Document:

Amended and Restated Stock Purchase Warrant issued by Kana Software

 Exhibit 10.07 
  
 THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE COMMON STOCK AND WARRANT PURCHASE AGREEMENT DATED AS OF JUNE 25, 2005, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE COMPANY IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. 
  
 Right to Purchase 
 135,961 Shares of 
 Common Stock, 
 par value $0.001 
 per share 
  
 AMENDED AND RESTATED STOCK PURCHASE WARRANT 
  
 THIS CERTIFIES THAT, for value received, RHP Master Fund, Ltd. (the “Holder”) or its registered assigns, is entitled to purchase from
Kana Software, Inc., a Delaware corporation (the “Company”), at any time or from time to time during the period specified in Paragraph 2 hereof, 135,961 fully paid and nonassessable shares of the Company’s common stock, par value
$.001 per share (the “Common Stock”). at an exercise price of $2.452 per share (the “Exercise Price”). The term “Warrant Shares,” as used herein, refers to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The term Warrants means this Warrant issued to the Holder pursuant to that certain Common Stock and Warrant Purchase Agreement, dated June 25, 2005,
by and among the Company and the Buyers listed on the execution page thereof (the “Purchase Agreement”). 
  
 This Warrant is subject to the following terms, provisions, and conditions: 
  
 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. (a) Subject to the provisions
hereof, this Warrant may be exercised by the Holder, in whole or in part, by the physical surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the “Exercise Agreement”), to the Company during
normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder), and upon (i) payment to the Company in cash, by certified
or official bank check or by wire transfer for the account of the 

 
Company of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), delivery to the Company of a written notice of an election to effect a “Cashless Exercise” (as
defined in Section 11(c) below) for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the Holder or such holder’s designee, as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares (or an election to effect a Cashless Exercise has been
made) as set forth above. In the event of any exercise of the rights represented by this Warrant in accordance with and subject to the terms and conditions hereof, certificates for the Warrant Shares shall be dated the date of such exercise and
delivered to the Holder hereof within a reasonable time, not exceeding two (2) Trading Days (as defined in the Purchase Agreement) after such exercise (the “Warrant Share Delivery Date”) or, at the request of the Holder (provided that
a registration statement under the Securities Act providing for the resale of the Warrant Shares is then in effect), issued and delivered to the Depository Trust Company account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System within a reasonable time, not exceeding two (2) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise. The
certificates so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then
have been exercised. 
  
 (b) In addition to any other rights
available to the Holder, if the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise by the Warrant Share Delivery Date in Paragraph 1(b), and if after such second Trading
Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the
Company. Nothing herein shall 

  

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limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof. 
  
 (c) Notwithstanding anything in this Warrant to the contrary, in no event
shall the Holder of this Warrant be entitled to exercise a number of Warrants (or portions thereof) in excess of the number of Warrants (or portions thereof) upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common Stock which, but for this proviso, may be deemed beneficially owned through the ownership of the unexercised Warrants and the unexercised or unconverted portion of any
other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein) and (ii) the number of shares of Common Stock issuable upon exercise of the Warrants (or portions thereof) with
respect to which the determination described herein is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in this paragraph (b). Notwithstanding anything in this
Warrant to the contrary, the restrictions on exercise of this Warrant set forth in this paragraph shall not be amended without (i) the written consent of the Holder and the Company and (ii) the approval of the holders of a majority of the
Common Stock present, or represented by proxy, and voting at any meeting called to vote on the amendment of such restriction. 
  
 2. Period of Exercise. This Warrant is exercisable at any time or from time to time on or after March 28, 2006 and before 5:00 p.m., New
York City time on the fifth (5th) anniversary of the date of issuance of this Amended and Restated Warrant (the “Issue Date”) (the “Exercise Period”), after which the portion of this Warrant not exercised prior thereto shall
be and become void. 
  
 3. Certain Agreements of the
Company. The Company hereby covenants and agrees as follows: 
  
 (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof. 
  
 (b) Reservation of Shares. During
the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant. 
  
 (c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on 

  

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each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of
the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. 
  
 (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant. 
  
 (e)
Successors and Assigns. This Warrant and the rights and obligations evidenced hereby will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all the Company’s
assets (the “Company’s Successor”) and, subject to applicable securities laws, the permitted assigns of the Holder. Nothing in t his Warrant shall be construed to give any Person other than the Company, the Company’s Successor,
the Holder and the permitted assigns of the Holder any legal or equitable right, remedy or cause of action under this Warrant. 
  
 4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4. 
  
 In the
event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up to the nearest cent. 
  

