Nightwatch Capital Management SC13DA 2 9-29-2005

0001140361-05-008158.txt : 20051011 0001140361-05-008158.hdr.sgml : 20051010 20051011161236 ACCESSION NUMBER: 0001140361-05-008158 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20051011 DATE AS OF CHANGE: 20051011 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KANA SOFTWARE INC CENTRAL INDEX KEY: 0001089907 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 770435679 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56923 FILM NUMBER: 051132850 BUSINESS ADDRESS: STREET 1: 181 CONSTITUTION DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 6506148300 MAIL ADDRESS: STREET 1: 181 CONSTITUTION DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 FORMER COMPANY: FORMER CONFORMED NAME: KANA COMMUNICATIONS INC DATE OF NAME CHANGE: 19990702 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NightWatch Capital Management, LLC CENTRAL INDEX KEY: 0001325442 IRS NUMBER: 141839526 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3311 NORTH UNIVERSITY AVENUE STREET 2: SUITE 200 CITY: PROVO STATE: UT ZIP: 84604 BUSINESS PHONE: 801-805-1300 MAIL ADDRESS: STREET 1: 3311 NORTH UNIVERSITY AVENUE STREET 2: SUITE 200 CITY: PROVO STATE: UT ZIP: 84604 SC 13D/A 1 body.htm NIGHTWATCH CAPITAL MANAGEMENT SC13DA 2 9-29-2005 Nightwatch Capital Management SC13DA 2 9-29-2005

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

SCHEDULE 13D

Under the Securities Exchange Act of 1934

Amendment No. 2(*)

KANA SOFTWARE, INC.

(Name of Issuer)

COMMON STOCK, $.001 PAR VALUE

(Title of Class of Securities)

483600102

(CUSIP Number)

JOHN F. NEMELKA

NIGHTWATCH CAPITAL MANAGEMENT, LLC

3311 NORTH UNIVERSITY AVENUE, SUITE 200

PROVO, UTAH 84604

TELEPHONE: (801) 805-1300

(Name, address and telephone number of person

authorized to receive notices and communications)

September 29, 2005

(Date of event which requires filing of this statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box o.

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

13D
CUSIP No. 483600102

	(1)	NAME OF REPORTING PERSON

		S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

		NightWatch Capital Management, LLC
	(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
		(a) o
		(b) x
	(3)	SEC USE ONLY

	(4)	SOURCE OF FUNDS **

		WC
	(5)	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
		REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)		o

	(6)	CITIZENSHIP OR PLACE OF ORGANIZATION

		Delaware


			(7) SOLE VOTING POWER

			5,068,471
NUMBER OF			(8) SHARED VOTING POWER
SHARES
BENEFICIALLY			0
OWNED BY			(9) SOLE DISPOSITIVE POWER
EACH REPORTING
PERSON WITH			5,068,471
			(10) SHARED DISPOSITIVE POWER

			0

	(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

		5,068,471

	(12)	CHECK BOX IF THE AGGREGATE AMOUNT

		IN ROW (11) EXCLUDES CERTAIN SHARES **		o

	(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

		15.1%

	(14)	TYPE OF REPORTING PERSON **
		OO


		** SEE INSTRUCTIONS BEFORE FILLING OUT!

This Amendment No. 2 (this "Amendment") amends the statement on Schedule 13D filed on April 29, 2005, as amended by Amendment No. 1 filed on July 11, 2005 (as so amended, the "Schedule 13D") with respect to shares of common stock, par value $.001 per share (the "Common Stock") of Kana Software, Inc., a Delaware corporation (the "Company"). Capitalized terms used and not otherwise defined in this Amendment have the meanings set forth in the Schedule 13D. This Amendment amends the Schedule 13D as specifically set forth herein.

ITEM 1.

SECURITY AND ISSUER

Item 1 is amended by inserting the following paragraph at the end of the section therein:

On September 29, 2005, NWCP (as defined below) and NWCP II (as defined below) (collectively, the “NW Funds”) acquired from the issuer in the aggregate (i) 2,189,006 shares of Common Stock and (ii) warrants, which may be exercised during the period commencing on March 28, 2006 and expiring on September 29, 2010, to purchase an additional 788,042 shares of Common Stock (such transaction, the “September 29 Transaction”).

