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EXHIBIT 99.4
EXECUTION COPY
SILKNET STOCK OPTION AGREEMENT
THIS SILKNET STOCK OPTION AGREEMENT (this "AGREEMENT") is made and entered
into as of February 6, 2000, between Kana Communications, Inc., a Delaware
corporation ("KANA"), and Silknet Software Inc., a Delaware corporation (the
"COMPANY"). Capitalized terms used but not otherwise defined herein have the
meanings ascribed to them in the Merger Agreement (as defined below).
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Kana,
Merger Sub (as defined below) and the Company are entering into an Agreement and
Plan of Merger (the "MERGER AGREEMENT") that provides for the merger of a
wholly-owned subsidiary of Kana ("MERGER SUB") with and into the Company (the
"MERGER"). Pursuant to the Merger, each share of common stock, par value $0.01
per share, of the Company ("COMPANY SHARES") outstanding at the Effective Time
of the Merger will be converted into the right to receive common stock, par
value $0.001 per share, of Kana, upon the terms and subject to the conditions
and exceptions set forth in the Merger Agreement.
B. As a condition to Kana's willingness to enter into the Merger Agreement,
Kana has required that the Company agree, and the Company has so agreed, to
grant to Kana an option to acquire Company Shares upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Kana an irrevocable option (the "OPTION") to
purchase from the Company up to the number of fully paid and nonassessable
Company Shares equal to nineteen and nine tenths percent (19.9%) of the Company
Shares issued and outstanding at the time of exercise of the Option (the "OPTION
SHARES"), in the manner set forth below by paying cash to the Company at a price
of two hundred fourteen dollars and eighty-seven cents ($214.87) per Company
Share (the "EXERCISE PRICE").
2. EXERCISE OF OPTION.
(a) The Option may be exercised by Kana, in whole or in part, at any time
or from time to time on or after the occurrence of an Exercise Event. The
Company shall notify Kana promptly in writing of the occurrence of any Exercise
Event, it being understood that the giving of such notice by the Company shall
not be a condition to the right of Kana to exercise the option. For all purposes
of this Agreement, an "EXERCISE EVENT" shall mean the occurrence of any of (i) a
Triggering Event (as defined below), (ii) the public announcement of an
Acquisition Proposal (as defined below), or (iii) the commencement of a
solicitation within the meaning of Rule 14a-1(1) by
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any person or entity other than the Company or its Board of Directors (or any
person or entity acting on behalf of the Company or its Board of Directors)
seeking to alter the composition of the Company's Board of Directors. If Kana
wishes to exercise the Option, Kana will deliver to the Company a written notice
(each an "EXERCISE NOTICE") specifying the total number of Option Shares it
wishes to acquire. Each closing of a purchase of Option Shares (a "CLOSING")
will occur on a date and at a time prior to the termination of the Option
designated by Kana in an Exercise Notice delivered at least two (2) business
days prior to the date of such Closing, which Closing will be held at the
principal offices of the Company.
(i) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean
any offer or proposal (other than by Kana) for any transaction or series of
related transactions involving: (A) any purchase from the Company or acquisition
by any person or "group" (as defined in Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a ten percent (10%) interest
in the total outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or group beneficially owning ten percent (10%) or more of
the total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than ten
percent (10%) of the assets of the Company; or (C) any liquidation or
dissolution of the Company.
