Asset Purchase Agreement - Open Source Inc. and Red Hat Inc.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") entered into as of this 14th day
of December, 1999 ("Effective Date") by and between Open Source, Inc., a
Texas corporation having its place of business in Carrolton, Texas ("Seller")
and Red Hat, Inc., a Delaware corporation having its principal place of
business in Durham, North Carolina ("Buyer").
BACKGROUND
Seller now owns and wishes to sell to Buyer the Internet domain name
opensource.com, including all variants of the domain name, such as
www.opensource.com and ftp.opensource.com, (collectively, the "Domain Name"),
but not including the pages comprising the Seller's Web site or any database or
other content at such Web site as of the Closing Date; and
Buyer wishes to purchase the Domain Name from Seller.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree
as follows:
1. PURCHASE AND SALE.
1.1. Subject to the terms and conditions set forth in this Agreement, Buyer
hereby agrees to purchase, and Seller hereby agrees to sell, any and
all of Seller's right, title and interest in and to the Domain Name,
including, but not limited to, all goodwill, trademarks, service marks,
trademark or service mark applications (if any) for the Domain Name or
any variant of the Domain Name, URLs, and domain name registrations
(including, without limitation, www.opensource.com and
ftp.opensource.com), and all related contracts, agreements, licenses or
permits (collectively, the "Purchased Assets"), free and clear of all
mortgages, pledges, security interests, adverse claims, encumbrances
and liens.
1.2. The closing of the transactions contemplated in this Agreement (the
"Closing ") shall take place on a date and at a time and location
specified by Buyer (the "Closing Date "). On the Closing Date, the
Purchased Assets will be transferred to Buyer by Seller, and Seller
will do all things that are deemed necessary by Buyer to transfer the
Purchased Assets. The Purchased Assets will be delivered to Buyer in
such electronic or other format as Buyer shall reasonably request.
Seller shall complete and execute the bill of sale and other documents
attached as EXHIBIT A and all other documents necessary to effectuate
the sale and transfer of the Purchased Assets, and promptly
take such action as required by Network Solutions, Inc. ( "Network
Solutions ") to transfer the Domain Name to Buyer. For the purpose of
accomplishing the transfer of the Domain Name, Seller appoints Buyer as
its attorney in fact to execute all documents and take all action
required by Network Solutions to effect the assignment and transfer of
the Domain Name to Buyer. Failure to consummate the Closing in the
manner described above and in accordance with the other terms of this
Agreement will not result in termination of this Agreement and will not
relieve any party of any of its obligations under this Agreement.
1.3. Seller acknowledges that Buyer is not purchasing or assuming any
liabilities, obligations or indebtedness of Seller (collectively, the
"Liabilities"), regardless of whether such Liabilities are related to
the Purchased Assets, arise as a result of the transactions
contemplated by this Agreement, or are otherwise related to the
Seller's business in any manner. Not in limitation of any other
provision of this Agreement, Seller jointly and severally hereby agrees
to pay, perform and discharge the Liabilities of Seller related to or
connected with the Purchased Assets, and to indemnify and hold Buyer
harmless from any and all claims, costs, expenses, liabilities, losses
or damages, including attorneys' fees, relating to or arising out of
the Liabilities.
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2. PURCHASE PRICE.
2.1. In exchange for the Purchased Assets and subject to the terms and
conditions of this Agreement, Buyer shall pay to Seller at the Closing
Seventy Five Thousand Dollars ($75,000) payable in cash via wire
transfer to such account as designated by Seller. Seller shall pay all
sales and transfer taxes, if any, required with or resulting from the
sale of the Purchased Assets pursuant to this Agreement.
2.2. At the Closing, Seller shall deliver to Buyer such other and further
certificates, assurances and documents as Buyer may request in order to
evidence the accuracy of the representations and warranties of Seller
and the performance of the covenants and agreements to be performed by
Seller pursuant hereto at or prior to the Closing.
2.3. At the Closing, Seller shall deliver to Buyer a Registrant Name Change
Agreement Version 3.0 - Transfers, as required by Network Solutions,
Inc., ("Transfer Agreement") properly completed, signed, and notarized.
After delivery by Seller to Buyer of the Transfer Agreement, Buyer
shall complete whatever additional transactions with Network Solutions
that are necessary for the Buyer to take possession of the Purchased
Assets; provided that Sellers shall give Buyer all cooperation
reasonably requested by Buyer to complete the transfer of the Purchased
Assets.
