------------------------------------
The financial advisor of Kana, Goldman, Sachs & Co., has delivered to
Kana an opinion dated the date of this Agreement to the effect that the Exchange
Ratio is fair to Kana from a financial point of view.
Section 4.15 Voting Requirements.
---------------------------------
No vote of the holders of shares of Kana Common Stock or any other
class or series of capital stock of Kana is necessary to approve and adopt this
Agreement and the Kana Option Agreement and the transactions contemplated hereby
and thereby other than the approval of the Kana Voting Proposal.
Section 4.16 Brokers.
---------------------
No broker, investment banker, financial advisor or other person, other
than Xxxxxxx, Xxxxx & Co., the fees and expenses of which will be paid by Kana,
is entitled to any
24
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement and the Stock
Option Agreements based upon arrangements made by or on behalf of Kana.
Section 4.17 Kana Voting Agreement.
-----------------------------------
Each officer, director and affiliate under the control of Kana is
listed on Schedule 4.17 and has executed and delivered to Silknet a voting
agreement, substantially in the form of Exhibit B hereto.
---------
Section 4.18 Intellectual Property.
-----------------------------------
(a) Except as disclosed in Section 4.18 of the Kana Disclosure
------------
Schedule, Kana and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods schematics, technology, know how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Kana and
its Subsidiaries as currently conducted or planned to be conducted by Kana and
its Subsidiaries (the "Kana Intellectual Property Rights").
---------------------------------
(b) Except as disclosed in Section 4.18 of the Kana Disclosure
------------
Schedule, neither Kana nor any of its Subsidiaries is, or will be as a result of
the execution and delivery of this Agreement of the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Kana Intellectual Property Rights or any
material license, sublicense or other agreement pursuant to which Kana or any of
its Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are incorporated in or form a part of any
product of Kana or any of its Subsidiaries that is material to the business of
Kana and its Subsidiaries, taking Kana and its Subsidiaries together as a whole,
and where such breach would have a Kana Material Adverse Effect.
(c) Except as disclosed in the Kana Disclosure Schedule, (i) all
patents, registered trademarks, service marks and copyrights which are held by
Kana or any of its Subsidiaries, and which are material to the business of Kana
and its Subsidiaries, taking Kana and its Subsidiaries together as a whole, are
valid and subsisting; (ii) Kana has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents, trademarks,
service marks, copyrights or violation of any trade secret or other proprietary
right of any third party where such proceeding would have a Kana Material
Adverse Effect; and (iii) the manufacturing, marketing, licensing or sale of
Kana's products does not infringe any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party, which
infringement, either individually or in the aggregate, could reasonably be
expected to have a Kana Material Adverse Effect.
25
Section 4.19 Certain Contracts.
-------------------------------
Neither Kana nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, all or any material portion of the business of Kana and its
Subsidiaries, taken as a whole, is conducted.
ARTICLE V.
CONDUCT OF BUSINESS
Section 5.01 Covenants Of Silknet.
----------------------------------
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Silknet
agrees, as to itself and its Subsidiaries, except to the extent that Kana shall
otherwise consent in writing, to carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously conducted, and
consistent with preserving and advancing the revenues and results of operation
of Silknet, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform its other obligations when due, and,
to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it, except in each case
where the failure to do so would not have a Silknet Material Adverse Effect.
Silknet shall promptly notify Kana of any material event or occurrence not in
the ordinary course of business of Silknet. Except as expressly contemplated by
this Agreement or as set forth in Section 5.01 of the Silknet Disclosure
Schedule, Silknet shall not (and shall not permit its Subsidiaries to), without
the written consent of Kana (which shall not be unreasonably delayed):
(a) accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such party
or authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement, and except that (a) the vesting date of
each outstanding option under the Silknet Stock Plans other than the 1999 Non-
Employee Director Stock Option Plan at the Effective Time shall immediately
accelerate by one year, and the vesting date of any unvested shares previously
purchased under any of the Silknet Stock Plans shall at the Effective Time
accelerate by one year, and (b) each outstanding option under the Silknet 1999
Non-Employee Director Stock Option Plan at the Effective Time shall immediately
become fully vested and exercisable following the Effective Time.
26
(b) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to such
party;
(c) transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the Silknet Intellectual
Property Rights other than on a non-exclusive basis in the ordinary course of
business consistent with past practices;
(d) issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or securities convertible into
shares of its capital stock, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than (i) the grant
of options consistent with past practices to existing employees, not to exceed
25,000 shares, and to newly hired employees, which hiring of new employees shall
be in the ordinary course of business and which options represent in the
aggregate the right to acquire no more than 100,000 shares (net of
cancellations) of Silknet Common Stock and which will not be entitled to
accelerated vesting as a result of the Merger, or (ii) the issuance of shares of
Silknet Common Stock pursuant to the exercise of options outstanding on the date
of this Agreement;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership or
other business organization or division, or otherwise acquire or agree to
acquire any assets (other than inventory and other items in the ordinary course
of business);
(f) sell, lease, license or otherwise dispose of any material properties or
assets, except for transactions in the ordinary course of business; provided,
--------
however, that in no event shall Silknet enter into any agreement, option or
-------
other arrangements (including any joint venture) involving the exclusive
licensing of Silknet's name or system outside of the ordinary course of business
or inconsistent with past practice;
(g) (i) increase or agree to increase the compensation payable or to become
payable to its officers or employees, except for increases in salary or wages of
employees (other than officers) in accordance with past practices, (ii) grant
any additional severance or termination pay to, or enter into any employment or
severance agreements with, any employees or officers, (iii) enter into any
collective bargaining agreement (other than as required by law or extensions to
existing agreements in the ordinary course of business), (iv) establish, adopt,
enter into or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees, and except
as contemplated by Section 3.21 and Section 5.01(a);
------------ ---------------
27
(h) amend or propose to amend its Certificate of Incorporation or Bylaws,
except as contemplated by this Agreement;
(i) enter into or amend in any material respect any OEM agreement or any
agreements pursuant to which any third party is granted exclusive marketing,
manufacturing or other rights with respect to any Silknet product, process or
technology;
(j) amend or terminate any material contract, agreement or license to which
it is a party except in the ordinary course of business or where such action
would not have a Silknet Material Adverse Effect;
(k) waive or release any material right or claim, except in the ordinary
course of business;
(l) initiate any litigation or arbitration proceeding without otherwise
first consulting with Kana or where the initiation of such proceedings, if
determined adversely, would have a Silknet Material Adverse Effect;
(m) incur any indebtedness in excess of $10,000,000 for borrowed money
other than in the ordinary course of business;
(n) make or agree to make any new capital expenditure or expenditures, or
enter into any agreement or agreements providing for payments which,
individually, are in excess of $1,000,000 or, in the aggregate, are in excess of
$5,000,000;
(o) make any tax election that, individually or in the aggregate, is
reasonably likely to have a Silknet Material Adverse Effect on the tax liability
of Silknet or settle or compromise any material income tax liability;
(p) pay, discharge, settle or satisfy any material claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than in the ordinary course of business and where such
action would have a Silknet Material Adverse Effect; or
(q) take, or agree in writing or otherwise to take, any of the actions
described in Section 5.01(a) through Section 5.01(p) above.
--------------- ---------------
Section 5.02 Covenants Of Kana.
------------------------------
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Kana
agrees, as to itself and its Subsidiaries, except to the extent that Silknet
shall otherwise consent in writing, to carry on its business in the usual,
regular and ordinary course in substantially the same manner as previously
conducted (it being acknowledged that the foregoing shall not limit the ability
of Kana to make or pursue corporate acquisitions) and consistent with preserving
and advancing the revenues and results of operations of Kana, to pay its debts
and taxes when due subject to good faith disputes
28
over such debts or taxes, to pay or perform its other obligations when due, and,
to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it and except in each
case where the failure to do so would not have a Kana Material Adverse Effect.
Kana shall promptly notify Silknet of any material event or occurrence not in
the ordinary course of business of Kana. Except as expressly contemplated by
this Agreement or as set forth in Section 5.02 of the Kana Disclosure Schedule,
------------
Kana shall not (and shall not permit any of its Subsidiaries to), without the
written consent of Silknet (which shall not be unreasonably withheld or
delayed):
(a) accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such party
or authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement and except that the vesting date of all
options granted to employees of Kana under all options granted under all of
Kana's various stock plans may be accelerated by up to one year by the Kana
Board of Directors or an appropriate committee;
(b) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to such
party;
(c) sell, lease, license or otherwise dispose of a material amount of
properties or assets, except for transactions in the ordinary course of
business;
(d) transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Kana Intellectual
Property Rights other than on a non-exclusive basis in the ordinary course of
business consistent with past practices.
(e) enter in to or amend in any material respect any material OEM
agreement or any agreements pursuant to which any third party is granted
exclusive marketing, manufacturing or other rights with respect to any Kana
product, process or technology and where such action would have a Kana Material
Adverse Effect;
(f) amend or terminate any material contract, agreement or license to
which it is a party except in the ordinary course of business or where such
action would not have a Kana Material Adverse Effect;
(g) initiate any litigation or arbitration proceeding without
otherwise first notifying Silknet where the initiation of such proceedings, if
determined adversely, would have a Kana Material Adverse Effect;
29
(h) pay, discharge, settle or satisfy any material claims,
liabilities, obligations or litigation (absolute, accrued asserted or
unasserted, contingent or otherwise), other than in the ordinary course of
business or where such action would not have a Kana Material Adverse Effect; or
(i) take, or agree in writing or otherwise to take, any of the actions
described in Section 5.02(a) through Section 5.02(h) above.
--------------- ---------------
Section 5.03 Cooperation.
