EXHIBIT 10.1


 


	
  

  	
  Short-Term Incentive Plan (STI Plan)

  Terms and Conditions

  
	
   

  	
   

  



 


Compensation Philosophy


 


Cubist’s compensation philosophy is to attract, motivate, retain and
reward employees with base pay, short-term and long-term incentives, and
benefits that competitively target the market. 
Cubist’s compensation programs provide employees with the opportunity to
earn increased compensation — based on Cubist’s and the employee’s achievement
of pre-established performance targets.


 


Plan Overview


 


Cubist’s Short-Term Incentive Plan (“STI Plan”) is a bonus plan for all
Cubist employees (“Participants”) which is designed to reward them  for their roles in the achievement of Cubist’s
annual goals, as established by the Company (“Annual Goals”).  STI Plan awards (“Plan Awards”) are
determined on an annual basis, based on whether and to what extent Cubist
achieves its Annual Goals and each Participant achieves the Participant’s
individual goals for the relevant calendar year (the “Performance Period”).


 


Plan Objective


 


The intent of the STI Plan is to provide highly competitive total cash
compensation through an annual variable pay program that reflects Cubist’s
performance and the Participant’s performance against goals and
objectives.  The STI Plan is an important
variable component of the total compensation package for all employees.


 


Eligibility


 


All employees of Cubist are eligible to participate in the STI
Plan.  Participation in the STI Plan in
one year does not automatically guarantee participation in a future year.  Compliance with all Cubist policies,
guidelines and all applicable laws  is a
prerequisite to receiving an STI award. A determination that an employee is not
eligible to receive an STI award due to his or her failure to demonstrate
compliant behavior may be made by the CEO and Chief Compliance Officer.


 


Performance Periods


 


Each calendar year, beginning on January 1 of each year, constitutes a
separate Performance Period.


 


Financial Measures


 


Prior to the beginning of each Performance Period, the Company will
establish financial measures and weightings for each of the Company’s Annual
Goals. Cubist needs to achieve at least 70% of its Annual Goals for any
Participant to be eligible for a Plan Award. For 2007, company achievement will
be capped at a 200% payout.  In addition
to achievement of Annual Goals, Plan Awards are also determined on the basis of
individual performance and achievement of objectives.


 


Individual Objectives


 


As part of Cubist’s
annual (or in the case of Participants who join the Company after the
commencement of a Performance Period, ongoing) goal setting process, each
Participant should propose individual objectives for his or her manager’s
approval. Each Participant will be measured by his or her manager against these
objectives, and the manager shall make a recommendation to the CEO as to
whether the Participant should receive a Plan Award, and, if so, the amount of
such Plan Award (assuming Cubist’s Annual Goals have been achieved to the
requisite level noted above).


 


 

















 


Funding


 


After the end of each Performance Period, the CEO shall determine the
aggregate amount available for Plan Awards (if any) based on the Company’s
performance relative to the Annual Goals (the “Pool”).  The Pool will be funded based on the Company’s
performance.  Assuming the Company has
achieved the requisite performance level, the CEO shall then determine the
award and amount of any Plan Awards to 
Participants in accordance with the STI Target Percentages noted below;
provided that the Compensation Committee of the Company’s Board of Directors
shall make such determinations with respect to the CEO’s bonus and shall
approve the CEO’s recommendations with respect to the Executive Officers
bonuses.


 


Calculating the Amount of Any Target Award


 


Each Participant is eligible for Plan Awards at a
target percentage of base salary (“Target Percentage”) as listed in Figure 1
below. The “Target Award” is the Participant’s target percentage, multiplied by
his or her base salary for the Performance Period. The Target Award will be
pro-rated based on the portion of the performance period worked by the
Participant if the Participant (a) commenced employment with Cubist after the
commencement of the Performance Period, (b) worked part-time during the
Performance Period, or (c) took a leave of absence during the Performance
Period.  Examples of calculations are
included in Figure 2 below.