(ii) For purposes of this Agreement, a "TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Kana its recommendation in favor of the approval
and adoption of the Merger Agreement and approval of the Merger; (ii) the
Company shall have failed to include in the Joint Proxy Statement/Prospectus the
recommendation of the Board of Directors of the Company in favor of the approval
and adoption of the Merger Agreement and the Merger; (iii) the Board of
Directors of the Company shall have failed to reaffirm its recommendation in
favor of the approval and adoption of the Merger Agreement and the Merger within
ten (10) business days after Kana requests in writing that such recommendation
be reaffirmed at any time following the making, announcement or submission of a
Silknet Takeover Proposal (as such term is defined in the Merger Agreement); or
(iv) a tender or exchange offer relating to securities of the Company shall have
been commenced by a person unaffiliated with the Company and the Company shall
not have sent to its security holders pursuant to Rule 14e-2 promulgated under
the Securities Act, within ten (10) business days after such tender or exchange
offer is first published sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
(b) The Option and this Agreement will terminate upon the earliest of (i)
the Effective Time, (ii) termination of the Merger Agreement pursuant to SECTION
8.01(a) thereof, (iii) termination of the Merger Agreement pursuant to SECTION
801(e)(i) or 8.01(f)(i) thereof or otherwise under circumstances which cannot
give rise to a termination fee under SECTION 8.03(b) of the Merger Agreement if
prior thereto no Exercise Event shall have occurred or (iv) twelve (12) months
following the termination of the Merger Agreement under any other circumstances;
PROVIDED, HOWEVER, that if the Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation (including, without
limitation, if the waiting period related to the
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issuance of the Option Shares under the HSR Act shall not have expired or been
terminated), then the Option will not terminate until the forty fifth (45th)
business day after such impediment to exercise will have been removed or will
have become final and not subject to appeal. In addition, the period for the
exercise of the Option shall be extended to the extent necessary to avoid
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder, by reason of such exercise.
3. CONDITIONS TO CLOSING.
The obligation of the Company to issue Option Shares to Kana hereunder is
subject to the conditions that (A) any waiting period under the HSR Act
applicable to the issuance of the Option Shares hereunder shall have expired or
been terminated; (B) all material consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any United States Federal,
state or local administrative agency or commission or other United States
Federal state or local governmental authority or instrumentality, if any,
required in connection with the issuance of the Option Shares hereunder shall
have been obtained or made, as the case may be; and (C) no preliminary or
permanent injunction or other order by any court of competent jurisdiction or
other Governmental Entity in the United States prohibiting or otherwise
restraining such issuance shall be in effect. It is understood and agreed that
at any time during which the Option is exercisable, the parties will use their
respective best efforts to satisfy all conditions to Closing, so that a Closing
may take place as promptly as practicable.
4. CLOSING.
At any Closing, (A) the Company will deliver to Kana a single certificate
in definitive form representing the number of Company Shares designated by Kana
in its Exercise Notice, such certificate to be registered in the name of Kana
and to bear the restrictive legend set forth in Section 9 hereof, against
delivery of (B) payment by Kana to the Company of the aggregate purchase price
for the Company Shares so designated and being purchased by wire transfer of
immediately available funds to an account designated by the Company, provided
that failure or refusal of the Company to designate such an account shall not
preclude Kana from exercising the Option. Upon delivery of an Exercise Notice
and the tender of the aggregate purchase price in immediately available funds,
Kana shall be deemed to be the holder of record of the Option Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Company Shares shall
not be actually delivered to Kana.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Kana that (A) the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder; (B) the
execution and delivery of this Agreement by the Company and consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or any of the transactions contemplated hereby; (C) this Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the
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Company in accordance with its terms; (D) the Company has taken all necessary
corporate and other action to authorize and reserve for issuance and to permit
it to issue upon exercise of the Option, and at all times from the date hereof
until the termination of the Option will have reserved for issuance, a
sufficient number of unissued Company Shares for Kana to exercise the Option in
full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Company Shares or other securities which may
be issuable pursuant to Section 8(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (E) upon delivery of the
Company Shares and any other securities to Kana upon exercise of the Option,
Kana will acquire such Company Shares or other securities free and clear of all
material claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever; (F) the execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of the
Company, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or by which its properties is bound
or affected or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair the Company's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company is a
party or by which the Company or its properties are bound or affected, except,
with respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that could not, individually and in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company; and (G) the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except as disclosed in the Merger
Agreement and the disclosure schedule of the Company thereto.