2.4 Within five days after the date that Buyer receives notification from
Network Solutions of the effectiveness of the transfer of the Domain
Name in accordance with the Transfer Agreement ("Transfer Date"), Buyer
shall issue and deliver to Seller a number of unregistered shares of
the common stock of Buyer ("Shares") determined by dividing Eight
Hundred Fifty Thousand Dollars ($850,000) by the Issuance Average
Price. The "Issuance Average Price" shall mean the average closing
price per share for Buyer's common stock as quoted on the NASDAQ
National Market on the twenty (20) trading days immediately preceding
the Transfer Date. Section 8.5 below sets forth the registration rights
applicable to the Shares. In the event that the calculation of Shares
under this Agreement creates a fractional Share, the number of Shares
to be issued shall be rounded to the nearest whole number thereof.
2.5 Upon the earlier of (i) the effective date of a registration statement
registering the Shares for resale by Seller, or (ii) the first
anniversary of the Transfer Date (such earlier date shall be the
"Terminal Date"), the parties shall calculate the aggregate market
value of the Shares as of the Terminal Date ("Terminal Date Value") by
multiplying the number of Shares issued under Section 2.4 (as adjusted
to reflect any stock splits or similar events occurring prior to the
Terminal Date) by the Terminal Average Price. The "Terminal Average
Price" shall mean the average closing price per share of Buyer's common
stock as quoted on the NASDAQ National Market on the twenty (20)
trading days immediately preceding the Terminal Date.
2.5.1 In the event that the Terminal Date Value is less than Eight
Hundred Fifty Thousand Dollars ($850,000) ( "Shortfall "), then
Buyer shall promptly, at Buyer's option and subject to the terms
of Section 2.5.2 below, either (a) pay Seller an amount equal to
the Shortfall in cash, payable by wire transfer to an account
designated by Seller, or (b) issue and deliver to Seller that
number of shares of the common stock of Buyer which shall be
equal in aggregate value (based on the Terminal Average Price)
to the Shortfall. If Buyer elects to pay a Shortfall in stock,
and the event triggering the Terminal Date is the effectiveness
of a Registration Statement by Buyer in accordance with Section
8.5, then subject to the terms of Section 8.5 and to whether the
form of Registration Statement would accommodate Buyer's doing
so, Buyer will use its best efforts to include the additional
shares constituting payment of the Shortfall in such
Registration Statement.
2.5.2 Buyer, if electing to satisfy the Shortfall through the issuance
of common stock under Section 2.5.1 above, may delay such
issuance if and for so long as conditions exist which would
permit Buyer to issue a Suspension Notice under Section 8.5.2
below if a Registration Statement were in effect thereunder.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants as follows:
3.1. Seller owns good, valid and marketable title to the Purchased Assets,
free and clear of all liens, encumbrances, security interests,
restrictions or claims of any kind or nature, and no other person has
any interest in, or right or claim to, the Purchased Assets or any part
thereof;
3.2. Seller's use and operation of the Domain Name does not infringe upon,
violate or constitute a misappropriation of any intellectual property
or other right of any other person or entity or of any applicable law
or regulation as Seller is currently using the Domain Name. No claim
has been asserted by any person (i) that such person has any right,
title or interest in or to any intellectual property that is included
in the Purchased Assets, (ii) that such person has any right to use any
mark or trade name that is included within the Purchased Assets, or
(iii) that challenges the legality, validity or enforceability of any
of the intellectual property included within the Purchased Assets;
3.3. Seller has duly registered with all required authorities the Domain
Name, and is the sole and exclusive owner of and possesses all rights
necessary to use the Domain Name as Seller is currently using such
Domain Name;
3.4. No consent, approval or authorization from, or filing with or notice
to, any third party or any governmental authority is required in
connection with Seller's execution and delivery of this Agreement or
the performance of Seller's obligations hereunder;
3.5 There exists no contract, agreement or undertaking in connection with
the Purchased Assets to which Seller is a party or by which Seller is
or may become bound, or to which any of the Purchased Assets are
subject (collectively, the "Contracts"): (a) containing any provision
or covenant prohibiting or limiting the ability of Seller to engage in
any business activity with respect to the Purchased Assets, (b) under
which Seller has granted (or may grant) a lien, encumbrance or security
interest on or in the Purchased Assets (or any of them), (c) relating
to ownership, the right to use, or the future disposition or
acquisition of, any of the Purchased Assets, (d) otherwise limiting in
any way currently or with the passage of time Buyer's right to use the
Purchased Assets or convey any right or interest in the Purchased
Assets, or (e) under which Seller or any party thereto is, or with the
passage of time or the occurrence of an event may be, in breach.
