EXHIBIT 99.5
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Digital Island, Inc. (the "Corporation") and
_____________________________ ("Optionee") evidencing the stock option (the
"Option") granted this day to Optionee under the terms of the Corporation's
1999 Stock Incentive Plan, and such provisions are effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(a) Optionee shall have the unconditional right, exercisable at
any time during the thirty (30)-day period immediately following a
Hostile Take-Over, to surrender the Option to the Corporation. In return
for the surrendered Option, Optionee shall receive a cash distribution
from the Corporation in an amount equal to the excess of (A) the Take-
Over Price of the shares of Common Stock which are the time subject to
the surrendered option (whether or not the Option is otherwise at the
time exercisable for those shares) over (B) the aggregate Exercise Price
payable for such shares.
(b) To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's
copy of the Option Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within
five (5) business days following such delivery date. The exercise of the
limited stock appreciation right in accordance with the terms of this
Addendum is hereby pre-approved by the Plan Administrator in advance of
such exercise, and no further approval of the Plan Administrator or the
Board shall be required at the time of the actual option surrender and
cash distribution. Upon receipt of such cash distribution, the Option
shall be cancelled with respect to the Option Shares for which the Option
has been surrendered, and Optionee shall cease to have any further right
to acquire those Option Shares under the Option Agreement. The Option
shall, however, remain outstanding for the balance of the Option Shares
(if any) in accordance with the terms of the Option Agreement, and the
Corporation shall issue a replacement stock option agreement
(substantially in the same form of the surrendered Option Agreement) for
those remaining Option Shares.
(c) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market
Value of the Option Shares subject to the surrendered option and the
aggregate Exercise Price payable for such shares. This limited stock
appreciation right shall in all events terminate upon the expiration or
sooner termination of the option term and may not be assigned or
transferred by Optionee, except to the extent the Option is transferred
in accordance with the provisions of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall
be in effect:
(a) A Hostile Take-Over shall be deemed to occur upon the
acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with,
the Corporation) of beneficial ownership (within the meaning of Rule 13d-
3 of the Securities Exchange Act of 1934, as amended) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept.
(b) The Take-Over Price per share shall be deemed to be equal to
the greater of (A) the Fair Market Value per Option Share on the option
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surrender date or (B) the highest reported price per share of Common
Stock paid by the tender offeror in effecting the Hostile Take-Over.
However, if the surrendered Option is designated as an Incentive Option
in the Grant Notice, then the Take-Over Price shall not exceed the clause
(A) price per share.
IN WITNESS WHEREOF, Digital Island, Inc. has caused this Addendum to
be executed by its duly-authorized officer.
DIGITAL ISLAND
By:
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Title:
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EFFECTIVE DATE:
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