AMENDED MANAGEMENT INCENTIVE COMPENSATION PLAN OF PROGRESS ENERGY, INC. AS AMENDED July 12, 2011 TABLE OF CONTENTS

A Change in Control shall not be deemed to have occurred until a majority of the members of the Board receive written certification from the Compensation Committee that one of the events set forth in this Section 6 has occurred.  Any determination that an event described in this Section 6 has occurred shall, if made in good faith on the basis of information available at that time, be conclusive and binding on the Compensation Committee, the Sponsor, each Affiliated Entity, the Participant and their Beneficiaries for all purposes of the Plan.

7. “Company”:  The Sponsor and each Affiliated Entity.

8. “Compensation Committee”:  The Organization and Compensation Committee of the Board of Directors of the Sponsor.

9. “Continuing Director”:  The members of the Board as of the Effective Date; provided, however, that any person becoming a director subsequent to such date whose election or nomination for election was supported by seventy-five percent (75%) or more of the directors who then comprised Continuing Directors shall be considered to be a Continuing Director.

10. “Date of Retirement”:  The first day of the calendar month immediately following the Participant’s Retirement.

11. “Designated Beneficiary”:  The beneficiary designated by the Participant, pursuant to procedures established by the Human Resources Department of the Company, to receive amounts due to the Participant or to exercise any rights of the Participant to the extent permitted hereunder in the event of the Participant’s death.  If the Participant does not make an effective designation, then the Designated Beneficiary will be deemed to be the Participant's estate.

12. “Earnings”:  The net income of the Participating Employer as determined from time to time by the Compensation Committee.

13. “ECIP Goals”:  The goals set forth to receive a payment under the Employee Cash Incentive Plan of each department or business unit of the Company.

14. “Effective Date”:  The Effective Date of this Plan, as amended, is January 1, 2009.

 

15. “EPS”:  The on-going earnings per share of the Sponsor’s Common Stock for a Year as determined by the Compensation Committee from time to time.

16. “Legal Entity Earnings”:  The Earnings of the Participating Employer which employs the Participant.

17. “Participant”:  An employee of a Participating Employer who is selected pursuant to Article IV hereof to be eligible to receive an Award under the Plan.

18. “Participating Employer”:  Each Affiliated Entity that, with the consent of the Compensation Committee, adopts the Plan and is included in Exhibit C, as in effect from time to time.

19. “Performance Measures”:  The EPS, Legal Entity Earnings and ECIP Goals.

20. “Performance Unit”:  A unit or credit, linked to the value of the Sponsor’s Common Stock under the terms set forth in Article VI hereof.

21. “Performance Unit Subaccount”:  A notational bookkeeping account maintained under the Plan at the direction of the Compensation Committee representing a deemed investment in Performance Units, including the Incentive Performance Units described in Section 4 of Article VI, and associated earnings and adjustments.  The number of Performance Units awarded to a Participant shall be recorded in each Participant’s Performance Unit Subaccount as of the first day of the month coincident with or next following the month in which a deferral becomes effective with respect to Awards deferred for Years beginning prior to January 1, 2009, and thereafter with respect to deferred Awards allocated to the Performance Unit Subaccount by the Participant.  The number of Performance Units recorded in a Participant’s Plan Deferral Account shall be adjusted to reflect any splits or other adjustments in the Sponsor’s Common Stock, the payment of any cash dividends paid on the Sponsor’s Common Stock and the payment of Awards under this Plan to the Participant.  To the extent that any cash dividends have been paid on the Sponsor’s Common Stock, the number of Performance Units shall be adjusted to reflect the number of Performance Units that would have been acquired if the same dividend had been paid on the number of Performance Units recorded in the Participant’s Plan Deferral Account on the dividend record date.  For purposes of determining the number of Performance Units acquired with such dividend, the average of the opening and closing price of the Sponsor’s Common Stock on the payment date of the Sponsor’s Common Stock dividend shall be used.

