EXHIBIT 10(i)
EMPLOYMENT AGREEMENT
BETWEEN
CP&L SERVICE COMPANY LLC
AND
WILLIAM CAVANAUGH III
AUGUST 1, 2000
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT ("Agreement"), dated as of the ____________ day of
_____________, 2000, between CP&L Service Company, LLC ("CP&L"), a North
Carolina corporation headquartered in Raleigh, North Carolina, and a subsidiary
of CP&L Energy, its successors or assigns and William Cavanaugh III
("Cavanaugh"). CP&L Energy and CP&L Service Company will be referred to herein
as "CP&L" or the "Company."
RECITALS
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1. The Company and Cavanaugh wish to enter into an employment
relationship whereby Cavanaugh will be employed by CP&L Service Company but will
serve as President and Chief Executive Officer of CP&L Energy, Inc.
2. Cavanaugh will be employed as an "at will" employee of CP&L. The
parties wish to enter into this Agreement to set forth certain terms related to
that relationship.
PROVISIONS
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NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
hereby agree as follows:
1. TERM OF THE AGREEMENT:
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(a) The Agreement becomes effective on August 1, 2000, and
shall remain in effect for a three-year period;
(b) Each year, the Agreement will be extended such that
prospective term will always be three years forward ("Evergrow provisions") on
the anniversary date of the effective date.
(c) Company may elect to not extend Agreement and must notify
Cavanaugh at least 60 days prior to the annual anniversary date of the
Agreement's effective date. In any event, the Agreement will be effective for
the remainder of its term.
(d) The Agreement cannot extend beyond Cavanaugh's normal
retirement date unless Cavanaugh is requested to serve in his full-time position
for a defined period as set forth by the Board of Directors.
2. RESPONSIBILITIES; OTHER ACTIVITIES.
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Cavanaugh shall occupy the position of President and Chief Executive
Officer of CP&L Energy, Inc., and shall undertake the general responsibilities
and duties of such position as directed by CP&L. During the Employment Term,
Cavanaugh shall perform faithfully the duties of Cavanaugh's position, devote
all of Cavanaugh's working time and energies to the business and affairs of CP&L
and shall use Cavanaugh's best efforts, skills and abilities to promote CP&L.
CP&L reserves the right to reassign Cavanaugh to other positions.
3. SALARY.
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As compensation for the services to be performed hereunder:
Cavanaugh will be paid a salary at the annual rate of Eight Hundred Eighty
Thousand Dollars ($880,000) (less applicable withholdings). Annual salary for
each subsequent year of the Employment Term shall be subject to adjustment by
CP&L at the annual salary review period for all similarly situated executives as
determined by CP&L in its discretion. Annual Salary shall be deemed earned
proportionally as Cavanaugh performs services over the course of the Salary
Year. Payments of annual Salary shall be made, except as otherwise provided
herein, in accordance with CP&L's standard payroll policies and procedures.
4. BENEFITS
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During the Employment Term, Cavanaugh shall be entitled to
participate in all Company sponsored benefits programs as CP&L may have in
effect upon terms and in accordance with policies and procedures substantially
equivalent to those then in effect and applicable generally to employees of
CP&L. Provided, however, that nothing contained in this Agreement shall require
CP&L to continue to offer such benefits or programs or to limit CP&L's absolute
right to modify or eliminate these benefits.
(a). Management Incentive Compensation Plan. Cavanaugh will be
eligible to participate in the Management Incentive Compensation Plan (MICP).
Pursuant to the terms of MICP, Cavanaugh's target compensation under such plan
will be 60% of base salary earnings. The annual target will increase to 65%
effective January 1, 2001, contingent upon the closing of the Florida Progress
Corporation ("FPC") acquisition.
(b). Long Term Incentives. Cavanaugh will be eligible to
participate in the Performance Share Sub-Plan under the 1997 Equity Incentive
Plan in accordance with the terms of the plan. Pursuant to the terms of the
plan, Cavanaugh's target compensation under such plan will be 75% of Cavanaugh's
base salary at the time of the award. Cavanaugh's target compensation shall
increase to 150% effective January 1, 2001, contingent upon the closing of the
FPC acquisition.
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(c). Restricted Share Grant. Cavanaugh will be eligible to
participate in the Restricted Share Grant Plan under the 1997 Equity Incentive
Plan in accordance with the terms of the plan. Additionally, Cavanaugh has
previously received other grants of CP&L restricted common stock pursuant to
Restricted Stock Agreement(s). Restrictions are based on continued employment.
