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                                                                   exhibit 10.12

                            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.

                                       8
<PAGE>

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.

                                       9
<PAGE>

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

                                       10
<PAGE>

         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).

                                       11
<PAGE>

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

                                       12
<PAGE>

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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       13
<PAGE>

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
     ----------------------------------------

                                       14<PAGE>

                                                              Exhibit 10.19

                                  RED HAT, INC.

                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                   COVER SHEET

     Red Hat, Inc., a Delaware corporation (the "Company"), hereby grants as of
the date below (the "Grant Date") to the person named below (the "Optionee") and
the Optionee hereby accepts, an option to purchase the number of shares (the
"Option Shares") listed below of the Company's Common Stock, $.0001 par value
per share ("Common Stock"), at the price per share and with a vesting start date
(the "Vesting Start Date") listed below, such option to be on the terms and
conditions specified in the attached EXHIBIT A.

         Optionee Name:                     Tom Butta
                                         ----------------------

         Grant Date:                        July 20, 1999
                                         ----------------------

         Vesting Start Date:                July 20, 199
                                         ----------------------

         Number of Option Shares:            175,000
                                         ----------------------

         Exercise Price Per Share:           $10.00
                                         ----------------------

     IN WITNESS WHEREOF, the Company, the Escrow Agent and the Optionee have
caused this instrument to be executed as of the Grant Date set forth above.

  /s/ Tom Butta
---------------------------                          RED HAT, INC.
(Optionee Signature)                                 2600 Meridian Parkway
                                                     Durham, NC 27713
  ---------------------------
  (Street Address)

                                                     By:/s/ Matthew Szulik
                                                        -----------------------
  ---------------------------                        Name: Matthew Szulik
  (City/State/Zip Code)                              Title: President

                                                     ESCROW AGENT
                                                     RED HAT, INC.

                                                     By:/s/ Matthew Szulik
                                                        -----------------------
                                                     Name: Matthew Szulik
                                                     Title: President

<PAGE>

                                    EXHIBIT A

                             RED HAT SOFTWARE, INC.

                      NON-QUALIFIED STOCK OPTION AGREEMENT
                              TERMS AND CONDITIONS

         1. GRANT UNDER RED HAT SOFTWARE, INC. 1998 STOCK OPTION PLAN. This
option is granted pursuant to and is governed by the Red Hat Software, Inc. 1998
Stock Option Plan (the "Plan") and, unless the context otherwise requires, terms
used herein shall have the same meaning as in the Plan. Determinations made in
connection with this option pursuant to the Plan shall be governed by the Plan
as it exists on the Grant Date.

         2. GRANT AS NON?QUALIFIED OPTION; OTHER OPTIONS. This option is
intended to be a non?qualified stock option (rather than an incentive stock
option). This option is in addition to any other options heretofore or hereafter
granted to the Optionee by the Company or any Related Corporation (as defined in
the Plan), but a duplicate original of this instrument shall not effect the
grant of another option.

         3. EXERCISABILITY OF OPTION; VESTING.

                (a) FULL EXERCISABILITY. This option may be exercised at any
time and from time to time for all or any portion of the Option Shares, except
that this option may not be exercised for a fraction of a share. The foregoing
right (subject to Sections 4 or 5 hereof if the Optionee ceases to be employed
by the Company) may be exercised on or before the date which is ten years from
the Grant Date. Option Shares which are "Unvested Shares," as specified in
paragraph (b) below, shall, if purchased, be subject to the Company's Repurchase
Option described in Section 6 unless and until they become "Vested Shares" in
accordance with paragraph (b) below. As of any date, the Option Shares issued
upon the exercise of this option on or before such date (the "Issued Shares")
shall first be deemed to be Vested Shares up to the number of Option Shares that
are Vested Shares under Section 3(b) above as of such date and any Issued Shares
in excess of the number of Vested Shares as of such date shall be deemed to be
Unvested Shares. The term "Option Shares" used without reference to either
Unvested Shares or Vested Shares shall mean both Unvested Shares and Vested
Shares, without distinction.

