Document:

EXHIBIT 10.1

 

	
  

  	
  Short-Term Incentive Plan (STI Plan)

  Terms and Conditions for Managers

  	
   

  

 

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 – if
Cubist and employees achieve or exceed 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.

 

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 2005, 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 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”).  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

  	
   

  	
  Target Percentage

  (as % of base salary)

  	
   

  
	
  CEO

  	
   

  	
  50

  	
  %

  
	
  Senior Vice President

  	
   

  	
  40

  	
  %

  
	
  Vice President

  	
   

  	
  32

  	
  %

  
	
  Executive Director

  	
   

  	
  20

  	
  %

  
	
  Senior Director*/Director

  	
   

  	
  15

  	
  %

  
	
  Senior Manager/ equivalent individual contributor

  	
   

  	
  15

  	
  %

  
	
  Manager/ equivalent individual contributor**

  	
   

  	
  7.5

  	
  %

  

 

*Target Percentage for
Senior Directors shall be 15% for 2004, and 20% for years 2005 and beyond

** Target Percentage for
Manager/equivalent individual contributors shall be 7.5% for 2004, and 10% for
years 2005 and beyond.

 

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

  	
   

  	
  15

  	
  %

  	
  100

  	
  %

  	
  ($120,000 x 15% x 100%)=

  $18,000

  	
   

  
	
  Manager

  	
   

  	
  Part Time

  (20 hours/wk)

  	
   

  	
  $

  	
  75,000

  	
   

  	
  7.5

  	
  %

  	
  50

  	
  %

  	
  ($75,000 x 7.5% x 50%)=

  $2,812.50

  	
   

  
	
  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 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.

 

2

 

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

  	
   

  	
  Portion Tied to

  Company

  Results

  	
   

  	
  Portion Tied to

  Individual

  Results

  	
   

  
	
  CEO

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Senior Vice President*

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  Vice President

  	
   

  	
  40

  	
  %

  	
  60

  	
  %

  
	
  Executive Director

  	
   

  	
  30

  	
  %

  	
  70

  	
  %

  
	
  Senior Director**/Director

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  Senior Manager/ equivalent individual contributor

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  Manager/ equivalent individual contributor

  	
   

  	
  10

  	
  %

  	
  90

  	
  %

  

 

* For 2004, for Senior
Vice Presidents, the “Portion Tied to Company Results” shall be 50%, and the “Portion
Tied to Individual Results” shall be 50%. 
For 2005 and beyond, the “Portion Tied to Company Results” shall be 60%,
and the “Portion Tied to Individual Results” shall be 40%.

**For 2004, for Senior
Directors, the “Portion Tied to Company Results” shall be 20%, and the “Portion
Tied to Individual Results” shall be 80%. 
For 2005 and beyond, the “Portion Tied to Company Results” shall be 30%,
and the “Portion Tied to Individual Results” shall be 70%.

 

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

  	
   

  	
  $

  	
  18,000

  	
   

  	
  85% of target

  	
   

  	
  80% of goals met

  	
   

  	
  $18,000 x 20% x 85% = $3,060

  	
   

  	
  $18,000 x 80% x 80% of goal = $11,520

  	
   

  	
  $3,060+$11,520 = $14,580

  	
   

  
	
  Manager

  	
   

  	
  $

  	
  2,812.50

  	
   

  	
  100% of target

  	
   

  	
  100% of goals met

  	
   

  	
  $2,812.50 10% x 100% = $281.25

  	
   

  	
  $2,812.50 x
  90% x 100% of goal = $2,531.25

  	
   

  	
  $281.25 +
  $2,531.25 = $2,812.50

  	
   

  
	
  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:

 

3

 

•                  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, 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’s
shall be pro-rated based on the Participant’s regular scheduled work hours. 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, 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.

 

4

 

Cubist
and its employees are free to terminate the employment relationship at any
time, without cause or notice.

 

5EXHIBIT 4.16

 

 

 

THIRD SUPPLEMENTAL INDENTURE

 

Dated as of November 16, 2004

 

 

between

 

AVAYA INC.