22. “Phantom Investment Fund”:  A deemed investment option for purposes of the Plan, each of which shall be the same as those investment options generally available to all participants in the Progress Energy 401(k) Savings & Stock Ownership Plan, as amended from time to time, or as otherwise selected by the Compensation Committee.  Provided, however, the Company’s common stock shall not be a deemed investment option under this Plan for Section 16 Officers with respect to Deferrals made after September 1, 2010.  If a Participant becomes a Section 16 Officer after submitting a deferral election that specifies an allocation to the Performance Unit Subaccount, that portion shall be allocated to the stable value Phantom Investment Subaccount.

23. “Phantom Investment Subaccount”:  A notational bookkeeping account maintained under the Plan at the direction of the Compensation Committee representing a deemed investment in one or more Phantom Investment Funds as directed by the Participant under Section 6 of Article VI, including the Performance Unit Subaccount of the Participant, if

24. “Plan”:  The Management Incentive Compensation Plan of Progress Energy, Inc. as contained herein, and as it may be amended from time to time.

25. “Retirement”:  A Participant’s termination of employment from the Company on or after attaining (i) age 65 with 5 years of service, (ii) age 55 with 15 years of service, or (iii) 35 years of service.

 

26. “Salary”:  The compensation paid by the Company to a Participant in a relevant Year, consisting of regular or base compensation, such compensation being understood not to include bonuses, if any, or incentive compensation, if any.  Provided, that such compensation shall not be reduced by any cash deferrals of said compensation made under any other plans or programs maintained by such Company.

27. “Section 16 Officer”:  a Participant who is subject to Section 16 of the Securities Exchange Act of 1934.

28. “Senior Management Committee”:  The Senior Management Committee of the Company.

29. “Section 409A”:  Section 409A of the Code, or any successor section under the Code, as amended and as interpreted by final or proposed regulations promulgated thereunder from time to time and by related guidance.

30. “Separation from Service”:  The death, Retirement or other termination of employment with the Company as defined for purposes of Section 409A.

31. “Sponsor”:  Progress Energy, Inc., a North Carolina corporation, or any successor to it in the ownership of substantially all of its assets.

32. “Target Award Opportunity”:  The target for an Award under this Plan as set forth in Section 1 of Article V hereof.

33. “Unforeseeable Emergency”:  A severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

34. “Valuation Date”:  The last day of each calendar month and such other dates as selected by the Compensation Committee, in its sole discretion.

35. “Weighted Achievement Percentage”:  The percentage determined by multiplying the relative percentage weight assigned to each of the Performance Measures applicable to the

 

The Plan shall be administered by the Chief Executive Officer of the Sponsor. Except as otherwise provided herein, the Chief Executive Officer of the Sponsor shall have sole and complete authority to (i) select the Participants; (ii) establish and adjust (either before or during the Year) the performance criteria necessary for a Participant to attain an Award for the Year; (iii) adjust and approve Awards; (iv) establish from time to time regulations for the administration of the Plan; and (v) interpret the Plan and make all determinations deemed necessary or advisable for the administration of the Plan, all subject to its express provisions. Notwithstanding the foregoing, the Compensation Committee shall (a) approve the applicable threshold, target and outstanding levels of performance for a Performance Measure for the Year; (b) approve the performance criteria and Awards for all Participants who are members of the Senior Management Committee; and (c) certify to the Board that a Change in Control has occurred as provided in Section 6 of Article II.

The Chief Executive Officer of the Sponsor shall select from time to time the Participants in the Plan for each Year from those employees of each Company who, in his opinion, have the capacity for contributing in a substantial measure to the successful performance of the Company that Year.  No employee shall at any time have a right to be selected as a Participant in the Plan for any Year nor, having been selected as a Participant for one Year, have the right to be selected as a Participant in any other Year.

The Target Award Opportunity for the Chief Executive Officer of the Sponsor shall be 85%; however, the Compensation Committee of the Board shall be authorized to change that amount from year to year, or to award an amount of compensation based on other considerations, in its complete discretion.

2. Award Components.  Awards under the Plan to which Participants are eligible shall depend upon the achievement of the Performance Measures for the Year.  Prior to the beginning of each Year, or as soon as practical thereafter, the Chief Executive Officer of the Sponsor will establish and the Compensation Committee will approve the Performance Measures for the Year, their relative percentage weight, and the performance criteria necessary for attainment of various performance levels.  Attached hereto as Exhibit A are the relative percentage weights for each of the Performance Measures for each level of participation as of the Effective Date, which may be changed from time to time by the Compensation Committee.

