SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 26, 2001
KANA SOFTWARE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
000-27163 77-0435679
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(Commission (IRS Employer
File Number) Identification No.)
181 Constitution Drive, Menlo Park, CA 94025
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(Address of principal executive offices) (Zip Code)
(650) 614-8300
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(Registrant's telephone number)
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(Former name or former address, if changed since last report)
ITEM 5: OTHER EVENTS.
(a) On November 28, 2001, Kana Software, Inc., a Delaware corporation, entered
into a share purchase agreement with funds affiliated with Technology Crossover
Ventures, or TCV. TCV has committed to purchase a minimum of $38 million of
Kana's newly created 8% Series A Convertible Preferred Stock, and may, at its
discretion, purchase up to $45 million of the Series A Preferred Stock. Each
share of Series A Preferred Stock will initially convert into Common Stock on a
10-for-1 basis. The purchase price of the Series A Preferred Stock will be ten
times the lesser of (i) $10.00 per share (subject to adjustment for Kana's
pending 1-for-10 reverse stock split) or (ii) 66 2/3% of a volume-based weighted
average price for Kana's common stock on the Nasdaq National Market over a
10-day period prior to closing. There will be no change to the conversion ratio
subsequent to issuance of the Series A Preferred Stock based upon the trading
price of Kana's Common Stock. The Series A Preferred Stock will automatically
convert into Common Stock at any time after the first anniversary of the
issuance date if (1) the Common Stock has had a daily weighted average price of
at least three times the purchase price of the Series A Preferred Stock (on an
as-converted basis) for ninety consecutive trading days and (2) there is an
effective registration statement in place covering the resale of the Common
Stock underlying the Series A Preferred Stock.
The Series A Preferred Stock will accrue and cumulate dividends at a rate
of 8% per year, compounded quarterly, and is convertible into Common Stock at
any time at the option of TCV. The dividends are only payable through a
corresponding increase in the liquidation preference of the Series A Preferred
Stock and in the number of shares of Common Stock issuable upon conversion of
the Series A Preferred Stock.
In the event of a liquidation, dissolution or winding up of Kana in which
the holders of each share of Common Stock do not receive an amount equal to at
least five times the as-converted purchase price of the Series A Preferred Stock
plus accrued dividends, the holders of the Series A Preferred Stock are entitled
to a liquidation preference payment equal to the purchase price of the Series A
Preferred Stock, plus accrued dividends to such date. The Series A Preferred
Stock shall also participate with the Common Stock in the event of a liquidation
event, after payment of the foregoing preference. A merger, consolidation or
sale of Kana is treated as a liquidation unless the transaction has been
approved by the holders of a majority of the outstanding Series A Preferred
Stock. The Series A Preferred Stock may not be redeemed at the election of Kana
or TCV.
The Series A Preferred Stock generally will vote with the shares of Common
Stock, and not as a separate class, on an as-converted to Common Stock basis.
However, the Series A Preferred Stock will be entitled to a separate class vote
with respect to certain matters, including the creation of a class or series of
stock having preferences or privileges senior to or on a parity with the Series
A Preferred Stock, any amendment or waiver of any provision of Kana's
Certificate of Incorporation or Bylaws that would adversely affect the rights,
privileges and preferences of the Series A Preferred Stock or a proposed merger,
consolidation or sale of Kana. Additionally, pursuant to the right of the
holders of the Series A Preferred Stock to designate a member to Kana's board of
directors, Jay C. Hoag will join Kana's board of directors upon the completion
of the transaction.
Kana has also agreed to issue two warrants to TCV to purchase Common Stock
at an exercise price of $1.00 per share. The first warrant entitles TCV to
purchase up to approximately 1.9 million shares of Common Stock and will be
exercisable for a 30 trading-day period. The second warrant would entitle TCV to
purchase up to approximately 1.9 million additional shares of Common Stock and
will only become exercisable in the event of the failure of Kana's stockholders
to approve the transaction, a change in recommendation by Kana's board of
directors, the election by Kana to pursue an alternative transaction or certain
other similar conditions. If the second warrant is triggered, it will be
exercisable for two years and the exercise period of the first warrant will also
be extended for the same length of time.
The parties also entered into a Registration Rights Agreement pursuant to
which Kana is obligated to file a registration statement covering the resale of
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock and the Warrants. Kana has also agreed to provide TCV with piggyback
registration rights, on a pari passu basis with existing registration rights
holders, to participate in underwritten offerings of Kana's securities.
The financing is subject to certain customary closing conditions, including
approval by Kana's stockholders of the issuance of the Series A Preferred Stock
and the Warrants and the receipt of any required regulatory approvals. Kana
currently expects the transaction to close early in the first quarter of 2002.
The foregoing description of the transaction is only a summary and is
qualified in its entirety by reference to the aforementioned transaction
documents. Kana intends to use the proceeds from this investment for working
capital and general corporate purposes.
(b) On November 26, 2001, Kana also completed the sale of 10 million shares of
its Common Stock to certain institutional investors at a purchase price of $1.00
per share.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 29, 2001 KANA SOFTWARE, INC.
By: /s/ Eric H. Willgohs
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Eric H. Willgohs
Secretary