Executive Variable Compensation Plan
The following summary highlights key features of Red Hat’s Executive Variable Compensation Plan (the “Plan”).
The Plan has been designed to motivate and reward key management employees whose efforts impact the performance of
Red Hat Incorporated (the “Company”) and its subsidiaries through the achievement of pre-established financial and
Performance under the Plan is measured on the fiscal year and payments under the Plan are made annually.
Officers and key management employees may be eligible to participate in the plan, upon the recommendation by the Chief
Executive Officer of the Company and approval by the Board of Directors. An employee who is eligible to participate in
any other cash incentive plan of the company is not eligible to participate in this Plan.
III. AWARD CRITERIA
The Board of Directors, upon the recommendation by the Compensation Committee, must approve the Company
performance objectives that are used to determine awards paid under this plan. Performance metrics may include one or
more of (but not limited to) the following: net revenues, gross margins, operating income, pre-tax income, net income, EPS
(basic and diluted) EBITDA, return on invested capital, return on equity, cash flow from operations, or changes in deferred
In general, 100% of performance under this Plan will be based on financial objectives. At the discretion of the
Compensation Committee, up to 25% of the individual award may be based on subjective factors such as individual
performance or achievement of other goals not stated in the Plan. In other words, each Participant is eligible to receive no
less than 75% of the award earned on the basis of financial performance, and is eligible for up to 125%.
IV. TARGET AWARDS
A Target Award percentage is established for each position eligible to participate in the Plan. Target Awards (TA’s)