Document:

exv10w23

 

EXHIBIT 10.23

2007 INCENTIVE COMPENSATION AWARDS TO EXECUTIVE OFFICERS

A. Equity Awards

On February 7, 2007 the Incentive Compensation Committee of Registrant’s Board of Directors
approved grants of stock appreciation rights (“SARs”) to the executive officers of Registrant,
specifically Stephen W. Lilienthal, Michael Fusco, Jonathan D. Kantor, James R. Lewis and D. Craig
Mense (collectively the “Executive Officers”). The form of Award Letter and Award Terms pursuant
to such grants are reproduced below.

	 	 	 	 	 	 
	February 13, 2007
	 	 	 	 	 
	 
	 	 	 	 	 
	Private and Confidential
	 	 	 	 	 
	 
	 	 	 	 	 	 
	To:     {Participant}

	 	Number of Stock SARs
Granted
	 	 	{No. of SARs}
	 	 	 	 	 	 
	Re:     Grant of Stock Appreciation Rights paid in Stock

	 	Exercise Price
	 	 	$          
	 	 	 	 	 	 
	 

	 	Grant Date	 	 	 
	 	 	 	 	 	 
	 

	 	Expiration Date	 	 	 
	 	 	 	 	 	 

The Incentive Compensation Committee (the “Committee”) of the Board of Directors of CNA
Financial Corporation (“Company”), which administers the CNA Financial Corporation 2000 Incentive
Compensation Plan (the “Plan”), has determined that you are eligible for a grant of {No. of SARs}
Stock Appreciation Rights (the “Stock SARs”) paid in CNA Financial Corporation common stock at
$           per share (the “Exercise Price”). Each Stock SAR entitles the eligible person to receive,
at the time of exercise, an amount equal to the difference between the fair market value of a
single share of the Company’s common stock on the date of exercise and the Exercise Price, which
may not be less than the fair market value of a single share of the Company’s common stock on the
date the right was granted, paid in shares of the Company’s common stock. This stock appreciation
rights award was granted by the Committee under the Plan on February 7, 2007.

As described more fully in the attached Award Terms, the Stock SARs will become exercisable in four
equal annual installments on February 7th of 2008, 2009, 2010 and 2011 so long as you
are employed by Continental Casualty Company (“CCC”) or an affiliate of CCC on each such date. For
example, one quarter of the Stock SARs granted will be exercisable on February 7, 2008 if you are
an employee on that date. In most instances, after the Stock SARs become exercisable generally you
may exercise them any time prior to the expiration date shown above provided that you are employed
by Continental Casualty Company or an affiliate of CCC at the time of exercise. After exercising
the Stock SARs, you can decide whether to hold or sell the shares of Company common stock you have
obtained, subject to CNA’s Securities Compliance Policy and applicable insider trading
restrictions.

Under the present tax laws, as a result of exercising the Stock SARs you will potentially recognize
taxable income at the time of exercise. When and if you sell the shares of Company common stock
acquired through the Stock SARs exercise, any additional gain may be subject to further tax at
capital gain rates. The Company recommends that you consult with your own tax advisor to determine
the applicability of the tax rules to the awards granted to you in your individual circumstances.

This Award Letter provides a summary of your Stock SARs, and the Award is subject to the Award
Terms enclosed with this Award Letter. (In the attached Award Terms, you are referred to as the
“Participant.”) This Award Letter shall be subject to the Award Terms, and the Award Terms shall be
subject to the provisions of the Plan. If discrepancies arise between this Award Letter and the Award Terms, the
Award Terms will govern, and if discrepancies arise between the Award Terms and the Plan document,
the terms of the Plan document will govern.

