Exhibit 10.1

 

GRAPHIC [g273354kgi001.jpg]

 

March 4, 2013

 

BY HAND DELIVERY

David McGirr

Cubist Pharmaceuticals, Inc.

65 Hayden Avenue

Lexington, MA  02421

 

Re:  Transition Letter

 

Dear David:

 

You are a highly valuable employee of Cubist Pharmaceuticals, Inc. (including
any successor organizations, “Cubist”).  Cubist wishes to retain you as an
employee during a transition period, as described below, and is therefore
willing to make certain commitments in order to induce you to remain an
employee.  This letter will confirm the agreement between you and Cubist
(“Agreement”) in that regard.  The Agreement is as follows:

 

1.                                      Definitions.  For the purposes of this
Agreement, the following definitions apply:

 

(a)                                 “Cause” means, as determined in the
reasonable judgment of Cubist: (i) you commit an act of dishonesty, fraud or
misrepresentation in connection with your employment; (ii) you are convicted of,
or plead nolo contendere to, a felony or a crime involving moral turpitude;
(iii) you breach any material obligation under your Employee Confidentiality
Agreement/Proprietary Information and Inventions Agreement (your “Employee
Agreement”) or Cubist’s Code of Conduct and Ethics; (iv) you engage in
substantial or continuing inattention to or neglect of your duties and
responsibilities reasonably assigned to you by Cubist; (v) you engage in
substantial or continuing acts to the detriment of Cubist or inconsistent with
Cubist’s policies or practices; or (vi) you fail to carry out the reasonable and
lawful instructions of your supervisor or the Cubist Board of Directors that are
consistent with your duties.

 

(b)                                 “Change of Control” means the first to occur
of the following: (i) any person or entity other than Cubist or one of its
subsidiaries becomes the owner of more than fifty percent (50%) of Cubist’s
common stock or (ii) the consummation of a sale of all or substantially all of
the business and/or assets of Cubist to another person or entity pursuant to an
agreement of acquisition, merger, or consolidation that

 

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has been approved by Cubist’s stockholders.  Notwithstanding the foregoing, a
Change of Control” shall not be deemed to have occurred unless it also qualifies
as a change in control event (as defined in Treasury Regulation
Section 1.409A-3(i)(5)).

 

2.                                      Resignation.  You hereby resign from
your position as Chief Financial Officer of Cubist and from your occupancy of
all other offices you hold with Cubist or any of its subsidiaries (together, the
“Resignations”), with such Resignations effective as of March 4, 2013 (the
“Transition Date”).  Cubist, on its own behalf and on behalf of its
subsidiaries, hereby accepts the Resignations as of the Transition Date.  It is
understood and agreed that Cubist and its subsidiaries will take actions in
reliance on the Resignations and that the Resignations will become irrevocable
on the Transition Date.  You agree to sign and return such documents confirming
the Resignations as Cubist or any of its subsidiaries may reasonably request.

 

3.                                      Transition Agreement.

 

(a)                                 From the Transition Date until March 31,
2013, unless your employment is earlier terminated in accordance with
Section 3(c), you will continue to be employed by Cubist on a full-time basis as
Senior Advisor to the CEO (the “Initial Transition Period”).  Cubist will
continue to pay you your base salary, at your current annualized base rate of
pay of Four Hundred and Twenty-Five Thousand Dollars ($425,000) (the “Base
Salary”) and in accordance with the regular payroll practices of Cubist, during
the Initial Transition Period.  While you are employed during the Initial
Transition Period, you will continue to be eligible to participate in the
employee benefit plans made available by Cubist from time to time to its
employees generally, subject to plan terms and generally applicable Cubist
policies.

 

(b)                                 From March 31, 2013 until the earliest to
occur of (a) your voluntary resignation from your employment, (b) the
termination of your employment by Cubist, or (c) June 1, 2014 (the “Separation
Date”), you will continue to be employed by Cubist on a part-time basis as
Senior Advisor to the CEO (the “Extended Transition Period” and, together with
the Initial Transition Period, the “Transition Period”).  It is anticipated
that, during the Extended Transition Period, you will provide services for a
time commitment that is fifty percent (50%) of the level of services you
provided to Cubist during the thirty-six (36) month period ending on March 31,
2013; provided, however, that such level of services will, in all events, be
greater than twenty percent (20%) of the average level of services you provided
to Cubist during such thirty-six (36) month period.  Cubist will pay you a base
salary, at an annualized rate of Two Hundred Twelve Thousand and Five Hundred
Dollars ($212,500) (the “Transitional Base Salary”) and in accordance with the
regular payroll practices of Cubist, during the Extended Transition Period. 
While you are employed during the Extended Transition Period, you will continue
to be eligible to participate in the employee benefit plans made available by
Cubist from time to time to its employees generally, subject to plan terms and
generally