3. Performance Levels.  The Compensation Committee may establish three levels of performance related to a Performance Measure: outstanding, target, and threshold.  In such case, the payout percentages to be applied to each Participant’s Target Award Opportunity are as follows:

Payout percentages shall be adjusted for performance between the designated performance levels; provided, however, that performance which falls below the “Threshold” performance level results in a payout percentage of zero.

4. Determination of Award Amount.  The Chief Executive Officer of the Sponsor shall determine the amount of the Award, if any, earned by each Participant for the Year; provided, that the Compensation Committee shall approve the amount of the Award for a Participant who is a member of the Senior Management Committee.  The amount of an Award earned by the Participant shall be determined by multiplying the Salary times the Target Award

5. New Participants.  Any Award that is earned during the initial Year of participation shall be pro rated based on the length of time served in the qualifying job.

6. Adjustment of Award Amount.  The Chief Executive Officer of the Sponsor, in his sole discretion, may adjust the Award for the Year payable to Participants who are not members of the Senior Management Committee based upon management’s determination of the performance goals and core skill achievement of the Participant, the succession planning leadership rating of the Participant and any other applicable performance criteria.  Similar adjustments of Awards to Participants who are members of the Senior Management Committee shall be subject to approval by the Compensation Committee.

7. Example.  Attached as Exhibit B and incorporated by reference is an example of the process by which an Award is granted hereunder.  Exhibit B is intended solely as an example and in no way modifies the provisions of this Article V.

1. Distribution of Awards.  Unless a Participant elects to defer an Award pursuant to the remaining provisions of this Article VI, Awards under the Plan earned during any Year shall be paid in cash by March 15 of the succeeding Year.

2. Deferral Election.  A Participant may elect to defer the Plan Award he or she will earn for any Year by completing and submitting a deferral election in a form acceptable to the Vice President, Human Resources, by the last day of the preceding Year (or such other time as permitted by Section 409A).  Such election shall apply to the Participant’s Award, if any, otherwise to be paid after the Year during which it is earned. A Participant’s deferral election may apply to 100%, 75%, 50%, or 25% of the Plan Award; provided, however, that in no event shall the amount deferred be less than $1,000.

The election to defer shall be irrevocable as to the Award earned during the particular Year except as provided in Section 10 of this Article VI or as may be permitted by rules promulgated under Section 409A and the plan administrator.

3. Period of Deferral.  At the time of a Participant’s deferral election, a Participant must also select a distribution date and form of distribution.  Subject to Section 7, the distribution date may be: (a) any date that is at least five (5) years subsequent to the date the Plan Award would otherwise be payable, but not later than the second anniversary of the Participant’s Date of Retirement; or (b) any date that is within two years following the Participant’s Date of Retirement.  Subject to Section 7, the form of distribution may be either (i) a lump sum or (ii) equal installments over a period extending from two years to ten years, as elected by the

4. Performance Units.  All Awards which are deferred under the Plan with respect to Years beginning prior to January 1, 2009, shall be recorded in the form of Performance Units.  Each Performance Unit is generally equivalent to a share of the Sponsor’s Common Stock. In converting the cash Award with respect to Years beginning prior to January 1, 2009, to Performance Units, the number of Performance Units granted shall be determined by dividing the amount of the Award by 85% of the average value of the opening and closing price of a share of the Sponsor’s Common Stock on the last trading day of the month preceding the date of the Award.  The Performance Units attributable to the 15% discount from the average value of the Sponsor’s Common Stock shall be referred to as the “Incentive Performance Units.”  The Incentive Performance Units and any adjustments or earnings attributable to those Performance Units shall be forfeited by the Participant if he or she terminates employment either voluntarily or involuntarily other than for death or Retirement prior to five years from March 15 of the Year in which payment would have been made if the Award had not been deferred; provided, however, that if before such date the employment of the Participant is terminated by the Company without Cause following a Change in Control, the Incentive Performance Units shall not be forfeited but shall be payable to the Participant in accordance with Section 9 of this Article VI.