Sincerely,

#####

 

Stock Appreciation Rights Paid in Company Common Stock Terms for Grant Under the

CNA Financial Corporation 2000 Incentive Compensation Plan

     On February 7, 2007 (the “Grant Date”), CNA Financial Corporation (the “Company”) granted to
the Participant certain Stock Appreciation Rights (the “Stock SARs”) paid in Company common stock.
Each Stock SAR entitles the eligible person to receive, at the time of exercise, an amount equal to
the difference between the fair market value of a single share of the Company’s common stock on the
date of exercise and the Exercise Price, which may not be less than the fair market value of a
single share of the Company’s common stock on the date the right was granted, paid in shares of CNA
Financial Corporation common stock. All Stock SAR grants shall be subject to the following Terms
(sometimes referred to as the “Award Terms”):

     1. Stock SARs Award. For purposes of the Award Terms, the “Participant” shall be the
eligible person identified in the award letter included with these Award Terms (the “Award Letter”)
and reflecting the date of grant of the Stock SARs that is the same as the Grant Date specified in
these Award Terms. For purposes of the Award Terms, the “Exercise Price” is the price per share
for such Stock SARs as specified in the Award Letter. The Stock SARs have been granted under the
CNA Financial Corporation 2000 Incentive Compensation Plan (the “Plan”), which is incorporated into
and forms a part of the Award Terms. Certain words, terms and phrases used in the Award Terms are
defined in the Plan (rather than in the Award Terms or Award Letter), and except where the context
clearly implies or indicates the contrary, and except as otherwise provided in the Award Terms, a
word, term, or phrase used or defined in the Plan is similarly used or defined in the Award Terms
and the Award Letter. Other words, terms or phrases used in the Award Terms or Award Letter are
defined in paragraph 11 of these Award Terms or elsewhere in these Award Terms or Award Letter.

     2. Date of Exercise. Subject to the limitations of the Plan and these Award Terms,
each Stock SARs installment shall be exercisable on and after the Date of Exercisability for such
Installment as described in the following schedule (but only if the Date of Termination has not
occurred before the Date of Exercisability):

	 	 	 	 
	 	 	 	 
	 	 	 	DATE OF EXERCISABILITY APPLICABLE TO
	INSTALLMENT	 	 	INSTALLMENT
	 	 	 	 
	First quarter of Stock SARs

	 	 	First anniversary of February 7, 2007
	 	 	 	 
	Second quarter of Stock SARs

	 	 	Second anniversary of February 7, 2007
	 	 	 	 
	Third quarter of Stock SARs

	 	 	Third anniversary of February 7, 2007
	 	 	 	 
	Fourth quarter of Stock SARs

	 	 	Fourth anniversary of February 7, 2007
	 	 	 	 

     The Stock SARs may be exercised as provided for herein only as to that portion of the Stock SARs
that were exercisable (or became exercisable) immediately prior to the Date of Termination, if any.

     4. Expiration. The Stock SARs shall not be exercisable after the Company’s close of
business on the last business day that occurs prior to the Expiration Date. The “Expiration Date”
shall be earliest to occur of:

(a) Ten Years. The ten-year anniversary of the Grant Date.

 

 

(b) Death or Disability. The one-year anniversary of such Date of Termination, if the
Participant’s termination of employment by Continental Casualty Company or an Affiliate occurs by
reason of the Participant’s death or the Participant’s Permanent Disability.

(c) Retirement. The three-year anniversary of such Date of Termination, if the
Participant’s termination of employment by Continental Casualty Company or an Affiliate occurs by
reason of the Participant’s Retirement (and not by reason of death, Permanent Disability, or for
Cause).

(d) Cause. The Date of Termination, if the Participant’s termination occurs by reason of
Cause.

(e) Voluntary Resignation. The Date of Termination, if the Participant’s termination of
employment by Continental Casualty Company or an Affiliate occurs by reason of the Participant’s
voluntary resignation (and the termination is for reasons other than as described in paragraphs
(b), (c), or (d) next above, or paragraph (f) next below); provided, however, that the Compensation
Committee of the Company’s Board of Directors (the “Committee’), in its sole discretion, may
provide for extension of the date specified in this paragraph (e), except that such extended date
may not be later than the earlier to occur of the 90 day anniversary of the Date of Termination or
the date specified in paragraph (a) next above.