6. CERTAIN RIGHTS.
(a) KANA PUT. At the request of and upon notice by Kana (the "PUT NOTICE"),
at any time during the period during which the Option is exercisable pursuant to
SECTION 2 (the "PURCHASE PERIOD"), the Company (or any successor entity thereof)
shall be obligated to purchase from Kana all or any portion of the Option, to
the extent not previously exercised, at the price set forth in subparagraph (i)
below (as limited by subparagraph (iii) below), and all or any portion of the
Option Shares, if any, acquired by Kana pursuant thereto, at the price set forth
in subparagraph (ii) below (as limited by subparagraph (iii) below):
(i) The difference between the Market/Tender Offer Price (as defined
below) for the Company Shares as of the date Kana gives notice of its intent to
exercise its rights under this SECTION 6(a) and the Exercise Price, multiplied
by the number of Company Shares purchasable pursuant to the Option (or portion
thereof with respect to which Kana is exercising its rights under this SECTION
6), but only if the Market/Tender Offer Price is greater than the Exercise
Price. "MARKET/TENDER OFFER PRICE" shall mean the highest of (A) the highest
price per share offered pursuant to any Silknet Takeover Proposal which was made
prior to such date and has not terminated or been withdrawn as of such date and
(B) the highest closing sale price of Company
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Shares as reported on the Nasdaq National Market during the six (6) months
ending on the trading day immediately preceding such date. For purposes of
determining the highest price offered pursuant to any Silknet Takeover Proposal
which involves consideration other than cash, the value of such consideration
will be equal to the higher of (x) if securities of the same class of the
proponent of such Silknet Takeover Proposal as such consideration are traded on
any national securities exchange or by any registered securities association, a
value based on the closing sale price or closing asked price for such securities
on their principal trading market on such date and (y) the value ascribed to
such consideration by the proponent of such Silknet Takeover Proposal, or if no
such value is ascribed, a value determined in good faith by the Board of
Directors of the Company.
(ii) The Exercise Price paid by Kana for Company Shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer Price
and such Exercise Price (but only if the Market/Tender Offer Price is greater
than the Exercise Price) multiplied by the number of Company Shares so purchased
(provided that Kana then has beneficial ownership of such Company Shares).
(iii) The foregoing shall be subject to the limitations on Total
Profit set forth in
SECTION 10.
(b) PAYMENT AND REDELIVERY OF OPTION OR SHARES. If Kana exercises its
rights under SECTION 6(a), the Company will, within five (5) business days after
Kana delivers a Put Notice pursuant to SECTION 6(a), pay the required amount to
Kana in immediately available funds and Kana will surrender to the Company the
certificates evidencing the Company Shares and the portion of the Option
purchased by Kana pursuant thereto.
7. RESERVED.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION; RIGHTS PLANS.
(a) In the event of any change in the Company Shares by reason of stock
dividends, stock splits, reclassifications, reverse stock splits, mergers (other
than the Merger), recapitalizations, combinations, exchanges of shares and the
like, the type and number of shares or securities subject to the Option and the
Exercise Price will be adjusted appropriately, and proper provision will be made
in the agreements governing such transaction so that Kana will receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Kana would have received in respect of the Company Shares if the
Option had been exercised immediately prior to such event or the record date
therefor, as applicable.
(b) At any time during which the Option is exercisable, and at any time
after the Option is exercised (in whole or in part, if at all), the Company will
not amend (nor permit the amendment of) any current stockholder rights plan of
the Company or its subsidiaries nor adopt (nor permit the adoption of) a new
stockholders rights plan that contains provisions for the distribution or
exercise of rights thereunder as a result of Kana or any affiliate being the
beneficial owner of shares of the Company by virtue of the Option being
exercisable or having been exercised (or as a result of beneficially owning
shares issuable in respect of any Option Shares).
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9. RESTRICTIVE LEGENDS.
Each certificate representing Option Shares issued to Kana hereunder will
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT DATED AS OF FEBRUARY 6, 2000, A COPY OF WHICH MAY
BE OBTAINED FROM THE ISSUER.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Kana has
delivered to the Company a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to the Company,
to the effect that such legend is not required for purposes of the Securities
Act and (ii) the reference to restrictions pursuant to this Agreement in the
above legend will be removed by delivery of substitute certificate(s) without
such reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
10. TOTAL PROFIT.
(a) Notwithstanding any other provision of this Agreement, in no event
shall Net Company Payments (as hereinafter defined) exceed one hundred
forty-eight million three hundred thousand dollars ($148,300,000) and in no
event shall Total Kana Profits (as hereinafter defined) exceed one hundred
eighty-eight million three hundred thousand dollars ($188,300,000), and if Net
Company Payments or Total Kana Profits otherwise would exceed such amounts,
Kana, at its sole election, shall either (i) reduce the number of Company Shares
subject to this Option, (ii) deliver to the Company for cancellation Option
Shares previously purchased by Kana (or other securities into which such Option
Shares are converted or exchanged), (iii) pay cash to the Company or (iv) any
combination thereof, so that Kana's actually realized Net Company Payments and
Total Kana Profit shall not exceed such amounts after taking into account the
foregoing actions.
