EXHIBIT 99.3
ESCROW AGREEMENT
This Escrow Agreement (the "ESCROW AGREEMENT") is made and entered into
this 6th day of January, 2000, by and among Red Hat, Inc., a Delaware
corporation ("RED HAT"), and the Shareholders whose names are listed on EXHIBIT
A, attached hereto and made a part hereof (each a "SHAREHOLDER" and
collectively, the "SHAREHOLDERS"), by and through Xxxxxxxx X. Xxxxxxx, as their
representative (the "SHAREHOLDER Representative").
RECITALS
A. Red Hat and Xxxxxxxx X. Xxxxxxx and L. Xxxx Xxxxx (the "PRINCIPAL
SHAREHOLDERS") are parties to an Agreement and Plan of Merger, dated January 4,
2000, by and among Red Hat, the Principal Shareholders, HKS Acquisition Co., a
Pennsylvania corporation, and Hell's Kitchen Systems, Inc., a Pennsylvania
corporation ("HKS") (the "MERGER Agreement").
B. Pursuant to the Merger Agreement, the Shareholders have agreed to place
in escrow a certificate representing for 47,801 shares of Parent Stock
(collectively, the "ESCROW SHARES"). The number of Escrow Shares placed into
escrow attributable to each Shareholder is set forth opposite his or her name on
EXHIBIT A.
C. The Shareholders have appointed the Shareholder Representative to act as
their agent and representative in connection with this Agreement and the Escrow
Shares.
D. The Shareholders, acting through the Shareholder Representative, and Red
Hat have agreed that Red Hat shall retain and release the Escrow Shares pursuant
to the terms hereof.
E. Capitalized terms used in this Agreement but not defined herein shall
have the meanings provided in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. DELIVERY OF ESCROW SHARES. At the Closing, upon the execution hereof by
Red Hat and the Shareholder Representative, Red Hat will retain a certificate
issued in the name of the Shareholder Representative as agent for the
Shareholders evidencing the Escrow Shares, and the Shareholder Representative
will deliver to Red Hat a stock power duly executed in blank substantially in
the form set forth as Exhibit B hereto.
2. RIGHTS IN ESCROW SHARES. Except as provided herein, all legal and
beneficial ownership rights to the Escrow Shares, including, but not limited to,
any right to vote or to receive distributions, shall remain with the Shareholder
Representative, as agent for the Shareholders, during such time as the Escrow
Shares are retained by Red Hat. Shares issuable as a result of stock dividends,
stock splits and other shares issued in respect of the Escrow Shares shall be
issued in the name of the Shareholder Representative, as agent for the
Shareholders, and shall be retained as Escrow Shares pursuant to the terms of
this Agreement. Exhibit A may be revised from time to time to reflect any such
stock dividends, stock splits and other shares issued in respect of the Escrow
Shares.
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3. Release of Holdback Escrow Shares. Red Hat agrees to disburse the Escrow
Shares as follows:
a. SET-OFF SHARES. In the event that
(i) there is no dispute that Red Hat is entitled to indemnification
for any Loss pursuant to Article XI of the Merger Agreement, or
(ii) it is finally determined by arbitration conducted in accordance
with Section 13.12 of the Merger Agreement that Red Hat is entitled to
indemnification for any Loss pursuant to Article XI of the Merger
Agreement,
then Red Hat shall be entitled to retain Escrow Shares having a value
(determined as set forth in Section 3 below) equal to the full amount of
such Loss(es) (the "Set-Off Shares"). Such value and the number of Escrow
Shares corresponding to it shall be attributed to the Shareholders on a pro
rata basis in accordance with the percentage set forth opposite each
Shareholder's name on Exhibit A, rounded up or down to the nearest whole
share (hereinafter their "Pro Rata Share"). Any undisputed entitlement of
Red Hat to indemnification pursuant to Article XI of the Merger Agreement
or any final determination by arbitration in accordance with Section 13.12
of the Merger Agreement that Red Hat is entitled to indemnification
pursuant to Article XI of the Merger Agreement shall be referred to herein
as a "Claim" or, if multiple, "Claims". For purposes of determining the
number of Escrow Shares equivalent to the dollar value of payments to which
Red Hat is entitled under this Agreement, the Escrow Shares shall be valued
at the average of the closing price per share of Parent Stock on the NASDAQ
National Market on the ten (10) trading days immediately preceding the date
on which Red Hat is entitled to retain Escrow Shares pursuant to the
occurrence of one of the events described in paragraph 3(a)(i) or (ii)
above.