(f) Termination without Cause. The Date of Termination, if the Participant’s termination
of employment by Continental Casualty Company or an Affiliate occurs by reason of termination of
employment by the Participant’s employer for reasons other than Cause (and the termination is for
reasons other than as described in paragraphs (b), (c), or (d), next above); provided, however,
that the Committee, in its sole discretion, may provide for extension of the date specified in this
paragraph (f), except that such extended date may not be later than the earlier to occur of the
one-year anniversary of the Date of Termination or the date specified in paragraph (a) next above;
and further provided that, notwithstanding the provisions of paragraph 3, the Committee may, in its
sole discretion, permit additional exercisability of the Stock SARs to be earned, if any, during
such extension period.

     5. Method of Exercise. The Stock SARs may be exercised in whole or in part by
sending a written notice to the Secretary of the Company at its corporate headquarters before the
Company’s close of business on the last business day that occurs prior to the Expiration Date, or,
if offered by the Company at the Company’s discretion, by electing to exercise the Stock SARs
through a Company-arranged broker-dealer. Each exercise of the Stock SARs shall be subject to the
Award Letter, the Award Terms and the Plan, and also to the following provisions:

(a) Any notice of exercise shall specify the number of Stock SARs which the Participant elects to
exercise and the date(s) on which they were awarded and vested.

(b) Any gains realized upon exercise of Stock SARs will be paid in shares of CNA Financial
Corporation common stock. Except as otherwise provided by the Committee, before the Stock SARs are
exercised the Participant will be required to remit to the Company a sufficient portion of the
sale proceeds to pay in either cash or shares acquired through the exercise any tax withholding
requirements resulting from such exercise.

(c) No Stock SARs Rights shall be exercisable if and to the extent the Company determines in its
sole discretion that such exercise would be in violation of applicable state or federal securities
laws or the rules

 

 

or regulations of any securities exchange on which the shares of stock are traded. If the Company
makes such a determination, it shall use reasonable efforts to obtain compliance with such laws,
rules or regulations. In making any determination hereunder, the Company may rely on the opinion
of counsel for the Company.

     6. Administration. The authority to manage and control the operation and
administration of the Award Terms shall be vested in the Committee, and the Committee shall have
all such powers with respect to the Award Terms as it has with respect to the Plan. Any
interpretation of the Award Terms by the Committee and any decision made by it with respect to the
Award Terms is final and binding on the Company and the Participant. These Terms may be
subsequently modified at the discretion of the Company based on subsequent regulatory, tax, or
legal developments, as interpreted by the Company.

     7. Fractional Shares. Any gains realized upon exercise of Stock SARs will be paid in
shares of CNA Financial common stock, in whole or fractional shares, as determined by the Company
to be appropriate and as approved by the Committee.

     8. No Rights As Shareholder. The Participant shall not have any rights of a
shareholder with respect to the Stock SARs issued ,unless and until a certificate for such shares
has been duly issued by the Company following exercise of the Stock SARs as provided herein.

     9. Governing Documents. The Award Letter shall be subject to the Award Terms, and
the Award Terms shall be subject to the provisions of the Plan, a copy of which may be obtained by
the Participant from the office of the Secretary of the Company. If discrepancies arise between
these Award Terms and the Plan document, the terms of the Plan document will govern. The Award
Terms are subject to all interpretations, amendments, rules, and regulations promulgated by the
Committee from time to time pursuant to the Plan.

     10. Amendment. The Award Terms may be amended by written agreement of the
Participant and the Company, without the consent of any other person, except that any such
amendment shall be subject to the approval of the Committee.

     11. Definitions. For purposes of the Award Terms, the following definitions shall
apply:

(a) Affiliate. The term “Affiliate” means any business or entity in which at any relevant
time the Company holds directly or indirectly a greater than a 10% equity (voting or non-voting)
interest.

(b) Cause. The Participant will have engaged in conduct that constitutes “Cause” if the
Participant

i) engages in any conduct which the Chief Executive Officer of the Company’s insurance
subsidiaries reasonably determines to be fraudulent, constitute willful malfeasance or gross
negligence, or be inconsistent with the dignity and character of an executive of the Company or ii)
violates in a material manner the then current rules of professional conduct or human resource
policies of the Company. If the Participant has entered into an employment contract with the
Company or any Subsidiary and “Cause” is defined in such contract, then “Cause” for purposes of
these Award Terms shall be as defined in such contract in lieu of the definition in the immediately
prior sentence.