                (b) VESTING. All of the Option Shares initially shall be
Unvested Shares. For so long as the Optionee maintains a continuous service to
the Company or a Related Corporation as an employee, officer, director or
consultant (a "Business Relationship"), Unvested Shares (whether or not
previously purchased) shall become Vested Shares (or shall "vest") on the
following dates in an amount equal to the number of shares set opposite the
applicable date:

<PAGE>
                                      -2-

<TABLE>

<S>                                                             <C>
         On the Vesting Start Date                         -    25,000 of the Option Shares

         One year from the Vesting Start Date              -    25% of the remaining Option Shares

         On the first day of each subsequent three         -    6.25% of the remaining Option Shares
         month period following one year from the
         Vesting Start Date

</TABLE>

     In addition, in the event the Company's Repurchase Option becomes
exercisable pursuant to Section 6 below, and the Company elects not to exercise
its option for the repurchase of any or all of the Unvested Shares, then upon
the expiration of the Repurchase Option Period (as defined in Section 6), any
and all Option Shares not repurchased by the Company shall become Vested Shares.
The Board may, in its discretion, accelerate any of the foregoing vesting dates.

                (c) ACCELERATED VESTING OF UNVESTED SHARES UPON TERMINATION
FOLLOWING CHANGE IN CONTROL. If the Optionee's Business Relationship is
terminated by the Company or its successor or assign without Cause (as defined
in Section 4(c)) or if the Optionee voluntarily terminates his Business
Relationship for Good Reason, in either case, then immediately prior to such
termination one-half of all shares that are Unvested Shares as of such
termination date, shall be deemed Vested Shares for purposes of this Agreement.
Notwithstanding the foregoing, if the Change in Control that would otherwise
give rise to the acceleration of vesting under this Section 3(d) is one which
the parties intend to account for as a pooling of interests, and if the Board of
Directors, following consultation with the Company's accountants, determines
that such acceleration would cause such transaction not to qualify for pooling
of interests accounting, then the provisions of this Section 3(d) shall not
apply to such Change in Control.

         4. TERMINATION OF BUSINESS RELATIONSHIP.

                (a) TERMINATION OTHER THAN FOR CAUSE. If the Optionee's Business
Relationship with the Company or any Related Corporation terminates, other than
by reason of death or disability as defined in Section 5 or termination for
Cause as defined in Section 4(c), vesting of Unvested Shares shall immediately
cease, this option shall terminate (may no longer be exercised) immediately as
to any Unvested Shares and may be exercised only as to any Option Shares that
are Vested Shares on the date of termination of the Optionee's Business
Relationship. This option may then be exercised only as to any Option Shares
that are Vested Shares as of such termination date on or prior to the date which
is 90 days after the date of termination of the Optionee's Business Relationship
(but not later than the scheduled expiration date). In the event of termination
of the Optionee's Business Relationship, the Repurchase Option described in
Section 6 shall also be applicable. For purposes hereof, a Business Relationship
shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service); PROVIDED that the period of such leave does not exceed 90
days or, if longer, any period during which the Optionee's right to reemployment
is guaranteed by statute or by contract. A bona fide

<PAGE>
                                      -3-

leave of absence with the written approval of the Company shall not be
considered an interruption of the Business Relationship for purposes hereof;
PROVIDED that such written approval contractually obligates the Company to
continue the Business Relationship of the Optionee after the approved period of
absence. This option shall not be affected by any change of Business
Relationship within or among the Company or any Related Corporation so long as
the Optionee continuously maintains its Business Relationship with the Company
or any Related Corporation.

                (b) TERMINATION FOR CAUSE. If the Business Relationship of the
Optionee is terminated for Cause (as defined in Section 4(c)), this option shall
terminate (may no longer be exercised) as to any Vested Shares and Unvested
Shares upon the Optionee's receipt of written notice of such termination. In the
event of termination of the Optionee's Business Relationship, the Repurchase
Option described in Section 6 shall also be applicable.