(d). Management Deferred Compensation Plan. Cavanaugh will be
eligible for participation in CP&L's Management Deferred Compensation Plan
(MDCP), subject to its terms. Additionally, Cavanaugh has a vested benefit under
the suspended CP&L Deferred Compensation Plan for Key Management Employees.
Furthermore, Cavanaugh has a recruitment bonus with the Deferred Compensation
Plan for Key Management Employees as of September 1, 1992. This bonus included a
payment of One Hundred and Fifty Thousand Dollars ($150,000) deferred for the
calendar year 1992. This amount will be utilized to provide retirement income to
Cavanaugh of One Hundred Twenty One Thousand, Three Hundred Sixty Eight Dollars
($121,368) per year for 15 years, payable monthly commencing January 1 following
Cavanaugh's attainment of age 65. Reduced payments shall be made pursuant to an
agreed upon schedule if Cavanaugh dies prior to age 65.
(e). Supplemental Retirement Plan. Pursuant to its terms,
Cavanaugh is eligible for participation in CP&L Supplemental Retirement Plan
(SRP), subject to its terms.
(f). Supplemental Senior Executive Retirement Plan. Cavanaugh
shall be eligible for participation and immediately become fully vested in
CP&L's Supplemental Senior Executive Retirement Plan (SERP), subject to its
terms. Additionally, as of September 2, 1992, CP&L granted Cavanaugh fourteen
(14) years of deemed service for purposes of the plan.
(g). Executive Life Insurance Program. Cavanaugh shall be
eligible to participate in CP&L's Executive Permanent Life Insurance Plan,
subject to its terms. Coverage under this plan shall consist of an amount equal
to Two Million Three Hundred Seventy-Five Thousand Dollars ($2,375,000) in
addition to the Fifty Thousand Dollars ($50,000) in group term life insurance
policy provided to all senior executives with split dollar life insurance
coverage and shall be in lieu of any other insurance coverage available to
Company employees under the Company's group-term life insurance program.
Cavanaugh shall also be eligible to participate in the Executive Estate
Conservation Plan. Coverage under this plan shall be in an amount equal to Three
Million Dollars ($3,000,000) insuring the joint lives of Cavanaugh and his
spouse, with Cavanaugh's portion of the such premium to be paid by Cavanaugh or
the trustee of an irrevocable life insurance trust established by Cavanaugh if
the trust is the owner of the policy.
(h). Executive AD&D Life Insurance. Cavanaugh shall be
eligible to participate in CP&L's Executive AD&D Life Insurance Plan, subject to
its terms.
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(i). Stock Purchase-Savings Plan. Cavanaugh shall be eligible
to participate in CP&L's Stock Purchase-Savings Plan, subject to its terms.
(j). Directors' Educational Contribution Plan. Cavanaugh shall
be eligible to participate in the Directors' Educational Contribution Plan,
subject to its terms.
(k). Financial Planning. Consistent with CP&L's practice with
respect to other senior executives, Cavanaugh will be reimbursed for financial
planning and tax preparation.
(l). Vacation. Cavanaugh shall be entitled to four (4) weeks
of paid vacation days.
(m). Holiday. Cavanaugh will be eligible for eleven (11) paid
holidays in each calendar year as provided in the CP&L Handbook.
(n). Automobile Allowance. Cavanaugh will be eligible to
receive an automobile allowance of One Thousand Five Hundred Fifty Dollars
($1550) per month (less withholdings) subject to the terms of CP&L's policies.
Cavanaugh will also be eligible for a cellular phone and reserved parking at
CP&L's expense.
(o). Annual Physical. CP&L will pay for an annual physical
examination by a physician of Cavanaugh's choice.
(p). Health Club Membership. CP&L shall pay for the initiation
fee and monthly dues to a health club membership for Cavanaugh.
(q). Capital City Club. CP&L will pay an initiation fee and
monthly dues for a membership at the Capital City Club for Cavanaugh.
(r). Air Travel.
(i). CP&L will provide airline club membership in
accordance with CP&L's policy.
(ii). CP&L will reimburse Cavanaugh's spouse's travel
expenses when she accompanies Cavanaugh to business meetings where spousal
attendance is customary.
(iii). CP&L will provide chartered aircraft for
Cavanaugh's business related travel as needed.
(iv). CP&L will allow Cavanaugh to travel first class at
his discretion for business related travel.
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(v). Additionally, CP&L will provide Cavanaugh with other
travel related benefits as approved by the CP&L Energy, Inc. Board of Directors.