3.6 No license, permit, authorization, approval, registration (except with
Network Solutions) or similar consent must be granted by any third
party or governmental authority (collectively, "Licenses") to Seller in
connection with the Purchased Assets. Seller is not in violation of any
rule, regulation, policy, or procedure of Network Solutions in
connection with the Purchased Assets. There are no proceedings pending
or threatened that would have the effect of revoking or limiting or
affecting the transfer or renewal of the registration of the Domain
Name with Network Solutions. The Domain Name registration may be
transferred and assigned to Buyer without the consent of any person
other than Seller.
3.7 Seller is not a party to or threatened to be made a party to, any
charge, complaint, action, suit, arbitration, hearing, investigation or
other proceeding in connection with the Purchased Assets.
3.8. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Seller has full
corporate power and authority (i) to own the Purchased Assets, (ii) to
execute and deliver this Agreement and all other agreements and
documents contemplated by this Agreement to which Seller is a party,
(iii) to perform its obligations hereunder and thereunder, and (iv) to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and such other agreements and
documents has been duly authorized by Seller and the Agreement and the
other agreements and documents contemplated hereby
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constitute the legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, subject to
bankruptcy, insolvency or other laws of general applicability affecting
the rights and remedies of creditors and subject to the availability of
the remedy of specific performance or injunctive or other equitable
relief.
3.9. The execution and delivery of this Agreement by Seller and the
performance by it of the transactions contemplated by this Agreement do
not and will not (a) conflict with, or result in a violation, breach or
termination of or default under, any term or provision of its corporate
charter or by?laws, or any statute, rule or regulation of any
governmental authority, or any contract or agreement to which it is a
party or by which it is bound or (b) result in the imposition of any
lien or encumbrance upon any of the Purchased Assets.
3.10 No broker or other representative has acted on behalf of Seller in
connection with the transactions contemplated hereby in such a manner
as to give rise to any claim by any person against Buyer for a finder's
fee, brokerage commission or similar payment.
3.11 Seller has no liability (whether absolute, accrued, contingent or
otherwise) in connection with the Purchased Assets, and there is no
basis for any present or future action, suit, proceeding, claim,
demand, proceeding or investigation against Seller giving rise to any
liability in connection with the Purchased Assets, other than
liabilities disclosed in the Disclosure Letter.
3.12 Seller is acquiring the Shares and will acquire any shares issued to
compensate a Shortfall pursuant to Section 2.5.2 solely for investment
for Seller's own account and not with a view to, or for resale or
distribution thereof, other than pursuant to the registration statement
referred to in Section 8.5 below.
3.13. Seller represents that it has such knowledge and experience in
financial and business matters that Seller is capable of evaluating the
merits and risks of the investment in the Shares. Seller also
represents it has not been organized for the purpose of acquiring the
Shares. Seller acknowledges that the acquisition of the Shares involves
substantial risk; and Seller represents and warrants to the Buyer that
it can bear the economic risk of its investment in the Shares.
3.14. The representations and warranties of Seller contained in this
Agreement or any other agreement or document to be delivered at the
Closing by Seller to Buyer do not and will not contain any untrue
statement of a material fact and do not and will not omit to state a
material fact necessary in order to make the statements herein or
therein, in the light of the circumstances in which they were made, not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
4.1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full
corporate power and authority and all material governmental licenses,
authorizations, consents and approvals required to acquire the
Purchased Assets; and
4.2. The execution and delivery of this Agreement and the other agreements
and documents contemplated hereby and the transactions contemplated
hereby have been duly authorized by the Board of Directors of Buyer.
This Agreement and the other agreements and documents contemplated
hereby constitute the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, subject to
bankruptcy, insolvency or other laws of general applicability affecting
the rights and remedies of creditors or other equitable relief.
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4.3. No broker or other representative has acted on behalf of Buyer in
connection with the transactions contemplated hereby in such a manner
as to give rise to any valid claim by any person against Seller for a
finder's fee, brokerage commission or similar payment.
4.4. The representations and warranties of Buyer contained in this Agreement
or any other agreement or document to be delivered at the Closing by
Buyer to Seller do not and will not contain any untrue statement of a
material fact and do not and will not omit to state a material fact
necessary in order to make the statements herein or therein, in the
light of the circumstances in which they were made, not misleading.