 

 

(c) Date of Exercisability. The Participant’s “Date of Exercisability” is the date on which
the specified amount of Stock SARs are first able to be exercised as provided for in paragraph 3 of
these Award Terms.

(d) Date of Termination. The Participant’s “Date of Termination” shall be the first day
occurring on or after the Date of Grant on which the Participant is not employed by Continental
Casualty Company or an Affiliate, regardless of the reason for the termination of employment;
provided that a termination of employment shall not be deemed to occur by reason of a transfer of
the Participant’s employment between Continental Casualty Company and an Affiliate or between two
Affiliates; and further provided that the Participant’s employment shall not be considered
terminated while the Participant is on a leave of absence from Continental Casualty Company or an
Affiliate approved by the Participant’s employer. If, as a result of a sale or other transaction,
the Participant’s employer ceases to be an Affiliate (and the Participant’s employer is or becomes
an entity that is not an Affiliate), the occurrence of such transaction shall be treated as the
Participant’s Date of Termination caused by the Participant being discharged by the employer.

(e) Permanent Disability. The term “Permanent Disability” means a physical or mental
condition of Participant which, as determined by the Company, in its sole discretion based on all
available medical information, is expected to continue indefinitely and which renders Participant
incapable of substantially performing of the services required of him by his employer.

(f) Retirement. Termination because of “Retirement” shall mean the Participant’s Date of
Termination after attainment of age 62 or, if earlier, the Participant’s Date of Termination which
is designated by the Committee as a “Retirement” for purposes of the Award Terms.

B. Cash Awards

On February 7, 2007 the Incentive Compensation Committee of Registrant’s Board

of Directors approved the following items with regard to the Executive Officers:

	 	a.	 	Annual Incentive Bonus (“AIB”) amounts for 2006, payable in
2007. The AIB is determined through a performance goal of
Registrant’s net operating income or payout formula that is a
percentage of Registrant’s net operating income achieved in a
particular year, in this instance 2006.	 
	 
	 	b.	 	2006 performance year results for the Long-Term Incentive
Cash Plan (the “LTI Plan”), and payouts for the 2004-2006 LTI
Plan cycle pursuant to such results. The form of the letter pursuant
to such payouts is reproduced below. The 2006 performance
year results that were approved apply to the 2004-2006, 2005-2007	 

 

 

	 	 	 	and 2006-2008 cycles under the LTI Plan.	 

	 	c.	 	LTI Plan cash awards for the 2007-2009 LTI Plan cycle. The form
of award letter and award terms pursuant to such cash awards
are reproduced below.	 
	 
	 	d.	 	AIB opportunities for the 2007 performance year, determined
through a performance goal of Registrant’s net operating
income or payout formula that is a percentage of Registrant’s
net operating income achieved in 2007, payable in 2008.	 
	 
	 	e.	 	Net operating income goals for 2007 under the LTI Plan,
applicable to the 2005-2007, 2006-2008 and 2007-2009 LTI
Plan cycles. The LTI Plan potential bonus amounts are based
upon Registrant’s net operating income over three year
cycles, with goals set for each calendar year within the
three year cycle. Performance is determined at the end of
each calendar year and payouts are accrued until the end of
each three year cycle.	 
	 
	 	f.	 	The definition of net operating income for purposes of
determining performance and bonus payouts applicable to AIB
opportunities for 2007 and the 2007 LTI Plan cash targets
for the 2005-2007, 2006-2008 and 2007-2009 LTI Plan cycles.	 

#####

 

 

March 8, 2007

Private and Confidential

{Participant}

Re: CNAF LTI Cash Plan 2004-2006 Performance Cycle Payout

The Incentive Compensation Committee (ICC) of CNAF Board of Directors has determined the
performance level of achievement for the 2004-2006 performance cycle of the CNAF LTI Cash Plan.

