**PROGRESS
      ENERGY, INC.**





**NON-EMPLOYEE
      DIRECTOR**


**DEFERRED
      COMPENSATION PLAN**





**Restated
      Effective January 1, 2007**







**1.**  **RECITALS**





1.1  **Whereas,** Progress
      Energy, Inc. (the “Company”) adopted this Non-Employee Director Deferred
      Compensation Plan (the “Plan”) as of December 16, 1981 (the “Effective
      Date”).





1.2  **Whereas** ,
      the
      Company has maintained and operated the Plan since the Effective Date pursuant
      to individual deferral agreements with the Company’s Directors.





1.3  **Whereas** ,
      the
      Company adopted this written restatement of the Plan effective as of January
      1,
      2007 in order to clarify the rights and obligations under the Plan of the
      Company and its Directors.





**2.**  **PURPOSE**





2.1  **Purpose.** The
      purpose of the Plan is to
      permit
      the Company’s non-employee Directors to defer all or a portion of their annual
      retainers and meeting fees in the form of Stock Units (as defined below),
      thereby aligning the interests of the Directors with the interests of the
      Company’s shareholders.





2.2  **Limitations** .
      Distributions required or contemplated by this Plan or actions required to
      be
      taken under this Plan shall not be construed as creating a trust of any kind
      or
      a fiduciary relationship between the Company and any Director, any Director’s
      designated beneficiary, or any other person.





2.3  **Code
      Section 409A** .
      This
      Plan is intended to comply with the requirements of Section 409A of the Internal
      Revenue Code and the regulations and other guidance issued thereunder, as in
      effect from time to time (“Section 409A”). To the extent a provision of the Plan
      is contrary to or fails to address the requirements of Section 409A, the Plan
      shall be construed and administered as necessary to comply with such
      requirements until this Plan is appropriately amended.




















**3.**  **DEFINITIONS**





The
      following terms shall have the following meanings unless the context in which
      they are used clearly indicates that some other meaning is
      intended:





3.1  “Account”
      means the bookkeeping account maintained for each Director which shall be
      credited with all Voluntary Deferrals elected by a Director, all Automatic
      Deferrals and Matching Contributions made on behalf of a
      Director, and all dividend credits with respect to Stock Units in the Account,
      and other adjustments thereto.





3.2  “Automatic
      Deferral” means the portion of a Director’s annual retainer that is
      automatically deferred under this Plan pursuant to Section 6.1.





3.3  “Beneficiary”
      means the beneficiary or beneficiaries designated by a Director pursuant to
      Section 11.7 to receive the benefits, if any, payable on behalf of the Director
      under the Plan after the death of such Director, or, when there has been no
      such
      designation or an invalid designation, the individual or entity, or the
      individuals or entities, who will receive such amount.





3.4  “Board”
      means the Board of Directors of the Company.





3.5  “Change
      in Control” means “Change in Control,” as defined in Section 2.5.1 of the
      Progress Energy, Inc. Management Change in Control Plan (Amended and Restated
      Effective January 1, 2007).





3.6  “Code”
      means the Internal Revenue Code of 1986, as amended.





3.7  “Committee”
      means the Board’s Committee on Corporate Governance.





3.8  “Common
      Stock” means the common stock of the Company.





3.9  “Company”
      means Progress Energy, Inc., a North Carolina corporation, including any
      successor entity.





3.10  “Compensation”
      means a Director’s annual retainer fees, meeting fees and committee fees
      otherwise payable to such Director during his or her current term as a
      Director.





3.11  “Continuing
      Directors” mean the members of the Board as of January 1, 2007; provided,
      however, that any person becoming a Director subsequent to such date whose
      election or nomination for election was supported by 75 percent or more of
      the
      Directors who then comprised the Continuing Directors shall be considered to
      be
      a Continuing Director.












3.12  “Deferral
      Election” means an annual irrevocable election, made in accordance with Section
      6 in such form (electronic or otherwise) as approved and provided by the
      Committee, to defer the receipt of a designated amount of
      Compensation.





3.13  “Deferrals”
      mean Automatic Deferrals and Voluntary Deferrals.





3.14  “Director”
      means any person (other than a person who is an employee of the Company) who
      has
      been elected to serve as a member of the Board and any former member of the
      Board for whom an Account is maintained under this Plan.





3.15  “Effective
      Date” means January 1, 2007.





3.16  “Fair
      Market Value” means the average of the highest and lowest selling prices of
      Common Stock on the date a Director’s Account is credited (or on the last
      preceding trading date if Common Stock is not traded on such date) if Common
      Stock is readily tradable on a national securities exchange or other market
      system. If the Common Stock is not readily tradable on a national securities
      exchange or other market system, an amount determined in good faith by the
      Board
      as the fair market value of Common Stock on the date of
      determination.