5. COVENANTS OF SELLER.
5.1. The parties agree that Buyer will be irreparably damaged if Seller does
not transfer the Purchased Assets on the Closing Date. Accordingly,
without limiting Section 6 below, Buyer shall be entitled to a
temporary or permanent injunction, without showing any actual damage,
and/or a decree for specific performance, in order to effect the
transfer of Purchased Assets at the Closing Date.
5.2. Seller agrees that, unless this Agreement is properly terminated
pursuant to Section 17 below, Seller will not, directly or indirectly,
through any officer, director, shareholder, affiliate or agent or
otherwise, solicit, initiate, encourage or negotiate any proposal or
offers from any third party relating to (a) the acquisition of any of
the Purchased Assets or (b) the licensing, assignment or granting of
any other right in or to the Purchased Assets or any of the
intellectual property relating to any of the Purchased Assets, nor will
any of Seller's officers, directors, shareholders, affiliates or agents
participate in any negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate with or facilitate
any effort by any person to do or seek any such transaction.
5.3 Seller agrees that, by the earlier of (i) notification from Network
Solutions of the effectiveness of the transfer of the Domain Name in
accordance with the Transfer Agreement, or (ii) thirty (30) days after
the Closing, Seller shall cease all use of the Domain Name, and if
necessary Seller shall implement on Seller's web servers an automated
redirect which shall route all Internet traffic that would otherwise be
directed to the Domain Name, to a URL provided by Buyer ("Redirect"),
and Seller shall maintain such Redirect until Network Solutions
provides notification of the effectiveness of the transfer of the
Domain Name in accordance with the Transfer Agreement.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
The obligations of Buyer under this Agreement are subject to the satisfaction,
at or before the Closing, of all the conditions set out below in this Section 6.
Buyer may, in its absolute discretion, waive any or all of these conditions in
whole or in part without prior notice; PROVIDED, HOWEVER, that no such waiver of
a condition shall constitute a waiver by Buyer of any of its other rights or
remedies, at law or in equity, if Seller shall be in breach or default of any of
its representations, warranties or covenants under this Agreement.
6.1. The representations and warranties of Seller contained in this
Agreement were true when made, and shall be true as of the Closing Date
with the same force and effect as if made at and as of the Closing
Date, and Seller shall, at the request of Buyer, which request Buyer
hereby makes, deliver at Closing a written certification as to the
truthfulness of such representations and warranties, which shall not
indicate the occurrence of a material adverse change with respect to
the Purchased Assets.
6.2. Seller shall have performed, satisfied and complied with all covenants,
agreements, and conditions required by this Agreement to be performed,
satisfied or complied with by Seller prior to or on the Closing Date
and Seller shall deliver at Closing a written certification thereof.
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6.3. Seller shall have executed and delivered all documents and agreements
contemplated by this Agreement to which Seller is a party.
6.4. No action, suit or proceeding before any court or any governmental body
or authority, pertaining to the transactions contemplated by this
Agreement or to their consummation or in any way relating to or
affecting the Purchased Assets or any part thereof, shall have been
instituted or threatened.
6.5. Buyer shall have satisfactorily completed its pre?acquisition
investigation and review of Seller and the Purchased Assets and shall
be satisfied with the results of such investigation and review in its
sole discretion; PROVIDED, HOWEVER, that no such investigation or
review shall in any way relieve Seller from, or affect Buyer's right to
rely upon, the representations and warranties made by Seller under this
Agreement.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
The obligations of Seller under this Agreement are subject to the satisfaction,
at or before the Closing, of all the conditions set out below in this Section 7.
Seller may, in its absolute discretion, waive any or all of these conditions in
whole or in part without prior notice; PROVIDED, HOWEVER, that no such waiver of
a condition shall constitute a waiver by Seller of any of their other rights or
remedies, at law or in equity, if Buyer shall be in breach or default of any of
its representations, warranties or covenants under this Agreement.
7.1. The representations and warranties of Buyer contained in this Agreement
were true when made, and shall be true as of the Closing Date with the
same force and effect as if made at and as of the Closing Date. Buyer
shall deliver at Closing a written certification as to the truthfulness
of such representations and warranties.
7.2. Buyer shall have performed, satisfied and complied with all covenants,
agreements, and conditions required by this Agreement to be performed,
satisfied or complied with by Buyer prior to or on the Closing Date and
Buyer shall deliver at Closing a written certification thereof.
7.3. Buyer shall have executed and delivered all documents and agreements
contemplated by this Agreement to which Buyer is a party.