-------------------------
Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of Kana and Silknet shall confer on a regular and
frequent basis with one or more representatives of the other party to report on
the general status of ongoing operations and shall promptly provide the other
party or its counsel with copies of all filings made by such party with any
Governmental Entity in connection with this Agreement, the Merger and the
transactions contemplated hereby and thereby.
Section 5.04 Advice of Changes.
-------------------------------
Silknet and Kana shall promptly advise the other party orally and in
writing to the extent it has knowledge of (i) any representation or warranty
made by it (and, in the case of Kana, made by Sub) contained in this Agreement
or the Stock Option Agreements becoming untrue or inaccurate in any respect
where the failure of such representation to be so true and correct (without
giving effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), individually or in the aggregate, has had or is reasonably
likely to have a material adverse effect on it, (ii) the failure by it (and, in
the case of Kana, by Sub) to comply in any material respect with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Stock Option Agreements and (iii)
any change or event having, or which is reasonably likely to have, a material
adverse effect on such party or on the truth of their respective representations
and warranties or the ability of the conditions set forth in Article VII to be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement or the Stock Option Agreements.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 Proxy Statement/Prospectus; Registration Statement.
----------------------------------------------------------------
As promptly as reasonably practicable after the execution of this
Agreement, Silknet and Kana will prepare, and file with the SEC, the Joint Proxy
Statement/Prospectus, and Kana will prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement/Prospectus will be
included as a prospectus. Each of Kana and Silknet shall provide
30
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Joint Proxy
Statement/Prospectus and the Registration Statement, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement. Each of Silknet and Kana
will respond to any comments of the SEC, and will use its respective
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and Silknet will cause the Joint Proxy Statement/Prospectus to be mailed to its
stockholders at the earliest practicable time after the Registration Statement
is declared effective by the SEC (the "SEC Effective Date"). As promptly as
------------------
practicable after the date of this Agreement, each of Silknet and Kana will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other federal, foreign or Blue Sky or related
securities laws in order to consummate the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each of Silknet and Kana
-------------
will notify the other promptly upon the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Registration Statement or the Joint Proxy
Statement/Prospectus and will supply the other with copies of all correspondence
between such party or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Registration Statement, the
Joint Proxy Statement/Prospectus or the Merger. Each of Silknet and Kana will
cause all documents that it is responsible for filing with the SEC under this
Section 6.01 to comply in all material respects with all applicable requirements
------------
of law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Joint Proxy Statement/Prospectus or the Registration Statement, Silknet or Kana,
as the case may be, will promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff, and/or mailing to stockholders of
Silknet, such amendment or supplement. Notwithstanding any other provision of
this Agreement, nothing herein shall required Kana to qualify to do business in
any jurisdiction in which it is not now so qualified or to file a general
consent to service of process under any applicable state securities laws in
connection with the issuance of Kana Common Stock in the Merger.
Section 6.02 No Solicitation by Silknet.
----------------------------------------
(a) Until the earlier of the Effective Time or a valid termination of
this Agreement pursuant to Article VIII, Silknet will not, and will not
------------
authorize, direct or permit any of its officers, directors, employees,
affiliates under the control of Silknet, investment bankers, attorneys,
accountants or other agents, advisors or representatives (collectively,
"Representatives") to, directly or indirectly, (i) solicit, initiate, encourage
---------------
or induce the making, submission or announcement of any Silknet Takeover
Proposal (as defined below), (ii) participate in any discussions or negotiations
with any person regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiry or proposal that
constitutes or may reasonably be expected to lead to, any Silknet Takeover
Proposal, (iii) authorize, approve or recommend any Silknet Takeover Proposal,
or (iv) enter into any letter of intent or similar document or any contract,
agreement or commitment accepting or providing for
31
any Silknet Takeover Proposal; provided, however, nothing herein shall prohibit
Silknet's Board of Directors from complying with Rules 14d-9 and 14e-2 under the
Exchange Act; and provided, further, however, that this Section 6.02(a) shall
-------- ------- ------- ---------------
not prohibit Silknet, before the adoption of this Agreement by the stockholders
of Silknet, from furnishing information regarding Silknet or entering into
negotiations or discussions with, any person or group in response to a Silknet
Takeover Proposal submitted by such person or group (and not withdrawn) and,
subject to the provisions of Section 6.06 of this Agreement, endorsing and/or
------------
recommending a Silknet Superior Offer (as defined below), and any such actions
shall not be considered a breach of this Agreement to the extent they are taken
in compliance with the conditions and limitations set forth in this Agreement if
(1) neither Silknet nor any of its Representatives shall have violated any of
the restrictions set forth in this Section 6.02(a) or Section 6.06, (2) the
--------------- ------------
Board of Directors of Silknet determines in good faith, after considering the
advice of an investment bank of nationally recognized reputation, that such
Silknet Takeover Proposal is substantially more favorable to Silknet and its
stockholders than the Merger, taking into account the anticipated long-term
strategic benefits of the Merger to Silknet stockholders, (3) the Board of
Directors of Silknet concludes in good faith, after consultation with its
outside legal counsel, that failure to take such action would be inconsistent
with the fiduciary obligations of the Board of Directors of Silknet to Silknet
stockholders under applicable law, (4) prior to furnishing any such information
to, or entering into discussions or negotiations with, such person or group,
Silknet gives Kana written notice of the identity of such person or group, the
terms and conditions of the offer and Silknet's intention to furnish information
to, or enter into discussions or negotiations with, such person or group, (5)
Silknet receives from such person or group an executed confidentiality agreement
which shall not in any way restrict Silknet from complying with its disclosure
obligations under this Agreement and which shall contain customary limitations
on the use and disclosure of all nonpublic written and oral information
furnished to such person or group by or on behalf of Silknet and other terms no
less favorable to Silknet than those set forth in the Confidentiality Agreement
(as hereinafter defined), and (6) contemporaneously with furnishing any such
information to such person or group, Silknet furnishes such information to Kana
(to the extent that such information has not been previously furnished by
Silknet to Kana).
(b) Silknet and its Representatives will immediately cease and cause to be
terminated any and all existing discussions, negotiations, exchanges of
information and other activities with respect to any Silknet Takeover Proposal.
Promptly following the execution and delivery of this Agreement, Silknet shall
(i) inform each of its Representatives of the obligations undertaken in this
Section 6.02 and in the Confidentiality Agreement and (ii) request each person
------------
that has heretofore executed a confidentiality or non-disclosure agreement in
connection with its consideration of acquiring it or any of its Subsidiaries to
return to Silknet all confidential information heretofore furnished to such
person by or on behalf of it or any of its Subsidiaries. At the Closing,
Silknet shall assign to Kana the non-exclusive right to enforce the rights of
Silknet and its Subsidiaries under any and all such confidentiality or non-
disclosure agreements. Any violation of the restrictions set forth in this
Section 6.02 by any officer, director or employee of Silknet, any affiliate
------------
under the control of Silknet, or any investment banker, attorney, accountant or
other agent, advisor or representative of Silknet shall be deemed to be a breach
of this Section 6.02 by Silknet. Silknet shall notify Kana forthwith if any
------------
inquiries, proposals or offers relating to a Silknet Takeover Proposal are
received by, any such information
32
is requested from, or any such discussions or negotiations are sought to be
initiated or continued with, Silknet or any of its Representatives, indicating,
in connection with such notice, the name of the person making the inquiry,
proposal or offer and the material terms and conditions of any proposals or
offers. Thereafter Silknet shall provide Kana with a true and complete copy of
such Silknet Takeover Proposal or communication (if it is in writing) and shall
otherwise keep Kana informed, on a current basis, with respect to the status and
terms of any such proposal or offer and the status of any such negotiations or
discussions.
(c) Silknet and Kana agree that irreparable damage would occur in the
event that the provisions of this Section 6.02 were not performed in accordance
------------
with their specific terms or were otherwise breached. It is accordingly agreed
by the parties hereto that Kana shall be entitled to seek an injunction or
injunctions to prevent breaches of this Section 6.02 and to enforce specifically
------------
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which the
parties may be entitled at law or in equity.
(d) For purposes of this Agreement, "Silknet Takeover Proposal" means any
-------------------------
offer or proposal for, or any indication of interest in, a merger or other
business combination involving Silknet or the acquisition of twenty percent
(20%) or more of the outstanding shares of capital stock of Silknet, or all or
substantially all of the assets of Silknet or any asset of Silknet, the absence
of which would materially diminish the value of the Merger to Kana or the
benefits expected by Kana to be realized from the Merger (other than the
transactions contemplated by this Agreement), or any other transaction
inconsistent with consummation of the transactions contemplated hereby.
Section 6.03 No Solicitation by Kana.
