Exhibit 10.1

Red Hat, Inc.

2006 Non-employee Director Compensation Plan

Cash Compensation

 

Basic Retainer:    Each non-employee director of the Board of Directors shall
receive an annual cash retainer of $50,000. Lead Director Retainer:    The
non-employee director who serves as Lead Director, in addition to the Basic
Retainer, shall receive an annual cash retainer of $30,000.

Committee Member

Retainer:

  

Each non-employee director/member of a standing committee (those presently being
the Audit Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee), in addition to any other retainer and in lieu
of meeting fees, shall receive an annual cash retainer of:

 

Audit Committee Members: $15,000

Compensation Committee Members: $10,000

Nominating Committee Member: $5,000

Committee Chair Retainer:   

Each non-employee director/member of a standing committee who serves as the
chair of that committee, in lieu of the Committee Member Retainer, shall receive
an annual cash retainer of:

 

Audit Committee Chair: $30,000

Compensation Committee Chair: $20,000

Nominating Committee Chair: $10,000

 

Provided, however, that should the Lead Director also serve as a Committee
Chair, said individual shall only receive the Committee Member Retainer and not
the Committee Chair Retainer for the committee on which they serve as chair.

Payment of Cash

Compensation :

   All cash compensation shall be paid in equal quarterly amounts on February
15, May 15, August 15 and November 15

Deferred Stock Units in

Lieu of Cash :

  

Each non-employee director may elect to receive all or a portion of such cash
retainer payment in deferred stock units (“DSU”) pursuant to the Corporation’s
2004 Long-Term Incentive Plan, as amended. A DSU is a right to receive shares of
the Corporation’s common stock at a future date. The number of DSUs to be
received is determined by dividing the cash compensation deferred by the closing
stock price of the Corporation’s common stock (on such U.S. national exchange on
which said stock principally trades) on the date the cash compensation is due to
be paid. The DSUs in lieu of cash are fully vested upon issuance. DSUs may be
converted into shares of the Corporation’s common stock at the earlier of:

 

(a) termination of the DSU holder’s Board service; or (b) the date designated by
the DSU holder at the time of issuance of the DSU, such date to be no earlier
than three years following the date of issuance of the DSU.

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Equity Compensation

   Initial Equity Award:    Upon initial election or appointment to the Board of
Directors, the Corporation will grant to each non-employee director of the
Corporation a non-qualified stock option to purchase 40,000 shares of Red Hat
common stock priced at an exercise price equal to the fair market value of the
Common Stock on the date of such grant, such options to vest (a) 33.33% on the
first anniversary of the date of grant and (b) 8.33% on the first day of each
subsequent three month period following the first anniversary of the initial
grant date. Annual Equity Award:    Annually, on the earlier of (a) August 13 of
such year or (b) the date of the annual stockholders’ meeting for such year,
each non-employee director who has served as a director of the Corporation for
at least eight (8) months prior to such date will receive an annual equity
grant. Such grant will be a non-qualified stock option to purchase 15,000 shares
of Red Hat common stock priced at an exercise price equal to the fair market
value of the Common Stock on the date of such grant, such options to vest over a
one year period in 25% increments starting on the first day of each three month
period following the grant date. Other Option Provisions:    Any initial equity
award or other Equity Award received as stock options shall be subject to the
following terms: (a) a total term of 5-years from the date of grant; and (b) an
exercise period commencing with vesting and continuing until the expiration of
the option (5 years).

Deferred Stock Units in

Lieu of Options :

   Each non-employee director may elect to receive DSU’s or restricted stock
awards (“RSA”) in lieu of options pursuant to the Corporation’s 2004 Long-Term
Incentive Plan, as amended. The number of DSUs or RSAs to be received is 35% of
the number of options granted. The DSUs and RSAs vest on the same basis of the
underlying stock options. DSUs may be converted into shares of the Corporation’s
common stock at the earlier of: (a) termination of the DSU holder’s Board
service; or (b) the date designated by the DSU holder at the time of issuance of
the DSU, such date to be no earlier than three years following the date of
issuance of the DSU; provided, however, in no case shall such conversion occur
prior to vesting.