8. STOCK TRANSFER RESTRICTIONS AND RELATED MATTERS.
8.1. Seller acknowledges that the Shares (which shall include, solely for
purposes of this Section 8.1, any shares of Buyer's common stock issued
to pay any Shortfall pursuant to Section 2.5.1) are being issued in
reliance on an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act ") for an offer
and sale of securities that does not involve a public offering and,
upon issuance, shall not have been registered under any federal or
state securities laws, and that such Shares cannot be resold in the
absence of applicable and effective registration except pursuant to an
exemption from, or in a transaction not subject to the registration
requirements of applicable federal and state securities laws. Seller
agrees that it shall refrain from transferring in any manner any
interest in any of the Shares prior to the filing with the Securities
and Exchange Commission of Buyer's next Annual Report on Form 10-K,
except pursuant to the provisions on Section 8.5 below. After such
date, Seller agrees that it shall refrain from transferring any of the
Shares except in a transaction registered under the Securities Act or
unless it shall have delivered to the Buyer an opinion of counsel,
which counsel and opinion shall be reasonably satisfactory to the
Buyer, that such transfer is being effected in accordance with an
available exemption from, or in a transaction not subject to the
registration requirements of the Securities Act. Seller also
acknowledges that the Buyer is under no obligation to effect any such
registration under the Securities Act or otherwise with respect to
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such shares (or any securities issued in exchange or substitution
therefor) or to file for or comply with any exemption from such
registration except as set forth in Section 8.5 below.
8.2. The certificates representing such Shares shall bear legends in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND HAVE BEEN ISSUED UNDER
EXEMPTIONS THAT DEPEND IN PART ON THE INTENT OF THE HOLDER NOT TO SELL
OR TRANSFER SUCH SHARES IN ANY MANNER NOT PERMITTED BY SUCH LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT OR UNLESS (1) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(2) IN ACCORDANCE WITH RULE 144 OF THE RULES AND REGULATIONS OF SUCH
ACT, OR (3) IN ACCORDANCE WITH A LEGAL OPINION SATISFACTORY TO COUNSEL
FOR RED HAT, INC. THAT SUCH SALE OR TRANSFER IS OTHERWISE EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT. TRANSFER OF THE SECURITIES
EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO AN ASSET PURCHASE AGREEMENT
DATED ON OR ABOUT [THE DATE OF THIS AGREEMENT] BETWEEN RED HAT, INC.
AND OPEN SOURCE, INC. A COPY OF SAID ASSET PURCHASE AGREEMENT IS ON
FILE IN THE OFFICE OF RED HAT, INC., AND A COPY THEREOF WILL BE MAILED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST
THEREFOR.
8.3. Seller acknowledges that the Buyer is a reporting company under Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); that Seller has received and had an opportunity to review the
Buyer's various filings previously made pursuant to the Exchange Act,
which are publicly available; and that Seller has been given the
opportunity to ask questions of and receive answers from the officers
of the Buyer concerning the Buyer and the terms and conditions of the
transactions contemplated by this Agreement.
8.4 Transfers in Violation. Any sale, assignment, transfer, pledge,
hypothecation, mortgage or disposition of any Shares, by gift or
otherwise, in violation of any provision of this Agreement shall be
void and of no effect and shall not be recognized by Buyer as
transferring any interest in any of such Shares.
8.5. Registration Rights.
8.5.1. If, at any time after the Transfer Date, the Buyer shall file a
registration statement with the Securities and Exchange
Commission (the "SEC ") which in form is suitable for inclusion
of the Shares (which shall include, solely for purposes of this
Section 8.5, any shares of Buyer's common stock issued to pay
any Shortfall pursuant to Section 2.5.1), the Buyer shall so
notify Seller. In such event, Seller may include some or all of
the Shares in such registration statement (the "Registration
Statement ") by completing and signing the Buyer's notification
form and returning it within ten days of the date of the notice,
and thereafter taking such other related actions as the Buyer
reasonably shall request; provided, however, that the foregoing
right to have shares included in any such Registration Statement
shall (i) be subject to cutback in the discretion of the
managing underwriter in the case of an underwritten offering;
and (ii) expire if and when all of the Shares may be sold during
a single three-month period under Rule 144 promulgated under the
Securities Act.