-------------------------------------
(a) Until the earlier of the Effective Time or a valid termination of
this Agreement pursuant to Article VIII, Kana will not, and will not authorize,
------------
direct or permit any of its Representatives to, directly or indirectly, (i)
solicit, initiate, encourage or induce the making, submission or announcement of
any Kana Takeover Proposal (as defined below), (ii) participate in any
discussions or negotiations with any person regarding, or furnish to any person
any information with respect to, or take any other action to facilitate any
inquiry or proposal that constitutes or may reasonably be expected to lead to,
any Kana Takeover Proposal, (iii) authorize, approve or recommend any Kana
Takeover Proposal, or (iv) enter into any letter of intent or similar document
or any contract, agreement or commitment accepting or providing for any Kana
Takeover Proposal; provided, however, nothing herein shall prohibit Kana's Board
-------- -------
of Directors from complying with Rules 14d-9 and 14e-2 under the Exchange Act;
and provided, further, however, that this Section 6.03(a) shall not prohibit
-------- ------- ------- ----------------
Kana, before the approval by Kana stockholders of the issuance of Kana Common
Stock pursuant to this Agreement (the "Kana Voting Proposal"), from furnishing
--------------------
information regarding Kana or entering into negotiations or discussions with,
any person or group in response to a Kana Takeover Proposal submitted by such
person or group (and not withdrawn) and, subject to the provisions of Section
-------
6.06 of this Agreement, endorsing and/or recommending a Kana Superior Offer (as
----
defined below), and any such actions shall not be considered a breach of this
Agreement to the extent they are taken in
33
compliance with the conditions and limitations set forth in this Agreement if
(1) neither Kana nor any of its Representatives shall have violated any of the
restrictions set forth in this Section 6.03(a) or Section 6.06, (2) the Board of
--------------- ------------
Directors of Kana determines in good faith, after considering the advice of an
investment bank of nationally recognized reputation, that such Kana Takeover
Proposal is substantially more favorable to Kana and its stockholders than the
Merger, taking into account the anticipated long-term value and strategic
benefits of the Merger to Kana stockholders, (3) the Board of Directors of Kana
concludes in good faith, after consultation with its outside legal counsel, that
failure to take such action would be inconsistent with the fiduciary obligations
of the Board of Directors of Kana to Kana stockholders under applicable law, (4)
prior to furnishing any such information to, or entering into discussions or
negotiations with, such person or group, Kana gives Silknet written notice of
the identity of such person or group, the terms and conditions of the offer and
Kana's intention to furnish information to, or enter into discussions or
negotiations with, such person or group, (5) Kana receives from such person or
group an executed confidentiality agreement which shall not in any way restrict
Kana from complying with its disclosure obligations under this Agreement and
which shall otherwise contain customary limitations on the use and disclosure of
all nonpublic written and oral information furnished to such person or group by
or on behalf of Kana and other terms no less favorable to Kana than those set
forth in the Confidentiality Agreement, including with respect to such Kana
Takeover Proposal), and (6) contemporaneously with furnishing any such
information to such person or group, Kana furnishes such information to Silknet
(to the extent that such information has not been previously furnished by Kana
to Silknet).
(b) Kana and its Representatives will immediately cease and cause to
be terminated any and all existing discussions, negotiations, exchanges of
information and other activities with respect to any Kana Takeover Proposal.
Promptly following the execution and delivery of this Agreement, Kana shall (i)
inform each of its Representatives of the obligations undertaken in this Section
-------
6.03 and in the Confidentiality Agreement, and (ii) request each person that has
----
heretofore executed a confidentiality or non-disclosure agreement in connection
with its consideration of acquiring it or any of its Subsidiaries to return to
Kana all confidential information heretofore furnished to such person by or on
behalf of it or any of its Subsidiaries. Any violation of the restrictions set
forth in this Section 6.03 by any officer, director or employee of Kana, any
------------
affiliate under the control of Kana, or any investment banker, attorney,
accountant or other agent, advisor or representative of Kana shall be deemed to
be a breach of this Section 6.03 by Kana. Kana shall notify Silknet forthwith
------------
if any inquiries, proposals or offers relating to a Kana Takeover Proposal are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, Kana or any of its
Representatives, indicating, in connection with such notice, the name of the
person making the inquiry, proposal or offer and the material terms and
conditions of any proposals or offers. Thereafter Kana shall provide Silknet
with a true and complete copy of such Kana Takeover Proposal or communication
(if it is in writing) and shall otherwise keep Silknet informed, on a current
basis, with respect to the status and terms of any such proposal or offer and
the status of any such negotiations or discussions.
(c) Kana and Silknet agree that irreparable damage would occur in the
event that the provisions of this Section 6.03 were not performed in accordance
------------
with their specific terms or
34
were otherwise breached. It is accordingly agreed by the parties hereto that
Silknet shall be entitled to seek an injunction or injunctions to prevent
breaches of this Section 6.03 and to enforce specifically the terms and
------------
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which the parties
may be entitled at law or in equity.
(d) For purposes of this Agreement, "Kana Takeover Proposal" means any
----------------------
offer or proposal for, or any indication of interest in, a merger or other
business combination involving an acquisition or a change in control of Kana or
the acquisition of a majority of the outstanding shares of capital stock of
Kana, or all or substantially all of the assets of Kana, or any other
transaction inconsistent with consummation of the transactions contemplated
hereby, which offer, proposal or indication of interest is conditioned on the
termination of this Agreement by Kana or the denial by Kana stockholders of the
Kana Voting Proposal.
Section 6.04 Nasdaq.
--------------------
Each of Silknet and Kana agrees to continue the quotation of Kana
Common Stock and Silknet Common Stock, respectively, on the Nasdaq National
Market, during the term of this Agreement so that appraisal rights will not be
available to stockholders of Silknet under Section 262 of the DGCL.
Section 6.05 Access To Information.
-----------------------------------
Upon reasonable notice, Silknet and Kana shall each (and shall cause
each of their respective Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of the other, access, during
normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
each of Silknet and Kana shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. Unless otherwise required by law, the
parties will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section 6.05 shall affect or be
------------
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
Section 6.06 Stockholders Meetings.
-----------------------------------
(a) Promptly after the date hereof, Silknet will take all action
reasonably necessary in accordance with the DGCL and its Certificate of
Incorporation and by-laws to cause the Silknet Stockholders' Meeting to be held
as promptly as practicable for the purpose of voting upon this Agreement and the
Merger, and Kana will take all action reasonably necessary in accordance with
the DGCL and its Certificate of Incorporation and by-laws to cause the Kana
Stockholders' Meeting to be held as promptly as practicable for the purpose of
voting upon the Kana Voting Proposal. Unless otherwise mutually agreed by Kana
and Silknet, Kana and
35
Silknet shall coordinate and cooperate with respect to the timing of such
meetings and shall use their reasonable best efforts to hold such meetings on
the same day and as soon as practicable after the date hereof. Subject to their
rights under Section 8.01(i) and Section 8.01(j), Silknet and Kana shall
--------------- ---------------
solicit from their respective stockholders proxies in favor of the approval and
adoption of this Agreement and approval of the Merger (in the case of Silknet
stockholders) and the Kana Voting Proposal (in the case of Kana stockholders),
and will take all other action necessary or advisable to secure the vote or
consent of their respective stockholders required by the rules of Nasdaq or the
DGCL to obtain such approvals; provided, however, that neither Silknet nor Kana
-------- -------
shall be required to take any action that its respective Board of Directors
determines in good faith after consultation with outside legal counsel would be
inconsistent with its fiduciary duties to its stockholders under applicable law.
Notwithstanding anything to the contrary contained in this Agreement, Silknet
may adjourn or postpone the Silknet Stockholders' Meeting, and Kana may adjourn
or postpone the Kana Stockholders' Meeting, to the extent that (i) such
adjournment or postponement is necessary to ensure that any necessary supplement
or amendment to the Prospectus/Proxy Statement is provided to such party's
stockholders in advance of the applicable vote or (ii) additional time is
reasonably required to solicit proxies in favor of the approvals required by
Section 7.01(a) or (iii) as of the time for which such stockholders' meeting is
---------------
originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of such stockholders' meeting. Silknet
shall ensure that Silknet Stockholders' Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited by Silknet in connection with
Silknet Stockholders' Meeting are solicited, and Kana shall ensure that Kana
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by Kana in connection with Kana Stockholders' Meeting are
solicited, in compliance with the DGCL, applicable charter documents, the rules
of Nasdaq and all other applicable legal requirements.
(b) (i) The Board of Directors of Silknet shall recommend that Silknet
stockholders vote in favor of the approval and adoption of this Agreement and
approval of the Merger at the Silknet Stockholders' Meeting; (ii) the
Prospectus/Proxy Statement shall include a statement to the effect that the
Board of Directors of Silknet has recommended that Silknet stockholders vote in
favor of the approval and adoption of this Agreement and approval of the Merger
at Silknet Stockholders' Meeting; and (iii) neither the Board of Directors of
Silknet nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to Kana the
recommendation of the Board of Directors of Silknet that Silknet stockholders
vote in favor of the approval and adoption of this Agreement and approval of the
Merger; provided, however, that nothing in this Agreement shall prevent the
-------- -------
Board of Directors of Silknet from withholding, withdrawing, amending or
modifying its recommendation in favor of approval and adoption of this Agreement
and approval of the Merger if: (A) a Silknet Superior Offer is made to Silknet
and is not withdrawn, (B) neither Silknet nor any of its representatives shall
have violated any of the restrictions set forth in Section 6.02, (C) five
------------
business days elapse following delivery by Silknet to Kana of written notice
advising Kana that the Board of Directors of Silknet intends to withhold,
withdraw, amend or modify its recommendation; and (D) the Board of Directors of
Silknet concludes in good faith, after considering applicable state law and
consultation with its outside counsel, that,
36
in light of such Silknet Superior Offer, the failure to withhold, withdraw,
amend or modify such recommendation would be inconsistent with the fiduciary
duties of the Board of Directors of Silknet to Silknet stockholders under
applicable law. For purposes of this Agreement, "Silknet Superior Offer" shall
----------------------
mean an unsolicited, bona fide written offer made by a third party to consummate
any of the following transactions: (x) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Silknet pursuant to which the stockholders of Silknet immediately
preceding such transaction hold less than fifty percent (50%) of the equity
interest in the surviving or resulting entity of such transaction; (y) a sale or
other disposition by Silknet of assets (excluding inventory and used equipment
sold in the ordinary course of business) representing all or substantially all
of Silknet's assets, or (z) the acquisition by any person or group (including by
way of a tender offer or an exchange offer or issuance by Silknet), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing fifty percent (50%) or more of the voting power of the
then outstanding shares of capital stock of Silknet, in each case on terms that,
in the good faith judgment of the Board of Directors of Silknet (after
consultation with an investment bank of nationally recognized reputation) are
substantially more favorable to Silknet stockholders than the Merger (after
taking into account all relevant factors, including the anticipated long-term
value and strategic benefits of the Merger to Silknet stockholders, any
conditions to the Silknet Superior Offer, the timing of the consummation of the
transaction pursuant to the Silknet Superior Offer, the risk of nonconsummation
thereof and the need for any required governmental or other consents, filings
and approvals); provided, however, that an offer shall only be a Silknet
-------- -------
Superior Offer if any financing required to consummate the transaction
contemplated by such offer is committed or is otherwise reasonably likely in the
good faith judgment of Silknet's Board of Directors to be obtained by such third
party on a timely basis.
