Exhibit 10.1

 

2011 PERFORMANCE COMPENSATION PLAN

 

Red Hat, Inc. (the “Company”), a Delaware corporation, hereby establishes and
adopts the following 2011 Performance Compensation Plan, as amended from time to
time (the “Plan”), to provide incentive awards that are intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended.

 

1. PURPOSES OF THE PLAN

 

The purposes of the Plan are to advance the interests of the Company and its
stockholders and assist the Company in attracting and retaining executive
officers of the Company and its Affiliates who, because of the extent of their
responsibilities can make significant contributions to the Company’s success by
their ability, industry, loyalty and exceptional services, by providing
incentives and financial rewards to such executive officers that take into
account appropriate performance objectives.

 

2. DEFINITIONS

 

2.1. “Affiliate” shall mean any corporation, partnership or other entity of
which the Company owns or controls, directly or indirectly, not less than 50% of
the total combined voting power of all classes of stock or other equity
interests.

 

2.2. “Board” shall mean the board of directors of the Company.

 

2.3. “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.

 

2.4. “Committee” shall mean the Compensation Committee of the Board or any
subcommittee thereof formed by the Compensation Committee to act as the
Committee hereunder. For purposes of satisfying the requirements of
Section 162(m) of the Code and the regulations thereunder, the Committee is
intended to consist solely of “outside directors” as such term is defined in
Section 162(m) of the Code.

 

2.5. “Disabled” or “Disability” shall mean any physical or mental condition of a
Participant that in the opinion of the Committee renders the Participant
incapable of continuing to be an employee of the Company and its Affiliates.

 

2.6. “Participant” shall mean the individuals selected by the Committee pursuant
to Section 3.1 to participate in this Plan.

 

2.7. “Performance Award” shall mean an award under the Plan which shall be
subject to the achievement of one or more objective Performance Goals
established by the Committee.

 

2.8. “Performance Goal” shall mean the attainment of specified levels of one or
any combination of the following: revenue growth, revenue, gross margins, net
margins, operating income, operating income growth, pre-tax income, after-tax
income, net income, net earnings, EPS (basic and diluted), earnings before
taxes, earnings before interest and taxes, EBITDA, return on invested capital,
return on equity, return on assets, economic value added (or an equivalent
metric), cash flow from operations, cash flow per share, changes in deferred
revenues, share price performance, total shareholder return, improvement in or
attainment of expense levels, improvement in or attainment of working capital
levels, attainment of strategic and operational initiatives, market share, gross
profits, comparisons with various stock market indices, and/or implementation,
completion or attainment of measurable objectives with respect to research,
development, products or projects. Performance

 

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Goals also may be based solely by reference to the Company’s performance or the
performance of an Affiliate, division, business unit or department of the
Company for or within which the Participant is primarily employed, or based upon
the relative performance of other companies, or upon comparisons of any of the
indicators of performance relative to other companies.

 

2.9. “Performance Period” shall mean the Company’s fiscal year or such other
period that the Committee, in its sole discretion, may establish, provided no
Performance Period shall be more than five years in length.

 

3. ELIGIBILITY AND ADMINISTRATION

 

3.1. Eligibility. The individuals eligible to participate in the Plan shall be
the Company’s Chief Executive Officer and any other executive officer of the
Company or an Affiliate selected by the Committee to participate in the Plan
(each, a “Participant”).

 

3.2. Administration.

 

(a) The Plan shall be administered by the Committee. The Committee shall have
full power and authority, subject to the provisions of the Plan and subject to
such orders or resolutions not inconsistent with the provisions of the Plan as
may from time to time be adopted by the Board, to: (i) select the Participants
to whom Performance Awards may from time to time be granted hereunder;
(ii) establish Performance Goals and determine the terms and conditions of each
Performance Award in compliance with the requirements of Code Section 162(m);
(iii) determine whether a Performance Goal or Performance Award should be
adjusted to eliminate the effects of charges for restructurings, discontinued
operations, extraordinary items and other unusual or non-recurring items, as
well as the cumulative effect of accounting changes, in each case as determined
in accordance with generally accepted accounting principles or identified in the
Company’s financial statements, notes to the financial statements, management’s
discussion and analysis or other filings with the U.S. Securities and Exchange
Commission; (iv) determine the time when Performance Awards will be granted and
paid and the Performance Period to which they relate; (v) certify the
achievement of the Performance Goals underlying the Performance Award and the
amount of the Performance Award payable to each Participant in respect of each
Performance Period; (vi) determine whether payment of Performance Awards may be
deferred by Participants, in a manner compliant with Section 409A of the Code;
(vii) interpret and administer the Plan and any instrument or agreement entered
into in connection with the Plan; (viii) correct any defect, supply any omission
or reconcile any inconsistency in the Plan or any Performance Award in the
manner and to the extent that the Committee shall deem desirable to carry it
into effect; (ix) establish such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Plan; and
(x) make any other determination and take any other action that the Committee
deems necessary or desirable for administration of the Plan.

 

(b) Decisions of the Committee shall be final, conclusive and binding on all
persons or entities, including the Company, any Affiliate, any Participant and
any person claiming any benefit or right under a Performance Award or under the
Plan.

 

4. AWARDS

 

4.1. Performance Period. Not later than the earlier of (i) 90 days after the
commencement of the Performance Period and (ii) the expiration of 25% of the
Performance Period, the Committee shall, in writing, designate one or more
Performance Periods, and determine the Participants for such Performance
Periods, the Performance Goals and the maximum amount of each Performance Award.

 

4.2. Certification. At such time as it shall determine appropriate following the
conclusion of each Performance Period, the Committee shall certify, in writing,
the attainment of the Performance Goal and the amount of the Performance Award
achieved for each Participant for such Performance Period.