(a) Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the Issue Date of this Warrant, the Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the greater of (1) 80% of the Market Price (as hereinafter defined) (a “Market Price
Adjustment”) and (2) the then effective Exercise Price (an “Exercise Price Adjustment”) on the date of issuance (or deemed issuance) of such Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by multiplying the Exercise Price in effect immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal to the sum of (x) the
number of shares of Common Stock actually outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient of the aggregate consideration, calculated as set forth in Paragraph 4(b) hereof, received 

  

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by the Company upon such Dilutive Issuance divided by the greater of (1) in the case of a Market Price Adjustment, 80% of the Market Price and
(2) in the case of an Exercise Price Adjustment, the Exercise Price in effect immediately prior to the Dilutive Issuance, and (ii) the denominator of which is the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance; provided that the Exercise Price will in no event be reduced below the Purchase Price (as defined in the Purchase Agreement). 
  
 Unless the Company either (a) is permitted by the applicable rules and regulations of the principal securities market
on which the Common Stock is listed or traded to issue shares of Common Stock upon exercise or otherwise pursuant to the Warrants in excess of the Maximum Share Amount (as defined below) or (b) has obtained stockholder approval of the issuance
of the Common Stock upon exercise or otherwise pursuant to the Warrants in excess of the Maximum Share Amount in accordance with applicable law and the rules and regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or any of its securities (the “Stockholder Approval”), in no event shall the total number of shares of Common Stock issued the Holder upon exercise or otherwise pursuant to
the Warrants (including any shares of capital stock or rights to acquire shares of capital stock issued by the Company which are aggregated or integrated (including (i) the Purchased Shares (as defined in the Purchase Agreement), (ii) the
shares of Common Stock issued to the Holder pursuant to the Common Stock and Warrant Purchase Agreement, dated September 29, 2005, by and among the Company, the Holder and the other purchasers named therein (the “Second Purchase
Agreement”) and (iii) the number of shares of Common Stock issuable upon exercise of or otherwise pursuant to warrants to purchase Common Stock issued pursuant to the Second Purchase Agreement) issued to the Holder pursuant to the Purchase
Agreement) with the Common Stock issued or issuable upon exercise or otherwise pursuant to the Warrants for purposes of any such rule or regulation) exceed the maximum number of shares of Common Stock that the Company can so issue pursuant to any
rule of the principal securities market on which the Common Stock trades (the “Maximum Share Amount”), which shall be equal to 19.99% of the total shares of Common Stock outstanding on June 30, 2005, subject to equitable adjustments
from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after June 30, 2005. In the event that the sum of (x) the aggregate number of shares of
Common Stock actually issued upon exercise or otherwise pursuant to the Warrants and any shares of capital stock or rights to acquire shares of capital stock issued by the Company which are aggregated or integrated with the Common Stock issued or
issuable upon exercise or otherwise pursuant to the Warrants for purposes of any such rule or regulations (including the Purchased Shares (as defined in the Purchase Agreement) issued to the Holder pursuant to the Purchase Agreement) plus
(y) the aggregate number of shares of Common Stock that remain issuable upon exercise or otherwise pursuant to the Warrants at the then effective Exercise Price and any shares of capital stock or rights to acquire shares of capital stock issued
by the Company which are aggregated or integrated with the Common Stock issued or issuable upon exercise or otherwise pursuant to the Warrants for purposes of any such rule or regulations, represents at least one hundred percent (100%) of the
Maximum Share Amount (the “Triggering Event”), the Company will use its reasonable best efforts to seek and obtain Stockholder Approval (or obtain such other relief as will allow conversions hereunder in excess of the Maximum Share Amount)
as soon as practicable following the Triggering Event. 
  

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 (b) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted
Exercise Price under Paragraph 4(a) hereof, the following will be applicable: 
  
 (i) Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the
price per share for which Common Stock is issuable upon the exercise of such Options is less than the greater of (1) the Market Price and (2) the Exercise Price on the date of issuance or grant of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options will, as of the date of the issuance or grant of such Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share for
purposes of this Section 4. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options. 
  
 (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the greater
of (1) the Market Price and (2) the Exercise Price on the date of issuance of such Convertible Securities, then the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities
will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the “price per share for
which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities. 
  

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 (iii) Change in Option Price or Conversion Rate. If there is a change at
any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the conversion or exchange of any Convertible
Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time
of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold. 
  
 (iv) Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Option or upon conversion or exchange
of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number
of shares of Common Stock issued upon exercise or conversion thereof), never been issued. 
  
 (v) Calculation of Consideration Received. All calculations under this Paragraph 4 shall be made to the nearest cent or
nearest 1/100th of a share, as applicable. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company
therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any
acquisition, merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined in good faith by the Board of Directors of the Company. 
  

