{"id":40749,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/warrant-agreement-robert-f-young-nancy-r-young-marc-ewing.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"warrant-agreement-robert-f-young-nancy-r-young-marc-ewing","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/warrant-agreement-robert-f-young-nancy-r-young-marc-ewing.html","title":{"rendered":"Warrant Agreement &#8211; Robert F. Young, Nancy R. Young, Marc Ewing, Erik William Troan and Red Hat Software Inc."},"content":{"rendered":"<pre>\n                                    AGREEMENT\n\n\n     THIS AGREEMENT, made as of the 29th day of September 1998, by and between\nROBERT F. YOUNG, NANCY R. YOUNG and MARC EWING (individually and collectively,\nthe \"Founders\"); ERIK WILLIAM TROAN (\"Employee,\" and collectively with the\nFounders, the \"Individual Parties\"); and RED HAT SOFTWARE, INC., a Delaware\ncorporation with offices in Research Park, North Carolina (the \"Corporation\");\n\n                              W I T N E S S E T H:\n\n     WHEREAS, as of the date of this Agreement the Founders own and hold of\nrecord shares of the Corporation's common stock as follows:\n\n                    Founder                                Number of Shares\n                    -------                                ----------------\n\n                    Robert F. Young                        2,030,000\n                    Nancy R. Young                         1,820,913\n                    Marc Ewing                             4,044,238\n\n     WHEREAS, as of the date of this Agreement Employee has been granted\nwarrants (the \"Warrants\") to purchase shares of the Corporation's common stock\npursuant to an Employment Agreement by and between the Corporation and Employee\ncommencing May 1, 1995 and executed October 10, 1995 (the \"Employment\nAgreement\") and desires to enter into this Agreement to bind Employee and the\nCorporation to its terms for the Warrants and for any and all shares of the\nCorporation issued to Employee upon exercise of the Warrants (the \"Warrant\nShares\") in accordance with the terms hereof; and\n\n     WHEREAS, pursuant to the Warrants, the Employee, if such Employee exercises\nall Warrants available pursuant to such Employee's Employment Agreement prior to\nthe termination of such Warrants pursuant to the terms of this Agreement, may\nown and hold of record, upon exercise of all Warrants, total shares of the\nCorporation's common stock as follows:\n\n                    Employee                               Number of Warrant\n                    --------                               Option Shares\n                                                           -------------\n\n                    Erik William Troan                     770,200; and\n\n     WHEREAS, the Employee acknowledges that there are shares of the Corporation\nissued and outstanding to other shareholders and stock options for shares of the\nCorporation issued and outstanding to other employees of the Corporation which\nare not subject to this Agreement and that the Corporation, in its sole\ndiscretion, will issue shares of common and preferred stock from time to time to\nother shareholders and pursuant to stock options which will not be subject to\nthis Agreement; and\n\n     WHEREAS, the Corporation also anticipates that it may in the future issue\nadditional stock options to employees, directors, consultants or other service\nproviders of the Corporation pursuant to a plan or plans established by the\nCorporation's Board of Directors (the \"Plan\") and that the Corporation, in its\nsole discretion, may, but shall not be obligated to, subject any such stock\noptions authorized under the\n\n\n\n                                       -2-\n\n\nPlan and any shares of the Corporation's stock purchased pursuant to such stock\noptions to terms and conditions similar to those contained in this Agreement;\nand\n\n     WHEREAS, the Individual Parties and the Corporation recognize that the\nWarrants are granted to the Employee as an incentive to promote the success of\nthe business and to encourage the Employee to remain in the Corporation's\nemploy; and\n\n     WHEREAS, the Individual Parties and the Corporation desire to set forth and\nconfirm the terms and conditions upon which the Warrants may be exercised and\nterminated and the terms and conditions under which they Warrant Shares will be\nheld; and\n\n     WHEREAS, the Individual Parties and the Corporation agree that it is in\ntheir best interest to agree upon the terms and conditions set forth herein and\nthat such terms and conditions reflect the full understanding of the Individual\nParties and the Corporation.\n\n     NOW, THEREFORE, in consideration of the premises and of the mutual\ncovenants and conditions herein contained, the Individual Parties and the\nCorporation agree, for themselves, their successors and assigns, as follows:\n\n                                    ARTICLE I\n                                    WARRANTS\n\n     1.1 Warrant. The Corporation and the Employee hereby agree that the\nEmployee's rights to purchase Warrant Shares pursuant to the Employment\nAgreement, and the exercise of the Warrants, shall be governed by the terms of\nthis Article I. Employee agrees that the provisions in this Agreement pertaining\nto the exercise and termination of Warrants and the vesting and purchase of\nWarrant Shares represents the understanding of the parties and shall control and\nshall supersede over any provisions to the contrary in such Employee's\nEmployment Agreement. Employee acknowledges that the only options or warrants to\npurchase or receive shares of the Corporation's stock to which the Employee is\nentitled are the Warrants described in this Article I, that no profit sharing\nplan has been implemented by the Corporation, and that the Employee waives any\nrights under Section 3c of the Employment Agreement to demand \"warrants\"\npursuant to a profit sharing plan unless a profit sharing plan expressly\ngranting the right to Employee to \"warrants\" is hereinafter implemented by the\nCorporation and authorized by its Board of Directors.