The Long-Term Incentive plan generally provides that you will be eligible for an award based on the
achievement of the predetermined levels of the Company’s Net Operating Income (NOI), as defined by
the ICC. The NOI target and a range for minimum and maximum performance are set annually by the
ICC for each year within the relevant performance cycles.

For the 2004-2006 performance cycle, NOI goals and LTI attainment were determined according to the
following schedule.

The final NOI achievement for each year within the 3-year cycle is determined by the ICC, derived
from the net income reported in the Company’s financial statements, with adjustments applied based
on the NOI definition as approved by the ICC. The primary purpose for making adjustments to net
income is to remove those potential elements of income or loss which relate to one-time or
extraordinary events or developments or other matters that, in the judgment of the ICC, are not
appropriate to consider for purposes of assessing performance.

The amount payable to you under the terms of the Plan is $___. The payout amount is based on
the calculation provided in the table on the following page. It will be shown on your March 15,
2007 pay statement, as a separate line item labeled CNA LTIP (478). If you have any questions
regarding this calculation, please call Irma Quintana at extension 7828 or Megan Reilly at
extension 1295.

Sincerely,

#####

 

 

March 30, 2007

Private and Confidential

{Name}

{Address}

{Address}

			
	Re:	 	Grant of 2007-2009 Cash Long-Term Incentive Award

CNA Financial Corporation (the “Company”) has granted you a long-term incentive cash award (the
”Long-Term Incentive Award”) under the CNA Financial Corporation 2000 Incentive Compensation Plan
(the “Plan”) for the performance period beginning January 1, 2007 and ending December 31, 2009 (the
“Performance Period”). The Long-Term Incentive Award generally provides that you will be eligible
for an award opportunity based on the achievement of predetermined levels of the Company’s net
operating income (“NOI”). The NOI target goal and a schedule for minimum and maximum performance
levels will be set annually for each year within the relevant performance cycles. At the end of
each year NOI results will be determined and Long-Term Incentive Award payouts (if any) will be
accrued. No interest will be applied to the accruals.

For each year within the performance cycle 1/3 of the target award percentage will be applied to your
year-end base salary. Your target award for 2007-2009 Performance Period is ___% (“target bonus”).

For the calendar year 2007, NOI goals and Long-Term Incentive Award attainment will be determined
according to the following schedule.

Awards will be determined by interpolating between the minimum and maximum target attainments under
the schedule.

At the end of the Performance Period, the Compensation Committee of the Company’s Board of
Directors (“Committee”) that administers the Plan will determine the performance level achieved for
the period, and the amount, if any, distributable to you for your award under the terms of the
Plan.

This letter provides a summary of your Long-Term Incentive Award. This Long-Term Incentive Award
is subject to the Long-Term Incentive Award terms (the “Award Terms”) enclosed with this letter.
(In the attached Award Terms, you are referred to as the “Participant.”) This Award Letter shall
be subject to the Award Terms, and the Award Terms shall be subject to the provisions of the Plan.
If discrepancies arise between this Award Letter and the Award Terms, the Award Terms will govern,
and if discrepancies arise between the Award Terms and the Plan, the terms of the Plan will govern.
Note that the Award Terms impose certain restrictions on your Long-Term Incentive Award, and
provide that the Committee has the authority to reduce the amount of the Long-Term Incentive Award
otherwise payable to you, or cancel the Long-Term Incentive Award otherwise payable to you
entirely, all in its discretion as it determines necessary or appropriate.

Sincerely,

#####

 

 

Cash Long-Term Incentive Award Terms for Grant Under the

CNA Financial Corporation 2000 Incentive Compensation Plan

     On February 7, 2007 (the “Grant Date”), the Incentive Compensation Committee of the Board of
Directors of CNA Financial Corporation (the “Company”) set net operating income goals for a cash
long-term incentive award to the Participant for the 2007-2009 LTI Plan cycle (the “LTI Award”).
The LTI Award is subject to the following LTI Award terms (the “Award Terms”):