ITEM 3.

SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

Item 3 is hereby amended and restated in its entirety as follows:

The NW Funds purchased an aggregate of 1,519,847 shares of Common Stock in a series of transactions between July 8, 2004 and April 22, 2005. The aggregate purchase price for such shares of Common Stock was approximately $2.4 million. On June 30, 2005, in connection with the June 30 Transaction, the NW Funds purchased in the aggregate (i) an additional 1,359,618 shares of Common Stock, bringing their total holdings to 2,879,465 shares of Common Stock and (ii) warrants (as amended), which may be exercised during the period commencing on March 28, 2006 and expiring on September 29, 2010, to purchase an additional 679,808 shares of Common Stock. The aggregate purchase price paid in the June 30 Transaction for such shares of Common Stock and such warrants was $2 million. On September 29, 2005, in connection with the September 29 Transaction, the NW Funds purchased in the aggregate (i) an additional 2,189,006 shares of Common Stock, bringing their total holdings to 5,068,471 shares of Common Stock and (ii) warrants, which may be exercised during the period commencing on March 28, 2006 and expiring on September 29, 2010, to purchase an additional 788,042 shares of Common Stock. The aggregate purchase price paid in the September 29 Transaction for such shares of Common Stock and such warrants was $3,333,200.

The source of funds for all of the above-described purchase transactions was working capital of NWCP and NWCP II. The shares of Common Stock are held in prime brokerage accounts of NWCP and NWCP II, which may from time to time have debit balances. Because other securities are held in such accounts, it is not possible to determine the amounts, if any, of financing used at any time with respect to the shares of Common Stock.

ITEM 5.

INTEREST IN SECURITIES OF THE ISSUER.

The first paragraph of Item 5 is hereby amended and restated in its entirety as follows:

(a)-(b) The securities referenced in this statement (the “Securities”) consist of 5,068,471 shares of Common Stock, representing approximately 15.1% of the 33,498,976 shares of Common Stock represented by the Company to be outstanding as of as September 29, 2005.

ITEM 6.

CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.

Item 6 is hereby amended and restated in its entirety as follows:

On June 25, 2005, the Company entered into a Common Stock and Warrant Purchase Agreement (the “June Purchase Agreement”) with certain investors (the “Investors”), including the NW Funds, pursuant to which the Company agreed to issue to the Investors, for a purchase price of $2,400,000.00, certain units (the “June Units”), with each June Unit consisting of (i) one share of Common Stock and (ii) one half of a warrant. The purchase price per unit is equal to 90% of the volume weighted average trading price per share of Common Stock for the three consecutive trading days beginning on June 27, 2005. On June 30, 2005, the Company issued to the Investors (A) an aggregate of 1,631,541 shares of Common Stock at $1.471 per share, and (B) warrants (as subsequently amended, the “June Warrants”) to purchase an aggregate of 815,769 shares of Common Stock at an exercise price of $2.452 per share. The June Warrants will become exercisable on March 28, 2006 and expire on September 29, 2010.

The Company also entered into a Registration Rights Agreement, dated June 25, 2005, with the Investors (as subsequently amended, the “June Registration Rights Agreement”) pursuant to which the Company agreed to file, within thirty (30) days following the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, a registration statement covering the resale of Common Stock and shares of Common Stock issuable upon the exercise of the June Warrants (the “June Registrable Securities”). If the Company’s registration statement is not declared effective within 120 days from September 29, 2005, then the Company will pay each holder of June Registrable Securities a fee pursuant to the terms of the June Registration Rights Agreement until the registration statement is declared effective.