\n\n     1.2 Vesting. Employee has the option to purchase the following number of\nWarrant Shares on the dates (the \"Vesting Dates\") set forth on the following\nschedule:\n\n\n\n                                                                 Vesting Dates\n                                                                 -------------\nEmployee                                 5\/1\/96            5\/1\/97            5\/1\/98             5\/1\/99\n--------                               ---------         ---------         ----------         ---------\n                                                                                  \n                                       183,400           183,400           183,400            220,000\n\n\nHowever, if the Employee does not purchase the full number of Warrant Shares to\nwhich the Employee is entitled on or before the Vesting Dates, the Employee is\npermitted to purchase those remaining Warrant Shares at a later period (unless\nterminated) in addition to those Warrant Shares which the Employee may otherwise\nbe entitled to purchase. No partial exercise of such Warrant may be for less\nthan one hundred (100) full Warrant Shares. In no event shall the Corporation be\nrequired to transfer fractional shares to the Employee. The Individual Parties\nand the Corporation acknowledge and confirm that as of the April 22, 1999, the\nEmployee has exercised 101,975 of his Warrants and that, after selling 76,975\nWarrant Shares, the Employee owns 25,000 Warrant Shares.\n\n\n\n                                       -3-\n\n\n     1.3 Purchase Price. The purchase price for each Warrant Share shall be\n$.0001 per Warrant Share.\n\n     1.4 Exercise of Warrants. The respective number of Warrants shall be\nexercisable from time to time after the applicable Vesting Dates by ten (10)\ndays written notice to the Corporation and the payment in cash to the\nCorporation of the purchase price of the Warrant Shares which the Employee may\nand elects to purchase. The Corporation shall make immediate delivery of such\nWarrant Shares, provided that if any law or regulation requires the Corporation\nto take any action with respect to the Warrant Shares specified in such notice\nbefore the issuance thereof, the date of delivery of such Warrant Shares shall\nbe extended for the period necessary to take such action.\n\n     1.5 Termination of Warrants. The Warrants, to the extent not heretofore\nexercised, shall terminate on the first to occur of the following dates:\n\n          (a) If the Employee's employment with the Corporation terminates\nbecause of his death, any Warrants held by the Employee on the date of his death\nmay be exercised only within thirty (30) days after his death and only to the\nextent that the Warrants could have been exercised immediately before the\nEmployee's death;\n\n          (b) If the Employee's employment with the Corporation terminates\nbecause of Total Disability (as hereinafter defined) after at least one (1) year\nof continuous employment with the Corporation immediately following the date on\nwhich Warrants were originally granted in the Employment Agreement, the Employee\nmay exercise the Warrant to the extent that it could be exercised upon such\ntermination of employment at any time within thirty (30) days after the\nemployment shall terminate;\n\n          (c) If the Employee's employment with the Corporation terminates\nbecause of his retirement after at least one (1) year of continuous employment\nwith the Corporation immediately following the date on which the Warrants were\ngranted, the Employee may exercise the Warrant to the extent that the Warrants\ncan be exercised upon such termination of employment at any time within thirty\n(30) days after retirement. Retirement means retirement from the Corporation\npursuant to the provisions of the Corporation's policy as may be implemented by\nthe Board of Directors from time to time.;\n\n          (d) If the Employee's employment with the Corporation is terminated by\nthe Corporation without cause, the Employee may exercise the Warrants to the\nextent that the Warrants can be exercised upon such termination of employment at\nany time within thirty (30) days after such termination; provided, however, that\nany Option Shares so acquired shall be subject to the rights of the Corporation\nor the Founders to purchase such shares in accordance with the provisions of\nSection 2.6 of this Agreement;\n\n          (e) Termination of the Employee's employment with the Corporation for\nany reason other than death, disability, retirement, or without cause;\n\n          (f) The happening of any event resulting in the termination of this\nAgreement pursuant to Section 3.14 hereof;\n\n          (g) May 1, 2006.\n\n     1.6 Rights Prior to Exercise of Warrant. The Warrants granted to the\nEmployee are nontransferable by the Employee and are exercisable only by the\nEmployee. The Employee shall have no\n\n\n\n                                       -4-\n\n\nright as a shareholder with respect to the Warrant Shares until payment of the\nwarrrantprice and delivery to the Employee of such Warrant Shares as herein\nprovided.\n\n     1.7 Restrictions. All Warrant Shares acquired by Employee pursuant to the\nWarrants shall be subject to the restrictions on sale, encumbrance, and other\ndispositions contained in Article II of this Agreement.\n\n     1.8 Time is of the Essence. Time is of the essence in exercising the\nWarrants under this Agreement.\n\n                                   ARTICLE II\n                         RESTRICTIONS ON WARRANT SHARES\n\n     2.1 Restriction on Share Transfer. Employee shall not sell, assign,\ntransfer, pledge, or otherwise dispose of or in any way alienate any of his\nrespective Warrant Shares in the Corporation by operation of law or otherwise\nexcept as provided in this Agreement.