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 Kana Communications, 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, Kana Communications, Inc. has caused this Addendum
to be executed by its duly-authorized officer.
KANA COMMUNICATIONS, INC.
By:______________________________________
Title: __________________________________
EFFECTIVE DATE:______________________________________