(c) Subject to the right of Silknet to terminate this Agreement
pursuant to Section 8.01(i), nothing contained in Section 6.06(b) shall limit
---------------
Silknet's obligation to call, give notice of, convene and hold the Silknet
Stockholders' Meeting (regardless of whether the recommendation of the Board of
Directors of Silknet shall have been withdrawn, amended or modified and
regardless of whether any Silknet Takeover Proposal has been commenced,
disclosed, or announced).
(d) (i) The Board of Directors of Kana shall recommend that Kana
stockholders vote in favor of approval of the Kana Voting Proposal at the Kana
Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of Kana has recommended that
Kana stockholders vote in favor approval of the Kana Voting Proposal pursuant to
this Agreement at the Kana Stockholders' Meeting; and (iii) neither the Board of
Directors of Kana nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify in a manner adverse to Silknet
the recommendation of the Board of Directors of Kana that Kana stockholders vote
in favor approval of the Kana Voting Proposal pursuant to this Agreement;
provided, however, that nothing in this Agreement shall prevent the Board of
-------- -------
Directors of Kana from withholding, withdrawing, amending or modifying its
recommendation in favor of approval and adoption of this Agreement and approval
of the Merger if (A) a Kana Superior Offer is made to Kana and is
37
not withdrawn, (B) neither Kana nor any of its representatives shall have
violated any of the restrictions set forth in Section 6.03, (C) five business
------------
days elapse following delivery by Kana to Silknet of written notice advising
Silknet that the Board of Directors of Kana intends to withhold, withdraw, amend
or modify its recommendation absent modification of the terms and conditions of
this Agreement, and (D) the Board of Directors of Kana concludes in good faith,
after considering applicable state law and consultation with its outside
counsel, that, in light of such Kana Superior Offer, the failure to withhold,
withdraw, amend or modify such recommendation would be inconsistent with the
fiduciary duties of the Board of Directors of Kana to Kana stockholders under
applicable law. For purposes of this Agreement, "Kana Superior Offer" shall mean
-------------------
an unsolicited, bona fide written offer made by a third party to consummate any
of the following transactions: (x) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Kana pursuant to which the stockholders of Kana immediately preceding
such transaction hold less than fifty percent (50%) of the equity interest in
the surviving or resulting entity of such transaction; (y) a sale or other
disposition by Kana of assets (excluding inventory and used equipment sold in
the ordinary course of business) representing all or substantially all of Kana's
assets, or (z) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Kana), directly or indirectly,
of beneficial ownership or a right to acquire beneficial ownership of shares
representing fifty percent (50%) or more of the voting power of the then
outstanding shares of capital stock of Kana, in each case on terms that, in the
good faith judgment of the Board of Directors of Kana (after consultation with
an investment bank of nationally recognized reputation) are substantially more
favorable to Kana or its stockholders than the Merger (after taking into account
all relevant factors, including the anticipated long-term value and strategic
benefits of the Merger to Kana and its stockholders, any conditions to the Kana
Superior Offer, the timing of the consummation of the transaction pursuant to
the Kana Superior Offer, the risk of nonconsummation thereof and the need for
any required governmental or other consents, filings and approvals); provided,
--------
however, that an offer shall only be a Kana Superior Offer if any financing
-------
required to consummate the transaction contemplated by such offer is committed
or is otherwise reasonably likely in the good faith judgment of Kana's Board of
Directors to be obtained by such third party on a timely basis.
(e) Subject to the right of Kana to terminate this Agreement pursuant
to Section 8.01(j), nothing contained in Section 6.06(d) shall limit Kana's
---------------
obligation to call, give notice of, convene and hold the Kana Stockholders'
Meeting (regardless of whether the recommendation of the Board of Directors of
Kana shall have been withdrawn, amended or modified and regardless of whether
any Kana Takeover Proposal has been commenced, disclosed, or announced).
(f) Kana may also submit additional proposals to its stockholders at
the Kana Stockholders' Meeting (including a proposal to amend its Certificate of
Incorporation to increase the number of authorized shares of Kana Common Stock
or amend its Stock Incentive Plan to increase the number of Kana Common Stock
issuable thereunder) that are not inconsistent with Kana's obligations under
this Agreement, separate from the proposal referred to in Section 3.20. The
------------
approval by Kana stockholders of such additional proposals shall not be a
condition to the closing of the Merger under this Agreement.
38
Section 6.07 Legal Conditions To Merger.
----------------------------------------
(a) Silknet and Kana shall each use all requisite commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary and proper under applicable
law to consummate and make effective the transactions contemplated hereby as
promptly as practicable, (ii) obtain from any Governmental Entity or any other
third party any consents, licenses, permits, waivers, approvals, authorizations,
or orders required to be obtained or made by Silknet or Kana or any of their
Subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
including the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws, and (B)
any other applicable law. Silknet and Kana shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. Silknet and Kana shall use commercially reasonable
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
law (including all information required to be included in the Joint Proxy
Statement/Prospectus and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) Kana and Silknet agree, and shall cause each of their respective
Subsidiaries, to cooperate and to use their respective commercially reasonable
efforts to obtain any government clearances required for Closing, to respond to
any government requests for information, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that
-----
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement, including by vigorously pursuing
all available avenues of administrative and judicial appeal and all available
legislative action.
(c) Each of Silknet and Kana shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, commercially reasonable efforts to
obtain any third party consents related to or required in connection with the
Merger that are (i) necessary to consummate the transactions contemplated
hereby, (ii) disclosed or required to be disclosed in the Silknet Disclosure
Schedule or the Kana Disclosure Schedule, as the case may be, or (iii) required
to prevent a Silknet Material Adverse Effect or a Kana Material Adverse Effect
from occurring.
Section 6.08 Public Disclosure.
-------------------------------
Kana and Silknet shall consult with each other before issuing any
press release or otherwise making any public statement with respect to the
Merger or this Agreement and shall
39
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
Section 6.09 Tax-Free Reorganization.
-------------------------------------
Kana and Silknet shall each use all requisite commercially reasonable
efforts to cause the Merger to be treated as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code.
Section 6.10 Nasdaq Quotation.
------------------------------
Kana shall use all requisite commercially reasonable efforts to cause
the shares of Kana Common Stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of issuance,
prior to the Closing Date.
Section 6.11 Stock Plans and Warrants.
--------------------------------------
(a) At the Effective Time, each outstanding option to purchase shares
of Silknet Common Stock (a "Silknet Stock Option") under the Silknet Stock
--------------------
Plans, whether vested or unvested, shall be assumed and shall constitute an
option to acquire, on the same terms and conditions as were applicable under
such Silknet Stock Option, the same number of shares of Kana Common Stock as the
holder of such Silknet Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior to
the Effective Time (rounded downward to the nearest whole number), at a price
per share (rounded upward to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Silknet Common Stock purchasable pursuant to
such Silknet Stock Option immediately prior to the Effective Time divided by (z)
the number of full shares of Kana Common Stock deemed purchasable pursuant to
such Silknet Stock Option in accordance with the foregoing. All outstanding
rights of Silknet that it may hold immediately prior to the Effective Time to
repurchase unvested shares of Silknet Common Stock issued or issuable under any
of the Silknet Stock Plans (the "Repurchase Options") shall be assigned to Kana
------------------
and shall thereafter be exercisable by Kana upon the same terms and conditions
in effect immediately prior to the Effective Time, except that the shares
purchasable pursuant to the Repurchase Options and the purchase price per shall
be adjusted to reflect the Exchange Ratio.
(b) As soon as practicable after the Effective Time, Kana shall
deliver to the participants in Silknet Stock Plans appropriate notice setting
forth such participants' rights pursuant thereto and the grants pursuant to
Silknet Stock Plans shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 6.11 after giving effect
------------
to the Merger). Consistent with the terms of the Silknet Stock Plans and the
documents governing the outstanding options under those plans, the Merger
shall not result in the termination of any outstanding options under the
Silknet Stock Plans that are so assumed by Kana or the shares of Kana Common
Stock that will be subject to those options upon Kana's assumption of the
options in the Merger. All holders of Silknet stock options shall have the
right to exercise such options following the Effective Time, with full credit
given to all of the provisions of the existing stock option agreements and the
Silknet stock option plans, including provisions regarding vesting and service
relating to any predecessor corporation acquired by Silknet and including the
vesting acceleration provisions pursuant to which the vesting date of all
options shall accelerate by one year upon a change in control such as the
Merger. It is the intention of the parties that the options so assumed by Kana
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent such options qualified as incentive
stock options prior to the Effective Time. Within 30 business days after the
Effective Time, provided that Kana has received within 10 business days after
the Effective Time all option documentation it requires relating to the
outstanding options, Kana will issue to each person who, immediately prior to
the Effective Time, is a holder of an outstanding option under the Silknet
stock option plans that is to be assumed by Kana hereunder, a document in form
and substance reasonably satisfactory to Silknet evidencing the foregoing
40
assumption of such option by Kana, including provisions regarding vesting and
service relating to any predecessor corporation acquired by Silknet and its
subsidiaries and including the vesting acceleration provisions pursuant to
which the vesting date of all options shall accelerate by one year upon a
change in control such as the Merger. For purposes of clarity, an option to
purchase 10,000 shares of Silknet Common Stock which but for the Merger would,
immediately prior to the Effective Time, be vested with respect to 2,500
shares of Silknet Common Stock and scheduled to vest with respect to 2,500
shares of Silknet Common Stock in each of the first, second and third years
following the Effective Time shall, immediately prior to the Effective Time,
accelerate such that it is vested with respect to 5,000 shares of Silknet
Common Stock (2,500 previously vested; 2,500 accelerated by one year) and
scheduled to vest with respect to 2,500 shares of Silknet Common Stock in each
of the first and second years following the Effective Time and thereafter be
fully vested and exercisable in accordance with its terms.