\n\n     2.2 Offer to Purchase All Warrant Shares. If any one or more of the\nFounders receives a third party offer to purchase fifty percent (50%) or more of\nall of the shares of the Corporation owned collectively by the Founders plus all\nof the Warrant Shares and Warrants and the Founders desire to accept the third\nparty offer, then the Founders have the right to deliver a notice (the \"Bring\nAlong Notice\") with respect to such third party offer to the Corporation and the\nEmployee stating that the Founders propose to effect such transaction, the name\nand address of the third party offeror, and the purchase price under the third\nparty offer, together with a copy of all writings, if any, between the Founders\nand the third party offeror or such other person necessary to establish the\nterms of such third party offer. Employee agrees that upon receipt of the Bring\nAlong Notice, Employee shall be obligated to sell all Warrants and Warrant\nShares held by him to the third party offeror upon the terms and conditions\n(including, without limitation, purchase price) of the third party offeror (and\notherwise take all necessary action to cause the Corporation to consummate the\nproposed transaction). The rights of first refusal in Section 2.3 of this\nAgreement shall not apply to this Section 2.2. Notwithstanding anything in this\nSection 2.2 to the contrary, Employee acknowledges and agrees that the rights\nand obligations hereunder are subject to (and, where applicable, subordinate to\nthe rights of the Investor, as hereinafter defined) the terms and conditions of\na Co-Sale Agreement between the Founding Shareholders, the Corporation and the\nFrank Batten, Jr. Trust, a copy of which is attached hereto as Exhibit A (the\n\"Co-Sale Agreement\"), and that the number of Warrants and Warrant Shares sold by\nthe Employee to the third party offeror may be reduced by the participation\nrights of the Investor as defined and provided in the Co-Sale Agreement. For\npurposes of this Section 2.2, the term \"Investor\" shall have the same meaning as\nset forth in the Co-Sale Agreement.\n\n     2.3 Transfers During Employee's Lifetime. Except as otherwise set forth in\nthis Agreement, no Warrant Shares owned by Employee shall be transferred, sold,\nassigned, pledged or otherwise disposed of during Employee's lifetime except in\naccordance with the following provisions:\n\n          (a) Offer to Corporation. Employee (hereinafter referred to as\n\"Offeror\") intending to transfer any Warrant Shares (the \"Offered Shares\") shall\nfirst submit to the Corporation a written offer to sell the Offered Shares to\nthe Corporation at the price offered by the proposed purchaser, on the terms of\nsuch offer. Every written offer submitted to the Corporation in accordance with\nthe provisions of this Section 2.3(a) shall continue to be a binding offer to\nsell until expressly rejected by an officer or director of the Corporation\nacting pursuant to a resolution adopted in accordance with Section 2.7 of this\nAgreement or until the expiration of a period of sixty (60) days after the\ndelivery of such offer to the Corporation, whichever time is earlier. Upon\ndelivery to the Corporation of any written offer submitted\n\n\n\n                                       -5-\n\n\nin accordance with the provisions of this Section 6(a), any officer or director\nof the Corporation, acting before the termination of the offer and pursuant to a\nresolution adopted in accordance with Section 2.7 of this Agreement may bind the\nCorporation to purchase all or any part of the Offered Shares.\n\n          (b) Offer to Founders. Upon termination of the offer referred to in\nsubparagraph (a) above, the Offeror shall then submit to the Founders a written\noffer to sell, at the price offered by the proposed purchaser, on the terms of\nsuch offer, any of the Offered Shares not previously purchased by the\nCorporation under the aforesaid offer to it (the \"Excess Offered Shares\"). Each\nFounder shall then have the right to purchase up to his Founder Percentage of\nthe Excess Offered Shares. Each Founder's right to purchase the Excess Offered\nShares shall be exercisable by written notices to the Offeror, the Corporation\nand the other Founders given within thirty (30) days of the Offeror's written\noffer to the Founders. Each Founder has the right and may indicate in such\nnotice, his election to purchase the balance of such Excess Offered Shares if\nany other Founder or Founders fail to exercise this right to purchase up to the\nfull amount of their Founder Percentage of the Excess Offered Shares. The\nfailure of a Founder to exercise his right to purchase Excess Offered Shares\nwithin the thirty (30) day notice period shall be regarded as a waiver of his\nright to participate in the purchase of the Excess Offered Shares. For purposes\nof this Section, Founder Percentage for each Founder shall be determined by\ndividing the total number of shares of the Corporation owned by the Founders\ninto the total number of shares owned by each Founder at the time of the\nOfferor's written offer to the Founders.\n\n          (c) Contents of Offer and Subsequent Transfer. Every written offer\nsubmitted in accordance with this Section 2.3 shall specifically name the person\nor persons to whom the Offeror intends to transfer the shares, the number of\nshares that he intends to so transfer to each person, and the price per share\nand other terms upon which each intended transfer is to be made, and shall\ninclude copies of the written offer and pertinent documentation. Upon the\ntermination of the written offer to the Founders, the Offeror shall, for a\nperiod of thirty (30) days thereafter, be free to transfer any unpurchased\nshares to the person or persons so named at the price per share and upon the\nother terms so named as stated in the Offeror's written offer to the\nCorporation; provided that any such transferee of those shares shall thereafter\nbe bound by and subject to all of the provisions and restrictions of this\nAgreement and shall agree in writing to be so bound. However, if the Offeror\nfails to make such transfer within such thirty (30) days, such shares shall\nagain be subject to all the restrictions and provisions of this Agreement.\n\n          (d) Consideration for Shares. If any consideration to be received by\nthe Offeror for the Warrant Shares offered is property other than cash, then the\nprice per share shall be measured to that extent by the fair market value of\nsuch noncash consideration. Fair market value for the purposes of this Section\n6(d) shall mean the sum of (i) the fair market value of any noncash\nconsideration offered for the shares as determined by the Board of Directors of\nthe Corporation (the \"Board\"), plus (ii) the value of any special benefits to\nthe Offeror of such noncash consideration to the extent they can be reasonably\nidentified and valued, plus (iii) the amount of any additional expense or cost\n(including additional taxes) incurred by the Offeror in accepting cash instead\nof such noncash consideration, in each case based upon a realistic appraisal of\nsuch noncash consideration, special benefits, expense or cost agreed upon by the\nOfferor and the Corporation or by two independent qualified appraisers, one\nbeing selected and paid for by the Offeror and the other by the Corporation. If\nthe two appraisers are unable to agree, they shall select a third, and the\ndetermination of the third appraiser shall be final and conclusive. The cost of\nthe third appraiser shall be divided equally between the Offeror and the\nCorporation.