                (c) DEFINITION OF CAUSE. "Cause" shall mean conduct involving
one or more of the following: (i) the substantial and continuing failure of the
Optionee, after notice thereof, to render services to the Company or any Related
Corporation in accordance with the terms or requirements of his or her Business
Relationship; (ii) disloyalty, gross negligence, willful misconduct, dishonesty,
fraud or breach of fiduciary duty to the Company or any Related Corporation;
(iii) deliberate disregard of the rules or policies of the Company or any
Related Corporation, or breach of an employment or other agreement with the
Company or any Related Corporation, which results in direct or indirect loss,
damage or injury to the Company or any Related Corporation; (iv) the
unauthorized disclosure of any trade secret or confidential information of the
Company or any Related Corporation; or (v) the commission of an act which
constitutes unfair competition with the Company or any Related Corporation or
which induces any customer or supplier to breach a contract with the Company or
any Related Corporation.

         5. DEATH; DISABILITY.

                (a) DEATH. If the Optionee dies while in a Business Relationship
with the Company or any Related Corporation, vesting of Unvested Shares shall
immediately cease. In such event, this option may be exercised only as to any
Option Shares that are Vested Shares on the date of the Optionee's death, by the
Optionee's estate, personal representative or beneficiary to whom this option
has been assigned pursuant to Section 10, and this option may be exercised only
on or prior to the date which is 180 days after the date of death (but not later
than the scheduled expiration date). In the event of death, the Repurchase
Option described in Section 6 shall also be applicable.

                (b) DISABILITY. If the Optionee ceases its Business
Relationship with the Company or any Related Corporation by reason of his or her
disability, vesting of Option Shares shall immediately cease; this option may be
exercised only as to any Option Shares that are Vested Shares on the date of
termination of the Optionee's Business Relationship; and this option may be
exercised only on or prior to the date which is 180 days after the date of
termination of the Optionee's Business Relationship (but not later than the
scheduled expiration date). In the event of such termination of Business
Relationship, the Repurchase Option

<PAGE>
                                      -4-

described in Section 6 shall also be applicable. For purposes hereof,
"disability" means "permanent and total disability" as defined in Section
22(e)(3) of the Code.

         6. REPURCHASE OPTION. In the event of any voluntary or involuntary
termination of the Optionee's Business Relationship with the Company or any
Related Corporation for any or no reason, including by reason of death or
disability, the Company shall, upon and from the date of such termination (as
reasonably fixed and determined by the Company) have an irrevocable, exclusive,
assignable option (the "Repurchase Option") for a period of ninety (90) days
following the termination of such Business Relationship (the "Repurchase Option
Period") to repurchase all or any portion of the Unvested Shares held by the
Optionee at the original purchase price per share paid by the Optionee. Such
option may be exercised by the Company by sending written notice to the
Optionee, which notice shall specify the number of Unvested Shares being so
repurchased and which notice shall be accompanied by the Company's check for the
purchase price of those shares. Upon the sending of such notice and check, the
Company shall become the legal and beneficial owner of the Unvested Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Unvested Shares being repurchased by the Company.

         7. PAYMENT OF EXERCISE PRICE.

         (a) PAYMENT OPTIONS. The exercise price shall be paid by one or any
combination of the following forms of payment:

             (i)      in cash, or by check payable to the order of the Company;

             (ii)     subject to Section 7(b) below, if the Common
Stock is then traded on a national securities exchange or on the Nasdaq National
Market (or successor trading system), by delivery of shares of Common Stock
having a fair market value equal as of the date of exercise to the option price;
or

             (iii) delivery of an irrevocable and unconditionalundertaking
satisfactory in form and substance to the Company, by acreditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Optionee to the Company of a copy of irrevocable and
unconditional instructions, satisfactory in form and substance to the Company,
to a creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price.

         In the case of (ii) above, fair market value shall be determined as of
the last business day for which such prices or quotes are available prior to the
date of exercise and shall mean (i) the average (on that date) of the high and
low prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market (or successor trading
system), if the Common Stock is not then traded on a national securities
exchange.