 

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applicable Cubist policies.  Without limiting the generality of the foregoing,
you will be eligible to receive an award under Cubist’s Short Term Incentive
Plan (the “STI Plan”) for the 2013 calendar year, determined in accordance with
the terms and conditions of the STI Plan, but determined using (i) your actual
earned base salary during the calendar year ending December 31, 2013, (ii) a 60%
bonus target with respect to the period from January 1, 2013 through March 31,
2013, and (iii) a 50% bonus target with respect to the period from April 1, 2013
through December 31, 2013,  for purposes of such determination.

 

(c) During the Transition Period, you will perform the duties and
responsibilities of your position, and such other duties and responsibilities as
are expressly assigned to you by the Chief Executive Officer of Cubist.  Both
you and Cubist may terminate your employment at any time during the Transition
Period upon written notice to the other party.

 

4.                                      Severance.

 

(a)                                 Except as set forth in Section 4(b) below,
in the event that your employment is terminated for any reason other than by
Cubist for Cause, then, following and subject to receipt by Cubist of your
signed and effective release of claims as more fully described in Section 9
below (and your not revoking such release during any applicable revocation
period), Cubist shall pay you an amount equal to Six Hundred Thirty-Seven
Thousand Five Hundred Dollars ($637,500) minus the total amount of  Transitional
Base Salary paid to you during the Extended Transition Period (the “Severance
Payment”).  Payments will begin on the sixtieth (60th) day following the
Separation Date and will be made in twelve (12) semi-monthly installments.  A
payment in the amount of $53,125 will be made on each of the final three
(3) payment dates; the remaining portion of the Severance Payment will be paid
in equal installments on the initial nine (9) payment dates.  The first payment
will be retroactive to the day immediately following the Separation Date and
will include any installments that would have otherwise been paid during the
sixty (60) days following the Separation Date.

 

(b)                                 In the event that a Change of Control occurs
prior to the Separation Date, and your employment is subsequently terminated for
any reason other than by Cubist for Cause, then, following and subject to
receipt by Cubist of your signed and effective release of claims as more fully
described in Section 9 below (and your not revoking such release during any
applicable revocation period), Cubist shall, in lieu of making any payments to
you under Section 4(a), make a one-time, lump-sum payment to you on the sixtieth
(60th) day following the Separation Date equal to Six Hundred Thirty-Seven
Thousand Five Hundred Dollars ($637,500) plus your target annual bonus amount
for the year in which the Change of Control occurs.

 

(c)                                  In the event that you become entitled to
severance payments under Section 4(a) or 4(b) of this Agreement:

 

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(1)                                 Subject to (i) your having timely elected
continuation coverage under the federal law known as “COBRA”, (ii) such
continuation coverage not having terminated and (iii) your timely payment of a
portion of each monthly COBRA premium equal to the portion an active employee
would be required to pay for the same coverage, Cubist shall be responsible for
the balance of the monthly premium for a period of up to eighteen (18) months
beginning on the first day of the month after the month in which your employment
terminates or, if earlier, until such time as your COBRA coverage terminates. 
Notwithstanding the foregoing, if the payment by Cubist of the amounts described
in this Section 4(c)(1) will subject or expose Cubist to taxes or penalties, you
and Cubist agree to renegotiate the provisions of this Section 2(c)(1) in good
faith and enter into a substitute arrangement pursuant to which Cubist will not
be subjected or exposed to taxes or penalties and you will be provided with
payments or benefits with an economic value that is no less than the economic
value of the payments described herein.

 

(2)                                 If the Separation Date occurs following
January 1, 2014, you will be eligible to receive an award under the STI for the
2014 calendar year, determined in accordance with the terms and conditions of
the STI Plan, pro-rated based on the number of days that you have been employed
during the 2014 calendar year and determined using (i) your actual earned base
salary during the calendar year ending December 31, 2014 and (ii) a 50% bonus
target.

 

Notwithstanding any other provision with respect to the timing of payments under
this Section 4, in order to comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended and the regulations thereunder
(“Section 409A”), if any amount or benefit to be paid to you pursuant to this
Agreement as a result of your termination of employment constitutes “deferred
compensation” within the meaning of,  and subject to, Section 409A, if you are a
“specified employee” (as determined by Cubist in its sole discretion and as
defined below) on the Separation Date, any payment or benefit or portion
thereof, if any, that is scheduled to be paid or provided to you hereunder
during the first six (6) months following the Separation Date shall not be paid
until the date which is the first business day of the seventh month following
the Separation Date.  For purposes of the preceding sentence, the term
“specified employee” means an individual who is determined by Cubist to be a
specified employee under Treasury regulation Section 1.409A-1(i).  Cubist may,
but need not, elect in writing, subject to the applicable limitations under
Section 409A of the Code, any of the special elective rules prescribed in
Section 1.409A-1(i) of the Treasury Regulations for purposes of determining
“specified employee” status.  Any such written election shall be deemed part of
this Agreement.  For purposes of the Treasury Regulations under Section 409A,
each payment described in this Section shall be treated as a separate payment.