(c) Kana shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Kana Common Stock for delivery under
Silknet Stock Plans assumed in accordance with this Section 6.11. As soon as
------------
practicable and in no event more than thirty (30) business days after the
Effective Time, provided that Kana has received within 10 business days after
the Effective Time all option documentation it requires relating to the
outstanding options, Kana shall file a registration statement on Form S-8 (or
any successor forms), subject to such options and shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
Silknet shall cooperate with and assist Kana in the preparation of such
registration statements.
(d) The Board of Directors of Silknet shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance with
the terms of the Silknet Stock Plans and the instruments evidencing the Silknet
Stock Options, to provide for the conversion of the Silknet Stock Options into
options to acquire Kana Common Stock in accordance with this Section 6.11, and
------------
that no consent of the holders of the Silknet Stock Options is required in
connection with such conversion.
(e) The Board of Directors of Silknet shall, prior to or as of the
Effective Time, take appropriate action to approve the deemed cancellation of
the Silknet Stock Options for purposes of Section 16(b) of the Exchange Act. The
Board of Directors of Kana shall, prior to or as of the Effective Time, take
appropriate action to approve the deemed grant of options to purchase Kana
Common Stock under the Silknet Stock Options (as converted pursuant to this
Section 6.11) for purposes of Section 16(b) of the Exchange Act.
------------
(f) Effective as of the date that is two business days prior to the
Closing Date, Silknet shall take, or cause to be taken, all action necessary to
amend the Silknet ESPP to (a) provide that the Silknet ESPP, and all future
payment periods thereunder, shall terminate on the
41
business day immediately prior to the first semi-annual entry date under the
Kana Employee Stock Purchase Plan that is at least 30 business days following
the Effective Time (the "Kana Entry Date"), and (b) any purchase rights that are
---------------
outstanding on the business day immediately prior to the Kana Entry Date shall
be exercised immediately prior to the Plan termination. Outstanding purchase
rights under the Silknet ESPP shall be assumed by Kana at the Effective Time. On
the Closing Date, Silknet shall deliver to Kana a complete list of all holders
of outstanding purchase rights under the Silknet ESPP, including payroll
deduction amounts elected by each holder and the price per share of Silknet
Common Stock at the beginning of the current Silknet ESPP payment period. Each
such purchase right so assumed by Kana under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the Silknet
ESPP and the documents governing the outstanding purchase rights under the
Silknet ESPP, immediately prior to the Effective Time, except that the purchase
price of shares of Kana Common Stock and the number of shares of Kana Common
Stock to be issued upon the exercise of the assumed purchase right under the
Silknet ESPP shall be adjusted in accordance with the Exchange Ratio. On the
date the assumed purchase rights under the Silknet ESPP are exercised in
accordance with the foregoing, each participant in the Silknet ESPP shall
accordingly be issued shares of Kana Common Stock upon such purchase (adjusted
for the Exchange Ratio). The Silknet ESPP, and all outstanding purchase rights
thereunder, shall terminate with such purchase date, and no purchase rights
shall be subsequently granted or exercised under the Silknet ESPP. Silknet
employees who meet the eligibility requirements for participation in the Kana
Employee Stock Purchase Plan (giving credit for service to Silknet for purposes
of determining eligibility) shall be eligible to begin payroll deductions under
that plan as of the first semi-annual entry date thereunder after the Effective
Time.
(g) Within five (5) business days following the date of this
Agreement, Silknet shall set forth on Schedule 6.11(g) a list of all persons who
----------------
Silknet reasonably believes are, with respect to Silknet and as of the date of
this Agreement, "disqualified individuals" (within the meaning of Section 280G
of the Code and the regulations promulgated thereunder). Within five (5)
business days prior to the Closing Date, Silknet shall revise Schedule 6.11(g)
---------------
to reflect any additional information that Silknet reasonably believes would
impact the determination of persons who are, with respect to Silknet, such
"disqualified individuals."
(h) At the Effective Time, Kana shall assume all outstanding warrants
to exercise Silknet Common Stock ("Silknet Warrants") which have not expired or
been exercised prior thereto. Each Silknet Warrant so assumed by Kana under this
Agreement shall continue to have, and be subject to, the same terms and
conditions as were applicable to such Silknet Warrant immediately prior to the
Effective Time (including, without limitation, any repurchase rights or vesting
provisions), provided that (A) such Silknet Warrant shall be exercisable for
that number of whole shares of Kana Common Stock equal to the product of the
number of shares of Silknet Common Stock that were issuable upon exercise of
such Silknet Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio applicable to the Silknet Common Stock subject to such Silknet
Warrant (rounded down to the nearest whole number of shares of Kana Common
Stock) and (B) the per share exercise price for the shares of Kana Common Stock
issuable upon exercise of such assumed Silknet Warrant shall be equal to the
quotient determined by dividing the exercise price per share of Silknet Common
Stock at which such
42
Silknet Warrant was exercisable immediately prior to the Effective Time by the
Exchange Ratio applicable to the series of Silknet Common Stock subject to such
Silknet Warrant (rounded up to the nearest whole cent). Kana shall, from and
after the Effective Time, upon exercise of the Silknet Warrants in accordance
with the terms thereof, make available for issuance all shares of Kana Common
Stock covered thereby and shall, as promptly as practicable after the Effective
Time, issue to each holder of an outstanding Silknet Warrant a document
evidencing the foregoing assumption by Kana.
Section 6.12 Stock Option and Voting Agreements.
------------------------------------------------
Concurrently with the execution and delivery of this Agreement,
Silknet and Kana shall (a) execute and deliver the Silknet Stock Option
Agreement and the Kana Stock Option Agreement in the form annexed hereto as
Exhibit C and Exhibit D, respectively, and (b) cause each of their respective
--------- ---------
directors and executive officers and each of their respective controlled
affiliates listed on Schedule 6.12 herewith to execute and deliver voting
agreements and irrevocable proxies in the applicable forms annexed hereto as
Exhibits A and B (the "Voting Agreements"), agreeing, among other things, to
---------- - -----------------
vote in favor of the Merger and against any competing proposals. Silknet and
Kana shall each take all corporate action necessary to reserve for issuance a
sufficient number of shares of its common stock for delivery upon an exercise in
full of the option granted to Kana in the Silknet Stock Option Agreement and to
Silknet in the Kana Stock Option Agreement.
Section 6.13 Board Composition.
-------------------------------
Kana and the Kana Board of Directors shall take all action required
to increase the size of the Board to nine (9) as of the Effective Time and to
cause the election promptly after the Election Time by the Kana Board of Xxxxx
X. Xxxx to the Kana Board for at least a period of one (1) year following the
Closing Date.
Section 6.14 Brokers Or Finders.
--------------------------------
Each of Kana and Silknet represents, as to itself, its Subsidiaries
and its affiliates, that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement except Credit Suisse First Boston,
whose fees and expenses will be paid by Silknet in accordance with Silknet's
agreement with such firm (copies of which have been delivered by Silknet to Kana
prior to the date of this Agreement), and Xxxxxxx, Sachs & Co., whose fees and
expenses will be paid by Kana in accordance with Kana's agreement with such firm
(a copy of which has been delivered by Kana prior to the date of this
Agreement). Each of Kana and Silknet agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any such fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or any of
its Affiliates.
43
Section 6.15 Stand-Off Agreements.
----------------------------------
On or before the Effective Time, each officer and director of
Silknet and Kana and affiliates controlled by Silknet or Kana will execute a
Market Stand-Off Agreement in substantially the form attached hereto as Exhibit
-------
E (the "Stand-Off Agreement").
- -------------------
Section 6.16 Registration Rights.
---------------------------------
On or before the Effective Time, Kana shall use all commercially
reasonable efforts to amend its Fourth Amended and Restated Investors Rights
Agreement to provide registration rights to Silknet Principal Stockholders which
possess rights to cause their Silknet Common Stock to be registered, on a basis
pari passu with the holders of Kana registration rights, substantially in the
form of Exhibit F hereto (the "Rights Agreement Amendment").
---------
Section 6.17 Indemnification.
-----------------------------
(a) From and after the Effective Time, Kana agrees that it will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of Silknet (the "Indemnified Parties"),
-------------------
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement
(collectively, "Costs") incurred in connection with any claim, action, suit,
-----
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Silknet would have been
permitted under Delaware law and its certificate of incorporation or bylaws in
effect on the date hereof to indemnify such Indemnified Party (and Kana and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided the Indemnified Party to whom
--------
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Indemnified Party is not entitled to
indemnification).
(b) For a period of six (6) years after the Effective Time, Kana shall
cause the Surviving Corporation to maintain (to the extent available in the
market) in effect a directors' and officers' liability insurance policy covering
those persons who are currently covered by Silknet's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Kana) with coverage in amount and scope at least as favorable as Silknet's
existing coverage; provided, that in no event shall Kana or the Surviving
--------
Corporation be required to expend in excess of two hundred percent (200%) of the
annual premium currently paid by Silknet for such coverage as heretofore
disclosed by Silknet to Kana (the "Current Premium"); and if such premium would
---------------
at any time exceed 200% of the Current Premium, then the Surviving Corporation
shall maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to two hundred percent (200%) of the
Current Premium.