 

and

 

THE BANK OF NEW YORK

 

as Trustee

 

 

Supplemental to Indenture

 

Dated as of October 31, 2001 and

 

 Second Supplemental Indenture
dated March 28, 2002

 

 

111/8% Senior Secured Notes due 2009

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Amendments to the
  Indenture and Notes.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  

 

 

i

 

THIRD SUPPLEMENTAL INDENTURE, dated as of the 16th
day of November, 2004, between AVAYA INC., a corporation duly organized and
existing under the laws of the State of Delaware, having its principal
executive office located at 211 Mount Airy Road, Basking Ridge, New Jersey
07920 (the “Company”), and THE BANK OF NEW YORK, a banking corporation
duly organized and existing under the laws of the State of New York, having its
Corporate Trust Office located at 101 Barclay Street, 7 East, New York, New
York 10286, as Trustee (the “Trustee”).

 

R E
C I T A L S

 

WHEREAS, the Company has heretofore executed and
delivered to the Trustee an Indenture, dated as of October 31, 2001 (the “Original
Indenture”, as amended by the Second Supplemental Indenture, dated as of March 28,
2002 (the “Second Supplemental Indenture”), and as so amended the “Indenture”),
pursuant to which the Company issued $640,000,000 aggregate principal amount of
its 111/8% Senior Secured Notes due 2009 (said series
hereinafter referred to as the “Notes”);

 

WHEREAS, the Company desires to amend certain
provisions of the Indenture, as set out in Article I hereof;

 

WHEREAS, Section 9.02 of the Second Supplemental
Indenture provides that the Company and the Trustee may, with certain
exceptions, amend the Indenture or the Notes with the written consent of the
Holders of at least a majority of the aggregate principal amount of the Notes
at the time outstanding (the “Required Consents”);

 

WHEREAS, the Company has distributed an Offer to
Purchase for Cash and Consent Solicitation, dated November 1, 2004 (the “Offer
to Purchase”), and accompanying letter of transmittal and consent (the “Letter
of Transmittal”) to the Holders of the Notes in connection with the Company’s
tender offer with respect to the Notes (the “Tender Offer”);

 

WHEREAS, in connection with the Tender Offer, the
Company is soliciting consents (the “Consent Solicitation” and, together
with the Tender Offer, the “Offer”) for certain proposed amendments to
the Indenture as described in the Offer to Purchase (the “Proposed
Amendments”);

 

WHEREAS, the Company has received the Required
Consents to adoption of the Proposed Amendments; and

 

WHEREAS, the execution and delivery of this Third
Supplemental Indenture have been duly authorized by all necessary corporate
action on the part of the Company and all conditions and requirements necessary
to make this instrument a valid, binding and legal agreement have been duly
performed and complied with.

 

NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Trustee mutually covenant and
agree, for the equal and proportionate benefit of the Holders of the Notes, as
follows:

 

 

ARTICLE I

 

AMENDMENTS

 

SECTION 1.01.  Amendments to the Indenture and Notes.

 

(a)                                  Effective
upon the date the Company notifies the Trustee and the depositary for the
Notes, The Bank of New York (the “Depositary”), that the Notes tendered
and not validly withdrawn pursuant to the Offer are accepted for purchase
pursuant to the Offer to Purchase and Letter of Transmittal (the “Effective
Date”), the following Sections and Articles of the Indenture, and any
corresponding provisions in the Notes, are hereby deleted in their entirety and
replaced with “Intentionally Omitted.”:

 

	
  Existing Section/Article Number

  	
   

  	
  Caption

  
	
   

  	
   

  	
   

  
	
  Section 4.02

  	
   

  	
  Limitation on Liens

  
	
  Section 4.03

  	
   

  	
  Limitation on Sale/Leaseback Transactions

  
	
  Section 4.04

  	
   

  	
  Amendment of Security Documents

  
	
  Section 4.05

  	
   

  	
  Reports to Holders

  
	
  Section 4.06

  	
   

  	
  Change of Control

  
	
  Section 4.07

  	
   

  	
  Limitation on Indebtedness

  
	
  Section 4.08

  	
   

  	
  Limitation on Restricted Payments

  
	
  Section 4.09

  	
   

  	
  Limitation on Restrictions on Distributions
  from Restricted Subsidiaries

  
	
  Section 4.10

  	
   

  	
  Limitation on Sales of Assets and
  Subsidiary Stock

  
	
  Section 4.11

  	
   

  	
  Limitation on Affiliate Transactions

  
	
  Section 4.12

  	
   

  	
  Limitation on Issuances of Guarantees by Restricted
  Subsidiaries

  
	
  Section 4.13

  	
   

  	
  Existence

  
	
  Section 4.14

  	
   

  	
  Maintenance of Properties

  
	
  Section 4.15

  	
   