5. Phantom Investments.  Effective with respect to Awards earned in Years beginning on and after January 1, 2009, the Participant shall allocate in his or her deferral election the deferred Award among the Phantom Investment Subaccounts made available by the Compensation Committee.  The Participant may elect to reallocate the value of his Phantom Investment Subaccounts among other Phantom Investment Subaccounts once per calendar month, pursuant to uniform rules and procedures adopted by the Compensation Committee.  A Participant having a Plan Deferral Account as of December 31, 2008, may reallocate any part of the balance in the Plan Deferral Account (other than amounts attributable to Incentive Performance Units) among the Phantom Investment Subaccounts pursuant to uniform rules and procedures adopted by the Compensation Committee.  Effective September 1, 2010, Section 16 Officers may not reallocate the value of his or her Phantom Investment Subaccounts into the Performance Unit Subaccount.

6. Plan Accounts.  A Plan Deferral Account will be established on behalf of each Participant electing to defer payment of an Award under the Plan.  The Plan Deferral Account shall represent the aggregate balance in the Phantom Investment Subaccounts of the Participant.  Phantom Investment Subaccounts shall be valued as of each Valuation Date based on the notional investments of each such account, and shall be stated in a unit value or dollar amount, pursuant to rules and procedures adopted by the Compensation Committee.  Each Participant shall receive an annual statement of the balance of his Plan Deferral Account.

7. Payment of Deferred Plan Awards.  Subject to Section 4 related to forfeiture of Incentive Performance Units, the balance in the Plan Deferral Account shall be paid in cash to the Participant within sixty (60) days after the deferred distribution date specified by the Participant in accordance with Section 3.  The balance in the Plan Deferral Account shall be

In the event that a Participant elects to receive the deferred Plan Award in equal annual payments, the amount of the Award to be received in each year shall be determined as follows:

                      (a)           To determine the amount of the initial annual payment, the balance in the Participant’s Plan Deferral Account as of the applicable Valuation Date will be divided by the total number of annual payments to be received by the Participant.

                      (b)           To determine the amount of each successive annual payment, the balance in the Participant’s Plan Deferral Account as of the Valuation Date next preceding the date of payment will be divided by the number of annual payments remaining to be received.

8. Termination of Employment/Effect on Deferral Election.  If the employment of a Participant terminates prior to the last day of a Year for which a Plan Award is determined, then any deferral election made with respect to such Plan Award for such Year shall not become effective and any Plan Award to which the Participant is otherwise entitled shall be paid as soon as practicable after the end of the Year during which it was earned, in accordance with Section 1 of this Article VI.

9. Separation from Service/Payment of Deferral.  Notwithstanding the foregoing, if a Participant Separates from Service by reason other than death or Retirement, full payment of all amounts due to the Participant shall be made within sixty (60) days following the date of Separation.  However, if the Participant is a “key employee” as defined in Section 416(i) of the Code (but determined without regard to paragraph 5 thereof or the 50 employee limit on the number of officers treated as key employees), payment shall not be made before the date that is six months after the date of Separation from Service for any reason including Retirement (or, if earlier, the date of death of the Participant).  Incentive Performance Units shall be subject to forfeiture to the extent provided in Section 4.

10. Payments Due to Unforeseeable Emergency.  In the event of an Unforeseeable Emergency, a Participant may apply to receive a distribution earlier than initially elected.  The Chief Executive Officer of Sponsor or his designee may, in his sole discretion, either approve or deny the request.  The determination made by the Chief Executive Officer of Sponsor will be final and binding on all parties.  If the request is granted, the amount distributed will not exceed the amount necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated to result from the distribution, after taking into account the extent to which such hardship is or may be relieved through cancellation of a deferral election under this Section 10, reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent such liquidation of assets would not itself cause severe

11. Death of a Participant.  If the death of a Participant occurs before a full distribution of the Participant’s Plan Deferral Account is made, the remaining portion of the Participant’s Plan Deferral Account shall be paid in a lump sum to the Designated Beneficiary of the Participant within sixty (60) days following notification that death has occurred.  The balance in the Plan Deferral Account shall be determined as of the Valuation Date next preceding the date of payment.

12. Non-Assignability of Interests.  The interests herein and the right to receive distributions under this Article VI may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, the interests of the Participant under this Article VI may be terminated by the Chief Executive Officer of Sponsor, which, in his sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such Participant or make any other disposition of such interests that he deems appropriate.