8.5.2. Notwithstanding Section 8.5.1 above, the Buyer shall not be
required to take any action with respect to the filing or the
declaration or continuation of effectiveness of the Registration
Statement following notice to Seller from the Buyer (a
"Suspension Notice") of the existence of any state of facts or
the happening of any event (including without
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limitation pending negotiations relating to, or the consummation
of a transaction) or the occurrence of any event which in the
opinion of the Buyer might require additional disclosure of
material, non-public information by the Buyer in the
Registration Statement as to which the Buyer believes it has a
bona fide business purpose for preserving confidentiality or
which renders the Buyer unable to comply with the published
rules and regulations of the SEC promulgated under the
Securities Act or the Exchange Act, as in effect at any relevant
time. Upon receipt of a Suspension Notice from the Buyer, Seller
will forthwith discontinue disposition of all of such shares
pursuant to the Registration Statement until receipt from the
Buyer of copies of prospectus supplements or amendments prepared
by or on behalf of the Buyer, together with a notification that
the Suspension Notice is no longer in effect, and, if so
directed by the Buyer, Seller will deliver to the Buyer all
copies in its possession of the prospectus covering such shares
current at the time of receipt of any Suspension Notice.
8.5.3. All expenses incurred in connection with the registration
pursuant to this Section 8.5 shall be borne by the Buyer, except
that all selling discounts and commissions (if any) and stock
transfer taxes applicable to the shares covered by the
Registration Statement and all fees and disbursements of counsel
for the Seller relating thereto shall be borne by the Seller.
8.5.4. Buyer will indemnify Seller, each of Seller's directors and
officers, and each person who controls Seller within the meaning
of Section 15 of the Securities Act, against all expenses,
claims, losses, damages, or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement
of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement,
prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading, or any violation by Buyer of the
Securities Act or any rule or regulation promulgated under the
Securities Act applicable to Buyer in connection with any such
registration, qualification or compliance, and Buyer will
reimburse Seller and each such other person for any legal and
any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that Buyer will not be
liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or
omission made in conformity with information furnished to Buyer
by Seller.
8.5.5. Seller will indemnify Buyer, each of Buyer's directors and
officers, each person who controls Buyer within the meaning of
Section 15 of the Securities Act, and each other person or
entity including securities in such registration, qualification
or compliance and each controlling person thereof against all
claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
will reimburse Buyer and all such directors, officers and
persons for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim,
loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular or
other document in conformity with information furnished to Buyer
by Seller.
8.5.6. The registration rights in this Section 8.5 are not transferable
by Seller.
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9. INDEMNIFICATION.
9.1. Each party ("Indemnitor") shall indemnify the other ("Indemnitee")
against and shall hold the Indemnitee harmless from any and all
liabilities, losses, damages, costs and expenses (collectively,
"Damages") incurred by the Indemnitee (including, without limitation,
reasonable attorneys' fees and expenses) by reason of any falsity in or
breach or incorrectness of any representation and warranty of, or
failure to perform any covenant or agreement made or given by, the
Indemnitor in this Agreement or in connection with the consummation of
the transactions contemplated hereby.
9.2. Indemnitee shall provide prompt written notice to Indemnitor of any
claim or the commencement of any suit, action, or proceeding in respect
of which indemnity may be sought under this Section 9. The failure of
Indemnitee to provide prompt written notice shall not impair
Indemnitee's rights hereunder except to the extent that Indemnitor
demonstrates that Indemnitor's ability to defend has been materially
prejudiced by such failure of Indemnitee. Indemnitor shall have thirty
(30) days to negotiate, settle or defend (or institute the defense of),
without cost to Indemnitee, any claim or dispute before Indemnitor's
indemnification obligation shall arise under this Section 9; PROVIDED,
HOWEVER, that Indemnitor may not settle any action without the consent
of Indemnitee, which shall not be unreasonably withheld or delayed.
Indemnitor shall not be liable under this Section for any settlement
effected without its reasonable consent of any claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder.
9.3. Indemnitor shall promptly pay to Indemnitee the amount of any Damages
to which Indemnitee may become entitled to by reason of the provisions
of this Agreement. The payment required to be made pursuant to this
Section 9.3 shall be made in cash.
10. CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS.
10.1. Seller and Buyer shall keep confidential, and shall cause its officers,
directors, employees, accountants, counsel, consultants, advisors and
other agents (collectively, "Representatives ") to keep confidential,
the terms of this Agreement and all confidential documents and
information concerning the other party provided pursuant to this
Agreement or in connection with the transactions contemplated hereby
(collectively, the "Confidential Information "), unless disclosure is
compelled by judicial or administrative process, by the terms of this
Agreement, or other applicable law; PROVIDED, that Buyer shall have no
obligation to keep confidential or cause its Representatives to keep
confidential this Agreement or any trade secrets, know-how,
intellectual property rights and other Purchased Assets acquired by
Buyer pursuant to this Agreement. For purposes of this Section 10, all
trade secrets, know-how, intellectual property rights and other
Purchased Assets acquired by Buyer shall be deemed to be Confidential
Information of Buyer from and after the Closing Date. Without limiting
any of the foregoing, a party shall disclose Confidential Information
only to those of its Representatives who have a need to know such
information for a purpose contemplated by the terms of this Agreement,
PROVIDED, that the person receiving such Confidential Information shall
be informed of the proprietary nature of the information and
shall agree not to disclose such Confidential Information except in
accordance with the terms hereof.