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 (vi) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities granted, issued and outstanding prior to and on the date of issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit plan or equity incentive plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority
of the independent members of the Board of Directors of the Company or a majority of the members of a committee of independent directors established for such purpose; (iii) upon the issuance or deemed issuance of securities for less than the
Market Price in connection with a strategic relationship, joint venture or strategic investment in the Company (so long as (i) the main purpose of which is not to raise equity capital and (ii) the Company’s board of directors approves
such issuance solely for strategic purposes) (provided that during the Exercise Period only an aggregate of 1,000,000 or less shares of Common Stock (subject to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Common Stock occurring subsequent to the date hereof) (or securities convertible or exercisable into 1,000,000 or less shares of Common Stock (subject to appropriate
arithmetic adjustment in the event of any stock splits, stock dividends, combinations of shares, recapitalizations or other such events relating to the Common Stock occurring subsequent to the date hereof)) may be issued pursuant to this clause
(iii) without effecting an adjustment to the Exercise Price pursuant to Section 4(a)), (iv) upon the exercise of the Warrants; (v) so long as the shareholders of the Company prior to the transaction have 50% or more of the voting
power after consummation of such transaction, upon the issuance of any stock pursuant to an acquisition of another corporation or entity by the Company by consolidation, merger, purchase of all or substantially all of the assets, or other
reorganization in which the Company acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty percent (50%) or more of the voting power of such other
corporation or entity; or (vi) upon the exercise of the other stock purchase warrants issued pursuant to the Purchase Agreement or (vii) upon any investment by the Holder (or affiliates thereof) in Common Stock or warrants of the Company.

  
 (c) Subdivision or Combination of Common Stock.
If the Company at any time subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be
proportionately increased. 
  
 (d) Adjustment in Number of
Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Paragraph 4, the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying (x) a number equal to the
Exercise Price in effect immediately prior to such adjustment by (y) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise
Price. 
  

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 (e) Consolidation, Merger or Sale. In case of any consolidation of the Company with, or
merger of the Company into any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right (and such right will continue for the remainder of the Exercise Period) to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger
or sale or conveyance unless prior to the consummation thereof, the successor or acquiring entity (if other than the Company) and, if an entity different from the successor or acquiring entity, the entity whose capital stock or assets the holders of
the Common Stock of the Company are entitled to receive as a result of such consolidation, merger or sale or conveyance, assumes by written instrument the obligations under this Paragraph 4 and the obligations to deliver to the holder of this
Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire. In the event the Company effects any consolidation, merger or sale or conveyance of substantially all of its
assets prior to the end of the Exercise Period, this Warrant will become, at the option of the Holder, immediately exercisable. 
  
 (f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or otherwise, then, after the date of record for determining stockholders entitled to such distribution, but prior to the date of distribution, the holder of this Warrant shall be
entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the holder had such holder been the holder of such shares of
Common Stock on the record date for the determination of stockholders entitled to such distribution. 
  
 (g) Notice of Adjustment. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. 
  
 (h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such 

  

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adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. 
  
 (i) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant. If the exercise of this
Warrant would result in a fractional share of Common Stock, such fractional share shall be paid in cash in an amount equal to such fraction multiplied by the closing price of one Warrant Share as reported by the applicable principal trading market
on the date of exercise. 
  
 (j) Other Notices. In
case at any time: 
  
 (i) the Company shall
declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (including dividends or distributions payable in cash out of retained earnings) to the holders of the Common Stock; 
  
 (ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or other rights; 
  
 (iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another corporation or entity; or 
  
 (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; 
  
 then, in each such case, the Company shall give to the holder of this Warrant (a) notice
of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common
Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall
be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at least 20 days prior to the record date or the date on which the Company’s books are closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. 
  
 (k) Certain Events. If any event occurs of the type contemplated by the adjustment provisions of this Paragraph 4 but not expressly provided
for by such provisions, the Company will give notice of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the Holder shall be neither enhanced nor diminished by such event. 
  

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 (l) Certain Definitions. 
  
 (i) “Common Stock Deemed Outstanding” shall mean the number of shares of Common
Stock actually outstanding (not including shares of Common Stock held in the treasury of the Company), plus (x) in the case of a Dilutive Issuance pursuant to Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
upon the exercise of Options issued or granted in such Dilutive Issuance, as of the date of such issuance or grant of such Options, if any, and (y) in the case of a Dilutive Issuance pursuant to Paragraph 4(b)(ii) hereof, the maximum total
number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities issued or granted in such Dilutive Issuance, as of the date of issuance of such Convertible Securities, if any. 
  
 (ii) “Market Price,” as of any date,
means (i) the average of the last reported sale prices for the shares of Common Stock on the Nasdaq National Market (“Nasdaq”) for the five (5) trading days immediately preceding such date as reported by Bloomberg Financial
Markets or an equivalent reliable reporting service mutually acceptable to and hereafter designated by the holder of this Warrant and the Company (“Bloomberg”), or (ii) if Nasdaq is not the principal trading market for the shares of
Common Stock, the average of the last reported sale prices on the principal trading market for the Common Stock during the same period as reported by Bloomberg, or (iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the fair market value as reasonably determined in good faith by (a) the Board of Directors of the Company or, at the option of a majority-in-interest of the holders of the outstanding Warrants by
(b) an independent investment bank of nationally recognized standing in the valuation of businesses similar to the business of the Company. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition
shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. 
  