(s). Country Club Membership. At Cavanaugh's option, if
joined, CP&L will pay an initiation fee and monthly dues for a membership for
Cavanaugh at a country club approved by CP&L. Business related expenses will be
reimbursed consistent with CP&L's expense account guidelines.
(t). Personal Computer. CP&L will provide a personal computer
to Cavanaugh to be used at his personal residence.
(u). Home Security. CP&L will install a home security system
at Cavanaugh's personal residences.
(v). Other Benefits. Cavanaugh shall be eligible for
participation in other CP&L benefit plans, subject to the terms of the
respective plans, as described in more detail in the Employee Handbook or
Summary Plan Descriptions. In addition, after age 55 upon separation from
employment with CP&L, Cavanaugh will be entitled to the same medical and dental
coverage provided to other future retirees, provided that to the extent any such
benefit may not be provided to Cavanaugh due to statutory or regulatory
limitation, CP&L will obtain substantially equivalent coverage on an insured
basis.
5. TERMINATION OF EMPLOYMENT.
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(a). Termination Without Cause. During the terms of this
Agreement, if Cavanaugh's employment is terminated without cause, then Cavanaugh
will be provided with his base salary at Cavanaugh's current rate for the
remainder of the term of this Agreement. Additionally, CP&L will reimburse
Cavanaugh for his COBRA premium for up to eighteen (18) months after the
termination of Cavanaugh's employment as long as Cavanaugh is not eligible for
coverage under the same type of benefit plan covered by COBRA. Receipt of these
benefits is subject to the requirements of paragraph 5(g), (h) and (i) of this
Agreement. In addition, Cavanaugh will be eligible to retain all benefits under
existing benefit programs to the extent vested within the terms of those
programs.
(b) Termination for Cause. During the term of this Agreement,
CP&L may elect at any time to terminate Cavanaugh's employment immediately
hereunder and remove Cavanaugh from employment for cause. For purposes of this
paragraph 5, cause for the termination of employment shall be defined as: (i)
any act of Cavanaugh's including, but not limited to, misconduct, negligence,
unlawfulness, dishonesty or inattention to the business, which is detrimental to
CP&L's interests; or (ii) Cavanaugh's unsatisfactory job performance or failure
to comply with CP&L's direction, policies, rules or regulations. If Cavanaugh is
terminated for Cause as defined, then he shall be eligible to retain all
benefits under existing benefit programs which he has vested pursuant to those
plans, but he shall not be entitled to any form of salary
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continuance or any form of severance benefits. Upon such termination, Cavanaugh
shall be entitled to any earned but unpaid salary accrued to the date of
termination. Any continued rights or benefits Cavanaugh's legal representatives
may have under employee benefit plans and programs of CP&L upon Cavanaugh's
termination for cause shall be determined in accordance with the terms or
provisions of the plan or program.
(c). Constructive Termination.
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(i) Within the term of this Agreement, if Cavanaugh's
employment is constructively terminated, then Cavanaugh will be provided with
his base salary at the current rate for the remainder of the term of this
Agreement. Additionally, CP&L will reimburse Cavanaugh for his COBRA premiums
for up to eighteen (18) months after the termination of Cavanaugh's employment
as long as Cavanaugh is not eligible for coverage elsewhere under the same types
of benefits plans covered by COBRA. Receipt of these benefits is subject to the
requirements of paragraph 5(g), (h) and (i) of this Agreement. In addition,
Cavanaugh will be eligible to retain all benefits under existing benefit
programs to the extent vested within the terms of those programs.
(ii) For the purposes of paragraph 5 of this
Agreement, a constructive Termination will be deemed to occur if: aa) there is a
change in the form of ownership of CP&L (e.g., CP&L is acquired, enters into a
business combination with another company or otherwise changes form of
ownership) and bb) Cavanaugh is offered a new position with a material change in
authority, duties, wages or benefits, or Cavanaugh is asked to relocate more
than 50 miles. If Cavanaugh's employment is constructively terminated under this
paragraph, Cavanaugh is entitled to the greater of either the benefits contained
in this paragraph or the benefits he is entitled to, if any, under the CP&L
Management Change-in-Control Plan, according to the terms of the Plan. Changes
the corporation structure of CP&L not related to an acquisition of CP&L shall
not constitute a grounds for constructive termination.
(d). Voluntary Termination - If Cavanaugh terminates his
employment voluntarily for any reason at any time, then he shall be eligible to
retain all benefits under existing benefit plans which have vested pursuant to
the terms of those plans, but he shall not be entitled to any form of salary
continuance or any form of severance benefit.