 

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4.3. Limitations on Grants to Individual Participants. No Participant may be
granted Performance Awards that are denominated in shares of the Company’s
common stock in any 12-month period with respect to more than 1,000,000 shares.
In addition to the foregoing, the maximum dollar value granted to any
Participant in any 12-month period with respect to Performance Awards that are
valued in cash or in property other than shares is $10,000,000. The
per-Participant limit described in this Section 4.3 shall be construed and
applied consistently with Section 162(m) of the Code, or any successor provision
thereto, and the regulations thereunder.

 

4.4. Payment of Performance Awards. Performance Awards determined by the
Committee for a Performance Period shall be paid in cash or, to the extent
provided in a shareholder-approved stock plan of the Company, share awards under
such plan. Payment to each Participant shall be made no later than the fifteenth
day of the third month following the end of the fiscal year of the Company in
which the applicable Performance Period ends or such other date determined by
the Committee and consistent with Section 409A of the Code.

 

4.5. Commencement or Termination of Employment. If a person becomes a
Participant during a Performance Period (whether through promotion or
commencement of employment) or if a person who otherwise is a Participant dies,
retires or is Disabled, or if the person’s employment is otherwise terminated
(including, where applicable, through action by the Participant for a “good
reason” as defined in a plan or agreement covering the Participant), during a
Performance Period, the Performance Award payable to such a Participant may, in
the discretion of the Committee, be proportionately reduced based on the period
of actual employment during the applicable Performance Period. No payment will
be made if a Participant’s employment is terminated either by the Company for
“cause” (as defined in a plan or agreement covering the Participant and
implemented by the Committee in its sole discretion) or by the Participant by
resignation (other than through retirement or for “good reason”). Nothing in
this Section 4.5 is intended to prohibit establishing a Performance Period under
Section 4.1 that is specific to the covered individual.

 

4.6. Adjustments. The Committee may adjust downwards, but not upwards, the
amount payable pursuant to a Performance Award, and the Committee may not waive
the achievement of the applicable Performance Goals, except in the case of
death, Disability of the Participant or change-in-control or ownership of the
Company.

 

5. MISCELLANEOUS

 

5.1. Amendment and Termination of the Plan. The Board may, from time to time,
alter, amend, suspend or terminate the Plan as it shall deem advisable, subject
to any requirement for stockholder approval imposed by applicable law, including
Section 162(m) of the Code. No amendments to, or termination of, the Plan shall
in any way impair the rights of a Participant under any Performance Award
previously granted without such Participant’s consent.

 

5.2. Section 162(m) of the Code. Unless otherwise determined by the Committee,
the provisions of this Plan shall be administered and interpreted in accordance
with Section 162(m) of the Code to ensure the deductibility by the Company of
the payment of Performance Awards.

 

5.3. Tax Withholding. The Company or an Affiliate shall have the right to make
all payments or distributions pursuant to the Plan to a Participant, net of any
applicable federal, state and local taxes required to be paid or withheld. The
Company or an Affiliate shall have the right to withhold from wages, Performance
Awards or other amounts otherwise payable to such Participant such withholding
taxes as may be required by law, or to otherwise require the Participant to pay
such withholding taxes. If the Participant shall fail to make such tax payments
as are required, the Company or an Affiliate shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Participant or to take such other action as may be
necessary to satisfy such withholding obligations.

 

5.4. Right of Discharge Reserved; Claims to Performance Awards. Nothing in this
Plan shall provide any Participant a right to receive any Performance Award or
payment under the Plan with respect to a Performance Period. Nothing in the Plan
nor the grant of a Performance Award hereunder shall confer upon any Participant

 

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the right to continue in the employment of the Company or an Affiliate or affect
any right that the Company or an Affiliate may have to terminate the employment
of (or to demote or to exclude from future Performance Awards under the Plan)
any such Participant at any time for any reason. Except as specifically provided
by the Committee, the Company shall not be liable for the loss of existing or
potential profit from a Performance Award granted in the event of the
termination of employment of any Participant. No Participant shall have any
claim to be granted any Performance Award under the Plan, and there is no
obligation for uniformity of treatment of Participants under the Plan.

 

5.5. Nature of Payments. All Performance Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or an
Affiliate, division or business unit of the Company. Any income or gain realized
pursuant to Performance Awards under the Plan constitute a special incentive
payment to the Participant and shall not be taken into account, to the extent
permissible under applicable law, as compensation for purposes of any of the
employee benefit plans of the Company or an Affiliate except as may be
determined by the Committee or by the Board or board of directors of the
applicable Affiliate.

 

5.6. Other Plans. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

 

5.7. Severability. If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part by a court of competent
jurisdiction, such provision shall (a) be deemed limited to the extent that such
court of competent jurisdiction deems it lawful, valid and/or enforceable and as
so limited shall remain in full force and effect, and (b) not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable by a court of competent jurisdiction, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.

 

5.8. Construction. As used in the Plan, the words “include” and “including,” and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words “without limitation.”

 

5.9. Unfunded Status of the Plan. The Plan is intended to constitute an
“unfunded” plan for incentive compensation and deferred compensation if
permitted by the Committee. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.

 

5.10. Governing Law. The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Delaware, without
reference to principles of conflict of laws that might result in the application
of the laws of another jurisdiction, and shall be construed accordingly.

 

5.11. Effective Date of Plan. The Plan became effective as of the date approved
by the stockholders of the Company.

 

5.12. Captions. The captions in the Plan are for convenience of reference only,
and are not intended to narrow, limit or affect the substance or interpretation
of the provisions contained herein.

 

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