 (iii) “Common Stock,” for purposes of this Paragraph 4, includes the Common Stock, par value $0.001 per share, and
any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only shares of Common Stock, par value $0.001 per share,
in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in such Paragraph. 
  
 5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder
of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided, however, the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant. 
  

 11 

 6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the Holder to
any voting rights or other rights as a shareholder of the Company. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of such holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 
  
 7. Transfer, Exchange, and Replacement of Warrant. 

 
 (a) Restriction on Transfer. This Warrant and the rights
granted to the Holder are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, and funds sufficient to pay any transfer taxes payable upon the making of such
transfer, at the office or agency of the Company referred to in Paragraph 7(e) below, provided, however, that any transfer or assignment shall be subject to all applicable securities laws, the conditions set forth in Paragraph 7(f) hereof and
to the applicable provisions of the Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered Holder as the owner and Holder for all purposes, and the Company shall not
be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Paragraph 8 are assignable only in accordance with the provisions of that certain Registration Rights
Agreement, dated as of June 25, 2005, by and among the Company and the other signatories thereto (the “Registration Rights Agreement”). 
  
 (b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or
agency of the Company referred to in Paragraph 7(e) below and presentation of a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the holder or its agent or attorney, for new Warrants of like
tenor representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the Holder
at the time of such surrender. 
  
 (c) Replacement of
Warrant. Upon request and receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, the Company will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated as of such cancellation or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant by Holder, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated as of such cancellation. 
  
 (d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer,
exchange, or replacement as provided in this Paragraph 7, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other 

  

 12 

 
than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to this Paragraph 7. 
  
 (e) Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner
of this Warrant. 
  
 (f) Exercise or Transfer Without
Registration. This Warrant shall only be exercised, transferred, or exchanged in compliance with Section 2.6 of the Purchase Agreement. The first holder of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to the distribution thereof. 
  
 8. Registration Rights. The Holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration Rights Agreement. 
  
 9. Notices. All notices, requests, and other communications required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid and addressed, to such holder at the address shown for such holder on the books
of the Company, or at such other address as shall have been furnished to the Company by notice from such holder. All notices, requests, and other communications required or permitted to be given or delivered hereunder to the Company shall be in
writing, and shall be personally delivered, or shall be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid and addressed, to the office of the Company at 181 Constitution Drive, Menlo Park, California
94025, Attention: Chief Financial Officer, or at such other address as shall have been furnished to the holder of this Warrant by notice from the Company. Any such notice, request, or other communication may be sent by facsimile, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by certified or registered mail or by recognized overnight mail courier as provided above. All notices, requests, and other communications shall be deemed to have been given
either at the time of the receipt thereof by the person entitled to receive such notice at the address of such person for purposes of this Paragraph 9, or, if mailed by registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier, if postage is prepaid and the mailing is properly addressed, as the case may be. 
  
 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE STATE COURTS LOCATED IN DELAWARE WITH RESPECT TO ANY
SUIT OR PROCEEDING BASED ON OR ARISING UNDER 

  

 13 

 
THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL CLAIMS
IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. 
  
 10. Replacement of Prior Warrant. This Amended and Restated
Warrant replaces and supercedes the prior warrant(s) issued by the Company to the Holder on June 30, 2005 and both parties acknowledge that the Holder will, upon acceptance of this Warrant, have no future rights under the prior warrant(s).

  
 11. Miscellaneous. 
  
 (a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the Holder. 
  
 (b) Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the
provisions hereof. 
  
 (c) Cashless Exercise.
Notwithstanding anything to the contrary contained in this Warrant, if the resale of the Warrant Shares by the holder is not then registered pursuant to an effective registration statement under the 1933 Act, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder’s intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where: 
  
 (A) = the
Closing Price on the Trading Day immediately preceding the date of such election; 
  
 (B) = the Exercise Price of this Warrant, as adjusted; and 
  

 14 

 (X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a cashless exercise. 
  
 (d) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holder of this Warrant by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of
this Warrant, that the holder of this Warrant shall be entitled, in addition to all other available remedies in law or in equity, to an injunction or injunctions to prevent or cure any breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions of this Warrant, without the necessity of showing economic loss and without any bond or other security being required. 
  
 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 
  

 15 

 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer. 
  

			
	KANA SOFTWARE, INC.
		
	By:	 	 /S/    JOHN THOMPSON

	Name:	 	 John Thompson

	Title:	 	 Executive Vice President & Chief Financial Officer

	
	Dated as of September 29, 2005

  

 16 

 FORM OF EXERCISE AGREEMENT 
  
 Dated:                  ,
200     
  
 To: KANA
SOFTWARE, INC. 
  