(c) The provisions of this Section 6.17 are intended to be an addition
-----------
to the rights otherwise available to the current officers and directors of
Silknet by law, charter, statute, bylaw
44
or agreement, and shall operate for the benefit of, and shall be enforceable by,
each of the Indemnified Parties, their heirs and their representatives.
(d) To the extent there is any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) against any
Indemnified Party that arises out of or pertains to any action or omission in
his or her capacity as a director, officer, employee, principal stockholder,
fiduciary or agent of Silknet occurring prior to the Effective Time, or arises
out of or pertains to the transactions contemplated by this Agreement for a
period of six years after the Effective Time (whether arising before or after
the Effective Time), such Indemnified Party shall be entitled to be represented
by counsel and following the Effective Time (i) any counsel retained by the
Indemnified Parties shall be reasonably satisfactory to the Surviving
Corporation and Kana, (ii) the Surviving Corporation and Kana shall pay as
incurred the reasonable fees and expenses of such counsel, promptly after
statement therefor are received, and (iii) the Surviving Corporation and Kana
will cooperate in the defense of any such matter; provided, however, that
-------- -------
neither the Surviving Corporation nor Kana shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld, conditioned or delayed); and provided, further, that, in the event
-------- -------
that any claim or claims for indemnification are asserted or made within such
six-year period, all rights to indemnification in respect to any such claim or
claims shall continue until the final disposition of any and all such claims.
The Indemnified Parties as a group may retain only one law firm to represent
them with respect to any single action unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties. The provisions of this
Section are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and representatives.
Section 6.18 Benefit Plans.
---------------------------
Kana agrees that, during the period commencing at the Effective Time
and continuing for a reasonable period thereafter, the employees of Silknet and
its Subsidiaries will continue to be provided with benefits under employee
benefit plans (other than stock option or other plans involving the potential
issuance of securities) each of which are listed in Section 3.13 of the Silknet
------------
Disclosure Schedule which are substantially as favorable in the aggregate as
those currently provided by Silknet and its Subsidiaries to such employees
(except with respect to the 401(k) plan as provided below).
(a) Unless Kana consents otherwise in writing, Silknet shall take all
action necessary to terminate, or cause to terminate, before the Effective Time,
any Silknet Employee Plan that is a 401(k) plan or other defined contribution
retirement plan or employee stock purchase plan. Kana shall permit the rollover
of the accounts of participants in the Silknet 401(k) plans to the Kana 401(k)
plan (including outstanding loans of those participants who became employees of
Kana).
(b) Kana shall include Silknet employees in Kana's welfare plans
(within the meaning of Section 3(1) of ERISA) and fringe benefit plans on the
same basis and terms as Silknet employees currently participate and, in any
event, with respect to particular welfare plans
45
of Kana, upon the termination of the Silknet welfare plans. All welfare benefit
plans of Kana or the Surviving Corporation in which Silknet's employees
participate after the Effective Time shall (i) recognize expenses and claims
that were incurred by Silknet' employees in the year in which the Effective Time
occurs and entitle Silknet employees to applicable copayments and deductibles,
if any, at a rate not higher than that in effect under the corresponding welfare
benefit plan of Silknet in effect at the Effective Time, and (ii) provide
coverage for preexisting health conditions to the extent covered under the
applicable plans or programs of Silknet as of the Effective Time. In addition,
for eligibility purposes under plans of the Surviving Corporation or Kana,
service by an employee for Silknet or any of its subsidiaries and any
predecessor prior to the Effective Time shall be taken into account to the same
extent as service for Kana; provided, that nothing hereby shall require the
--------
inclusion any such employee in any such plan prior to the Effective Time, and
further provided, that in determining the amount of vacation pay owed to any
------- --------
such Silknet employee from and after the Effective Time under the applicable
terms of the vacation pay plan of the Surviving Corporation or Kana (which terms
need not be comparable to the terms of the vacation plan or policy of Silknet or
any of its subsidiaries and any predecessor), credit shall be given for such
employee's service for Silknet or any of its subsidiaries and any predecessor
corporation prior to the Effective Time. Employees of Silknet or any of its
subsidiaries and any predecessor corporation as of the Effective Time shall be
permitted to participate in Kana's Employee Stock Purchase Plan (the "Kana
----
ESPP") (if any) commencing on the first enrollment date following the Effective
----
Time, subject to compliance with the eligibility provisions of such plan (with
employees receiving credit, for purposes of such eligibility provisions, for
service with Silknet or any of its subsidiaries and any predecessor corporation.
In addition, for eligibility and vesting purposes (but not for benefit
computation or accrual purposes) under plans of the Surviving Corporation or the
Parent, service by an employee for Silknet, its subsidiaries and any of their
predecessor corporations prior to the Effective Time shall be taken into account
to the same extent as service for Kana. Notwithstanding the foregoing, for a
period of no less than one year after the Effective Time, Kana shall provide
severance and termination benefits to employees of Silknet that are no less
favorable than those provided by Silknet to such Silknet employees as of the
date hereof.
(c) (c) With respect to each benefit plan, program practice, policy
or arrangement maintained by Kana (the "Kana Employee Plans") in which employees
-------------------
of Silknet subsequently participate, Kana will recognize such employee's
cumulative prior service to Silknet and its subsidiaries (and their predecessor
corporation) for purposes of determining eligibility to participate in and for
the vesting of benefits under such Kana Employee Plans; provided that such
--------
recognition shall not be for the purpose of determining retirement benefits and
accrual. Such service also shall apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the application of any pre-
existing condition limitations. Each Kana Employee Plan shall waive pre-
existing condition limitations to the same extent waived under the applicable
Silknet benefit plan. Silknet Employees shall be given credit for amounts paid
under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the Kana
Employee Plan.
46
Section 6.19 Registration Statement; Joint Proxy Statement/Prospectus.
----------------------------------------------------------------------
If at any time prior to the Effective Time any event relating to
Silknet or any of its Affiliates, officers or directors should be discovered by
Silknet which should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement/Prospectus, Silknet shall promptly
inform Kana. If at any time prior to the Effective Time any event relating to
Kana or any of its Affiliates, officers or directors should be discovered by
Kana which should be set forth in an amendment to the Registration Statement or
a supplement to the Joint Proxy Statement/Prospectus, Kana shall promptly inform
Silknet.
Section 6.20 Section 16.
------------------------
Assuming that Silknet delivers to Kana the Section 16 Information
(as defined below) in a timely fashion, the Board of Directors of Kana, or a
committee of two or more "non-employee directors" thereof (as such item is
defined for purposes of Rule 16b-3 under the Exchange Act), shall adopt
resolutions prior to the consummation of the Merger, providing that the receipt
by Silknet Insiders (as defined below) of Kana Common Stock in exchange for
Silknet Common Stock, and of options and warrants for Kana Common Stock upon
conversion of outstanding options and warrants of Silknet, in each case pursuant
to the transactions contemplated hereby and to the extent such securities are
listed in the Section 16 Information, are intended to be exempt from liability
pursuant to Section 16(b) under the Exchange Act. Such resolutions shall comply
with the approval conditions of Rule 16b-3 under the Exchange Act for purposes
of such Section 16(b) exemption, including, but not limited to, specifying the
name of Silknet Insiders, the number of equity securities to be acquired or
disposed of for each such person, the material terms of any derivative
securities, and that the approval is intended to make the receipt of such
securities exempt pursuant to Rule 16b-3(d). "Section 16 Information" shall
mean information accurate in all respects regarding Silknet Insiders, the number
of Silknet Common Stock (or options or warrants therefor, collectively, the
"Options") held by each such Silknet Insider and expected to be exchanged for
Kana Common stock in the Merger, and the number and description of the Options
held by each such Silknet Insider and expected to be converted into options or
warrants for Kana Common Stock in connection with the Merger. "Silknet
Insiders" shall mean those officers, directors and 10% stockholders of Silknet
who will be subject to the reporting requirements of Section 16(b) of the
Exchange Act with respect to Kana and who are listed in the Section 16
Information.
ARTICLE VII.
CONDITIONS TO MERGER
Section 7.01 Conditions To Each Party's Obligation To Effect The Merger.
------------------------------------------------------------------------
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
47
(a) Stockholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding shares of Silknet Common Stock and the Kana Voting Proposal
shall have been approved by the affirmative vote of the holders of a majority of
the shares of Kana Common Stock present or represented at the Kana Stockholders'
Meeting at which a quorum is present.
(b) Approvals. Other than the filing provided for by Section 1.01, all
--------- ------------
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity
shall have been obtained or made or shall have expired, other than those, the
absence of which would not reasonably be expected to have a Kana Material
Adverse Effect or Silknet Material Adverse Effect and would not prohibit or
render unlawful the consummation of the Merger.
(c) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(d) No Legal Impediment. No Governmental Entity or federal, state or
-------------------
foreign court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Order, statute, rule or regulation which is in effect
and which has the effect of making the Merger unlawful or otherwise prohibiting
consummation of the Merger.
(e) Nasdaq. The shares of Kana Common Stock to be issued in the
------
Merger shall have been approved for quotation on the Nasdaq.
7.02 Additional Conditions To Obligations Of Kana And Merger Sub.
-----------------------------------------------------------------
The obligations of Kana and Merger Sub to effect the Merger are
subject to the satisfaction of each of the following conditions, any of which
may be waived in writing exclusively by Kana and Merger Sub:
(a) Representations And Warranties. The representations and warranties
------------------------------
of Silknet set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, other than representations and warranties which speak as of an
earlier date (which shall be true and correct as of such earlier date) and
except for (i) changes contemplated by this Agreement and (ii) where the failure
to be true and correct, individually or in the aggregate, has not had and will
not, determined as of the Closing Date and solely with the passage of time, have
a Silknet Material Adverse Effect.