b. RELEASE OF ESCROW. Subject to this Paragraph 3(b), on the eighteen
(18) month anniversary of the Closing Date (the "ESCROW RELEASE DATE"), Red
Hat shall release to each Shareholder his or her Pro Rata Share of the
Escrow Shares, less the sum of (i) his or her Pro Rata Share of that number
of Escrow Shares that shall have been used to satisfy any Claims, and (ii)
his or her Pro Rata Share of any Retained Shares (defined below), together
with a corresponding stock power. In the event that there are any Claims
which are unresolved on the Escrow Release Date, Red Hat shall retain in
the escrow account such number of Escrow Shares as, in the reasonable
judgment of Red Hat and the Shareholder Representative, are necessary to
satisfy any such unsatisfied Claim(s) until such Claim(s) has been fully
and finally resolved (the "RETAINED SHARES"). Red Hat and the Shareholder
Representative shall attempt in good faith within thirty (30) calendar days
after the Escrow Release Date (the "RETENTION RESOLUTION PERIOD") to agree
upon the number of Retained Shares necessary to satisfy any such
unsatisfied Claims. If Red Hat and the Shareholder Representative should so
agree, a memorandum setting forth such agreement shall be prepared and
signed by Red Hat and the Shareholder Representative, and Red Hat shall
distribute and/or retain such Escrow Shares in accordance with the terms
thereof. If Red Hat and the Shareholder Representative cannot agree within
the Retention Resolution Period, the number of Retained Shares shall be
determined pursuant to paragraph 3(c) below.
c. ARBITRATION. If Red Hat and the Shareholder Representative cannot
agree within the Retention Resolution Period, the number of Retained Shares
shall be determined by arbitration as set forth in Section 11 below. The
arbitrators shall deliver their decision in writing, which shall include a
calculation of the number of Retained Shares, to Red Hat and the
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Shareholder Representative, and Red Hat shall distribute and/or retain in
the escrow account such Escrow Shares in accordance with the decision of
the arbitrators.
4. TRANSFER OF ESCROW SHARES. Red Hat, upon becoming entitled to any Escrow
Shares in accordance with the terms of this Escrow Agreement and the Merger
Agreement, shall have full legal and beneficial ownership of such Escrow Shares,
and may either cancel such shares, hold them in treasury or reissue them as it
deems appropriate.
5. TERMINATION OF ESCROW. This Escrow Agreement and the escrow account
created hereby shall terminate upon delivery of all of the Escrow Shares
pursuant to the terms of Section 3.
6. AMENDMENT. This Escrow Agreement may be amended, modified or
supplemented but only in writing signed by Red Hat and the Shareholder
Representative.
7. NOTICES. Any notice, request, instruction or other document to be given
hereunder by a party hereto shall be in writing and shall be deemed to have been
given or received: (a) when received if given in person; (b) when sent by telex,
facsimile or other wire transmission to a party at the number listed below for
such party; (c) two (2) Business Days after the day on which the same has been
delivered prepaid to a national courier service or (d) three (3) Business Days
after being deposited in the U.S. mail, certified or registered mail, return
receipt requested, postage prepaid, at or to the following addresses:
If to Red Hat: Red Hat, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxxx Xxxx, XX 00000
Attention: Counsel
Facsimile: (000) 000-0000
with a copy to: Xxxxx & Xxx Xxxxx, PLLC
One Hannover Square, Suite 1700
P.O. Box 26507
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Shareholders: c/o Xxxxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to: Xxxxx Xxxx & Xxxxxxxxx, LLP
Xxx Xxxxxxxxxx Xxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner to the other parties hereto.