 

For purposes of this Agreement, references to termination of employment,

 

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separation from service and similar or correlative terms mean a “separation from
service” (as defined at Section 1.409A-1(h) of the Treasury Regulations) from
Cubist and from all other corporations and trades or businesses, if any, that
would be treated as a single “service recipient” with Cubist under
Section 1.409A-1(h)(3) of the Treasury Regulations.

 

5.                                      Withholding.  All payments made by
Cubist under this Agreement shall be reduced by any tax or other amounts
required to be withheld by Cubist under applicable law.

 

6.                                      Medical and Dental Benefits.  Except for
any right you have to continue participation in Cubist’s group health and dental
plans under COBRA, all employee benefits shall terminate in accordance with the
terms of the applicable benefit plans as of the Separation Date. The “qualifying
event” under COBRA, which triggers your right to continue your health insurance
post-employment, shall be deemed to have occurred on the first day of the month
following your Separation Date.

 

7.                                      Treatment of Equity.

 

(a)                                 For the avoidance of doubt, your employment
during the Transition Period will be treated as continued employment by Cubist
for purposes of any Cubist equity plan.

 

(b)                                 In the event that you become entitled to
severance payments under Section 4(b) of this Agreement, then, effective as of
the Separation Date, but subject to receipt by Cubist of your signed and
effective release of claims as more fully described in Section 9 below (and your
not revoking such release during any applicable revocation period), all
outstanding unvested stock options and/or restricted stock awards granted to you
under any Cubist equity plan prior to the Change of Control shall become
exercisable and vested in full, and all restrictions thereon shall lapse,
notwithstanding any vesting schedule or other provisions to the contrary in the
agreements evidencing such options or awards, and Cubist and you hereby agree
that such stock option agreements and restricted stock awards are hereby, and
will be deemed to be, amended to give effect to this provision.

 

(c)                                  You will have until the earlier of (1) the
date that is twelve (12) months following the Separation Date or (2) the
expiration date of the relevant stock option to exercise any stock option that
is vested and exercisable as of the Separation Date, notwithstanding any
provisions to the contrary in any stock option agreement(s) evidencing such
option(s), and Cubist and you hereby agree that such stock option agreements are
hereby, and will be deemed to be, amended to give effect to this provision.

 

8.                                      No Contract of Employment.  This
Agreement is not a contract of employment for a specific term, and your
employment is “at will” and may be terminated by Cubist at any time and for any
reason.

 

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9.                                      Employee Releases.

 

(a)                                 In exchange for the payments and benefits
provided to you under this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
to which you acknowledge you would not otherwise be entitled, on your own behalf
and that of your heirs, executors, administrators, beneficiaries, personal
representatives and assigns, you agree that this Agreement shall be in complete
and final settlement of any and all causes of action, rights and claims, whether
known or unknown, that you have had in the past, now have, or might now have, in
any way related to, connected with or arising out of your employment or its
termination or pursuant to Title VII of the Civil Rights Act, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Employee
Retirement Income Security Act, the wage and hour, wage payment and fair
employment practices statutes of the state or states in which you have provided
services to Cubist and/or any other federal, state or local law, regulation or
other requirement, and you hereby release and forever discharge Cubist and all
of its past, present and future subsidiaries, affiliates, officers, directors,
trustees, employees, employee benefit plans, agents, representatives, successors
and assigns, and all others connected with any of them, both individually and in
their official capacities, from any and all such causes of action, rights and
claims.

 

(b)                                 Any obligation of Cubist to provide you
severance payments or other benefits under Section 4, 7(b) or 7(c) of this
Agreement is expressly conditioned upon your signing and returning (and not
revoking during any applicable revocation period) a general release of claims in
a form reasonably satisfactory to Cubist on or after the date when your
employment terminates and within the time period specified in such release
(which in all events shall be no later than the fiftieth (50th) calendar day
following the date on which your employment terminates).  Cubist shall provide
you with the general release promptly after the date on which you give or
receive, as the case may be, notice of termination of your employment or, if you
remain employed through such date, June 1, 2014.