(b) Performance Of Obligations Of Silknet. Silknet shall have
-------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
48
(c) Certificate. Kana shall have received a certificate signed on
-----------
behalf of Silknet by the chief executive officer and the chief financial officer
of Silknet to the effect that the conditions set forth in Section 7.02(a) and
---------------
Section 7.02(b) are satisfied.
---------------
(d) Stand-Off Agreements. Each officer and director of and each
--------------------
affiliate controlled by Silknet shall have entered into Stand-Off Agreements,
pursuant to which each such person will agree not to sell, transfer, pledge,
hypothecate or otherwise dispose of any shares of Silknet Common Stock held as
of the date of such agreement or later acquired by such person for a period
ending 90 days after the Closing.
(e) Tax Opinion. Kana shall have received a written opinion from
-----------
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel to Kana, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. The parties
to this Agreement shall make reasonable representations as requested by such
counsel for the purpose of rendering such opinion.
(f) Absence of Material Adverse Effect. No Silknet Material Adverse
----------------------------------
Effect or Kana Material Adverse Effect shall have occurred, and no fact or
circumstance shall exist which will, determined as of the Closing Date and
solely with the passage of time, result in a Silknet Material Adverse Effect.
Section 7.03 Additional Conditions To Obligations Of Silknet.
-------------------------------------------------------------
The obligation of Silknet to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by Silknet:
(a) Representations And Warranties. The representations and warranties
------------------------------
of Kana and Merger Sub set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, other than representations which speak as of an earlier
date (which shall be true and correct as of such earlier date) and except for,
(i) changes contemplated by this Agreement and (ii) where the failures to be
true and correct, individually or in the aggregate, have not had and will not,
determined as of the Closing Date and solely with the passage of time, have a
Kana Material Adverse Effect.
(b) Performance Of Obligations Of Kana And Merger Sub. Kana and Merger
-------------------------------------------------
Sub shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Certificate. Silknet shall have received a certificate signed on
-----------
behalf of Kana by the chief executive officer and the chief financial officer of
Kana to the effect that the conditions set forth in Section 7.03(a) and Section
--------------- -------
7.03(b) are satisfied.
-------
(d) Stand-Off Agreements. Each officer and director of and each
--------------------
affiliate controlled by Kana shall have entered into Stand-Off Agreements,
pursuant to which each such person will agree not to sell, transfer, pledge,
hypothecate or otherwise dispose of any shares of
00
Xxxx Xxxxxx Stock held as of the date of such agreement or later acquired by
such person for a period ending 90 days after the Closing Date.
(e) Tax Opinion. Silknet shall have received the opinion of Xxxxx,
-----------
Xxxxxxx &Thibeault, LLP, counsel to Silknet, to the effect that the Merger will
be treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. The parties to this
Agreement shall make reasonable representations as requested by such counsel for
the purpose of rendering such opinion.
(f) Absence of Kana Material Adverse Effect. No Kana Material Adverse
---------------------------------------
Effect shall have occurred, and no fact or circumstance shall exist which will,
determined as of the Closing Date and solely with the passage of time, result in
a Kana Material Adverse Effect.
(g) Rights Agreement Amendment. Kana shall have delivered the Rights
--------------------------
Agreement Amendment.
Section 7.04 Frustration of Closing Conditions.
-----------------------------------------------
Neither Kana, Merger Sub nor Silknet may rely on the failure of any
condition set forth in Section 7.01, 7.02 or 7.03, as the case may be, to be
------------
satisfied if such failure was caused by such party's failure to use reasonable
efforts to consummate the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreements, as required by and subject to Section
-------
6.07.
----
ARTICLE VIII.
TERMINATION AND AMENDMENT
Section 8.01 Termination.
-------------------------
At any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Silknet, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Boards of Directors of
Kana and Silknet;
(b) by either Kana or Silknet, if the Closing shall not have occurred
on or before July 31, 2000 (provided, that the right to terminate this Agreement
under this Section 8.01(b) shall not be available to any party whose action or
---------------
failure to act has been the cause or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes a
material breach of this Agreement);
(c) by Kana, if (i) Silknet shall have breached any representation or
warranty made as of the date of this Agreement, or shall breach any obligation
or agreement hereunder in a manner causing conditions precedent to the Closing
not to be satisfied and such breach shall
50
not have been cured within twenty (20) business days of receipt by Silknet of
written notice of such breach, provided that the right to terminate this
--------
Agreement by Kana under this Section 8.01(c)(i) shall not be available to Kana
------------------
where Kana is at that time in material breach of this Agreement, or (ii) the
Board of Directors of Silknet shall have omitted, withdrawn or modified its
recommendation of this Agreement or the Merger in a manner adverse to Kana or
recommended, endorsed, accepted or agreed to a Silknet Takeover Proposal or
shall have resolved to do any of the foregoing;
(d) by Silknet, if (i) Kana shall have breached any representation or
warranty made as of the date of this Agreement, or shall breach any obligation
or agreement hereunder in a manner causing conditions precedent to the Closing
not to be satisfied and such breach shall not have been cured within twenty (20)
business days following receipt by Kana of written notice of such breach,
provided that the right to terminate this Agreement by Silknet under this
Section 8.01(d)(i) shall not be available to Silknet where Silknet is at that
------------------
time in material breach of this Agreement, or (ii) the Board of Directors of
Kana shall have omitted, withdrawn or modified its recommendation of this
Agreement or the Merger in a manner adverse to Silknet or recommended, endorsed,
accepted or agreed to a Kana Takeover Proposal or shall have resolved to do any
of the foregoing;
(e) by Kana if (i) any permanent injunction or other order of a court
or other competent authority preventing the consummation of the Merger shall
have become final and nonappealable, (ii) if any required approval of the
stockholders of Silknet shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof, or (iii) the Kana Voting Proposal is not obtained
at the Kana Stockholders Meeting or at any adjournment thereof; or
(f) by Silknet if (i) any permanent injunction or other order of a
court or other competent authority preventing the consummation of the Merger
shall have become final and nonappealable, (ii) if any required approval of the
stockholders of Silknet shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof, or (iii) the Kana Voting Proposal is not obtained
at the Kana Stockholders Meeting or at any adjournment thereof.
(g) by Kana, if Silknet or any of its Representatives shall
participate in discussions or negotiations, or take any other action, in breach
(other than an immaterial breach) of Section 6.02.
------------
(h) by Silknet, if Kana or any of its Representatives shall
participate in discussions or negotiations, or take any other action, in breach
(other than an immaterial breach) of Section 6.03.
------------
(i) by Silknet, in response to a Silknet Superior Offer which was not
solicited by Silknet; provided that Silknet shall have complied in all material
--------
respects with its obligations under Sections 6.02 (no-shop) and 6.06
------------- ----
(stockholder meetings) and such Silknet Superior Offer did not otherwise result
from a breach of any of Silknet's obligations under this Agreement; and provided
--------
further, that no termination pursuant to this Section 8.01(i) shall be effective
------- ---------------
until after
51
the fifth business day following Kana's receipt of written notice advising Kana
that the Board of Directors of Silknet is prepared to accept a Silknet Superior
Offer, specifying the material terms and conditions of such Silknet Superior
Offer and identifying the person making such Silknet Superior Offer; and the
payment of any applicable termination fee pursuant to Section 8.03.
------------
(j) by Kana, in response to a Kana Superior Offer which was not
solicited by Kana; provided that Kana shall have complied in all material
--------
respects with its obligations under Sections 6.03 (no-shop) and 6.06
------------- ----
(stockholder meetings) and such Kana Superior Offer did not otherwise result
from a breach of any of Kana's obligations under this Agreement; and provided
--------
further, that no termination pursuant to this Section 8.01(j) shall be effective
------- ---------------
until after the fifth business day following Silknet's receipt of written notice
advising Silknet that the Board of Directors of Kana is prepared to accept a
Kana Superior Offer, specifying the material terms and conditions of such Kana
Superior Offer and identifying the person making such Kana Superior Offer; and
the payment of any applicable termination fee pursuant to Section 8.03.
------------
Section 8.02 Effect of Termination.
-----------------------------------
In the event of termination of this Agreement as provided in Section
-------
8.01, this Agreement shall forthwith become void and there shall be no liability
----
or obligation on the part of Kana or Silknet or their respective officers,
directors, security holders or affiliates, except as provided in Section 8.03
------------
and/or except to the extent that such termination results from the breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement involving fraud, intentional misrepresentation or
willful misconduct; provided that the provisions of Section 8.03 and this
------------
Section 8.02 shall remain in full force and effect and survive any termination
------------
of this Agreement.
Section 8.03 Expenses and Termination Fees.
-------------------------------------------
(a) Subject to Sections 8.03(b) and 8.03(c), whether or not the Merger
---------------- -------
is consummated, all costs and expenses incurred in connection with this
Agreement, related agreements and documents and the transactions contemplated
hereby and thereby (including the fees and expenses of its advisers, accountants
and legal counsel) shall be paid by the party incurring such expense.
(b) In the event that (i) after a Silknet Takeover Proposal has been
made to Silknet or to Silknet stockholders generally or otherwise has become
publicly known, this Agreement shall be terminated by Kana pursuant to Section
-------
8.01(c)(i) or Section 8.01(e)(ii) or by Silknet pursuant to Section 8.01(f)(ii)
---------- ------------------- -------------------
or by either party pursuant to Section 8.01(b), or (ii) this Agreement shall be
---------------
terminated by Kana pursuant to Section 8.01(c)(ii) (other than as a result of a
-------------------
change in the Silknet Board's recommendation based on a right of termination by
Silknet under Section 8.01(d)(i)), or Section 8.01(g), or (iii) this Agreement
------------------ ---------------
shall be terminated by Silknet pursuant to Section 8.01(i), then, in any such
---------------
event, in addition to any other remedies Kana may have, Silknet shall pay to
Kana the sum of one hundred forty-eight million three hundred thousand dollars
($148,300,000), (x) which shall be due and payable in full upon termination
of this Agreement (in the case of termination of Silknet pursuant to Section
-------
8.01(i)) and (y) forty million dollars ($40,000,000) of which shall be due and
--------
payable upon termination
52
of this Agreement and the balance of which shall be due and payable upon the
consummation of a Silknet Takeover Proposal at any time prior to the first
anniversary of the termination of this Agreement (in all other cases within the
scope of this Section 8.03(b)). All payments pursuant to Section 8.03(b) shall
--------------- ---------------
be made by wire transfer of same-day funds to an account specified by Kana.