8. WAIVERS. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. No waiver by a
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party of any condition or of any breach of any term, covenant, representation or
warranty contained in this Escrow Agreement shall be effective unless in
writing, and no waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in other instances
or a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
9. ASSIGNMENT. This Escrow Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns; provided that no assignment of any rights or obligations shall be made
by any party without the written consent of the other parties.
10. APPLICABLE LAW. This Escrow Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
North Carolina without giving effect to the principles of conflicts of law
thereof.
11. ARBITRATION. Any dispute, controversy or claim ("Dispute") arising out
of or relating to this Escrow Agreement shall be finally and conclusively
determined in accordance with the arbitration procedures set forth in Section
13.12 of the Merger Agreement.
12. COUNTERPARTS. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
effective this 6th day of January, 2000.
RED HAT, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
SHAREHOLDERS REPRESENTATIVE:
/s/ Xxxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxxx
EXHIBIT A
ESCROW SHARES
Number of Shares
of Red Hat
Name of Shareholder Common Stock Percentage of Total
------------------- ----------------- -------------------
Xxxxxxxx X. Xxxxxxx 15,562 32.5567%
L. Xxxx Xxxxx 14,672 30.6935
Xxxxxx X. Xxxxxxx 3,317 6.9383
Xxxxxxx Xxxx Xxxxx Xxxxx-Xxxxx 4,270 8.9330
Xxxxxxx X. Xxxxxx 00 0.0000
Xxxxxxxx Xxxxxxxx 232 0.4857
Xxxxxxx Xxxxxx 580 1.2143
Xxxxxx Xxxxxxxxx 166 0.3469
Xxxxxx Xxxxx 580 1.2142
Xxxxx Xxxxxxx 83 0.1735
Xxxxxxx Xxxxxxx 83 0.1735
Xxxxxx X. Xxxxxxxx 50 0.1041
Xxxx X. Xxxxx 56 0.1180
Xxxx Xxxxx 33 0.0694
Xxxxxxx Xxxx 1,658 3.4691
Xxxxxxx XxXxxxx 3 0.0069
Xxxxxx X. & Xxxx X. Xxxxxxx 50 0.1041
Xxxxx X. XxXxxxx 663 1.3877
Xxxxxx Xxxxxxx 298 0.6244
Xxxxxxxx X. & Xxxxxxx X. Xxxxxx 995 2.0815
Xxxxx XxXxxxx 17 0.0347
Xxxxxx XxXxxxxxx 3 0.0069
Xxxxxxx XxXxxxx 2,521 5.2731
R. Xxxxxx Xxxxxx 249 0.5204
Xxxxxx X. Xxxxxxx 99 0.2081
Xxxxxxxx X. Xxxxxx 83 0.1735
Xxxxxx X. Xxxxxxxx 553 1.1564
Xxxxxxx XxXxxxxx 133 0.2775
Xxxxxx Xxxxxxx 365 0.7632
Xxxxx, Xxxx & Xxxxxxxxx, LLP 410 0.8569
Totals 47,801 100.0000%
====== ====== =========
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EXHIBIT B
STOCK TRANSFER POWER
FOR VALUE RECEIVED, the undersigned, Xxxxxxxx X. Xxxxxxx, as representative
of the Shareholders (as defined in the Escrow Agreement, dated January ___,
2000, by and between Red Hat, Inc. and Xxxxxxxx X. Xxxxxxx, as Shareholder
Representative), hereby assigns, transfers and conveys unto RED HAT, INC.
[_______] shares of common stock, without par value, of RED HAT, INC., a
Delaware corporation (the "COMPANY"), consisting of [_______] shares represented
by Certificate No. [_______] of the Company registered in the name of the
undersigned on the books of said Company, and does hereby irrevocably constitute
and appoint _________________ attorney to transfer the foregoing on the books of
the Company, with full power of substitution in the premises, hereby ratifying
and confirming all that said attorney shall lawfully do by virtue hereof.
Dated: _____________________________
______________________________________
Xxxxxxxx X. Xxxxxxx
Shareholder Representative