 The undersigned, pursuant to the provisions
set forth in the within Warrant, hereby agrees to purchase              shares of Common Stock covered by such Warrant, and makes payment herewith in full therefor at the price per
share provided by such Warrant in cash or by certified or official bank check in the amount of, or, if the resale of such Common Stock by the undersigned is not currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the Company (including a portion of the Warrant) having a market value (in the case of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $            . Please issue a certificate or certificates for such shares of Common Stock in the name of and pay any cash for any fractional share to: 

 

			
	Name:	 	  

	Signature:	 	  

	Address:	 	  

	  

	  

		
	Note:	 	The above signature should correspond exactly with the name on the face of the within Warrant.

  
 and, if said number of shares of
Common Stock shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned covering the balance of the shares purchasable thereunder less any fraction of a share paid in cash. By its
delivery of this Exercise Notice, the undersigned represents and warrants to the Company that it is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, ,as amended. 

 FORM OF ASSIGNMENT 
  
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within
Warrant, with respect to the number of shares of Common Stock covered thereby set forth hereinbelow, to: 
  

					
	 Name of Assignee

	  	Address

	  	No of Shares

  
 , and hereby irrevocably constitutes
and appoints                      as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with
full power of substitution in the premises. 
  

	
	 Dated:                  ,
200    

	
	 In the presence of:

	
	

  

			
	Name:	 	  

	Signature:	 	  

	
	Title of Signing Officer or Agent (if any):
		
	Address:	 	  

	  

	
	Note: The above signature should correspond exactly with the name on the face of the within Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.Amendment, dated September 27, 2005, to Change of Control Retention Agreement

 Exhibit 10.27(b) 
 

 
  
 September 27, 2005 
  
 Gloria McCarthy 
 Executive Vice President and Chief Operating Officer 
 WellChoice, Inc. 
 3 Regina Court 
 Blauvelt, NY 10913 
  
 Re: Change in Control Retention 
  
 Dear Ms. McCarthy: 
  
 WellChoice, Inc. (“WellChoice”) considers it essential to its best interests to foster the continuous employment
of key management personnel should WellChoice receive a proposal from a third party, whether solicited by WellChoice or unsolicited, concerning a possible business combination transaction. Further, the Board of Directors of WellChoice (the
“Board”) has determined that it is imperative that it and WellChoice be able to rely upon your continued services without concern that you might be distracted by the personal uncertainties and risks that such a proposal might otherwise
entail. 
  
 Accordingly, the Board desires to reinforce and
encourage your continued attention and dedication to your assigned duties without distraction in the face of potentially disturbing circumstances that could arise out of a proposal for a change in control of WellChoice. In order to induce you to
remain in the employ of WellChoice and its subsidiaries, you shall receive the severance benefits set forth in this letter agreement (the “Agreement”) in the event your employment with WellChoice and its subsidiaries is involuntarily
terminated in connection with a change in control of WellChoice. 
  
 For purposes of this Agreement, the “Company” shall refer to WellChoice and its successors and assigns as provided for in Section 6(a) below. 
  
 1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through
December 31, 2005; provided that the term of this Agreement shall automatically be extended for one additional year as of January 1, 2005 and each January 1 thereafter unless the Company provides you with written notice prior to any
such date that it does not wish to further extend this Agreement. Notwithstanding any such notice by the Company, if a Change in Control occurs during the original or any extended term of this Agreement, this Agreement shall continue in effect until
the second anniversary of such Change in Control. 

 Gloria McCarthy 
 September 27, 2005 
 Page 2 
  
 2. Change in
Control. 
  
 (a) Notwithstanding any other provision in this
Agreement, no benefits shall be payable hereunder unless there shall have been a Change in Control of the Company, as set forth below. 
  
 (b) For purposes of this Agreement, a Change in Control shall be deemed to have occurred if (A) any “person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Fund referred to below, is or becomes the “beneficial owner” (as determined for purposes of Regulation 13D-G under
the Exchange Act as currently in effect), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities; or (B) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board and any new director whose election to the Board or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (C) the Company effects a merger or
consolidation with any other corporation, other than a merger or consolidation (x) which does not result in any person becoming the beneficial owner, directly or indirectly, of securities of the Company or the surviving entity representing 25%
or more of the combined voting power of the Company’s (or such surviving entity’s) then outstanding securities and (y) in which a majority of the Board of Directors of the Company or such surviving entity immediately after such merger
or consolidation is comprised of directors of the Company immediately prior to such merger or consolidation; or (D) the Company sells or disposes of all or substantially all of the Company’s assets. Notwithstanding anything to the contrary
set forth herein, the ownership of The New York Public Asset Fund of more than 25% of the Company’s securities does not constitute a Change in Control for purposes of this Agreement. 
  
 (c) For purposes of this Agreement, a “potential change in control of the Company” shall be deemed to have
occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (B) any person (including the Company) publicly announces an intention to take or to consider taking
actions which if consummated would constitute a Change in Control; or (C) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. 