<PAGE>
                                      -5-

                (b) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK. If the
Optionee delivers Common Stock held by the Optionee ("Old Stock") to the Company
in full or partial payment of the exercise price, and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Optionee and the Company, an equivalent number of Option Shares shall be subject
to all restrictions and limitations applicable to the Old Stock to the extent
that the Optionee paid for the Option Shares by delivery of Old Stock, in
addition to any restrictions or limitations imposed by this Agreement.
Notwithstanding the foregoing, the Optionee may not pay any part of the exercise
price hereof by transferring Common Stock to the Company unless such Common
Stock has been owned by the Optionee free of any substantial risk of forfeiture
for at least six months.

         8. RESTRICTIONS ON RESALE; LEGEND.

                (a) TRANSFER RESTRICTIONS.

                    (i) UNVESTED SHARES. The Optionee agrees not to sell,
assign, transfer, pledge, hypothecate, gift, mortgage or otherwise encumber or
dispose of (except to the Company or any successor to the Company) all or any
Unvested Shares or any interest therein, and any Unvested Shares purchased upon
exercise of this option shall be held in escrow by the Company in accordance
with the terms of Section 18 below unless and until they become Vested Shares.

                    (ii) VESTED SHARES. Option Shares that are Vested Shares may
not be transferred without the Company's written consent except
by will, by the laws of descent and distribution and in accordance with the
provisions of Section 16, if applicable.

                    (iii) SECURITIES ACT RESTRICTIONS. Option Shares will be of
an illiquid nature and will be deemed to be "restricted securities" for purposes
of the Securities Act of 1933, as amended (the "Securities Act"). Accordingly,
such shares must be sold in compliance with the registration requirements of the
Securities Act or an exemption therefrom. Each certificate evidencing any of the
Option Shares shall bear a legend substantially as follows:

         "The shares represented by this certificate are subject to restrictions
         on transfer and may not be sold, exchanged, transferred, pledged,
         hypothecated or other?wise disposed of except in accordance with and
         subject to all the terms and conditions of a certain Non-Qualified
         Stock Option Agreement, a copy of which the Company will furnish to the
         holder of this certificate upon request and without charge."

                (b) TERMINATION OF RESTRICTIONS. The restrictions on transfer
contained in Section 8(a)(ii) (including without limitation the provisions of
Section 16) shall expire as to Option Shares on the earliest to occur of (i) a
distribution to the public of shares of common stock of the Company pursuant to
an effective registration statement filed under the Securities Act or any
successor statute (a "Public Offering"), or (ii) an Organic Change (as defined
in the Plan).

<PAGE>
                                      -6-

         9. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company at
its principal executive office, or to such transfer agent as the Company shall
designate. Such notice shall state the election to exercise this option and the
number of Option Shares for which it is being exercised and shall be signed by
the person or persons so exercising this option. Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Optionee
and if the Optionee shall so request in the notice exercising this option, shall
be registered in the name of the Optionee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Optionee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.

         10. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Optionee's lifetime only the Optionee can exercise this option.

         11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.

         12. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the Plan,
this Agreement, nor the grant of this option imposes any obligation on the
Company to continue the Optionee in the Business Relationship.

         13. ADJUSTMENTS. Except as is expressly provided in the Plan with
respect to certain changes in the capitalization of the Company, no adjustment
shall be made for dividends or similar rights for which the record date is prior
to such date of exercise.

         14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.

         15. WITHHOLDING TAXES; SECTION 83(b) ELECTION.

                (a) WITHHOLDING TAXES. If the Company in its discretion
determines that it is obligated to withhold any tax in connection with the
exercise of this option, or in connection with the transfer of, or the lapse of
restrictions on, any Common Stock or other property acquired pursuant to this
option, the Optionee hereby agrees that the Company may withhold from the
Optionee's wages or other remuneration the appropriate amount of tax. At the
discretion of the Company, the amount required to be withheld may be withheld in
cash from such wages or other

<PAGE>
                                      -7-

remuneration or in kind from the Common Stock or other property otherwise
deliverable to the Optionee on exercise of this option. The Optionee further
agrees that, if the Company does not withhold an amount from the Optionee's
wages or other remuneration sufficient to satisfy the withholding obligation of
the Company, the Optionee will make reimbursement on demand, in cash, for the
amount underwithheld.