\n\n          (e) Closing. The closing of the sale of the Warrant Shares shall be\nsixty (60) days following the last timely delivery of notice of election to\npurchase any of the shares.\n\n          (f) Involuntary Transfer. The provisions of this Section 2.3 shall\nalso be applicable to Involuntary Transfers of Warrant Shares. \"Involuntary\nTransfer\" means any transfer, proceeding or\n\n\n\n                                       -6-\n\n\naction by or in which Employee shall be deprived or divested of any right, title\nor interest in or to any of his Warrant Shares, including, without limitation,\nany seizure under levy of attachment or execution, any transfer in connection\nwith bankruptcy or other court proceeding to a debtor-in-possession, trustee or\nreceiver or other officer or agency, or any transfer pursuant to a separation\nagreement or entry of a final court order in a divorce proceeding. In such\nevent, the Corporation and the Founders shall have the right to purchase from\neither the Employee or the transferee on the Stipulated Terms (as hereinafter\ndefined) all of the Warrant Shares of the Corporation owned by the Employee at\nthe lesser of (i) 80% of the book value of the Warrant Shares as determined by\nthe Board, (ii) 80% of the fair market value of the Warrant Shares based on the\nCorporation as a going concern as determined by the Board, or (iii) the amount\nof the indebtedness which resulted in the involuntary transfer of Warrant\nShares. Notice to the Corporation by any person or in any manner of an\nInvoluntary Transfer shall be deemed a written offer to sell the Warrant Shares\nand the Corporation and the Founders shall have the right to purchase the\nWarrant Shares in accordance with the procedures as set forth in this Section\n2.2.\n\n     2.4 Option to Purchase Upon Permanent Disability. If Employee becomes\ntotally disabled for a period of three (3) months (the \"Disabled Employee\"), the\nCorporation and the Founders shall each have the option to purchase all or any\nof the Disabled Employee's Warrant Shares upon the following terms:\n\n          (a) Exercise of Option. Such option of the Corporation shall commence\non the date three (3) months after such disability commences and shall be\nexercised by written notice by the Corporation within ninety (90) days after\nsuch right commences. The purchase price of the Warrant Shares shall be the\nStipulated Price and shall be payable upon the Stipulated Term (as hereinafter\ndefined), which shall be paid in cash to the extent of proceeds of insurance\nreceived by the Corporation as the result of such permanent disability, if any,\nwith the balance of the purchase price payable pursuant to the Stipulated Terms\n(as hereinafter defined).\n\n          (b) Exercise of Option by Founders. In the event the Corporation does\nnot elect to exercise its option to purchase all or any of the Warrant Shares\nunder Section 2.4(a) above (the \"Excess Warrant Shares\"), then each Founder\nshall have the option to purchase up to his Founder Percentage of the Excess\nWarrant Shares. Each Founder's right to purchase the Excess Warrant Shares shall\nbe exercisable by written notice to the Disabled Employee, the Corporation and\nthe other Founders given within thirty (30) days of the termination of the\nCorporation's option. Each Founder has the right and may indicate in such notice\nhis election to purchase the balance of such Excess Warrant Shares if any other\nFounder or Founders fail to exercise this right to purchase up to the full\namount of their Founder Percentage of the Excess Warrant Shares. The failure of\na Founder to exercise his right to purchase Excess Warrant Shares within the\nthirty (30) day notice period, shall be regarded as a waiver of his right to\nparticipate in the purchase of the Excess Warrant Shares. For purposes of this\nSection, Founder Percentage for each Founder shall be determined by dividing the\ntotal number of shares of the Corporation owned by the Founders into the total\nnumber of shares owned by each Founder at the time of the Disabled Employee's\nTotal Disability.\n\n          (c) Determination of Disability. \"Totally Disabled\" shall mean the\ninability by reason of a physical or mental condition, or both, of the Disabled\nEmployee to perform satisfactorily his usual duties for the Corporation, as\ndetermined by the Board. The Total Disability shall be deemed to have commenced\non the date of the determination by the Board.\n\n          (d) Closing. The closing of the sale of the Warrant Shares shall be\nsixty (60) days after delivery of the Corporation's or the Founder's, as the\ncase may be, notice of election to purchase the Warrant Shares.\n\n\n\n                                       -7-\n\n\n     2.5 Option to Purchase Upon Death. Upon the death of Employee (the\n\"Decedent\"), all of the Warrant Shares of the Corporation which had been owned\nby the Decedent and all Warrant Shares owned by the Decedent's representative if\nWarrants are exercised within thirty (30) days after the Decedent's death and to\nwhich he or his personal representatives shall be entitled shall be sold and\npurchased as herein provided at the option of the Corporation.\n\n          (a) Option of the Corporation to Purchase. The Corporation has the\noption to purchase from Decedent's estate, and, if the option is exercised,\nDecedent's estate shall sell to the Corporation, all the Warrant Shares of the\nCorporation owned by Decedent at the Stipulated Price and upon the Stipulated\nTerms (as hereinafter defined). The Corporation shall exercise its option by\ngiving written notice to the Decedent's personal representative within one\nhundred twenty (120) days after the Decedent's death.