 


Figure 1: Target Percentage by Level


 


	
  Eligibility Group

  	
   

  	
  2007 Target

  Percentage (as %

  of base salary)

  	
   

  
	
  CEO

  	
   

  	
  80

  	
  %

  
	
  Chief Financial
  Officer

  	
   

  	
  50

  	
  %

  
	
  Executive Vice
  President

  	
   

  	
  50

  	
  %

  
	
  Senior Vice
  President

  	
   

  	
  40

  	
  %

  
	
  Vice President,
  Sales & Marketing

  	
   

  	
  40

  	
  %

  
	
  Vice President

  	
   

  	
  35

  	
  %

  
	
  Executive
  Director

  	
   

  	
  25

  	
  %

  
	
  Senior Director

  	
   

  	
  25

  	
  %

  
	
  Director

  	
   

  	
  20

  	
  %

  
	
  Senior Manager/
  equivalent individual contributor

  	
   

  	
  15

  	
  %

  
	
  Manager/
  equivalent individual contributor

  	
   

  	
  10

  	
  %

  
	
  Employee

  	
   

  	
  5

  	
  %

  



 


Figure 2: Target Award Calculation
Examples


 


 


	
  Level

  	
   

  	
  Full-time or

  Part-Time

  	
   

  	
  Base Salary

  	
   

  	
  Target

  Percentage

  	
   

  	
  Pro-Ration

  Factor

  	
   

  	
  Target Award

  	
   

  
	
  Manager

  	
   

  	
  Part Time

  (20 hours/wk)

  	
   

  	
  $

  	
  75,000

  	
   

  	
  10

  	
  %

  	
  50

  	
  %

  	
  ($75,000 x 10% x 50%)=

  $3,750

  	
   

  
	
  Senior

  Manager

  	
   

  	
  Full Time

  	
   

  	
  $

  	
  90,000

  	
   

  	
  15

  	
  %

  	
  100

  	
  %

  	
  ($90,000 x 15% x 100%)=

  $13,500

  	
   

  



 


 


Calculating Actual Awards


A Participant’s Actual
Award is calculated in two portions, which are then added to form the Actual
Award.  The first portion is tied to
company results, while the second portion is tied to the Participant’s
performance against goals as


 


 


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assessed by the
participant’s Manager.  As the
Participant’s level of responsibility in the organization increases, the
portion tied to company results increases and the portion tied to individual
results decreases, as listed in Figure 3 below. 
Actual Awards are subject to approval by the CEO.  In addition, Actual Awards for Executive
Officers are subject to approval by the Compensation Committee.


 


 


 


Calculation
of portion tied to company results:


The Participant’s Target
Award is multiplied by the portion (percentage) tied to company results as
listed in Figure 3 for the Participant’s eligibility group.  That number is then multiplied by Cubist’s
achievement against the Annual Goals.


 


Calculation
of portion tied to individual results:


The Participant’s Target
Award is multiplied by the portion (percentage) tied to individual results as
listed in Figure 3 for the participant’s eligibility group.  That number is then multiplied by the
percentage of individual goals met by the Participant as assessed by the
Participant’s Manager.


 


Calculation
of Actual Plan Award:


The Actual Award is the
sum of the portion tied to company results and the portion tied to individual
results.


 


Figure 3: Portions Tied to Company and Individual
Results


 


	
  Eligibility Group

  	
   

  	
  2007 Portion Tied

  to Company

  Results

  	
   

  	
  2007 Portion Tied

  to Individual

  Results

  	
   

  
	
  CEO

  	
   

  	
  100

  	
  %

  	
  Board discretion

  	
   

  
	
  Chief Financial
  Officer

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  Executive Vice
  President

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  Senior Vice
  President

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  Vice President,
  Sales & Marketing

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  Vice President

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  Executive
  Director

  	
   

  	
  40

  	
  %

  	
  60

  	
  %

  
	
  Senior Director

  	
   

  	
  40

  	
  %

  	
  60

  	
  %

  
	
  Director

  	
   

  	
  30

  	
  %

  	
  70

  	
  %

  
	
  Senior Manager/
  equivalent individual contributor

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  Manager/
  equivalent individual contributor

  	
   

  	
  10

  	
  %

  	
  90

  	
  %

  
	
  Employee

  	
   

  	
  10

  	
  %

  	
  90

  	
  %

  



 


Figure 4: Actual STI Plan Award Calculation Examples


 


