Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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(d) On January 18, 2017, the Board of Directors (the Board) of Red Hat, Inc. (the Company) appointed Eric R.
Shander, 48, to serve as the Companys acting chief financial officer and principal financial officer, effective January 20, 2017, pending a decision on a permanent replacement. Mr. Shander replaces Frank Calderoni, whose resignation
was previously disclosed by the Company in a report on Form 8-K filed on December 21, 2016. Mr. Shander joined the Company in November 2015 and currently serves as the Companys Vice President, Finance and Accounting and principal
accounting officer. Prior to joining the Company, Mr. Shander spent over twenty years in a variety of business and finance roles at International Business Machines Corporation (NYSE: IBM), a provider of integrated solutions and products that
leverage data, information technology, deep expertise in industries and business processes. Most recently, Mr. Shander served as VP/Global Services Automation & Competitiveness from January 2015 until November 2015, VP/Americas
Strategic IT Outsourcing Delivery from May 2011 until December 2014 and VP/Global Finance & Accounting Solutions & Delivery from September 2008 until April 2011. Mr. Shander left IBM in March 2005 to serve as VP/Chief
Accountant at Lenovo Group Ltd. (SEHK: 992), a manufacturer and marketer of technology products and services, from April 2005 until August 2008, when he rejoined IBM. Mr. Shander entered into no new compensation arrangements with the Company in
connection with his appointment as principal financial officer.
(e) Mr. Shander currently participates in the same compensation
arrangements as the Companys non-executive employees except where noted below.
Annual Base Salary
: Mr. Shanders annual base
salary is $385,000. He is eligible for discretionary base salary increases.
Employee Variable Incentive Compensation Plan
: Mr. Shander
participates in the Companys variable incentive compensation plan (the VIC Plan), under which he is eligible to receive a cash bonus determined quarterly at the discretion of his manager based upon:
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1.
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Mr. Shanders target annual bonus opportunity (currently 40% of his annual base salary and subject to change);
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2.
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The Companys performance against target performance goals for the Companys revenue and non-GAAP operating income for the applicable quarter; and
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3.
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Mr. Shanders individual performance during the applicable quarter.
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Mr. Shander must be
employed by the Company on the bonus payment date in order to receive any award.
Equity Awards:
Mr. Shander is eligible for discretionary
grants of restricted stock units (RSUs), subject to the terms and conditions of the form of RSU Agreement filed as Exhibit 10.1 to the Companys Form 10-Q filed on October 8, 2010 (the RSU Agreement). The amount and
timing of any RSU award is at his managers discretion and is subject to approval by the Companys Compensation Committee. The shares of restricted stock subject to the award vest ratably on the anniversary of the awards grant date
over the course of the subsequent four-year period, provided that Mr. Shander maintains continuous service with the Company or any of its affiliates as an employee, consultant or director (a Business Relationship) as of the vesting
date. If Mr. Shanders Business Relationship ceases for any reason prior to the vesting date, any unvested RSUs will be forfeited.
If a change
in control of the Company occurs (a CIC Event), and provided that Mr. Shanders Business Relationship has not ceased, all outstanding RSUs shall vest if (x) the RSU Agreement is continued, assumed converted or substituted
for immediately following the CIC Event and (y) Mr. Shanders Business Relationship with the Company is terminated without Good Cause (as defined in the RSU Agreement). If the RSU Agreement is not continued, assumed, converted or
substituted for immediately following the CIC Event, Mr. Shander will receive a lump sum cash payment within 30 days of the CIC Event in an amount equal to the amount that would have been delivered had the RSUs fully vested upon the CIC Event.
The foregoing description of the terms of the RSU awards and the RSU Agreement does not purport to be complete and is qualified in its entirety by the
provisions of the RSU Agreement.
Severance Arrangements
: Mr. Shander is eligible for a cash payment equal to 1.4 times his then current
annual base salary in the event that his employment with the Company is terminated by the Company without Good Cause (as defined below) or by Mr. Shander with Good Reason (as defined below), subject to the Companys receipt of a valid
release of claims and his compliance with non-compete, non-solicitation, non-disparagement, protection of confidential information and other covenants. This severance benefit is not available to all of the Companys non-executive employees.
Good Cause is defined as one of the following:
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conviction of, or plea of guilty or
nolo contendere
to, a felony;
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willful misconduct resulting in material harm to the Company;
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fraud, embezzlement, theft or dishonesty against the Company resulting in material harm to the Company;
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repeated and continuing failure to follow proper and lawful directions after a written demand identifying the failure has been delivered;
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current alcohol or prescription drug abuse affecting work performance, or current illegal use of drugs;
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a material violation of the Companys Code of Business Conduct and Ethics that causes harm to the Company; or
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a material breach of any term of any confidentiality and/or non-competition agreement.
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Good
Reason is defined as one of the following:
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a material reduction in annual base salary, other than an across-the-board reduction applicable to all Company employees at a position of Vice President of not more than 10%; or
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any requirement to be based anywhere more than fifty miles from the participants primary office location and in a new office location that is a greater distance from the principal residence at the time that the
move is requested.
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Change in Control Severance Arrangements:
Mr. Shander is eligible for benefits under our Senior Management Change
in Control Policy (the CIC Policy). Under this policy, Mr. Shander will be eligible for lump sum cash payments if his employment is terminated under certain circumstances after a Change in Control (as defined in the CIC Policy) of the
Company. These payments will be in lieu of, and not in addition to, any other cash severance payments to which he may be entitled following a Change in Control. He will not be entitled to receive any excise tax gross-up payments under the CIC
Policy. This severance benefit is not available to all of the Companys non-executive employers.
The summary of the terms of the CIC Policy in the
Current Report on
Form 8-K
filed with the SEC on February 28, 2007 (the February 2007 Form 8-K) is incorporated herein by reference and is qualified in its entirety by the provisions of the
CIC Policy filed as Exhibit 10.14 to our Annual Report on Form 10-K filed with the SEC on April 25, 2012; provided, however, that in February 2015, the Board adopted a policy that it would no longer enter into any new agreements to make gross-up
payments for excise taxes paid under Section 4999 of the Internal Revenue Code of 1986, as amended, by any Company executive.
Other Arrangements
:
Mr. Shander received a one-time sign-on bonus of $300,000 when he joined the Company in 2015. If Mr. Shander resigns or is terminated by the Company for Cause within twenty-four months of his November 16, 2015 start date, he must
repay a pro-rata amount of the bonus.
Cause is defined as one of the following:
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fraud, misappropriation, embezzlement, willful misconduct or gross negligence with respect to the Company;
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conviction of, or plea of guilty or no contest to (1) a felony, (2) any misdemeanor (other than a traffic violation) with respect to employment, or (3) any other crime or activity that would impair the
ability to perform duties or impair the Companys business reputation;
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continued failure to adequately perform assigned duties after a written demand identifying the failure has been delivered;
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willful failure or refusal to comply with the Company or its subsidiaries standards, policies or procedures; or
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material misrepresentation or breach of any representation, obligation or agreement under any employment agreement with the Company.
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