\n\n          (b) Option of the Founders to Purchase. In the event the Corporation\ndoes not elect to exercise its option to purchase all or any of the Warrant\nShares under Section 2.5(a) above (the \"Excess Warrant Shares\"), then each\nFounder shall have the option to purchase up to his Founder Percentage of the\nExcess Warrant Shares at the Stipulated Price and upon the Stipulated Terms (as\nhereinafter defined). Each Founder's right to purchase the Excess Warrant Shares\nshall be exercisable by written notice to the Decedent's Estate, the Corporation\nand the other Founders given within thirty (30) days of the termination of the\nCorporation's option. Each Founder has the right and may indicate in such notice\nhis election to purchase the balance of such Excess Warrant Shares if nay other\nFounder or Founders fail to exercise this right to purchase up to the full\namount of their Founder Percentage of the Excess Warrant Shares. The failure of\na Founder to exercise his right to purchase Excess Warrant Shares within the\nthirty (30) day notice period, shall be regarded as a waiver of his right to\nparticipate in the purchase of the Excess Warrant Shares. For purposes of this\nSection, Founder Percentage for each Founder shall be determined by dividing the\ntotal number of shares of the Corporation owned by the Founders into the total\nnumber of shares owned by each Founder at the time of the Decedent's death.\n\n          (c) Insurance. The Corporation may, but is not obligated to, obtain\ninsurance on the life of Employee for a sum determined by the Corporation,\nnaming itself as beneficiary of the policies The Corporation shall pay all\npremiums on the insurance policies. The Corporation shall be the sole owner of\nthe insurance policies and may apply to the payment of premiums any dividends\ndeclared and paid on the policies.\n\n          (d) Closing. The Closing of the purchase of the Warrant Shares shall\nbe ninety (90) days after the Corporation or the Founders, as the case may be,\nexercises their option to purchase the Warrant Shares.\n\n     2.6 Purchase Upon Termination of Employment. In the event that Employee's\nemployment with the Corporation is terminated by the Corporation or such\nEmployee for any reason whatsoever, with or without cause, or at any time (the\n\"Terminated Employee\"), the Corporation and the Founders shall each have the\noption to purchase all or any of the Warrant Shares owned by the Terminated\nEmployee upon the following terms:\n\n          (a) Option to Purchase by Corporation. The Corporation shall have the\noption to purchase from the Terminated Employee all of the Warrant Shares owned\nby the Terminated Employee at the Stipulated Price and upon the Stipulated Terms\n(as hereinafter defined), which option the corporation may exercise by notice in\nwriting to the Terminated Employee within (90) days of the effective date of\ntermination; provided, however, in the event the Employee's terminated for\ncause, then the option to purchase under this Section 2.6(a) and 2.6(b) shall be\nat the lesser of eighty percent (80%) of book value of the Warrant Shares as\ndetermined by the Board or eighty percent (80%) of the value of the Warrant\n\n\n\n                                       -8-\n\n\nShares based on the Corporation as a going concern as determined by the Board,\nand on the Stipulated Terms.\n\n          (b) Option to Purchase by Founders. In the event the Corporation does\nnot elect to exercise its option to purchase all or any of the Warrant Shares\nunder 2.6(a) above (the \"Excess Warrant Shares\"), then each Founder shall have\nthe option to purchase up to his Founder Percentage of the Excess Warrant Shares\nat the price and under the terms provided in Section 2.6(a) above. Each\nFounder's right to purchase the Excess Warrant Shares shall be exercisable by\nwritten notice to the Terminated Employee, the corporation and the other\nFounders given within thirty (30) days of the termination of the Corporation's\noption. Each Founder has the right and may indicate in such notice his election\nto purchase the balance of such Excess Warrant Shares if any other founder or\nFounders fail to exercise this right to purchase up to the full amount of their\nFounder Percentage of the Excess Warrant Shares. The failure of a Founder to\nexercise his right to purchase Excess Warrant Shares within the thirty (30) day\nnotice period, shall be regarded as a waiver of his right to participate in the\npurchase of the Excess Warrant Shares. For purpose of this Section, Founder\nPercentage for each Founder shall be determined by dividing the total number of\nshares of the Corporation owned by the Founders into the total number of shares\nowned by each Founder at the time of the Employee's termination of employment.\n\n          (c) Closing. The closing of the purchase of the Warrant Shares shall\nbe ninety (90) days after the Corporation or the Founders, as the case may be,\nexercise their option to purchase the Warrant Shares.\n\n     2.7 Vote on Option to Purchase. Whenever, under the terms of this\nAgreement, the Corporation has an option to purchase Warrant Shares, action on\nsuch option may be taken by the holders of a majority of the voting shares of\nthe Corporation (or such other percentage as may be required by the\nCorporation's Articles of Incorporation as may be amended and\/or restated from\ntime to time if such redemption of stock under this Agreement is not excluded\nfrom such greater percentage), exclusive of the Warrant Shares held by the\nOfferor, the Decedent, the Disabled Employee or the Terminated Employee, as the\ncase may be.\n\n     2.8 Non-Exercise of Option. Whenever, under the terms of this Agreement,\nthe Corporation and Founders have an option to purchase Warrant Shares and\nelects not to exercise the option, said Warrant Shares shall nevertheless remain\nsubject to all of the terms of this Agreement.