10.2. All press releases and other public disclosures concerning this
transaction shall be made only by Buyer, except as required by
applicable law. The parties agree to issue a press release concerning
this transaction mutually approved by the parties promptly after the
Closing.
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11. COSTS AND EXPENSES.
Except as otherwise provided for hereunder, the parties hereto shall bear and be
responsible for their respective attorneys' fees, accountants' fees, broker's
fees and all other expenses incurred by them in the preparation, negotiation and
execution of this Agreement and all related documents and the consummation of
the transactions contemplated hereby.
12. BEST EFFORTS; FURTHER ASSURANCES.
Subject to the terms and conditions of this Agreement, each party will use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement. Buyer
and Seller agree without further consideration to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and to vest in
Buyer good, valid and marketable title to the Purchased Assets.
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants contained herein shall survive the
Closing until the date which is one year after the Closing Date, PROVIDED,
HOWEVER, that any covenants or agreements of a party that are required to be
performed following the Closing shall continue in effect as specified herein.
Notwithstanding the foregoing, (a) the confidentiality obligations of the
parties pursuant to Section 10 shall survive in perpetuity and (b) any
representation, warranty, covenant or agreement in respect of which indemnity
may be sought under Section 9 shall survive the time at which it would otherwise
terminate pursuant to this Section, if notice of a claim under Section 9 for
indemnity shall have been given to Seller prior to such time.
14. GOVERNING LAW.
The execution, performance and interpretation of this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of North Carolina, without regard to conflicts of laws principles.
15. NOTICES.
All notices required or permitted to be given under this Agreement must be in
writing, and will be deemed given on the date of receipt if delivered in person
or by facsimile, or on the date of mailing if mailed by overnight courier or
registered or certified mail, postage prepaid, return receipt requested, to the
applicable party at the following addresses:
If to Buyer:
Red Hat, Inc.
2600 Meridian Parkway
Durham, NC 27713
Attention: General Counsel
Fax: (919) 547?0024
If to Seller:
Open Source, Inc.
1925 E. Beltline Road, Suite 409
Carrolton, Texas 75006
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Attention: Srini Vasan
Fax: (972) 478-5931
Either party may change its address for purposes of this Agreement by giving
fifteen (15) days' prior written notice of such change of address to the other
party in the manner described in this Section.
16. BINDING EFFECT; ASSIGNMENT.
Seller shall not assign any of its respective rights, or delegate any of its
obligations under the Agreement to any third party without the consent of Buyer.
This Agreement is binding upon, and shall inure solely to the benefit of, the
parties hereto and their respective heirs, personal representatives, successors
and permitted assigns. This Agreement is not intended to benefit, and shall not
be construed as benefiting, any third party, and no third party shall have
standing to enforce any provision of this Agreement.
17. TERMINATION.
17.1. This Agreement may be terminated:
17.1.1. prior to the Closing by the mutual written agreement of Seller
and Buyer;
17.1.2. prior to the Closing by Buyer upon written notice of such
termination to Seller if (a) there is a material breach of any
covenant or obligation of Seller contained herein, or (b) Buyer
reasonably determines that the timely satisfaction of any
condition set forth in Section 6 has become impossible or
impractical (other than as a result of any failure on the part
of Buyer to comply with or perform its covenants and obligations
under this Agreement), or (c) if the Closing has not occurred on
or prior to December 31, 1999;
17.1.3. prior to the Closing by Seller upon written notice of such
termination to Buyer if (a) there is a material breach of any
covenant or obligation of Buyer contained herein, or (b) Seller
reasonably determines that the timely satisfaction of any
condition set forth in Section 7 has become impossible or
impractical (other than as a result of any failure on the part
of Seller to comply with or perform their covenants and
obligations under this Agreement), or (c) if the Closing has not
occurred on or prior to December 31, 1999;
17.1.4 after the Closing by Buyer in the event that Network Solutions
refuses to or fails to effect transfer of the Domain Name
pursuant to the Transfer Agreement within sixty (60) days
after the Closing.