3.17  “Matching
      Contributions” mean discretionary amounts the Company may from time to time
      contribute to Directors’ Accounts based on the Company’s achievement of
      corporate incentive goals.





3.18  “Plan”
      means this Progress Energy, Inc. Non-Employee Director Deferred Compensation
      Plan, as amended from time to time.





3.19  “Plan
      Year” means the calendar year ending on each December 31.





3.20  “Stock
      Units” mean investment units, each of which is deemed to be equivalent to one
      share of Common Stock.





3.21  “Voluntary
      Deferrals” mean the Compensation that a Director elects to defer under this Plan
      pursuant to Section 6.2.





**4.**  **ADMINISTRATION**





4.1  **Responsibility** .
      The
      Committee shall have the responsibility, in its sole discretion, to control,
      operate, manage and administer the Plan in accordance with its
      terms.















4.2  **Authority
      of the Committee** .
      The
      Committee shall have all the discretionary authority that may be necessary
      or
      helpful to enable it to discharge its responsibilities with respect to the
      Plan,
      including but not limited to the following:





(a)  to
      correct any defect, supply any omission, and reconcile any inconsistency in
      the
      Plan in such manner and to such extent as it shall deem appropriate in its
      sole
      discretion to carry the same into effect;





(b)  to
      issue
      administrative guidelines as an aid to administer the Plan and make changes
      in
      such guidelines as it from time to time deems proper;





(c)  to
      make
      rules for carrying out and administering the Plan and make changes in such
      rules
      as it from time to time deems proper;





(d)  to
      the
      extent permitted under the Plan, grant waivers of Plan terms, conditions,
      restrictions and limitations; and





(e)  to
      take
      any and all other actions it deems necessary or advisable for the proper
      operation or administration of the Plan.





4.3  **Action
      by the Committee** .
      The
      Committee may act only by a majority of its members. Subject to applicable
      law,
      any determination of the Committee may be made, without a meeting, by a writing
      or writings signed by all of the members of the Committee. In addition, the
      Committee may authorize any one or more of its members to execute and deliver
      documents on behalf of the Committee.





4.4  **Delegation
      of Authority** .
      Subject
      to applicable law, the Committee may delegate to one or more of its members,
      or
      to one or more agents, such duties, responsibility and authority with respect
      to
      this Plan as it may deem advisable. In addition, the Committee, or any person
      to
      whom it has delegated duties, responsibility and authority as aforesaid, may
      employ one or more persons to render advice with respect to any responsibility
      the Committee or such person may have under the Plan. The Committee may employ
      such legal or other counsel, consultants and agents as it may deem desirable
      for
      the administration of the Plan and may rely upon any opinion or computation
      received from any such counsel, consultant or agent. Expenses incurred by the
      Committee in the engagement of such counsel, consultant or agent shall be paid
      by the Company or the Subsidiary whose employees have benefited from the Plan,
      as determined by the Committee.





4.5  **Determinations
      and Interpretations by the Committee** .
      All
      determinations and interpretations made by the Committee shall be binding and
      conclusive on all Directors and their heirs, successors, and legal
      representatives.













**5.**  **ELIGIBILITY
      AND PARTICIPATION**





5.1  **Eligibility
      and Participation** **.** All
      Directors are automatically eligible and shall participate in the Plan.





**6.**  **DEFERRALS**





6.1  **Automatic
      Deferrals** .
      A
      portion of each Director’s annual retainer, in an amount established from time
      to time by the Board, shall automatically be deferred under this Plan, which
      amount for purposes of the Plan shall be referred to as an “Automatic Deferral.”
Unless and until changed by the Board, the annual amount of the Automatic
      Deferral shall be $15,000.





6.2  **Voluntary
      Deferrals** .
      In
      addition to Automatic Deferrals, a Director may elect to defer all or any
      portion, expressed as a whole percentage, of his or her remaining Compensation
      by filing the appropriate Deferral Election with the Committee's designee.
      Deferrals under this Section 6.2 shall be known as “Voluntary
      Deferrals.”





6.3 **First
      Term Deferral Elections** .
      An
      individual who is elected to serve as a Director or who is nominated for
      election as a Director (other than an individual who was a Director immediately
      before such election or nomination) shall have the right at any time before
      the
      end of the thirty (30) day period immediately following the effective date
      of
      his or her election as a Director to elect to defer the payment of all or any
      portion of his or her future Compensation by filing the appropriate Deferral
      Election with the Committee's designee.