\n\n     2.9 Dates for Determination of Purchase Price. This Section sets the\nvarious dates from which the purchase price for Warrant Shares purchased\npursuant to this Agreement shall be determined. The price shall be determined in\neach case as of the following valuation dates: (a) upon the death of Employee,\nas of the date of death; (b) upon the Total Disability of Employee, as of the\ndate of determination of Total Disability by the Board; (c) upon a termination\nof employment of Employee, upon the effective date of the termination; and (d)\nupon an Involuntary Transfer, upon the effective date of the Involuntary\nTransfer.\n\n     2.10 Payment of Purchase Price. The manner of payment of the purchase price\nfor any Warrant Shares pursuant to this Agreement, with the exception of a\npurchase upon the terms offered by a proposed third-party purchaser or as\notherwise provided in this Agreement, shall be determined by this Section.\n\n          (a) Stipulated Price. The \"Stipulated Price\" shall be that price per\nshare of the Corporation as a going concern equal to eighty percent (80%) of the\nfair market value for such shares as determined by the Board.\n\n\n\n                                       -9-\n\n\n          (b) Stipulated Terms. The purchase price for any Warrant Shares\npurchased pursuant to this Agreement shall be paid either in cash or by a cash\ndown payment and the delivery of a secured promissory note, at the option of the\npurchaser. If the purchase is made for any reason other than the death of the\nEmployee, the down payment shall equal at least twenty percent (20%) of the\npurchase price. If the purchase is made because of the death of Employee, the\ndown payment shall equal not less than the greater of twenty percent (20%) of\nthe purchase price or the full amount of the net proceeds from any insurance\npolicies maintained by the Corporation on the life of the Employee. Any\npromissory note shall provide for equal quarterly installments of principal over\na term not to exceed five (5) years, and shall bear interest at the rate of\nseven (7%) percent. Accrued interest shall be payable quarterly commencing with\nthe first installment of principal. The note shall be subject to prepayment in\nwhole or in part at any time and without penalty. In the event of default in\npayment of any installment when due, the whole sum of the principal and interest\nshall become immediately due and payable at the option of the holder.\nNotwithstanding anything herein to the contrary, if the purchase price is less\nthan $10,000.00 the entire purchase price shall be paid in cash at closing.\n\n          (c) Delivery of Warrant Shares. At such time as the cash and\npromissory note, if applicable, have been delivered to the Employee or his\nestate, the Warrant Shares of the Employee shall be transferred to the purchaser\nor purchasers.\n\n          (d) Security. If part of the purchase price is paid by delivery of the\npurchaser's promissory note, then, as security for payments due under the terms\nof the note, the purchaser shall grant to the Employee a security interest in\nthe Shares by executing a pledge and escrow agreement and whatever additional\ndocuments may be reasonably necessary to perfect the security interest of the\nEmployee or his estate. The security documents shall provide that the\nCorporation or other purchaser shall deposit the shares it is purchasing with an\nescrow agent and that, if the purchaser defaults under the terms of the\npromissory note or the security documents, the Employee or his estate shall have\nthe right to receive possession of the shares and to exercise all other rights\nof a secured party under the North Carolina Uniform Commercial Code.\n\n          (e) Insufficient Corporate Surplus. If, at the time the Corporation is\nrequired to make payment of the purchase price for shares pursuant to this\nAgreement and\/or to issue its promissory notes therefor, its surplus is\ninsufficient for such purposes under applicable law, then the Corporation shall\npromptly take all action necessary and proper under applicable law to increase,\nto the extent possible, the surplus of the Corporation to permit such payment\nand\/or the issuance of such promissory note. Employee or his personal\nrepresentative shall perform such acts, execute such instruments, and vote the\nrespective shares in such a manner as may be required to increase the available\nsurplus to an amount sufficient to authorize the purchase of the shares,\nincluding, but not limited to, a recapitalization to reduce the capital of the\nCorporation and increase its surplus or a reappraisal of the assets of the\nCorporation for the purpose of reflecting the market value.\n\n                                   ARTICLE III\n                               GENERAL PROVISIONS\n\n     3.1 Corporate Action and Articles of Incorporation. The Corporation and the\nIndividual Parties shall take all action required pursuant to this Agreement to\neffectuate the provisions herein. The Corporation shall become a party to this\nAgreement.\n\n     3.2 Share Certificates. Every certificate representing Warrant Shares of\nthe Corporation shall bear the following legend prominently displayed:\n\n\n\n                                      -10-\n\n\n     \"The shares represented by this certificate, and the transfer thereof, are\n     subject to the provisions of that certain Agreement, dated as of September\n     29, 1998, among ROBERT F. YOUNG, NANCY R. YOUNG, MARC EWING, ERIK WILLIAM\n     TROAN and RED HAT SOFTWARE, INC., a Delaware corporation, a copy of which\n     is on file in, and may be examined at, the principal office of the\n     Corporation.\"\n\n     3.3 Warrant Shares. All references to Warrant Shares owned by Employee\nshall mean any outstanding shares of the Corporation hereafter owned by Employee\nand any shares distributed with respect to any such shares in a stock split,\nstock dividend, recapitalization, reorganization or otherwise.\n\n     3.4 Necessary Acts. Each party hereto agrees that they will do any act or\nthing and will execute any and all instruments necessary and\/or proper to make\neffective the provisions of this Agreement.\n\n     3.5 Severability. Should any provision of this Agreement be declared to be\ninvalid for any reason or to have ceased to be binding on the parties hereto,\nsuch provision shall be severed, and all other provisions herein shall continue\nto be effective and binding.\n\n     3.6 Governing Law. This Agreement shall be subject to and governed by the\nlaws of the State of Delaware.