 

10.                               Continuing Obligations, Confidentiality and
Non-Disparagement.

 

(a)                                 You agree that you will continue to comply
with your obligations under your Employee Agreement.

 

(b)                                 You agree that you will not disclose this
Agreement or any of its terms or provisions, directly or by implication, except
to members of your immediate family and to your legal and tax advisors, and then
only on condition that they agree not to further disclose this Agreement or any
of its terms or provisions to others.  You also agree that you will never
disparage or criticize Cubist, its business, its management or its services, and
that you will not otherwise do or say anything that could disrupt the good
morale of Cubist employees or harm its interests or reputation.

 

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(c)                                  In signing this Agreement, you represent
and warrant that you will return to Cubist, on or before the Separation Date,
any and all documents, materials and information (whether in hardcopy, on
electronic media or otherwise) related to Cubist business (whether present or
otherwise) and all keys, access cards, credit cards, computer hardware and
software, telephones and telephone-related equipment and all other property of
Cubist in your possession or control.  Further, you represent and warrant that
you will not retain copies of any Cubist documents, materials or information
(whether in hardcopy, on electronic media or otherwise).  Recognizing that your
employment with Cubist will end as of the Separation Date, you agree that you
will not, for any purpose, attempt to access or use any Cubist computer or
computer network or system, including without limitation its electronic mail
system, after the Separation Date.  Further, you acknowledge that you will
disclose to Cubist all passwords necessary or desirable to enable Cubist to
access all information which you have password-protected on any of its computer
equipment or on its computer network or system.

 

11.                               Assignment.  You shall not make any assignment
of this Agreement or any interest in it, by operation of law or otherwise,
without the prior written consent of Cubist.  Cubist may assign its rights and
obligations under this Agreement without your consent. This Agreement shall
inure to the benefit of and be binding upon you and Cubist, and each of our
respective successors, executors, administrators, heirs and permitted assigns,
including any organization involved in a Change of Control.

 

12.                               Severability.  If any portion or provision of
this Agreement shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision hereof shall be valid and enforceable to the
fullest extent permitted by law.

 

13.                               Miscellaneous.  This Agreement sets forth the
entire agreement between you and Cubist in connection with the subject matter
hereof, and replaces all prior and contemporaneous communications, agreements
and understandings, written or oral, with respect to the subject matter hereof
(including without limitation the Retention Letter between you and Cubist dated
as of October 12, 2010), other than any obligations set forth in your Employee
Agreement, which obligations shall remain in full force and effect.  In
consideration of the payments and benefits provided to you hereunder, you agree
that, when your employment with Cubist terminates, such payments and benefits
shall be in complete satisfaction of any and all obligations that Cubist may
have to you, including under any severance guidelines, practices or policies
that Cubist may have in place during your employment or at or after your
employment terminates.  Any severance amounts due to you under this Agreement
shall be reduced by any notice or pay in lieu thereof that Cubist is required to
give under the federal law known as “WARN” or any similar state statute.  This
Agreement may not be modified or amended, and no breach shall be deemed to be
waived, unless agreed to in writing by you and an expressly authorized

 

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representative of Cubist.  This Agreement may be executed in two counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.  This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts, without regard to its or any other state’s
conflicts of laws principles, and all disputes hereunder shall be adjudicated in
the courts of the Commonwealth of Massachusetts, to whose personal jurisdiction
you hereby consent.

 

This Agreement, which includes the release of claims set forth in Section 9,
creates legally-binding obligations and Cubist therefore advises you to consult
an attorney before you sign this Agreement.  In signing this Agreement, you give
Cubist assurance that you have signed it voluntarily and with a full
understanding of its terms; that you have had sufficient opportunity to consider
this Agreement and to consult with an attorney, if you wished to do so, or to
consult with any of those other persons listed in the first sentence of
Section 10(b) above before signing it; and that, in signing this Agreement, you
have not relied on any promises or representations, express or implied, that are
not set forth expressly in this Agreement.

 

If the terms of this Agreement are acceptable to you, please sign, date and
return it to me within twenty-one (21) days of the date you receive it.  You may
revoke this Agreement at any time during the seven (7) day period immediately
following the date of your signing.  If you do not revoke it, then, at the
expiration of that seven (7) day period, this letter will take effect as a
legally-binding agreement between you and Cubist on the basis set forth above. 
Please keep one original for your records and return one original to me.

 

 

Cubist Pharmaceuticals, Inc.

 

 

 

 

 

By:

/s/ Michael W. Bonney

 

 

Michael W. Bonney

 

Date:

February 28, 2013

 

 

Accepted and Agreed:

 

 

 

 

 

By:

/s/ David McGirr

 

 

Name:

David McGirr

 

Date:

February 28, 2013

 

 

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