On September 29, 2005, the Company entered into a Common Stock and Warrant Purchase Agreement (the “September Purchase Agreement”) with the Investors, pursuant to which the Company agreed to issue to the Investors, for a purchase price of $4,000,000.00, certain units (the “September Units”), with each September Unit consisting of (i) one share of Common Stock and (ii) 0.36 warrants. The purchase price per unit is $1.5227 (subject to adjustment upon certain events; provided that such adjusted purchase price per unit may not be less than $0.95 per unit). On September 29, 2005, the Company issued to the Investors (A) an aggregate of 2,626,912 shares of Common Stock and (B) warrants (the “September Warrants”) to purchase an aggregate of 945,687 shares of Common Stock at an exercise price of $2.284 per share. The September Warrants will become exercisable on March 28, 2006 and expire on September 29, 2010. Furthermore, so long as the NW Funds own in excess of 12.5% of the issued and outstanding Common Stock, from and after September 30, 2005, the NW Funds shall have the right to appoint one (1) member to the Company’s Board of Directors; provided that any such board member shall be subject to the approval of the Company’s Board of Directors, which approval shall not be unreasonably withheld.

The Company also entered into a Registration Rights Agreement, dated September 29, 2005, with the Investors (the “September Registration Rights Agreement”) pursuant to which the Company agreed to file, within twenty (20) days following the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, a registration statement covering the resale of Common Stock and shares of Common Stock issuable upon the exercise of the September Warrants (the “September Registrable Securities”). If the Company’s registration statement is not declared effective within 120 days from September 29, 2005, then the Company will pay each holder of September Registrable Securities a fee pursuant to the terms of the September Registration Rights Agreement until the registration statement is declared effective.

The Company also entered into a letter agreement (the “September Letter Agreement”) with the Investors pursuant to which the Company agreed to sell, and the Investors agreed to purchase, an additional $1,000,000 of September Units in the event the Company (i) files its quarterly reports on Form 10-Q for the three-month periods ended March 31, 2005 and June 30, 2005 on or prior to October 7, 2005 and on or prior to October 19, 2005, respectively, and (ii) files its quarterly report for the three-month period ended September 30, 2005 without the Common Stock being delisted from the Nasdaq National Market.

The foregoing is a summary of the terms and conditions of the June Purchase Agreement, form of June Warrant issued to the Investors, June Registration Rights Agreement, September Purchase Agreement, form of September Warrant issued to the Investors, September Registration Rights Agreement and September Letter Agreement and does not purport to be complete. The foregoing is also qualified in its entirety by reference to the June Purchase Agreement, form of June Warrant issued to the Investors, June Registration Rights Agreement, September Purchase Agreement, form of September Warrant issued to the Investors, September Registration Rights Agreement and September Letter Agreement, copies of which are filed as exhibits to this Amendment No. 2 to Schedule 13D and are incorporated herein by reference.

ITEM 7.

MATERIAL TO BE FILED AS EXHIBITS

Item 7 is hereby amended and restated in its entirety as follows:

Number		Description

1		Common Stock and Warrant Purchase Agreement, dated as of June 25, 2005, by and among the Company and the Investors (incorporated herein by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K dated June 30, 2005).

2		Registration Rights Agreement, dated as of June 25, 2005, by and among the Company and the Investors (incorporated herein by reference to Exhibit 10.02 to the Company’s Current Report on Form 8-K dated June 30, 2005).

3		Form of Stock Purchase Warrant issued by the Company in connection with the Common Stock and Warrant Purchase Agreement, dated as of June 25, 2005 (incorporated herein by reference to Exhibit 10.03 to the Company’s Current Report on Form 8-K dated June 30, 2005).

4		Amendment to the form of June Warrant, dated September 29, 2005 (incorporated herein by reference to Exhibit 10.06 to the Company’s Current Report on Form 8-K dated October 3, 2005).

5		Amendment to the June Registration Rights Agreement, dated September 29, 2005 (incorporated herein by reference to Exhibit 10.05 to the Company’s Current Report on Form 8-K dated October 3, 2005).

6		Common Stock and Warrant Purchase Agreement, dated as of September 29, 2005, by and among the Company and the Investors (incorporated herein by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K dated October 3, 2005).

7		Registration Rights Agreement, dated as of September 29, 2005, by and among the Company and the Investors (incorporated herein by reference to Exhibit 10.02 to the Company’s Current Report on Form 8-K dated October 3, 2005).

8		Form of Stock Purchase Warrant issued by the Company in connection with the September 29, 2005 Common Stock and Warrant Purchase Agreement, dated as of September 29, 2005 (incorporated herein by reference to Exhibit 10.03 to the Company’s Current Report on Form 8-K dated October 3, 2005).