\n\n     3.7 Entire Agreement. This Agreement contains the entire agreement between\nthe parties hereto with respect to the subject matter hereof, and no change,\namendment or modification of this Agreement shall be valid unless the same be in\nwriting and signed by all the parties hereto. No waiver of any of the terms of\nthis Agreement shall be valid unless signed by the party against whom such\nwaiver is asserted. This Agreement supersedes and nullifies the terms of any\nother agreement setting forth the rights of the Employee previously entered into\nby Employee with respect to the subject matter hereof. The Employee acknowledges\nthat his ownership of Warrants and Warrant Shares in the Corporation gives him\nno rights or expectations except those embodied in this Agreement.\n\n     3.8 Specific Performance. The parties acknowledge that the actual damage\nwhich would be sustained upon the breach of this Agreement by any of the parties\nor to a personal representative of a Decedent aggrieved by the breach or\nthreatened breach of any of its provisions shall be entitled to seek from any\ncourt of competent jurisdiction an order for specific performance of all of the\nterms and conditions of this agreement. This provision does not limit the\nparties from seeking any other available remedies at law or equity.\n\n     3.9 Prohibited Transfers Void. Any purported transfer in violation of this\nAgreement shall be void and shall not transfer any interest or title to the\npurported transferee. The Corporation shall not be required to transfer on its\nbooks any Warrant Shares sold or transferred in violation of any of the\nprovisions set forth in this Agreement or to treat as owner of those Warrant\nShares or to pay dividends to any transferee to whom any of those Warrant Shares\nshall have been so sold or transferred.\n\n     3.10 Representation as to Attorney. The Individual Parties (and the\nCorporation) acknowledge that a conflict may exist among their respective\ninterests, and that the Individual Parties should seek the advice of independent\ncounsel. The parties hereby waive any claim they may have as to any conflict\nwhich may exist in connection with the preparation of this Agreement.\n\n     3.11 New Parties. The Corporation shall not record a transfer of Warrant\nShares from Employee to any person not a party hereto unless said person shall\nexecute an acknowledgment of the\n\n\n\n                                      -11-\n\n\nterms hereof and agreement to be bound hereby, except for a transfer of Warrant\nShares to a third party pursuant to Section 2.2 of this Agreement.\n\n     3.12 Agreement Binding. This Agreement shall insure to the benefit of and\nbe binding upon the parties hereto and their respective next-of-kin, legatees,\nadministrators, executors, legal representatives, successors and permitted\nassigns (including remote, as well as immediate, successors to and assignees of\nsaid parties), except this Agreement shall not be binding on a third-party\npurchaser in the event of a transfer of Warrant Shares to such third party\npursuant to Section 2.2 of this Agreement.\n\n     3.13 Pronouns and Headings. In this Agreement the masculine shall include\nthe feminine and the singular shall include the plural as the context of this\nAgreement shall clearly require. The article and section headings in this\nAgreement are inserted for convenience only and are not part of the Agreement.\n\n     3.14. Termination. This Agreement shall commence as of the date hereof and\nshall continue in full force and effect until terminated (i) by the mutual\nagreement of the parties hereto, (ii) by the dissolution or bankruptcy of the\nCorporation, (iii) upon the effectiveness of a merger, consolidation or other\nacquisition of substantially all of the Corporation's assets, if the Corporation\nis not the surviving corporation, except that a merger or consolidation with a\nsubsidiary which effects a mere change in the form or domicile of the\nCorporation without changing the respective shareholdings of the Individual\nParties shall not terminate the agreement, even if the Corporation is not the\nsurviving corporation, (iv) upon the issuance of any of the Corporation's shares\nsold by means of a public offering that is required to be registered under the\nfederal securities laws, or (v) upon the sale of all of the issued and\noutstanding shares of the Corporation.\n\n     3.15 Transferability. Any rights or interests of the parties set forth in\nthis Agreement are personal and nontransferable.\n\n     3.16 Notices. Any notice or offer required hereunder shall be deemed to\nhave been validly given if delivered by certified mail, return receipt\nrequested, postage prepaid, addressed, or by federal express overnight delivery\n(or other nationally recognized service) with receipt confirmed, in the case of\nthe Corporation, to its principal office, and in the case of the Individual\nParties, to their address appearing on the stock records of the Corporation or\nto such other address as he may designate. Notices hereunder shall be deemed\ngiven seven (7) business days after deposit in the United States Mail or the\nnext business day, if delivered by Federal Express overnight delivery (or other\nnationally recognized service).\n\n     3.17 Jurisdiction and Venue. The parties agree that any action brought in\nany court whether federal or state shall be brought within the State of North\nCarolina in the judicial district of Durham, Durham County and do hereby waive\nall questions of personal jurisdiction or venue for the purpose of carrying out\nthis provision.\n\n     3.18 Counterparts. This Agreement may be executed in one or more\ncounterparts, each of which will be deemed to be an original copy of this\nAgreement and all of which, when taken together, will be deemed to constitute\none and the same agreements.\n\n\n                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]\n\n\n\n                                      -12-\n\n\n     IN WITNESS WHEREOF, the Corporation has caused this Agreement to be signed\nby its duly authorized officers and its corporate seal to be affixed hereto, and\nthe Individual Parties have hereunto set their hands, all as of the day and year\nfirst above written.\n\n                                                      RED HAT SOFTWARE, INC.