                (b) SECTION 83(b) ELECTION. The Optionee acknowledges that if
this option is exercised as to any Unvested Shares, such Unvested Shares may be
treated as subject to a substantial risk of forfeiture under Section 83(b) of
the Code. In such event, the Optionee may make an election under Section 83(b)
to include in income currently the difference between the fair market value of
such Unvested Shares and the exercise price. If the Optionee does not make such
an election, the Optionee understands that he or she will recognize income at
the time such Unvested Shares become Vested Shares. The Optionee agrees to
consult with his or her own tax advisor prior to the exercise of this option for
Unvested Shares.

         16. COMPANY'S RIGHT OF FIRST REFUSAL.

                (a) EXERCISE OF RIGHT. If the Optionee desires to transfer all
or any part of the Vested Shares to any person other than the Company (an
"Offeror"), the Optionee shall: (i) obtain in writing an irrevocable and
unconditional bona fide offer (the "Offer") for the purchase thereof from the
Offeror; and (ii) give written notice (the "Option Notice") to the Company
setting forth the Optionee's desire to transfer such shares, which Option Notice
shall be accompanied by a photocopy of the Offer and shall set forth at least
the name and address of the Offeror and the price and terms of the Offer. Upon
receipt of the Option Notice, the Company shall have an assignable option to
purchase any or all of such Vested Shares (the "Company Option Shares")
specified in the Option Notice, such option to be exercisable by giving, within
30 days after receipt of the Option Notice, a written counter-notice to the
Optionee. If the Company elects to purchase any or all of such Company Option
Shares, it shall be obligated to purchase, and the Optionee shall be obligated
to sell to the Company, such Company Option Shares at the price and terms
indicated in the Offer within 30 days from the date of delivery by the Company
of such counter-notice.

                (b) SALE OF OPTION SHARES TO OFFEROR. The Optionee may, for 60
days after the expiration of the 30-day option period as set forth in Section
16(a), sell to the Offeror, pursuant to the terms of the Offer, any or all of
such Company Option Shares not purchased or agreed to be purchased by the
Company or its assignee; PROVIDED, HOWEVER, that the Optionee shall not sell
such Option Shares to such Offeror if such Offeror is a competitor of the
Company and the Company gives written notice to the Optionee, within 30 days of
its receipt of the Option Notice, stating that the Optionee shall not sell his
or her Option Shares to such Offeror; and PROVIDED, FURTHER, that prior to the
sale of such Option Shares to an Offeror, such Offeror shall execute an
agreement with the Company pursuant to which such Offeror agrees to be subject
to the restrictions set forth in this Section 16. If any or all of such Option
Shares are not sold pursuant to an Offer within the time permitted above, the
unsold Option Shares shall remain subject to the terms of this Section 16.

<PAGE>
                                      -8-

                (c) FAILURE TO DELIVER OPTION SHARES. If the Optionee fails or
refuses to deliver on a timely basis duly endorsed certificates representing
Company Option Shares to be sold to the Company or its assignee pursuant to this
Section 16, the Company shall have the right to deposit the purchase price for
such Company Option Shares in a special account with any bank or trust company,
giving notice of such deposit to the Optionee, whereupon such Company Option
Shares shall be deemed to have been purchased by the Company. All such monies
shall be held by the bank or trust company for the benefit of the Optionee. All
monies deposited with the bank or trust company but remaining unclaimed for two
years after the date of deposit shall be repaid by the bank or trust company to
the Company on demand, and the Optionee shall thereafter look only to the
Company for payment.

                (d) EXPIRATION OF COMPANY'S RIGHT OF FIRST REFUSAL AND TRANSFER
RESTRICTIONS. The first refusal rights of the Company (or any of its assignees)
and the transfer restrictions set forth in Section 16(a)-(c) above shall remain
in effect until the earlier to occur of a Public Offering or an Organic Change.