(c) In the event that (i) after a Kana Takeover Proposal has been made
to Kana or to Kana stockholders generally or otherwise has become publicly
known, this Agreement shall be terminated by Silknet pursuant to Section
-------
8.01(d)(i) or Section 8.01(f)(iii) or by Silknet pursuant to Section
---------- -------------------- -------
8.01(e)(iii) or by either party pursuant to Section 8.01(b), or (ii) this
------------ ---------------
Agreement shall be terminated by Silknet pursuant to Section 8.01(d)(ii) (other
-------------------
than as a result of a change in the Kana Board's recommendation based on the
occurrence of a circumstance giving rise to a right of termination by Kana under
Section 8.01(c)(i)), or Section 8.01(h), or (iii) this Agreement shall be
----------------- ---------------
terminated by Kana pursuant to Section 8.01(j), then, in any such event, in
---------------
addition to any other remedies Silknet may have, Kana shall pay to Silknet the
sum of one hundred forty-eight million three hundred thousand dollars
($148,300,000), (x) which shall be due and payable in full upon termination of
this Agreement (in the case of termination by Kana pursuant to Section 8.01(j))
---------------
and (y) forty million dollars ($40,000,000) of which shall be due and payable
upon termination of this Agreement and the balance of which shall be due and
payable upon the consummation of a Kana Takeover Proposal at any time prior to
the first anniversary of the termination of this Agreement (in all other cases
within the scope of this Section 8.03(c)). All payments pursuant to Section
--------------- -------
8.03(c) shall be made by wire transfer of same-day funds to an account specified
-------
by Silknet.
(d) Each party acknowledges that the agreements contained in this
Section 8.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the other party would not enter
into this Agreement; accordingly, if a party fails promptly to pay the amount
due pursuant to this Section 8.03 and, in order to obtain such payment, the
------------
other party commences a suit which results in a judgment or settlement for the
fee set forth in this Section 8.03, the liable party shall pay to the party
------------
commencing such suit its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
Section 8.04 Amendment.
-----------------------
This Agreement may be amended by the parties hereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by the
stockholders of Silknet or of Kana, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by a
written instrument signed on behalf of each of the parties hereto.
53
Section 8.05 Extension; Waiver.
-------------------------------
At any time prior to the Effective Time any party hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto or (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
ARTICLE IX.
MISCELLANEOUS
Section 9.01 Nonsurvival Of Representations, Warranties And Agreements.
-----------------------------------------------------------------------
None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Section 1.04,
------------
Section 2.01, Section 2.02, Section 6.13, Section 6.14, Section 6.15, Section
------------ ------------ ------------- ------------ ------------ -------
6.17, Section 6.18, Section 19 and Article IX. The Confidentiality Agreement
---- ------------ ---------- ----------
between Kana and Silknet dated as of February 1, 2000 (the "Confidentiality
---------------
Agreement") shall survive the execution and delivery of this Agreement.
---------
Section 9.02 Notices.
---------------------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by a nationally recognized
express overnight courier service, telecopied (which is confirmed) or mailed by
registered or certified mail (return receipt requested), to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Kana or Merger Sub, to:
Kana Communications, Inc.
000 Xxx Xxxx
Xxxxxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn.: Chief Executive Officer
54
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxxxxxx, Esq.
Xxxxxxx, Phleger & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
and to:
Xxx X. Xxxxxx, Esq.
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
(b) if to Silknet, to:
Silknet Software Inc.
00 Xxxxxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn.: Chief Executive Officer
with a copy to:
Xxxx Xxxxxxx, Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
Xxxxxx Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Section 9.03 Definitions.
-------------------------
For purposes of this Agreement:
(a) "Silknet Material Adverse Effect" means any change, effect, event,
-------------------------------
occurrence, state of facts or development that is materially adverse to the
business, financial condition or results of operations of Silknet and its
Subsidiaries, taking Silknet and its Subsidiaries together as a whole, provided,
--------
however, that none of the following shall be deemed either alone or in
-------
combination, to constitute a Material Adverse Effect; (a) any change in the
55
market price or trading volume of Silknet after the date hereof; (b) any failure
by Silknet to meet the revenue or earnings predictions or other expectations of
equity analysts, or any decrease in revenues from prior periods, for any period
ending (or for which earnings are released) on or after the date of this
Agreement; (c) any adverse effect on the bookings, revenues, gross margins or
earnings of Silknet (or the direct consequence thereof) following the date of
this Agreement which is directly and primarily attributable to or arises
directly and primarily from a delay of, reduction in or cancellation or change
in the terms or timing of product orders by customers of Silknet or any change
in the timing of projects or implementations, purchasing patterns or habits of
Silknet customers, whether current or prospective, or any indecision of any such
customer regarding Silknet products or Services; (d) any change arising directly
and primarily out of conditions affecting the electronic customer relationship
management (eCRM) market, the U.S. economy as a whole or the international
economy as a whole or any political, economic or social instability in any such
markets or economies; (e) any termination or modification of any existing
Silknet contract with a customer or termination or modifications of negotiations
between Silknet and its customers (however, this proviso shall not exclude any
underlying change, effect, event, occurrence, state of facts or development
which results in a change in price or trading volume within the scope of clause
------
(a) or a failure to meet estimates, predictions or expectations within the scope
---
of clause (b).
---------
(b) "Kana Material Adverse Effect" means any change, effect, event,
----------------------------
occurrence, state of facts or development that is, materially adverse to the
business, financial condition or results of operations of Kana and its
Subsidiaries, taking Kana and its Subsidiaries together as a whole, provided,
--------
however, that none of the following shall be deemed either alone or in
-------
combination, to constitute a Material Adverse Effect; (a) any change in the
market price or trading volume of Kana after the date hereof; (b) any failure by
Kana to meet the revenue or earnings predictions or other expectations of equity
analysts, or any decrease in revenues from prior periods, for any period ending
(or for which earnings are released) on or after the date of this Agreement; (c)
any adverse effect on the bookings, revenues, gross margins or earnings of Kana
(or for direct consequence thereof) following the date of this Agreement which
is directly and primarily attributable to or arises directly and primarily from
a delay of, reduction in or cancellation or change in the terms or timing of
product orders by customers of Kana or any change in the timing of projects or
implementations, purchasing patterns or habits of Kana customers, whether
current or prospective, or any indecision of any such customer regarding Kana
products or services; (d) any change arising directly and primarily out of
conditions affecting the electronic customer relationship management (eCRM)
markets, the U.S. economy as a whole or the international economy as a whole or
any political, economic or social instability in any such markets or economies;
(e) any termination or modification of any existing Kana contract with a
customer or termination or modifications of negotiations between Kana and its
customers (however, this proviso shall not exclude any underlying change,
effect, event, occurrence, state of facts or developments which results in a
change in price or trading volume within the scope of clause (a) or a failure to
----------
meet estimates, predictions or expectations within the scope of clause (b)).
----------
56
Section 9.04 Interpretation.
----------------------------
When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to February 6, 2000.
Section 9.05 Counterparts.
--------------------------
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when two or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
Section 9.06 Entire Agreement; No Third Party Beneficiaries.
------------------------------------------------------------
This Agreement (including the documents and the instruments referred
to herein) (a) constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as provided in Section 6.14
------------
are not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder; provided that the Confidentiality Agreement shall
remain in full force and effect until the Effective Time. Each party hereto
agrees that, except for the representations and warranties contained in this
Agreement, neither Silknet nor Kana makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement or the transactions contemplated hereby,
notwithstanding the delivery or disclosure to the other or the other's
representatives of any documentation or other information with respect to any
one or more of the foregoing.
Section 9.07 Governing Law.
---------------------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware, including matters relating to merger procedure,
corporate governance and fiduciary duty without regard to any applicable
conflicts of law. All disputes or controversies shall be settled in the
Delaware Chancery Court and each party irrevocably and unconditionally consents
and submits to the jurisdiction of the courts of the State of Delaware for any
actions, suits or proceedings arising out of or relating to this Agreement and
the transactions contemplated hereby.
57
Section 9.08 Assignment.
------------------------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Kana, Merger Sub and Silknet have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
KANA COMMUNICATIONS, INC. PISTOL ACQUISITION CORP.
By: /s/ Xxxxxxx X. XxXxxxxxx By: /s/ Xxxxxxx X. XxXxxxxxx
-------------------------------- -----------------------------
Title: Chief Executive Officer Title: President
--------------------------- -------------------------
SILKNET SOFTWARE INC.
By: /s/ Xxxxx X. Xxxx
----------------------------
Title: Chief Executive Office
------------------------
59
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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EXHIBIT A
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SILKNET STOCK VOTING AGREEMENT
61
EXHIBIT B
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KANA STOCK VOTING AGREEMENT
62
EXHIBIT C
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SILKNET STOCK OPTION AGREEMENT
63
EXHIBIT D
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KANA STOCK OPTION AGREEMENT
64
EXHIBIT E
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STAND-OFF AGREEMENT
65
EXHIBIT F
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RIGHTS AMENDMENT AGREEMENT
66
