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 and employees achievement of pre-established
performance targets.


 


Plan Overview


 


Cubist’s Short-Term Incentive Plan (“STI Plan”) is a bonus plan for
managers and certain key individual contributors (as designated by senior
management, and is designed to reward participants (“Participants”) 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


 


Our intent through the STI Plan is to provide highly competitive total
cash compensation through an annual variable pay program that reflects Cubist’s
performance and Participant performance against goals and objectives.  The STI Plan is an important variable
component of the total compensation package designed for managers and other key
individual contributors designated by senior management as eligible to
participate in the STI Plan.


 


Eligibility


 


Managers and certain key individual contributors designated by senior
management 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.  Compliant behavior is a prerequisite to be
granted an STI award. Any determination that an employee is not eligible to
receive an STI award due to his or her failure to demonstrate behavior that is
compliant with acceptable levels shall 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 2006, 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 the 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.


 


Figure 1: Target Percentage by Level


 


	
  Eligibility Group

  	
   

  	
  2006 Target

  Percentage (as%

  of base salary)

  	
   

  
	
  CEO

  	
   

  	
  75

  	
  %

  
	
  Senior Vice
  President

  	
   

  	
  40

  	
  %

  
	
  Vice President

  	
   

  	
  35

  	
  %

  
	
  Executive
  Director

  	
   

  	
  20

  	
  %

  
	
  Senior Director

  	
   

  	
  20

  	
  %

  
	
  Director

  	
   

  	
  15

  	
  %

  
	
  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

  	
   

  
	
  Senior

  Director

  	
   

  	
  Full Time

  	
   

  	
  $

  	
  120,000

  	
   

  	
  20

  	
  %

  	
  100

  	
  %

  	
  ($120,000 x 20% x
  100%)=

  $24,000

  	
   

  
	
  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

  	
   

  	
  2006 Portion Tied 

  to Company

  Results

  	
   

  	
  2006 Portion Tied

  to Individual

  Results

  	
   

  
	
  CEO

  	
   

  	
  100

  	
  %

  	
  Board discretion

  	
   

  
	
  Senior Vice
  President

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  Vice President

  	
   

  	
  40

  	
  %

  	
  60

  	
  %

  
	
  Executive
  Director

  	
   

  	
  30

  	
  %

  	
  70

  	
  %

  
	
  Senior Director

  	
   

  	
  30

  	
  %

  	
  70

  	
  %

  
	
  Director

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  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

  	
   

  
	
  Senior

  Director

  	
   

  	
  $

  	
  24,000

  	
   

  	
  85% of

  target

  	
   

  	
  80% of

  goals met

  	
   

  	
  $24,000 x 30% x

  85% = $6,120

  	
   

  	
  $24,000 x 70% x

  80% of goal =

  $13,440

  	
   

  	
  $6,120 + $13,440 =

  $19,560

  	
   

  
	
  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

  	
   

  



 


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


 


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•                  Changes in Eligibility:


•                  If
a Participant changes from one eligibility group to another, or an individual
who was not a Participant at the commencement of the Performance Period changes
to a Plan-eligible position within the Performance Period, 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


 


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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