17.2. If this Agreement is terminated pursuant to Section 17.1, all further
obligations of the parties under this Agreement shall terminate;
PROVIDED, HOWEVER, that:
17.2.1. no party shall be relieved of any obligation or other liability
arising from any breach by such party of any provision of this
Agreement;
17.2.2. the parties shall, in all events, remain bound by and continue
to be subject to the provisions set forth in Sections 9, 10 and
11 hereof;
17.2.3 In the event of any termination of this Agreement after
the Closing, Seller shall refund to Buyer all funds paid under
Section 2.1 of this Agreement.
17.3. The termination rights provided in Section 17.1 above are not
exclusive. The exercise by any party of its right to terminate this
Agreement pursuant to Section 17.1 shall not be deemed to be an
election of remedies and shall not be deemed to prejudice, or to
constitute or operate as a waiver of any other right or remedy that
such party may be entitled to exercise (whether under this Agreement,
under any statute, rule or law, at common law, in equity or otherwise).
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18. MODIFICATION.
No purported modification, amendment or waiver of this Agreement or any of its
terms shall be effective unless it is in writing, and signed by all of the
parties hereto.
19. DISPUTE RESOLUTION.
19.1 The parties shall attempt in good faith to settle a dispute or
controversy for a period of thirty (30) days following the date on
which such dispute or controversy arises through consultation and
negotiation, in good faith and a spirit of mutual cooperation.
19.2 If the parties cannot resolve any dispute or controversy pursuant to
Section 19.1, then the parties hereby agree to submit all disputes or
controversies arising out of or in connection with this Agreement to
binding arbitration in Durham, North Carolina, under the Commercial
Arbitration Rules (the "Rules of Arbitration") then in effect of the
American Arbitration Association. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in
any court having in personam and subject matter jurisdiction. Buyer and
Seller submit to the in personam jurisdiction of the Federal and State
Courts in North Carolina, for the purpose of confirming any such award
and entering judgment thereon. All costs and expenses, including
attorneys' fees, of all parties incurred in any dispute which is
determined and/or settled by arbitration pursuant to this Section 19.2
shall be borne by the party determined to be liable in respect of such
dispute; PROVIDED, HOWEVER, that if complete liability is not assessed
against any one party, the parties shall share the total costs of such
liability in proportion to their respective amounts of liability so
determined. The decision of the arbitrator(s) shall (i) be rendered in
writing, and concurred in by a majority of the arbitrators, if more
than one, and (ii) be final, binding and conclusive and entitled to be
enforced to the fullest extent permitted by law in any court of
competent jurisdiction. Except where clearly prevented by the area in
dispute, both parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved.
Notwithstanding any provision to the contrary contained herein, no
provision of this Agreement shall prevent Buyer from seeking injunctive
relief for any purported violation or breach of any of Seller's
covenants contained in Section 5 or any confidentiality or
nondisclosure provision applicable to Seller pursuant to this
Agreement.
19.3 Sections 19.1 and 19.2 are the exclusive means of resolving any dispute
or controversy between the parties hereto. All proceedings under this
Section 19, and all evidence given or discovered pursuant hereto, shall
be maintained in confidence by all parties. All proceedings under this
Section 19, and all evidence given or discovered pursuant hereto, shall
be maintained in confidence by all parties.
20. SEVERABILITY.
If any provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transaction contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that any
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith or modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled.
21. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of Buyer and Seller with respect
to the subject matter hereof, and supersedes any and all prior and
contemporaneous understandings or agreements, whether oral or written,
concerning such subject matter. Each party acknowledges that it enters into this
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Agreement without relying on any statement by the other party which is not
specifically set forth in this Agreement.
22. WAIVER.
Any term or condition of this Agreement may be waived at any time by the party
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
23. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original and all of which together shall constitute one and
the same agreement. Facsimile copies shall also be deemed originals, except that
any facsimile signature shall as soon as practicable be replaced with a manual
signature.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first written above.
OPEN SOURCE, INC.
By: /s/ Venkadesamy Srinivasan
------------------------------------------
Name: Venkadesamy Srinivasan
------------------------------------------
Title: President
--------------------------------------
Date: 12/14/99
----------------------------------------
RED HAT, INC.
By: /s/ Tim Buckley
------------------------------------------
Name: Tim Buckley
----------------------------------------
Title: Chief Operating Officer
---------------------------------------
Date: 1/4/00
----------------------------------------
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