 Gloria McCarthy 
 September 27, 2005 
 Page 3 
  
 3. Termination In
Connection with a Change in Control. 
  
 (a)
Termination. You shall be entitled to the benefits provided in Section 4 hereof upon the termination of your employment with the Company and its subsidiaries during the term of this Agreement occurring within six months preceding, or
within two years following, a Change in Control, unless such termination is (i) a result of your death, retirement at or after age 65 (as set forth below), or permanent and total disability (as determined for purposes of the Company’s
long-term disability benefit plan in which you participate), (ii) by you other than for Good Reason, or (iii) by the Company or any of its subsidiaries for Cause. 
  
 (b) Disability. In the absence of any applicable long term disability benefit plan, any question as to the existence
of your permanent and total disability for purposes of this Agreement shall be governed by a qualified independent physician selected by the Company and approved by you, said approval not to be unreasonably withheld. The determination of such
physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement. 
  
 (c) Retirement. For purposes of this Agreement, “retirement” shall mean (i) your voluntary resignation of employment with the
Company and its subsidiaries at or after age 65 on your own initiative and other than for Good Reason, (ii) your termination of employment pursuant to a mandatory age limit policy for executives adopted by the Company at least one year prior to
any Change in Control, or (iii) your resignation in accordance with any retirement arrangement established with your consent with respect to you at least six months prior to any Change in Control. 
  
 (d) Cause. For purposes of this Agreement, “Cause” shall
mean (A) your willful breach of a material duty or other material willful misconduct in the course of your employment which, if curable, is not cured by you within ten (10) business days following written notice thereof from the Board,
(B) your commission of a felony or a crime involving moral turpitude (other than a petty misdemeanor), or (C) your habitual neglect of your employment duties provided you were provided prompt written notice of such neglect by the Board and
a reasonable opportunity to cure such neglect. For purposes of this Section 3(d) no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in and not opposed to the interests of the Company or any of its subsidiaries. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership 

 Gloria McCarthy 
 September 27, 2005 
 Page 4 
  
 of the Board at a meeting of the Board
called and held for such purposes (after reasonable notice to you and a reasonable opportunity for you, together with your counsel, to be heard before the Board), finding that in the reasonable, good faith opinion of the Board you were guilty of
conduct set forth above in this Section 3(d) and specify the particulars thereof in detail. 
  
 (e) Good Reason. You shall be entitled to terminate your employment with the Company and its subsidiaries for Good Reason on or after a Change in
Control by providing at least 30 days prior written notice to the Board specifying the acts or omissions within the preceding 90 days that are believed to constitute Good Reason and a proposed termination date. The Company and its subsidiaries shall
be permitted during the 30-day period following the Board’s receipt of such notice to cure or otherwise correct any such acts or omissions and, if reasonably cured or corrected, you shall not be allowed to resign for Good Reason. For the
purpose of this Agreement, “Good Reason” shall mean the occurrence, without your express written consent, of any of the following circumstances unless such circumstances are fully corrected prior to the Date of Termination (as defined in
Section 3) specified in the Notice of Termination (as defined in Section 3) given in respect thereof: 
  
 (i) the assignment to you of any duties that are not commensurate or consistent with your status as Executive Vice President and Chief
Operating Officer of WellChoice, your removal from such position(s), or a substantial diminution in the nature or status of your responsibilities from those in effect immediately prior to any potential change in control or Change in Control
occurring within the preceding two years; provided that (A) any diminution in the nature or status of your responsibilities resulting solely from the Company becoming a subsidiary of another entity (and not any other changes to your
responsibilities) shall constitute Good Reason, and (B) during the six-month period following a Change in Control, in connection with a transition of your responsibilities to a successor shall not constitute Good Reason until the earlier of the
completion of such transition or the end of such six-month period (except you may nevertheless provide a Notice of Termination prior thereto); 
  
 (ii) a reduction by the Company or any of its subsidiaries in your annual base salary as in effect on the date hereof or as the same may
be increased from time to time; 
  
 (iii) the
failure by the Company or any of its subsidiaries to continue in effect any bonus or incentive compensation plan in which you participate prior to the Change in Control, unless an 

 Gloria McCarthy 
 September 27, 2005 
 Page 5 
  
 equitable alternative
compensation arrangement (embodied in an ongoing substitute or alternative plan) has been provided for you, except that the discontinuation of the grant of options or other equity based awards shall not be deemed to be covered by the provisions of
this subparagraph; 
  
 (iv) the failure by the
Company or any of its subsidiaries to continue your participation in any employee benefit plans other than by reason of any change applicable to all similarly situated employees; 
  
 (v) the relocation of the office in which you are based to a location more than thirty-five (35) miles
from the office in which you are based, unless such relocation does not increase your commute by more than twenty (20) miles; 
  
 (vi) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof. 
  