13. Unfunded Deferrals.  Nothing in this Plan, including this Article VI, shall be interpreted or construed to require the Sponsor or any Company in any manner to fund any obligation to the Participants, terminated Participants or beneficiaries hereunder.  Nothing contained in this Plan nor any action taken hereunder shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Sponsor or any Company and the Participants, terminated Participants, beneficiaries, or any other persons.  Any funds which may be accumulated in order to meet any obligation under this Plan shall for all purposes continue to be a part of the general assets of the Sponsor or Company.  The Sponsor or Company may establish a trust to hold funds intended to provide benefits hereunder to the extent the assets of such trust become subject to the claims of the general creditors of the Sponsor or Company in the event of bankruptcy or insolvency of the Sponsor or Company.  To the extent that any Participant, terminated Participant, or beneficiary acquires a right to receive payments from the Sponsor or Company under this Plan, such rights shall be no greater than the rights of any unsecured general creditor of the Sponsor or Company.

14. Change in Control.  In the case of a Change in Control, the Company shall, subject to the restrictions in this Section 14 and Section 13 of Article VI, irrevocably set aside funds in one or more such grantor trusts in an amount that is sufficient to pay each Participant employed by such Company (or Designated Beneficiary) the net present value as of the date on which the Change in Control occurs, of the benefits to which Participants (or their Designated Beneficiaries) would be entitled pursuant to the terms of the Plan if the value of their Plan Deferral Account would be paid in a lump sum upon the Change in Control.  Notwithstanding the preceding sentence, the Company shall not set aside funds, revocably or irrevocably, in one

15. Limitation on Trust.  Notwithstanding the provisions of the foregoing Sections 13 and 14, the Company shall establish no such trust if the assets thereof shall be includable in the income of Participants thereby pursuant to Section 409A(b).

Except as otherwise provided in this Article VII, a Participant must be actively employed by the Company on the next January 1 immediately following the Year for which a Plan Award is earned in order to be eligible for payment of an Award for that Year.  In the event the active employment of a Participant shall terminate or be terminated for any reason, including death, before the next January 1 immediately following the Year for which a Plan Award is earned, such Participant shall receive his or her Award for the year, if any, in an amount that the Chief Executive Officer of the Sponsor deems appropriate.  Notwithstanding the foregoing provisions of this Article VII, in the event the employment of the Participant is terminated by the Company without Cause within one (1) year following a Change in Control, the Award of the Participant for the Year in which the termination occurs shall equal the amount of the Award which would have been earned for the Year if the Participant had remained in the employment of the Company through December 31, pro rated to reflect the portion of the Year completed by the Participant as an employee; provided, however, that such Award shall not be less than the Target Award Opportunity of the Participant for the Year, pro rated to reflect the portion of the Year completed by the Participant as an employee.

1. Assignments and Transfers.  The rights and interests of a Participant under the Plan may not be assigned, encumbered or transferred except, in the event of the death of a Participant, by will or the laws of descent and distribution.

2. Employee Rights Under the Plan.  No Company employee or other person shall have any claim or right to be granted an Award under the Plan or any other incentive bonus or similar plan of the Sponsor or any Company.  Neither the Plan, participation in the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Sponsor or any Company.

3. Withholding.  The Sponsor or Company (as applicable) shall have the right to deduct from all amounts paid in cash any taxes required by law to be withheld with respect to such cash payments.

4. Amendment or Termination.  The Compensation Committee may in its sole discretion amend, suspend or terminate the Plan or any portion thereof at any time; provided, that in the event of a Change in Control, no such action shall take effect prior to the January 1 next

5. Governing Law.  This Plan shall be construed and governed in accordance with the laws of the state of North Carolina to the extent not preempted by federal law and in a manner consistent with the requirements of Section 409A.

6. Entire Agreement.  This document (including the Exhibits attached hereto) sets forth the entire Plan.

Any and all prior designations of one or more beneficiaries by me under the Management Incentive Compensation Plan of Progress Energy, Inc. are hereby revoked and superseded by this designation. I understand that the primary and contingent beneficiaries named above may be changed or revoked by me at any time by filing a new designation with the Sponsor’s Human Resources Department.