     1. LTI Award. For purposes of these Award Terms, the “Participant” shall be the
eligible person identified in the award letter included with these Award Terms (the “Award
Letter”). For purposes of these Award Terms, the amounts of the target LTI Award and the maximum
LTI Award are, respectively, the amounts specified in the Award Letter. The LTI Award has been
granted under the CNA Financial Corporation 2000 Incentive Compensation Plan (the “Plan”), which is
incorporated into and forms a part of these Award Terms. Certain words, terms and phrases used in
these Award Terms are defined in the Plan (rather than in these Award Terms or the Award Letter),
and, except where the context clearly implies or indicates the contrary and except as otherwise
provided in these Award Terms, a word, term, or phrase used or defined in the Plan is used or
defined identically in these Award Terms. Other words, terms or phrases used in these Award Terms
are defined in paragraph 9 or elsewhere in these Award Terms or the Award Letter.

     2. Performance Period. The “Performance Period” shall have the meaning set forth in
the Award Letter.

     3. Expiration. If the Participant’s Date of Termination of Affiliation occurs, prior
to payment for the Performance Period, then the following shall apply:

(a) Retirement. If the Participant’s Date of Termination of Affiliation occurs before the
last day of the Performance Period by reason of the Participant’s Retirement, the Participant shall
be eligible for a payment with respect to the LTI Award in accordance with the terms of these Award
Terms, as though the Participant remained employed by the Company through the end of the
Performance Period, and based on the Company’s actual performance for the period, but subject to a
proration based on the number of months of participation for the portion of the Performance Period
prior to the Participant’s Date of Termination of Affiliation. Distribution under this paragraph
(a) for the Performance Period shall be made at the normally scheduled time for such distribution
(determined without regard to the occurrence of the Participant’s Date of Termination of
Affiliation).

(b) Death or Disability. If the Participant’s Date of Termination of Affiliation occurs
before the last day of the Performance Period by reason of the Participant’s death or Permanent
Disability, the Participant (or the Participant’s estate) shall be eligible for a payment with
respect to the LTI Award in accordance with the terms of these Award Terms based on the Company’s
actual performance for the period, but subject to pro-ration based on the number of months of
participation for the portion of the Performance Period prior to the Participant’s Date of
Termination of Affiliation. Distribution under this paragraph (b) shall be made as soon as
practicable after the Participant’s Date of Termination of Affiliation.

(c) Voluntary, Involuntary Termination and Termination for Cause. If the Participant’s
Date of Termination of Affiliation occurs at any time prior to the distribution of the LTI Award
(as provided for in paragraph 6 below) by reason of termination of employment by the Participant’s
employer for Cause, or by

 

 

reason of the Participant’s voluntary or involuntary termination, the Participant’s LTI Award shall
be entirely forfeited.

Notwithstanding the foregoing provisions of this paragraph 3, if a Participant has engaged in any
conduct which constitutes Cause prior to distribution with respect to the LTI Award, the LTI Award
shall be entirely forfeited.

     4. New Hires/Promotions. If an eligible employee is hired during the Performance
Period, the Participant’s LTI Award will be pro-rated based on the appropriate number of complete
months of participation. If an eligible employee is promoted outside of the Company annual officer
salary review process, the Participant’s LTI Award will be pro-rated based on the appropriate
number of complete months of participation. If an eligible employee is promoted as part of the
Company annual officer salary review process, the Participant’s LTI Award will be effective as of
the beginning of the Performance Period.

     5. Award Amount. The amount to be distributed with respect to the LTI Award shall be
determined according to the schedule in the Award Letter, subject to review and approval of the
Compensation Committee of the Company’s Board of Directors (the “Committee”). If the Net Operating
Income for the Performance Period is at least the minimum level but less than the target level, the
amount distributable with respect to the LTI Award shall be interpolated between zero and the
target amount. If the Net Operating Income for the Performance Period is greater than the target
level but less than the maximum level, the amount distributable with respect to the LTI Award shall
be interpolated between the target amount and the maximum amount. As soon as practicable after the
necessary financial data for the Performance Period is available to the Committee, the Committee
shall make a determination of the extent of the achievement of the performance goal(s) for that
Performance Period, and shall make a determination of the amount, if any, of the distribution to be
made under the LTI Award to the Participant for the Performance Period. The Committee may, in its
discretion, reduce the amount of the LTI Award or cancel the LTI Award entirely.

