January 5, 2000

Red Hat to Acquire E-commerce Software Provider Hell's Kitchen Systems, Inc.

Delivers Critical E-commerce Software and Strong ISP Customer Base to the Red Hat Portfolio of Solutions for Internet Business and 21st Century Computing



RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--Jan. 5, 2000--Red Hat, Inc. (Nasdaq: RHAT), the market leader in open source solutions, announced today that it has signed a definitive agreement to purchase privately-held Hell's Kitchen Systems, Inc. (HKS). Under the terms of the agreement, Red Hat will acquire HKS by issuing up to 398,335 shares of Red Hat common stock to acquire all the outstanding shares of HKS.

The acquisition will bring HKS's e-commerce payment processing software---a critical piece of infrastructure for any company trying to conduct business on the Web---into the Red Hat solutions family. Enterprises worldwide and HKS' more than 150 Internet Service Provider (ISP), online merchants and financial institution customers will benefit from Red Hat's complete open source software and services portfolio, providing all the software, information and services needed for Internet and enterprise e-business initiatives.

Under the terms of the agreement, Red Hat will issue up to 398,335 shares of Red Hat common stock to acquire all the outstanding shares of HKS. The transaction will be accounted for as a purchase transaction and is subject to approval by HKS shareholders and other customary closing conditions.

"Red Hat's global reach and brand recognition delivers HKS' e-commerce software to the open source servers running the world's Internet infrastructure," said Matthew Szulik, president and CEO of Red Hat, Inc. "The acquisition of HKS is another key addition to Red Hat's strategy to create a next-generation software company spanning powerful servers, Internet infrastructure and pervasive, post-PC-centric computing platforms."

The acquisition continues the expansion of Red Hat's open source software and services for enterprises migrating their business to the Internet and the next-generation of embedded, post-PC devices. In November 1999, Red Hat announced a definitive agreement to acquire Cygnus Solutions, an open source software technology leader with software development tools and engineering services for a variety of desktops, client/server systems, real-time operating systems (RTOS) and embedded, post-PC centric platforms.

"Enterprises and Internet Service Providers are increasingly turning to Linux for reliable, scalable and flexible Internet solutions," said Larry Weidman, president and CEO of Pittsburgh, PA-based HKS. "Red Hat's wide-reaching partnerships, complete line of open source solutions, technical expertise and vision makes it an ideal match for HKS and other forward-looking companies embracing the next-generation of Internet computing."

In 1999, Red Hat also added worldwide support for top open source Internet software, including the Apache Web Server, Sendmail and Postfix. Red Hat will bundle HKS' credit card verification system software with the Professional Edition of its Red Hat Linux operating system, providing users worldwide with an e-commerce server and services solution for fast-growing e-business initiatives.

Red Hat, Inc. is the market leader in open source solutions, offering a wide-array of consulting, training and support solutions for both its award-winning Red Hat Linux operating systems (OS) software and popular open source applications used by enterprises worldwide. Hell's Kitchen Solutions, Inc. (www.hks.net), based in Pittsburgh, Pa., provides e-commerce software and services to more than 150 Internet Service Providers (ISPs), online merchants and financial institutions nationwide. The combined entity will remain committed to serving the customers of each company.

Open Source and Internet Momentum

International Data Corp. (IDC) research states that Linux was the fastest-growing server operating environment in 1998, growing more than 190 percent in that year alone and capturing more than 15.8 percent of the 4.4 million revenue shipment server operating systems market segment. IDC also states that Red Hat Linux is by far the most popular distribution, preferred by 68.7 percent of U.S. Linux users.

Apache is the number one Web server and runs more than 55 percent of the Internet's Web sites and the Sendmail messaging solution powers 80 percent of Internet Service Providers (ISPs). Both Apache and Sendmail are included in the Red Hat Professional Edition and supported by Red Hat's services group. Finally, IDC predicts that by 2002, there will be more than 55 million handheld and notebook-style information appliance devices and that by 2005, shipments of these appliances will exceed shipments of PCs.

About Red Hat, Inc.

Founded in 1994, Red Hat (NASDAQ:RHAT) is the market leader in open source operating system (OS) software, services and information. Along with its award-winning open source Red Hat Linux OS, Red Hat offers a full line of services, including telephone support, on-site consulting, developer training, certification programs and priority access updates, making Red Hat a leading resource for knowledgeable, innovative, mission-critical open source solutions.

Red Hat shares all of its software innovations freely with the open source community under the GNU General Public License (GPL). The Official Red Hat Linux OS and related services are available directly from the company and through its partner, distributor and reseller programs, which include top PC and server manufacturers such as Compaq, Dell, Gateway, IBM, Hewlett-Packard and Silicon Graphics.

Red Hat and the Official Red Hat Linux OS have received industry praise. Recent accolades include: Red Herring's Top 100 Companies of the Electronic Economy, Upside's Hot 100 Companies, Network World's 10 Companies to Watch, Federal Computer Week's Government Best Buy, Software Development's Jolt Award and InfoWorld's Product of the Year for three years in a row. Red Hat was also voted a "LinuxWorld Favorite" by the attendees of the two most recent LinuxWorld Expos, winning Best Server Distribution at the August show.

Red Hat is based in Research Triangle Park, N.C. and has offices worldwide. Visit Red Hat on the Web at www.redhat.com. For investor inquiries, contact Lippert/Heilshorn at (212) 838-3777.



LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc. All other names and trademarks are the property of their respective owners.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, statements regarding the combined operations of the two companies, management's plans and objectives for future operations, and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, risks associated with the difficulty of integrating the two companies, the potential failure to achieve the beneficial synergies expected to result from the merger, Red Hat's dependence upon an open source business model, reliance upon independent third-party Linux developers, management of growth, reliance upon strategic relationships, expansion of Red Hat's business focus and operations, the possibility of undetected software errors, the enforceability of the GNU General Public License and other licenses under which Red Hat's products are developed and licensed, the scarcity of Linux-based applications, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, year 2000 compliance efforts of Red Hat and of third parties on which Red Hat depends, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's web site at http://www.sec.gov.

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