\n\n\n                                                      By: \/s\/ Robert F. Young\n                                                          ----------------------\n                                                      Title: CEO\nATTEST:\n\n\/s\/ David Schumannfang\n------------------------\n        Secretary\n[CORPORATE SEAL]\n                                                      \/s\/ Robert F. Young\n                                                      --------------------------\n                                                      Robert F. Young\n\n\n                                                      \/s\/ Nancy R. Young\n                                                      --------------------------\n                                                      Nancy R. Young\n\n\n                                                      \/s\/ Marc Ewing\n                                                      --------------------------\n                                                      Marc Ewing\n\n                                                      EMPLOYEE\n\n\n                                                      \/s\/ Erik Troan\n                                                      --------------------------\n                                                      Erik Troan\n\n\n\n                                      -13-\n\n\n                                 SPOUSAL CONSENT\n\n     The undersigned, being the spouse of Employee who has signed this\nAgreement, hereby acknowledges that she has read and is familiar with its\nprovisions and agrees to be bound thereby and to join therein to the extent, if\nany, that her joinder may be necessary. The undersigned hereby agrees that her\nspouse may join in the future amendment or modification of this Agreement\nwithout any further signature, acknowledgment, agreement or consent on her part;\nand further agrees that any interest which she may have in the Warrants and\nWarrant Shares (as defined in this Agreement) owned directly or beneficially by\nher spouse shall be subject to the provisions of this Agreement.\n\n\n                                                      \/s\/ [Illegible]\n                                                      --------------------------\n                                                      Name:\n\n\n\n                                      -14-\n\n\n                                    AMENDMENT\n\n     AMENDMENT, made as of May 24, 1999, by and among Red Hat Software, Inc.\n(the \"Company\"), Robert F. Young, Nancy R. Young and Marc Ewing (collectively,\nthe \"Founders\") and Erik Troan (the \"Warrantholder\").\n\n     WHEREAS, the Company, the Founders and the Warrantholder are parties to\nthat certain Warrant, dated as of August 12, 1997 (the \"Warrant\"), which by its\nterms, terminates on the issuance of any of the Company's shares sold by means\nof a public offering that is required to be registered under the federal\nsecurities laws; and\n\n     WHEREAS, the Company, the Founders and the Warrantholder wish to amend the\nWarrant to prevent it from terminating under such circumstances and to remove\ncertain restrictions on exercised Warrant Shares upon the closing of the\nCompany's initial public offering.\n\n     NOW THEREFORE, the parties hereto agree as follows:\n\n1. Capitalized terms not defined herein shall have the meaning set forth in the\nWarrant.\n\n2. Section 3.14 of the Warrant shall be amended and restated as follows:\n\n     \"3.14. Termination. This Agreement shall commence as of the date hereof and\n     shall continue in full force and effect until terminated (i) by the mutual\n     agreement of the parties hereto, (ii) by the dissolution or bankruptcy of\n     the Corporation, (iii) upon the effectiveness of a merger, consolidation or\n     other acquisition of substantially all of the Corporation's assets, if the\n     Corporation is not the surviving corporation, except that a merger or\n     consolidation with a subsidiary which effects a mere change in the form or\n     domicile of the Corporation without changing the respective shareholdings\n     of the Individual Parties shall not terminate the agreement, even if the\n     Corporation is not the surviving corporation, or (iv) upon the sale of all\n     of the issued and outstanding shares of the Corporation. Notwithstanding\n     the foregoing, the provisions of Article II hereof shall cease and have no\n     further force or effect with respect to any Warrant Shares upon the\n     issuance of any of the Corporation's shares sold by means of a public\n     offering that is required to be registered under the federal securities\n     laws.\"\n\n3. Continuing Effect. Except as otherwise set forth herein, all terms and\nconditions of the Warrant shall remain in full force and effect, and this\nAmendment shall not constitute a modification, acceptance or waiver of any other\nprovision of the Warrant.\n\n4. Counterparts. This Amendment may be executed in two or more counterparts,\neach of which shall constitute an original, but all of which, when taken\ntogether, shall constitute but one instrument.\n\n\n\n                                      -15-\n\n\n     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of\nthe date first written above.\n\n\nRED HAT SOFTWARE, INC.\n\n\nBy: \/s\/ Robert F. Young\n--------------------------\nTitle: COE\n\n\n\/s\/ Marc Ewing\n--------------------------\nMarc Ewing\n\n\/s\/ Robert F. Young\n--------------------------\nRobert F. Young\n\n\n\/s\/ Nancy R. Young\n--------------------------\nNancy R. Young\n\n\n\/s\/ Erik Troan\n--------------------------\nErik Troan\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8659],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9539,9544],"class_list":["post-40749","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-red-hat-inc","corporate_contracts_industries-technology__programming","corporate_contracts_types-compensation","corporate_contracts_types-compensation__employment"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/40749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=40749"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=40749"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=40749"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=40749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}