         17. LOCK-UP AGREEMENT. The Optionee agrees that in connection with any
underwritten public offering of Common Stock, upon the request of the Company or
the principal underwriter managing such public offering, the Option Shares may
not be sold, offered for sale or otherwise disposed of without the prior written
consent of the Company or such underwriter, as the case may be, for at least 180
days after the execution of an underwriting agreement in connection with such
offering, or such longer period of time as the Board of Directors may determine
if all of the Company's directors and executive officers agree to be similarly
bound. The obligations under this Section 17 shall remain effective for all
underwritten public offerings with respect to which the Company has filed a
registration statement on or before the date two (2) years after the closing of
the Company's initial public offering; PROVIDED, HOWEVER, that this Section 17
shall cease to apply to any Option Shares sold to the public pursuant to an
effective registration statement or an exemption from the registration
requirements of the Securities Act in a transaction that complied with the terms
of this Agreement.

         18. ESCROW OF UNVESTED SHARES.

                (a) If this option is exercised as to any Unvested Shares, such
Unvested Shares shall be issued in the name of the Optionee, but shall be held
in escrow by the Company, acting in the capacity of escrow agent, together with
a stock assignment executed by the Optionee with respect to such Unvested
Shares.

                (b) With respect to any Unvested Shares held in escrow that
become Vested Shares, the Company shall promptly issue a new certificate for the
number of shares that have become Vested Shares and shall deliver such
certificate to the Optionee and shall retain in escrow a new certificate for any
remaining Unvested Shares in exchange for the all or the relevant portion of the
applicable certificate then being held by the Company as escrow agent.

<PAGE>
                                      -9-

                (c) Subject to the terms hereof, the Optionee shall have all the
rights of a shareholder with respect to the Unvested Shares while they are held
in escrow, including without limitation, the right to vote the Unvested Shares
and receive any cash dividends declared thereon.

                (d) The Company may terminate this escrow at any time. The
Company may also appoint another entity to serve as escrow agent hereunder, in
which event the Optionee agrees to execute all documents requested by the
Company in connection therewith.

         19. PROVISION OF DOCUMENTATION TO OPTIONEE. By signing this Agreement
on the cover page hereto the Optionee acknowledges receipt of a copy of this
Agreement and a copy of the Plan.

         20. MISCELLANEOUS.

                (a) NOTICES. All notices hereunder shall be in writing and shall
be deemed given when sent by certified or registered mail, postage prepaid,
return receipt requested, if to the Optionee, to the address set forth below or
at the address shown on the records of the Company, and if to the Company, to
the Company's principal executive offices, attention of the Corporate Secretary.

                (b) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes
the entire agreement between the parties relative to the subject matter hereof,
and supersedes all proposals, written or oral, and all other communications
between the parties relating to the subject matter of this Agreement. This
Agreement may be modified, amended or rescinded only by a written agreement
executed by both parties.

                (c) FRACTIONAL SHARES. If this option becomes exercisable for a
fraction of a share because of the adjustment provisions contained in the Plan,
such fraction shall be rounded down.

                (d) ISSUANCES OF SECURITIES. Except as expressly provided herein
or in the Plan, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to this option.

                (e) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If there shall
be any change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or
exchange of shares, spin-off, split-up or other similar change in capitalization
or event, the restrictions and other provisions contained in Section 3, Section
6, Section 8, Section 16, Section 17 and Section 18 shall apply with equal force
to additional and/or substitute securities, if any, received by the Optionee in
exchange for, or by virtue of his or her ownership of, Option Shares, except as
otherwise determined by the Board.

<PAGE>
                                      -10-

                (f) SEVERABILITY. The invalidity, illegality or
unenforceability of any provision of this Agreement shall in no way affect the
validity, legality or enforceability of any other provision.

                (g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, subject to the limitations set forth in Section 10 hereof.

                (h) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of Delaware, without giving effect to
the principles of the conflicts of laws thereof.

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