9		Letter Agreement, dated as of September 29, 2005, by and among the Company and the Investors.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I hereby certify that the information set forth in this Schedule 13D is true, complete and correct.

Dated: October 7, 2005

	NIGHTWATCH CAPITAL MANAGEMENT, LLC

	By:	/s/ John F. Nemelka
	Name: John F. Nemelka
	Title: President

EX-9 2 ex9.htm EXHIBIT 9 Exhibit 9

September 29, 2005

NightWatch Capital Partners, LP and

NightWatch Capital Partners II, LP

3311 North University Avenue, Suite 206

Provo, Utah 84604

Attention: John Nemelka

RHP Master Fund, Ltd.

c/o Rock Hill Investor Management, L.P.

3 Bala Plaza - East, Suite 585

Bala Cynwyd, PA 19004

Attention: Wayne Bloch

Re: Purchase of Additional Units

Dear John and Wayne:

In connection with the execution of the Common Stock and Warrant Purchase Agreement (the "Purchase Agreement"), dated September 29, 2005, by and among Kana Software, Inc. (the "Company") and the Buyers named therein (the "Buyers"), the undersigned parties have agreed to enter into this letter agreement to set out the terms and conditions on which additional Units will be sold by the Company to the Buyers (the "Additional Issuance"). Capitalized terms used herein but not otherwise defined herein, shall have the respective meanings set forth in the Purchase Agreement.

The Company hereby agrees to sell $1,000,000 of Units to the Buyers, and the Buyers agree to purchase (on a pro rata basis based on the number of Units purchased under the Purchase Agreement), at a price per Unit of $1.52, within three (3) business days of satisfaction of the Purchase Conditions. If the Purchase Conditions are not satisfied, the Buyers will not have any obligation to purchase Units, and the Company will not have any obligation to sell Units, pursuant to the Additional Issuance. "Purchase Conditions" shall mean (i) the Company shall have filed its quarterly reports for the three-month periods ended March 31, 2005 and June 30, 2005 on or prior to October 7, 2005 and on or prior to October 19, 2005, respectively, and (ii) shall have filed its quarterly report for the three-month period ended September 30, 2005 without the Common Stock being delisted from the Principal Exchange. The Company will provide prompt written notice to the Buyers of its satisfaction of the Purchase Conditions.

Upon satisfaction of the Purchase Conditions, the parties will promptly execute definitive agreements for the Additional Issuance in the same forms as the Transaction Documents (other than Sections 4.12 and 4.15, which will be deleted).

All warrants issued pursuant to the Additional Issuance will become exercisable beginning six months days following the date of issuance and will expire five years from the date of issuance. All securities issued pursuant to the Buyers under the terms of this letter agreement will have registration rights identical to such registration rights included in the Registration Rights Agreement, dated the date hereof, by and among the parties.

NightWatch Capital Partners, LP,

NightWatch Capital Partners II, LP

RHP Master Fund, Ltd.

September 29, 2005

Page 2

Please indicate your agreement to the foregoing by executing a counterpart copy of this letter and returning it to the undersigned.

	KANA SOFTWARE, INC.
	By:		/s/ John Thompson
	Name:		John Thompson
	Title:		Chief Financial Officer

[Signatures Continue on Following Page]

NightWatch Capital Partners, LP,

NightWatch Capital Partners II, LP

RHP Master Fund, Ltd.

September 29, 2005

Page 3

Agreed and Acknowledged:

NIGHTWATCH CAPITAL PARTNERS, LP

By	NightWatch Capital Management, LLC, its general partner

By:	/s/ John F. Nemelka
	John F. Nemelka
	Managing Principal

NIGHTWATCH CAPITAL PARTNERS II, LP

By	NightWatch Capital Management, LLC, its general partner

By:	/s/ John F. Nemelka
	John F. Nemelka
	Managing Principal

RHP MASTER FUND, LTD.
By:	Rock Hill Investment Management, L.P., its investment manager
By:	RHP General Partner, LLC

By:	/s/ Keith S. Marlowe
	Keith S. Marlowe
	Director