	
  Level

  	
   

  	
  Target

  Award from

  Figure 2

  	
   

  	
  Company

  Results

  	
   

  	
  Individual

  Results

  	
   

  	
  Portion tied to

  Company

  Results

  	
   

  	
  Portion tied to

  Individual

  Results

  	
   

  	
  Actual STI Plan

  Award

  
	
  Manager

  	
   

  	
  $

  	
  3,750

  	
   

  	
  100% of

  target

  	
   

  	
  100% of

  goals met

  	
   

  	
  $3,750 x 10% x

  100% = $375

  	
   

  	
  $3,750 x 90% x

  100% of goal =

  $3,375

  	
   

  	
  $375 + $3,375 =

  $3,750

  
	
  Senior

  Manager

  	
   

  	
  $

  	
  13,500

  	
   

  	
  125% of

  target

  	
   

  	
  100% of

  goals met

  	
   

  	
  $13,500 x 20% x

  125% = $3,375

  	
   

  	
  $13,500 x 80% x

  100% of goal =

  $10,800

  	
   

  	
  $3,375 = $10,800 =

  $14,175

  



 


 


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Employment Changes


 


•                  New Hires:


•                  If a Participant is hired during a Performance Period, his or her award
will be pro-rated to reflect the portion of the year actually worked with
Cubist, subject to the pro-ration guidelines as described below


 


•                  Changes in Eligibility:


•                  If a Participant changes from one eligibility group to another, the
amount of any Plan Award will be determined by calculating the amount of time
worked in each eligible position—subject to the pro rata guidelines noted
below.


 


•                  Part-time:


•                  If a Participant is not a full-time
employee, any Plan Award to the Participant shall be pro-rated based on the
Participant’s regular scheduled work hours or percentage of time worked. If a
Participant has a change in regular scheduled work hours during a Performance
Period, the Participant’s Plan Award shall be pro-rated in accordance with the
pro rata guidelines below.


 


•                  Pro-rata Guidelines:


•                  All pro-rata adjustments occur on a whole calendar month basis


•                  Changes occurring prior to the 16th of the month will be effective
on the first day of the month


•                  Changes occurring on or after the 16th of the month will be
effective on the first day of the following month


 


•                  Departure or
Termination:


•                  If a Participant’s employment terminates prior to the end of a
Performance Period, the Participant shall not be entitled to a Plan Award
unless such termination is as a result of Participant’s death or retirement, or
a Participant becomes disabled, in which case the Participant, or the
Participant’s estate (as the case may be) shall be eligible for a pro-rated
Plan Award payable on the standard payment date for the Performance Period (as
opposed to an earlier date).


•                  If a Participant’s employment terminates after the completion of the
Performance Period but prior to the date that Plan Award payments are made (the
“Payment Date”), a Participant shall be eligible for a Plan Award, unless such
termination is as a result of an involuntary termination for cause or
misconduct.


 


 


STI award Payout Process


 


STI Plan Awards are paid
out following the end of the Performance Period and after the measurement of
Cubist’s achievement of Annual Goals has been completed.  Plan Awards will generally be paid out in the
first quarter following the end of the relevant Performance Period. Applicable
taxes other withholdings will be deducted from the Plan Award, as appropriate
for each jurisdiction. In the United States, individual contributions to the
401(k) Plan as well as applicable taxes will be deducted from the award
payment.


 


Glossary of Key Terms


 


Actual
Award: the Plan
Award based on the sum of the portion of the Plan Award tied to company results
and the portion tied to individual results


 


Payment
Date: the date that payments, if any, will be made
to Participants under the STI Plan


 


Performance
Period:  the twelve month period
beginning on January 1 of each calendar year


 


Target Award: 
the
Participant’s Target Percentage multiplied by his or her base salary for the
Performance Period


 


 


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Target
Percentage: the
maximum amount of a Participant’s Plan Award eligibility expressed as a
percentage of such Participant’s base salary


 


The Company reserves the right to amend or discontinue the Plan at any
time without prior notice. In no event does this STI Plan alter the “employment-at-will”
relationship between Cubist and its employees. Cubist and its employees are
free to terminate the employment relationship at any time, without cause or
notice.


 


 


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