 Your continued
employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder; provided, however, you may not seek to terminate your employment for Good Reason based on any act or such
circumstance that occurred more than 90 days prior to the date Notice of Termination is provided. The suspension of your duties and responsibilities, following written notice from the Board and during the pendency of the Board’s consideration
of a termination of your employment with the Company for Cause shall not, by itself, constitute Good Reason provided such suspension does not extend for more than 30 days unless you have requested in writing additional time in order to be heard by
the Board before it makes its final determination on your proposed termination for Cause. 
  
 (f) Notice of Termination. Any purported termination of your employment by the Company and its subsidiaries or by you shall be communicated by written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. 
  
 (g) Date of Termination, Etc. “Date of Termination” shall mean if your employment is terminated for any reason (other than your death or
Disability), the date specified in the Notice of Termination which shall not be less than thirty (30) days from the date such Notice of Termination is given; provided 

 Gloria McCarthy 
 September 27, 2005 
 Page 6 
  
 in the event of your proposed
termination by the Company for Cause you shall be permitted to correct or otherwise cure the offending act or failure to act, if possible, during the period following such notice. 
  
 4. Compensation Upon Termination. 
  
 (a) If your employment by the Company and its subsidiaries shall be terminated during the term of this Agreement by
(a) the Company and its subsidiaries other than for Cause or your death, Retirement or Disability, or (b) you for Good Reason, and such termination occurs within six months preceding, or within two years following, a Change in Control of
the Company, then you shall be entitled to the benefits provided below: 
  
 (i) The Company (or one of its subsidiaries, if applicable) shall pay you no later than the tenth business day following the Date of Termination (unless a different payment date is specified herein): (A) your
full base salary through the Date of Termination at the rate in effect at the time of the Change in Control or the Notice of Termination is given (whichever date your salary rate is higher), plus (B) the unpaid annual incentive for the
preceding year, if any, plus (C) a pro rata amount of your target annual incentive for the year in which your termination of employment occurs, plus (D) all other amounts to which you are entitled under any compensation plan of the Company
applicable to you, at the time such payments are due, plus (E) a pro rata portion of your target awards under the Company’s Long-Term Incentive Compensation Plan. 
  
 (ii) The Company shall pay you, on a date that is no later than the tenth business day following the Date of
Termination, a severance payment equal to two times (2x) the sum of (A) your full annual base salary and (B) annual incentive payment, in each case in effect at the time of the Change in Control or the Notice of Termination is given
(whichever date provides a higher payment). For purposes of this Section 4(a)(ii), your annual incentive payment shall mean your target bonus multiplied by the average of the corporate score under the annual incentive plan for the three years
preceding the year in which your termination of employment occurs. 
  
 (iii) The payment to be made to you pursuant to this Section 4(a) shall not be reduced by the amount of any other payment or the value of any benefit received or to be received by you in connection with your
termination of employment or 

 Gloria McCarthy 
 September 27, 2005 
 Page 7 
  
 contingent upon a
Change in Control of the Company (whether payable pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or an affiliate, predecessor or successor of the Company or any person whose actions result in a
Change in Control of the Company or an affiliate of such person), except your acceptance of the severance payment provided by this Agreement shall constitute a waiver of any right or entitlement to severance pay under any severance pay plan of the
Company otherwise applicable to you. In addition, the Company will pay you (x) all amounts under all retirement plans accrued through the Date of Termination (which shall be immediately vested on your termination of employment), Deferred
Compensation Plan or any other deferred compensation plan or non-qualified retirement plan in effect at the Date of Termination, such amounts to be paid to you at the time specified in your election (or deemed election) under such plans,
notwithstanding any provisions of such plan (or any related trust) that would allow WellChoice (or any trustee) to delay the payments of such amounts, (y) all amounts determined and earned by you on an annual basis consistent with
WellChoice’s practice as of the date of this Agreement for years ended before the year in which the Date of Termination occurs under, pursuant to or in connection with any Long-Term Incentive Compensation Plan adopted by WellChoice,
notwithstanding the fact that your employment will have terminated prior to the end of the relevant three-year period performance cycle thereunder or any vesting or other provisions of any such plan, and (z) if the number of your years of
service is a factor in the determination of your benefit under any of the Company’s defined benefit retirement plans, an amount equal to any additional benefit you would be entitled to under any such plans if your years of service for purposes
of such plans was increased by two. 
  
 (b) You shall not be
required to mitigate the amount of any payment provided for in Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in Section 4 be reduced by any compensation earned by you as the
result of employment by another employer or by retirement benefits received after the Date of Termination or otherwise. 
  
 (c) If you are entitled to the payments provided in Section 4 hereof, the Company or any of its subsidiaries shall continue your participation, as if
you were still an employee, in the medical, dental, hospitalization and life insurance plans, programs and/or arrangements of the Company or any of its 

 Gloria McCarthy 
 September 27, 2005 
 Page 8 
  
 subsidiaries in which you were
participating on the date of the termination of your employment on the same terms and conditions as other executives under such plans, programs and/or arrangements until the earlier of (i) the end of the 24-month period following the date of
the termination of your employment or (ii) the date, or dates you receive equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis). 
  