(e). Termination Due to Death. In the event of the death of
Cavanaugh during the Employment Term, Cavanaugh's employment hereunder shall
terminate and CP&L shall have no further obligation to Cavanaugh under this
Agreement except as specifically provided in this Agreement. Cavanaugh's estate
shall be entitled to receive all earned but unpaid Salary accrued to the date of
termination and any Bonus for a prior fiscal year that has been earned but not
paid. The Bonus, if any, for the current fiscal year shall be calculated on a
pro rata basis for the portion of the fiscal year in which death occurred and
shall be paid at the regularly scheduled time for the payment of the Bonus. Any
rights and benefits Cavanaugh, or Cavanaugh's estate or other legal
representatives, may have under employee benefit plans and programs of CP&L upon
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Cavanaugh's death during the Employment Term, if any, shall be determined in
accordance with the terms and provisions of such plans and programs.
(f). Termination Due to Medical Condition.
(i). CP&L may terminate Cavanaugh's employment
hereunder, subject to the Americans With Disabilities Act or other applicable
law, due to medical condition if (i) for a period of 180 consecutive days during
the Employment Term, Cavanaugh is totally and permanently disabled as determined
in accordance with the Company's long-term disability plan, if any, as in effect
during such time or (ii) at any time during which no such plan is in effect,
Cavanaugh is substantially unable to perform Cavanaugh's duties hereunder
because of a medical condition for a period of 180 consecutive days during the
Employment Term. Provided, however, that if Cavanaugh applies for and is deemed
eligible for benefits under CP&L's Long-Term Disability Plan (LTD Benefits),
Cavanaugh shall receive such benefits and his employment will not be terminated
as long as he is receiving LTD Benefits.
(ii). Upon the termination of Cavanaugh's employment
due to medical condition or placement of Cavanaugh on Long Term Disability
(LTD), CP&L shall have no further obligation to Cavanaugh under this Agreement
except as specifically provided in this Agreement. Upon such termination or
placement on LTD, Cavanaugh shall be entitled to all earned but unpaid Salary
accrued to the date of termination or placement on LTD and any Bonus for a prior
fiscal year that has been earned but not paid. The Bonus, if any, for the
current fiscal year shall be calculated on a pro rata basis for the portion of
the fiscal year Cavanaugh was employed or placed on LTD by CP&L and shall be
paid at the regularly scheduled time for the payment of the Bonus. Any continued
rights and benefits Cavanaugh, or Cavanaugh's legal representatives, may have
under employee benefit plans and programs of CP&L upon Cavanaugh's termination
or placement on LTD due to medical condition, if any, shall be determined in
accordance with the terms and provisions of such plans and programs.
(g). Release of Claims - In order to receive continuation of
salary under this paragraph 5(a) and 5(c), Cavanaugh agrees to execute a written
release of all claims against CP&L, and its employees, officers, directors,
subsidiaries and affiliates, on a form acceptable to CP&L.
(h) Covenant Not to Compete. If CP&L terminates Cavanaugh's
employment without Cause under paragraph 5(a) or constructively terminates
Cavanaugh's employment under paragraph 5(c) of this Agreement, Cavanaugh, for
one year after the Termination Date, shall not compete directly or indirectly
with the Company, or its affiliates within fifty (50) miles of any geographic
area in which the Company or its affiliates has a material business interests
with which Cavanaugh is involved at the time of the termination of Cavanaugh's
employment.
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(i) Non Interference. If CP&L terminates Cavanaugh's
employment without Cause under paragraph 5(a) or Constructively terminates
Cavanaugh's employment under paragraph 5(c) of this Agreement, Cavanaugh, for
one year after the Termination Date, shall not whether on his own account or on
the account of another individual, partnership, firm, corporation, or other
business organization (other than the Company and its affiliates), directly or
indirectly, intentionally solicit, endeavor to entice away from the Company or
any of its affiliates, or otherwise interfere with the relationship of the
Company or its affiliates with, any person who is employed by or otherwise
engaged to perform services for the Company or its affiliates including but not
limited to, any independent representatives or organizations, or any person or
entity that is a customer of the Company or its affiliates.
6. ASSIGNABILITY.
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No rights or obligations of Cavanaugh under this Agreement may
be assigned or transferred by Cavanaugh, except that (a) Cavanaugh's rights to
compensation and benefits hereunder may be transferred by will or laws of
intestacy to the extent specified herein and (b) Cavanaugh's rights under
employee benefit plans or programs described in Section 4(a) may be assigned or
transferred in accordance with the terms of such plans or programs, or regular
practices thereunder. The Company may assign or transfer its rights and
obligations under this Agreement.