     6. Settlement of Award. The amount that is distributable with respect to the LTI
Award shall be settled through cash payment of that amount to be made as soon as practicable as
determined by the Company after the Committee makes the determination described in paragraph 5.

     7. Administration. The authority to manage and to control the operation and
administration of these Award Terms shall be vested in the Committee, and the Committee shall have
all powers with respect to these Award Terms as it has with respect to the Plan. Any
interpretations of these Award Terms by the Committee and any decisions made by it with respect to
these Award Terms are final and binding on all persons.

     8. Governing Documents. The Award Letter shall be subject to these Award Terms, and
these Award Terms shall be subject to the provisions of the Plan, a copy of which may be obtained
by the Participant from the office of the Secretary of the Company. If discrepancies arise between
these Award Terms and the Plan, the terms of the Plan will govern. These Award Terms are subject
to all interpretations, amendments, rules, and regulations promulgated by the Committee from time
to time pursuant to the Plan.

     9. Definitions. For purposes of these Award Terms, the following definitions shall
apply:

 

 

(a) Affiliate. The term “Affiliate” means any business or entity in which at any relevant
time the Company directly or indirectly holds greater than a 10% equity (voting or non-voting)
interest.

(b) Cause. The Participant will have engaged in conduct that constitutes “Cause” if the
Participant (i) engages in any conduct which the Committee, in good faith, shall determine to be
fraudulent, constitute willful malfeasance or gross negligence, or inconsistent with the dignity
and character of an executive or other employee of the Company, or (ii) violates in a material
manner the then current rules of professional conduct or human resource policies of the Company.

(c) Date of Termination of Affiliation. The Participant’s “Date of Termination of
Affiliation” shall be the first day occurring on or after the Grant Date on which the Participant
is not employed by the Company or any Affiliate, as determined by the Company, regardless of the
reason for the termination of employment; provided that a termination of employment shall not be
deemed to occur by reason of a transfer of the Participant between the Company and an Affiliate or
between two Affiliates; and further provided that the Participant’s employment shall not be
considered terminated while the Participant is on a leave of absence from the Company or an
Affiliate approved by the Participant’s employer. If, as a result of a sale or other transaction,
the Participant’s employer ceases to be an Affiliate (and the Participant’s employer is or becomes
an entity that is separate from the Company), the occurrence of such transaction shall be treated
as the Participant’s Date of Termination of Affiliation, caused by the Participant being discharged
by the employer.

(d) Net Operating Income. “Net Operating Income” will mean net operating income of the
Company as defined by the Committee for the Performance Period.

(e) Permanent Disability. The term “Permanent Disability” means a physical or mental
condition of Participant which, as determined by the Committee in its sole discretion based on all
available medical information, is expected to continue indefinitely and which renders Participant
incapable of performing any substantial portion of the services required of Participant by the
Participant’s employer.

(f) Retirement. Termination because of “Retirement” shall mean the Participant’s Date of
Termination of Affiliation after attainment of age 62 or, if earlier, the Participant’s Date of
Termination of Affiliation which is designated by the Committee as a “Retirement” for purposes of
these Award Terms.exv10w1

 

Exhibit 10.1

February 28, 2007

Ms. Rosalyn Mallet

6141 Palomino

Plano, TX 75024

Re: Caribou Coffee Company, Inc.

Dear Rosalyn:

I am pleased to offer you the position of President & Chief Operations Officer of Caribou Coffee
Company, Inc. (the “Company”). The terms of this of employment are as follows:

Start Date: To be determined.

Base Salary: Your starting base salary will be $13,846.15 bi-weekly. You will be classified as an
exempt employee.

Target Bonus: Your annual target bonus will be 50% of your base earnings. A copy of the 2007
bonus plan is attached for your reference.

Signing Bonus: You will be paid a $25,000 signing bonus in the first payroll cycle following your
first day of employment.

