Ex-Progress CEO Johnson’s severance package outlined

William Johnson, the Chairman, President and CEO of Progress Energy from October 2007 until July 2 when Progress merged into Duke Energy (NYSE: DUK) will receive a severance package that could exceed $9m, according to Securities & Exchange Commission (SEC) documents filed by Duke on July 3.

Duke took the power industry by surprise July 3 when, in announcing completion of the long-sought-after Progress merger, it revealed that Johnson would not be staying on as CEO of the new, expanded Duke Energy. Instead that role will be filled by pre-merger Duke CEO James Rogers, who will also hold the previously announced post of chairman of the merged company.

The Johnson separation agreement appears to indicate that Johnson has agreed to release Duke from any potential legal claims and has agreed to certain “non-competition, non-solicitation, non- disparagement and confidentiality covenants,” according to the 8K filing.

Johnson, age 58, had actually entered into a three-year employment agreement with Duke on June 27, just days before the merger was final.  The agreement called for Johnson to serve as president and CEO of the merged company effective upon closing of the merger on July 2.

Duke, Johnson reached settlement agreement

According to Duke’s 8K filing, the Johnson employment agreement provided for an annual base salary of $1.1m, an annual short-term target bonus opportunity equal to 125% of his then current annual base salary and an annual long-term target opportunity of 500% of his then current annual base salary.

“In connection with Mr. Johnson’s resignation, on the Effective Date, Mr. Johnson and Duke Energy entered into a “separation and settlement agreement,” Duke said.

“Mr. Johnson will be entitled to the benefits to be provided upon a resignation of employment for “good reason” pursuant to the Johnson Employment Agreement, described above under the heading “Employment Agreement with William D. Johnson,” including a cash severance payment of $7,425,000, which is equal to three times the sum of Mr. Johnson’s annual base salary and target annual cash bonus as of the Effective Date, a cash payment of $1,375,000, representing Mr. Johnson’s target annual cash bonus for 2012, measured as of the Effective Date, continued health and welfare benefits, reimbursement for relocation expenses and accelerated vesting of all his equity compensation awards,” Duke said in the 8K.

“In addition, in consideration of the various covenants identified above, Mr. Johnson is eligible to receive a lump sum payment equal to the lesser of (i) $1.5 million or (ii) the portion of the $1.5 million that, when aggregated with the other payments that are contingent upon a change in control, would not be an “excess parachute payment” within the meaning of Section 280G of the Code. In the event that Mr. Johnson is not entitled to any payments under the preceding sentence, Duke Energy will make a $500,000 payment to Mr. Johnson and, to the extent any payment under the Separation Agreement would constitute an “excess parachute payment” and result in an excise tax under the golden parachute tax rules, Duke Energy would provide a payment to place Mr. Johnson in the same position as if no excise tax had been triggered in accordance with the terms of the CIC Plan. In addition, Mr. Johnson will be entitled to his accrued and unpaid benefits under Progress Energy’s retirement and deferred compensation plans.”

Johnson will evidently be paid all of his salary and unused vacation within 15 business days following his resignation.

Other employees took pre-merger buy-out

Approximately 1,150 employees accepted the termination benefits during the voluntary window period, which closed on Nov. 30, 2011. Total severance payments associated with the merger, including this voluntary program and payments to Johnson are estimated to be between $225m and $275m., Duke said in the filing.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.