6.4  **Annual
      Deferral Elections** .
      Before
      the beginning of each calendar year, a Director shall have the right to elect
      to
      defer the payment of his or her Compensation which is attributable to services
      rendered as a Director during such calendar year by filing the appropriate
      Deferral Election with the Committee's designee. Any Deferral Election which
      is
      made and which is not revoked before the beginning of such calendar year shall
      become irrevocable on the first day of such calendar year and shall remain
      irrevocable through the end of such calendar year.





6.5  **Automatic
      Renewal of Deferral Elections** .
      If a
      Director makes a Deferral Election under either Section 6.3 or Section 6.4
      for
      any calendar year and does not revoke such Deferral Election before the
      beginning of any subsequent calendar year, such Deferral Election shall remain
      in effect for each such subsequent calendar year and shall be irrevocable
      through the end of each subsequent calendar year.














6.6  **Account
      Credits** .
      The
      Compensation which a Director defers under this Section shall be credited to
      his
      or to her Account effective as of the business day on which such Compensation
      would otherwise have been paid to the Director.





**7.**
            **MATCHING
                CONTRIBUTIONS**





7.1  The
      Company may from time to time in its sole discretion make Matching Contributions
      to Directors’ Accounts which shall be converted to Stock Units as specified in
      Section 8.





**8.**  **STOCK
      UNITS**





8.1  **C** **onversion
      of Deferrals and Matching Contributions to Stock Units.** All
      Deferrals and Matching Contributions shall be converted to Stock Units on the
      day such Deferrals and Matching Contributions are credited to a Director’s
      Account. The number of Stock Units to be credited shall be determined by
      dividing the dollar value of the Deferrals and Matching Contributions credited
      to a Director’s Account by the Fair Market Value of one share of Common Stock as
      of the date on which the Deferrals and Matching Contributions are converted
      to
      Stock Units.





8.2  **Conversion
      of Dividend Equivalents to Stock Units** .
      Directors’ Accounts will be credited with additional fully vested Stock Units as
      of the payment date of any dividends declared on the Common Stock. The number
      of
      additional Stock Units credited to an Account shall be determined by dividing
      (i) the product of the per-share cash dividend amount (or the value of any
      non-cash dividend) times the number of Stock Units credited to the Account
      as of
      the record date for such dividend, by (ii) the Fair Market Value of one share
      of
      Common Stock as of the dividend payment date.


8.3  **No
      Other Investment Alternatives** .
      Nothing
      contained in this Plan shall be construed to give any Director any power or
      control to make investment decisions with respect to Deferrals or Matching
      Contributions other than the conversion to Stock Units as provided in this
      Section 8. Nothing contained in the Plan shall be construed to require the
      Company or the Committee to fund any Director's Account.





**9.**  **DISTRIBUTIONS**





9.1  **Vesting** **.** A
      Director shall be fully vested at all times in the Stock Units credited to
      his
      or her Account.

















9.2  **Timing
      and Form of Distributions**


(a)  Election
      Regarding Distributions .
      Directors must make or have in effect an election for each Plan Year regarding
      the timing of distributions to be made under the Plan as set forth in Section
      9.2(b) below (a “Distribution Election”). The Distribution Election shall have
      been or shall be made pursuant to a “Method of Payment Agreement” or otherwise
      pursuant to a Director’s Deferral Election.





A
      Director may only have one Distribution Election in effect with respect to
      Deferrals and Matching Contributions made prior to January 1, 2005 (the “409A
      Grandfathered Amounts”). A Director may change his or her Distribution Election
      with respect to 409A Grandfathered Amounts by completing and signing a new
      Method of Payment Agreement provided by the Company; provided, however, that
      any
      such new Method of Payment Agreement shall not be effective for a period of
      six
      (6) months from the day it is delivered to the Company.





With
      respect to Deferrals and Matching Contributions made after January 1, 2005,
      a
      Director must make or have in effect a Deferral Election with respect to an
      upcoming Plan Year no later than December 31 of the preceding Plan Year, which
      Deferral Election shall be irrevocable for such Plan Year. A Director may change
      his or her Distribution Election in effect for a subsequent Plan Year by
      delivering a new Method of Payment Agreement to the Company on or before
      December 31 of the preceding Plan Year. A Deferral Election will remain in
      effect for future Plan Years unless and until changed by the Director’s timely
      delivery of a new Method of Payment Agreement with respect to an upcoming Plan
      Year. A Director may not amend or change a Distribution Election with respect
      to
      any prior Plan Year. Notwithstanding the foregoing, a Director may make a
      one-time change to his or her Distribution Election with respect to all Plan
      Years, including the 2007 Plan Year, on or before December 31, 2007, subject
      to
      the transition relief rules under Code Section 409A and the regulations
      thereunder.