(b) As used herein, (i) the term "NET COMPANY PAYMENTS" means the aggregate
amount (without duplication) of (A) the net cash amounts received by Kana from
the Company pursuant to the Company's repurchase of the Option or Option Shares
pursuant to SECTION 6(a), less (in the case of the Option Shares) Kana's
purchase price for such Option Shares, and (ii) the aggregate amount actually
received by Kana from the Company (exclusive of attorneys' fees and interest)
pursuant to Section 8.03 of the Merger Agreement; and (ii) the term "TOTAL KANA
PROFIT" means the aggregate amount (without duplication) of (A) the net cash
amounts received by Kana pursuant to the Company's repurchase of the Option or
Option Shares pursuant to SECTION 6(a), less (in the case of the Option Shares)
Kana's purchase price for such Option Shares, (B) the aggregate
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amount actually received by Kana pursuant to Section 8.03 of the Merger
Agreement, and (C) the net cash amounts received by Kana pursuant to the sale of
Option Shares (or securities into which such shares are converted or exchanged)
to any other unaffiliated third party, less Kana's purchase price for such
Option Shares.
11. LISTING AND HSR FILING.
The Company, upon the request of Kana, will promptly file an application to
list the Company Shares to be acquired upon exercise of the Option for quotation
on the Nasdaq National Market and will use its best efforts to obtain approval
of such listing as soon as practicable. Promptly after the date hereof, each of
the parties hereto will promptly file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice all required
premerger notification and report forms and other documents and exhibits
required to be filed under the HSR Act to permit the acquisition of the Company
Shares subject to the Option at the earliest possible date.
12. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
successors and permitted assigns any rights or remedies of any nature whatsoever
by reason of this Agreement. Except as expressly provided for in this Agreement,
neither this Agreement nor the rights or the obligations of either party hereto
are assignable, except by operation of law or with the written consent of the
other party.
(b) SPECIFIC PERFORMANCE. The parties hereto recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party hereto agrees that in addition to
other remedies available, the other party hereto will be entitled to an
injunction restraining any violation or threatened violation of the provisions
of this Agreement or the right to enforce any of the covenants or agreements set
forth herein by specific performance. If any action will be brought in equity to
enforce the provisions of this Agreement, neither party hereto will allege, and
each party hereto hereby waives the defense, that there is an adequate remedy at
law.
(c) ENTIRE AGREEMENT. This Agreement and the Merger Agreement (including
the exhibits thereto) constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing under the Merger Agreement and shall survive any terminations thereof or
hereof.
(d) FURTHER ASSURANCES. Each party hereto will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
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(e) VALIDITY. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of the other provisions
of this Agreement, which will remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto will negotiate
in good faith and will execute and deliver an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
(f) NOTICES. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as will be specified by like notice):
if to Kana, to:
Kana Communications, Inc.
000 Xxx Xxxx
Xxxxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Road
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company, to:
Silknet Software Inc.
00 Xxxxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 0000000
and with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
Xxxxxx Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
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Attention: Xxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
(h) EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement will be paid by the party incurring
such expenses.
(i) AMENDMENTS; WAIVER. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
(j) ASSIGNMENT. Neither of the parties hereto may sell, transfer, assign or
otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express prior
written consent of the other party, except that the rights and obligations
hereunder will inure to the benefit of and be binding upon any successor of a
party hereto.
(k) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but both of which, taken together, will
constitute one and the same instrument.
(l) DESCRIPTIVE HEADINGS. The section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
KANA COMMUNICATIONS, INC.
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Name:
Title:
SILKNET SOFTWARE INC.
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Name:
Title:
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