  	
  Payment of Taxes and Other Claims

  
	
  Section 4.16

  	
   

  	
  Statement as to Compliance

  
	
  Article 5

  	
   

  	
  Successor Corporation

  

 

(b)                                 Effective
upon the Effective Date, Article 6 of the Indenture, and any corresponding
provisions in the Notes, are hereby amended as follows:

 

(i)                                     by
deleting Clauses (4), (5), (6), (7), (8), (10) and (11) of Section 6.01
and replacing them with “Intentionally Omitted”;

 

(ii)                                  by
inserting the word “or” at the end of Clause 6.01(2);

 

(iii)                               by
deleting the phrase “or Section 4.06 or, to the extent that the Company is
required to comply with sections 4.07 through 4.12, the Company fails to make
or consummate an offer to purchase in accordance with the provisions described
under Section 4.10; or”, in Clause 6.01(3);

 

2

 

(iv)                              with
respect to the paragraph following Clause 6.01(3):

 

(A)                              by
deleting the proviso, “provided that if an Event of Default described in Clause
(10) or (11) above occurs, the principal amount of all Notes then outstanding
shall become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.”; and

 

(B)                                by
deleting the last sentence of that paragraph;

 

(v)                                 by
deleting all references to the phrase “Change of Control Purchase Price or
purchase price with respect to an Excess Proceeds Offer” from Sections 6.02,
6.03 and 6.04;

 

(vi)                              by
inserting “or the” immediately before the first and third reference to “Redemption
Price” in Section 6.03 and the first reference in Section 6.04;

 

(vii)                           by
inserting “the” immediately before the second reference to “Redemption Price”
in Section 6.03;

 

(viii)                        by
deleting the word “or” appearing immediately before the phrase “interest on the
Notes” in the introductory paragraph of Section 6.03 and replacing it with
a comma; and

 

(ix)                                by
deleting the word “or” appearing immediately before the phrase “interest on the
Notes” in the last paragraph of Section 6.04 and replacing it with a
comma.

 

(c)                                  Effective
upon the Effective Date, the sections in Article IV of the Second
Supplemental Indenture (entitled “Security”), and any corresponding provisions
in the Notes, are deleted in their entirety and replaced with the following
section:

 

“SECTION 4.01 
Release of Collateral. 
Each Holder of Notes, by its acceptance thereof, authorizes and directs
the Trustee and the Collateral Trustee to amend the Security Documents as
necessary in order to release the Noteholders’ security interest in the
Collateral and terminate the Noteholders’ rights under the Security Agreement,
the Collateral Trust Agreement and the Intercreditor Agreement.

 

(d)                                 Effective
upon the Effective Date, any definitions used exclusively in the provisions of
the Indenture or Notes that are deleted pursuant to Paragraphs (a), (b) and (c)
of Section 1.1,  and any definitions
used exclusively within such definitions, are hereby deleted in their entirety
from the Indenture and the Notes, and all references in the Indenture and the
Notes to paragraphs, Sections, Articles or other terms or provisions of the
Indenture referred to in Section 1.1(a), (b) and (c) above that have been
otherwise deleted pursuant to this Third Supplemental Indenture are hereby deleted
in their entirety.

 

3

 

ARTICLE II

 

MISCELLANEOUS

 

The Trustee makes no undertaking or representations in
respect of, and shall not be responsible in any manner whatsoever for and in
respect of, the validity or sufficiency of this Third Supplemental Indenture or
the proper authorization or the due execution hereof by the Company or for or
in respect of the recitals and statements contained herein, all of which
recitals and statements are made solely by the Company.

 

Except as expressly amended hereby, the Indenture
shall continue in full force and effect in accordance with the provisions
thereof and the Indenture is in all respects hereby ratified and
confirmed.  This Third Supplemental
Indenture and all its provisions shall be deemed a part of the Indenture in the
manner and to the extent herein and therein provided.

 

This Third Supplemental Indenture shall be governed
by, and construed in accordance with, the laws of the State of New York.

 

This Third Supplemental Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

 

4

 

IN WITNESS WHEREOF, the undersigned, being duly
authorized, have executed this Third Supplemental Indenture on behalf of the
respective parties hereto as of the date first above written.

 

	
   

  	
  AVAYA INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Hong

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Peter Hong

  
	
   

  	
   

  	
  Title:  

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK,
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert A.
  Massimillo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert A.
  Massimillo

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

5

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