(b)  Timing
      of Distributions .
      A
      director’s Distribution Election shall specify whether the Director shall
      receive distributions (i) in a single lump sum payment in cash as soon as
      practicable following the first business day of the calendar year following
      the
      year in which the Director’s service as a member of the Board terminates for any
      reason or (ii) in a series of annual installments (not to exceed 10) commencing
      as soon as practicable following the first business day of the calendar year
      following the year in which the Director’s service as a member of the Board
      terminates for any reason. If the Director has elected to receive installment
      payments, the amount of each installment shall be determined by dividing the
      number of Stock Units credited to the Director’s Account on the first business
      day preceding the date of payment by the number of installments remaining to
      be
      paid, and then converting the number of Stock Units determined thereby into
      a
      cash payment as provided in Section 9.2(c) below.












(c)  Form
      of Distributions .
      All
      distributions under this Plan shall be in cash. Prior to any distribution,
      Stock
      Units shall be converted into the right to receive a cash payment equal to
      the
      number of Stock Units being distributed multiplied by the Fair Market Value
      of a
      share of Common Stock on the date of distribution.




(d)  Death .
      Notwithstanding anything in this Plan to the contrary (and regardless of any
      distribution election in the Director’s Deferral Agreement, Method of Payment
      Agreement or Deferral Election), the value of the Director's entire Account
      shall be distributed in a single lump sum to the Director’s Beneficiary as soon
      as administratively feasible after the Director’s death.





9.3  **Unforeseeable
      Emergency Payments.** In the
      event a Director incurs a financial hardship as a result of an “unforeseeable
      emergency” (as such term is defined below), the Director may apply to the
      Committee for the distribution of all or a portion of the Director’s Account.
      The application shall provide such information and be in such form as the
      Committee shall require. The Committee, in the exercise of its sole and absolute
      discretion, may approve or deny the request in whole or in part. The term
“unforeseeable emergency” shall mean a severe financial hardship to the Director
      resulting from an illness or accident of the Director, the Director’s spouse, or
      a dependent (as defined in Section 152(a) of the Code) of the Director, loss
      of
      the Director’s property due to casualty, or other similar extraordinary and
      unforeseeable circumstances arising as a result of events beyond the control
      of
      the Director. In no event may the amounts distributed with respect to an
      unforeseeable emergency exceed the amounts necessary to satisfy such emergency
      plus amounts necessary to pay taxes reasonably anticipated as a result of the
      distribution, after taking into account the extent to which such hardship is
      or
      may be relieved through reimbursement, cancellation of Deferrals for the
      remainder of the Plan Year, or compensation by insurance or otherwise or by
      liquidation of the Director’s assets (to the extent the liquidation of such
      assets would not itself cause severe financial hardship). If a Director receives
      a distribution of all or a portion of the Director’s Account pursuant to this
      Section 9.3, any Deferral Election in effect for the Director shall be
      cancelled, and the Director shall make no additional Voluntary Deferrals for
      the
      remainder of the current Plan Year. The Director may make Voluntary Deferrals
      with respect to future Plan Years by delivering a new Deferral Election in
      accordance with Section 6.4. Notwithstanding any provision in the Plan to the
      contrary, any payment made pursuant to this Section 9.3 shall comply with
      Section 409A(a)(2)(A)(vi) of the Code and the regulations (or similar guidance)
      promulgated thereunder (or under any successor provisions).












**10.**  **TERM
      OF PLAN; AMENDMENT AND TERMINATION**





10.1  **Term.** The
      Plan
      shall be effective as of the Effective Date. The Plan shall remain in effect
      until the Board terminates the Plan.





10.2  **Termination
      or Amendment of Plan** .
      The
      Board may amend, suspend or terminate the Plan at any time with or without
      prior
      notice; provided, however, ** that
      no
      action authorized by this Section 10.2 shall reduce the balance or adversely
      affect the Account of a Director.





**11.**  **MISCELLANEOUS**





11.1  **Adjustments** .
      If
      there shall be any change in Common Stock through merger, consolidation,
      reorganization, recapitalization, stock dividend, stock split, reverse stock
      split, split up, spin-off, combination of shares, exchange of shares, dividend
      in kind or other like change in capital structure or distribution (other than
      normal cash dividends) to holders of Common Stock, the number of Stock Units
      and
      the Director’s Account shall be adjusted to equitably reflect such change or
      distribution.





