The given sentence states a past action 'were good friends'. Hence the option will agree in tense.
Option B: 'Had known' is in the past perfect tense. It states an action that completed in the past. Hence it is relevant to the given sentence and option B is correct.
Option A: 'Has known' is in present perfect tense.
Option C; 'Have known' is also in present perfect tense. 'Have' is the plural form of 'has'.
Option D: 'Is knowing' is in present continuous tense. Also, 'is' presents a state. The verbs that relate to 'thinking' do not have a continuous tense form. 'Know' does not have a tense form. Hence 'knowing' as a verb form is not correct.
These verb forms do not agree with the past tense of the given sentence.
Hence options A, C and D are incorrect.