 5.
Parachute Tax Gross-Up. 
  
 (a) In the event that any
payment or benefit received or to be received by you pursuant to the terms of this Agreement (the “Contract Payments”) or in connection with or contingent upon a Change in Control of the Company pursuant to any other agreement, plan or
arrangement with the Company or any of its subsidiaries (“Other Payments” and, together with the Contract Payments, the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), the Company shall pay to you an additional amount (the “Gross-Up Payment”) such that the net amount of Payments retained by you shall be equal to the amount you would have retained if none of such Payments were subject to the
Excise Tax. In particular, the Company will timely pay to you an amount equal to the Excise Tax on the Payments, any interest, penalties or additions to tax payable by you by reason of your filing income tax returns and making tax payments in a
manner consistent with an opinion of tax counsel selected by the Company and reasonably acceptable to you (“Tax Counsel”), and any federal, state and local income tax and Excise Tax upon the payments by the Company to you provided for by
this Section 5. Notwithstanding the foregoing provisions of this Section 5(a), in the event the amount of Payments exceeds the product (“Parachute Payment Limit”) of 2.99 and your applicable “base amount” (as such term
is defined for purposes of Section 4999 of the Code) by less than ten percent (10%) of your annual base salary, you shall be treated as having waived such rights with respect to Payments designated by you to the extent required such that
the aggregate amount of Payments subject to the Excise Tax is less than the Parachute Payment Limit. 
  
 (b) The Company shall obtain an opinion of Tax Counsel that initially determines whether any of the Payments will be subject to the Excise Tax and the
amounts of such Excise Tax, which shall serve as the basis for reporting Excise Taxes and federal, state and local income taxes on Payments hereunder. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal
income tax at the highest marginal rates of federal income taxation applicable to individuals in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of your residence in the calendar year in which the Gross-Up Payment is to be 

 Gloria McCarthy 
 September 27, 2005 
 Page 9 
  
 made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of such state and local taxes, taking into account any limitations applicable to individuals subject to federal income tax at the highest marginal rates. 
  
 (c) The Gross-Up Payments provided for in this Section 5 shall be made
as to each Payment upon the earlier of (i) the payment to you of any such Contract Payment or Other Payment or (ii) the imposition upon you or payment by you of any Excise Tax or any federal, state or local income tax on any payment
pursuant to this Section 5. 
  
 (d) If it is established
pursuant to a final determination of a court or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the Excise Tax is less than the amount taken into account under Section 5 hereof, you shall repay to the Company within
five days of your receipt of notice of such final determination or opinion the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax or a federal, state and local income tax deduction) plus any interest received by you on the amount of such repayment. If it is
established pursuant to a final determination of a court or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the Excise Tax exceeds the amount taken into account hereunder (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess within five days of the Company’s receipt of notice of such final determination or
opinion. 
  
 6. Successors; Binding Agreement. 

 
 (a) For purposes of this Agreement, the “Company” shall mean
WellChoice, Inc. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined in the first sentence of this
Section 6(a) as well as any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 

 Gloria McCarthy 
 September 27, 2005 
 Page 10 
  
 (b) This Agreement
shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder
if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 

 
 7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the address set forth on
the first page of this Agreement with respect to the Company and on the signature page with respect to you, provided that all notices to the Company shall be directed to the attention of the General Counsel of the Company, or to such other address
as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 
  

8. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this
Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New
York, including Section 198 (1-a) of the New York Labor Law. All references to sections of the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 
  
 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in full force and effect. 

 Gloria McCarthy 
 September 27, 2005 
 Page 11 
  
 10. Legal
Expenses. The Company shall also pay to you all legal fees and expenses reasonably incurred by you in contesting or disputing the nature of any termination of your employment for purposes of this Agreement or in seeking to obtain or enforce any
right or benefit provided by this Agreement); provided that the Company shall not be obligated to pay any amount under this Section 10 to the extent a court or a mutually agreed upon arbitrator determines that your claim, contest, dispute or
enforcement of this Agreement is frivolous. 
  
 11.
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 
  
 12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising tinder or in connection with this Agreement. 
  
 If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. 
  

			
	 Sincerely,

	
	 WELLCHOICE, INC.

		
	 By:
	 	 /s/ Michael A, Stocker, MD

	 Name:
	 	 Michael A. Stocker, MD

	 Title:
	 	 President and Chief Executive Officer

  

	
	 Agreed to this 27th day of September, 2005.

	
	 /s/ Gloria McCarthy

	 Gloria McCarthy

	
	 Address for notices:

	
	 Gloria McCarthy

	 3 Regina Court

	 Blauvelt, NY 10913

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