11.2  **Governing
      Law** .
      The
      Plan and all actions taken in connection herewith shall be governed by and
      construed in accordance with the laws of the State of North Carolina without
      reference to principles of conflict of laws, except as superseded by applicable
      federal law.





11.3  **No
      Right Title or Interest in Company Assets** .
      Directors shall have no right, title, or interest whatsoever in or to any
      investments which the Company may make to aid it in meeting its obligations
      under the Plan. Nothing contained in the Plan, and no action taken pursuant
      to
      its provisions, shall create or be construed to create a trust of any kind,
      or a
      fiduciary relationship between the Company and any Director, beneficiary, legal
      representative or any other person. To the extent that any person acquires
      a
      right to receive payments from the Company under the Plan, such right shall
      be
      no greater than the right of an unsecured general creditor of the Company.
      All
      payments to be made hereunder shall be paid from the general funds of the
      Company and, except as provided in Section 11.10 below, no special or separate
      fund shall be established and no segregation of assets shall be made to assure
      payment of such amounts.












11.4  **No
      Right to Continued Service** .
      The
      Director’s rights, if any, to continue to serve the Company as a member of the
      Board shall not be enlarged or otherwise affected by his or her participation
      in
      the Plan.





11.5  **Other
      Rights** .
      The
      Plan shall not affect or impair the rights or obligations of the Company or
      a
      Director under any other written plan, contract, arrangement, or pension, profit
      sharing or other compensation plan.





11.6  **Severability** .
      If any
      term or condition of the Plan shall be invalid or unenforceable to any extent
      or
      in any application, then the remainder of the Plan, with the exception of such
      invalid or unenforceable provision, shall not be affected thereby and shall
      continue in effect and application to its fullest extent. If, however, the
      Committee determines in its sole discretion that any term or condition of the
      Plan which is invalid or unenforceable is material to the interests of the
      Company, the Committee may declare the Plan null and void in its
      entirety.





11.7  **Beneficiary
      Designation.** Every
      Director may file with the Company a designation in such form (electronic or
      otherwise) as approved and provided by the Company of one or more persons as
      the
      Beneficiary who shall be entitled to receive the benefits, if any, payable
      under
      the Plan after the Director’s death. A Director may from time to time revoke or
      change such Beneficiary designation without the consent of any prior Beneficiary
      by filing a new designation with the Company. The last such designation received
      by the Company shall be controlling; provided, however, that no designation,
      or
      change or revocation thereof, shall be effective unless received by the Company
      prior to the Director’s death, and in no event shall it be effective as of any
      date prior to such receipt. All decisions of the Committee concerning the
      effectiveness of any Beneficiary designation and the identity of any Beneficiary
      shall be final. If a Beneficiary shall die after the death of the Director
      and
      prior to receiving the payment(s) that would have been made to such Beneficiary
      had such Beneficiary’s death not occurred, then for the purposes of the Plan the
      payment(s) that would have been received by such Beneficiary shall be made
      to
      the Beneficiary’s estate.





11.8  **Transferability
      of Rights** .
      No
      Director or spouse of a Director shall have any right to encumber, transfer
      or
      otherwise dispose of or alienate any present or future right or expectancy
      which
      the Director or such spouse may have at any time to receive payments of benefits
      hereunder, which benefits and the right thereto are expressly declared to be
      nonassignable and nontransferable, except to the extent required by law. Any
      attempt to transfer or assign a benefit, or any rights granted hereunder, by
      a
      Director or the spouse of a Director shall be null and void and without
      effect.












11.9  **Entire
      Document** .
      The
      Plan, as set forth herein, supersedes any and all prior practices,
      understandings, agreements, descriptions or other non-written arrangements
      with
      respect to the subject matter hereof.





11.10 **Change
      in Control.** In
      the
      case of a Change in Control, the Company, subject to the restrictions in this
      Section 11.10 and in Section 11.3, shall irrevocably set aside funds in one
      or
      more grantor trusts in an amount that is sufficient to pay each Director the
      value of the Director’s Account as of the date on which the Change in Control
      occurs; provided, however, that the Company shall establish no such trust if
      the
      assets thereof are includable in the income of Directors thereby pursuant to
      Section 409A(b). The obligations and responsibilities of the Company under
      this
      Plan shall be assumed by any successor or acquiring corporation, and all of
      the
      rights, privileges and benefits of the Directors hereunder shall continue
      following the Change in Control.








IN
      WITNESS WHEREOF, this instrument has been executed this 13th day of December,
      2006.





PROGRESS
      ENERGY, INC.








By:  /s/ Robert B. McGehee


Robert
      B.
      McGehee


Chief
      Executive Officer