7. CONFIDENTIALITY. Cavanaugh will not disclose the terms of this
Agreement except (i) to financial and legal advisors under an obligation to
maintain confidentiality, or (ii) as required by a valid court order or subpoena
(and in such event will use Cavanaugh's best efforts to obtain a protective
order requiring that all disclosure be kept under court seal) and will notify
CP&L promptly upon receipt of such order or subpoena.
8. MISCELLANEOUS.
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(a) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
reference to laws governing conflicts of law.
(b) Entire Agreement. This Agreement contains all of the
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersedes all undertakings and agreements, whether
oral or in writing, if any, previously entered into by them with respect
thereto.
(c) Amendment or Modification; Waiver. No provision in this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Cavanaugh and by an officer of CP&L thereunto duly
authorized to do so. Except as otherwise specifically provided in the Agreement,
no waiver by a party hereto of any breach by the other party hereto of any
condition or provision of the Agreement to be performed by such other party
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shall be deemed a wavier of a similar or dissimilar provision or condition at
the same or any prior or subsequent time.
(d) Notice. Any notice (with the exception of notice of
termination by CP&L, which may be given by any means and need not be in writing
except that if termination is for Cause, oral notice must be followed by written
notice required under Section 5(c) hereof) or other document or communication
required or permitted to be given or delivered hereunder shall be in writing and
shall be deemed to have been duly given or delivered if (i) mailed by United
States mail, certified, return receipt requested, with proper postage prepaid,
or (ii) otherwise delivered by hand or by overnight delivery, against written
receipt, by a common carrier or commercial courier or delivery service, to the
party to whom it is to be given at the address of such party as set forth below
(or to such other address as a party shall have designated by notice to the
other parties given pursuant hereto):
If to Cavanaugh:
William Cavanaugh III
CP&L Energy, Inc.
411 Fayetteville Street Mall
Raleigh, North Carolina 27602
If to CP&L:
CP&L Service Company
411 Fayetteville Street Mall
Raleigh, North Carolina 27602
Attn.: Vice President of Human Resources
Any such notice, request, demand, advice, schedule, report, certificate,
direction, instruction or other document or communication so mailed or sent
shall be deemed to have been duly given, if sent by mail, on the third business
day following the date on which it was deposited at a United States post office,
and if delivered by hand, at the time of delivery by such commercial courier or
delivery service, and, if delivered by overnight delivery service, on the first
business day following the date on which it was delivered to the custody of such
common carrier or commercial courier or delivery service, as all such dates are
evidenced by the applicable delivery receipt, airbill or other shipping or
mailing document.
(e) Severability. In the event that any provision or portion
of this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions or portions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
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(f) References. In the event of Cavanaugh's death or a
judicial determination of Cavanaugh's incompetence, reference in this Agreement
to Cavanaugh shall be deemed, where appropriate, to refer to Cavanaugh's legal
representative, or, where appropriate, to Cavanaugh's beneficiary or
beneficiaries.
(g) Headings. Headings contained herein are for convenient
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(i) Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(i) Singular words shall connote the plural number as well
as the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(ii) All references herein to particular articles,
paragraphs, sections, subsections, clauses, Schedules or Exhibits are references
to articles, paragraphs, sections, subsections, clauses, Schedules or Exhibits
of this Agreement.
(iii) Each party and its counsel have reviewed and revised
(or requested revisions of) this Agreement, and therefore any rule of
construction requiring that ambiguities are to be resolved against a particular
party shall not be applicable in the construction and interpretation of this
Agreement or any exhibits hereto or amendments hereof.
(iv) As used in this Agreement, "including" is
illustrative, and means "including but not limited to."
(j) Remedies. Remedies specified in this Agreement are in
addition to any others available at law or in equity.
(k) Withholding Taxes. All payments under this Agreement shall
be subject to applicable income, excise and employment tax withholding
requirements.
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IN WITNESS WHEREOF, the parties hereto have executed, or have caused
this Agreement to be executed by their duly authorized officer, as the case may
be, all as of the day and year written below.
By: /s/William Cavanaugh III Date: October 30, 2000
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William Cavanaugh III
By: /s/ Robert B. McGehee Date: October 30, 2000
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CP&L Service Company LLC
Title: President & CEO
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