Options: Subject to your executing a Stock Option Agreement you will be issued 200,000 stock
options upon your first day of employment. The strike price for these stock options will be the
closing price for the Company stock on the day this offer is accepted by both parties. The actual
stock options will be issued on your first day of employment.

Contemporaneously with the occurrence of a Change of Control, the Board (or its compensation
committee) will accelerate, if not automatically accelerated pursuant to the terms of the awards,
all outstanding stock option grants previously granted to you under any then existing Company stock
option, stock appreciations, or other employee equity incentive plan that are not otherwise
exercisable by you at the time the Change of Control occurs. “Change of Control” shall have the
meaning assigned to the term “Change of Control” in the 2005 Equity Incentive Plan.

Severance: If your employment with the Company is terminated for any reason other than “cause”
within 36 months from the date of your initial employment with the Company, you will be entitled to
Severance Payment(s) in an amount equal to one (1) year of salary at your last prevailing rate at
the time of termination. The Severance Payment(s) shall be paid, at the Companies option, in a
lump sum at that time, or in

 

 

 bi-weekly installments in accordance with the Companies normal compensation schedule. The Severance
Payment(s) shall be subject to all applicable employee withholding taxes, and Employee will be
responsible for all applicable taxes associated with the Severance Payment(s).

Benefits: You will be eligible to enroll in the Company medical and dental benefits the first of
the month following 30 days of employment. You will be eligible for other benefits such as the
Company 401(k) and short and long-term disability plans as your years of service with the Company
increase. On your first day, we will provide enrollment materials and further details on each
benefit plan. Should you have questions about any of these plans in advance of your first day of
employment, Karen McBride can answer your questions.

The Company shall reimburse you for one month of COBRA continuation expense for your medical and
dental expense with your former employer.

Pooled Leave: You will become eligible to accrue pooled leave on the first day of your employment.
Pooled leave will accrue on per check basis if you were paid for at least 64 hours. The schedule
below shows how you will accrue pooled leave in detail:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Days of Polled	 	 	Accrual Rate Per	 	 	Maximum Pooled	 
	Years of Service	 	Leave Per Year	 	 	Paycheck	 	 	Leave Bank	 
	0 to 6 years
	 	 	20	 	 	6.153 hours	 	160 hours
	7-10 years
	 	 	22.5	 	 	6.923 hours	 	180 hours
	10+ years
	 	 	25	 	 	7.692 hours	 	200 hours

Relocation: You will be eligible for relocation reimbursement of $15,000 in the first payroll
cycle following your first day of employment.

Employee Non-Disclosure, Non-Compete and Non-Solicitation Agreement: This offer of employment is
contingent upon you signing the Employee Non-Disclosure, Non-Compete and Non-Solicitation
Agreement. That agreement includes various provisions, which restrict certain types of competition
with the Company, and protect its confidential information and trade secrets. A copy of this
agreement is enclosed for your review.

Background and Reference Checks: Please note that this offer is contingent upon, and may be
rescinded if any adverse or untruthful information is found during a routine background check and
reference checks.

At Will Employer: We as that you understand that while we hope you will always enjoy working with
the Company, you always have the right to terminate your employment any time, for any reason,
without advance notice. Similarly, the Company reserves the right to terminate your employment at
any time, for any reason, without notice or cause.

 

 

Directorship: As you know the Board of Directors of the Company is made up of a majority of
independent directors as that term is used by the SEC and NASDAQ. By accepting this offer you will
no longer qualify as an independent director of the Company. Upon acceptance by both parties this
offer of employment shall constitute your resignation as a Director of the Company.

Acceptance: This offer of employment shall not be effective until is has been accepted by both you
and the Company. Upon acceptance by both parties we will need to file certain notices with the
SEC. We will of course coordinate those filings with you.

If you have any questions, please don’t to hesitate to contact me.

Sincerely,

Michael J. Coles

President, CEO & ‘Head Bou

	 	 	 
	Accepted:	 	
Accepted:
	 

 

Rosalyn T. Mallet	 	 

 

Michael J. Coles

Chairman of the Board & CEO

Caribou Coffee Company, Inc.
	 	 	 

	 
Date	 	March 5, 2007

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