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|                                                |                                                  | Page   |
|-----------------------------------------------------|-------------------------------------------------------|--------|
|                                                |                                                  |   |
| ARTICLE                  I                          | PURPOSE                                               | 1      |
|                                                |                                                  |   |
| ARTICLE                  II                         | DEFINITIONS                                           | 1      |
|                                                |                                                  |   |
| ARTICLE                  III                        | ADMINISTRATION                                        | 7      |
|                                                |                                                  |   |
| ARTICLE                  IV                         | PARTICIPATION                                         | 8      |
|                                                |                                                  |   |
| ARTICLE                  V                          | AWARDS                                                | 8      |
|                                                |                                                  |   |
| ARTICLE                  VI                         | DISTRIBUTION                  AND DEFERRAL OF AWARDS  | 11     |
|                                                |                                                  |   |
| ARTICLE                  VII                        | TERMINATION                  OF EMPLOYMENT            | 17     |
|                                                |                                                  |   |
| ARTICLE                  VIII                       | MISCELLANEOUS                                         | 18     |
|                                                |                                                  |   |
| EXHIBIT                  A                          | MICP                  RELATIVE PERFORMANCE WEIGHTINGS |   |
|                                                |                                                  |   |
| EXHIBIT                  B                          | MANAGEMENT                  INCENTIVE EXAMPLE         |   |
|                                                |                                                  |   |
| EXHIBIT                  C                          | PARTICIPATING                  EMPLOYERS              |   |
|                                                |                                                  |   |
| FORM                  OF DESIGNATION OF BENEFICIARY |                                                  |   |

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| (a)   | embezzlement                or theft from the Company, or other acts of dishonesty, disloyalty                or                otherwise injurious to the Company; |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | disclosing                without authorization proprietary or confidential information of                the                Company; |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | committing                any act of negligence or malfeasance causing injury to the Company; |
|-----------------|-----------------------------------------------------------------------------------------------|

| (d)   | conviction                of a crime amounting to a felony under the laws of the United States                or                any of the several states; |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | any                violation of the Company’s Code of Ethics; or |
|-----------------|------------------------------------------------------------------------|

| (f)   | unacceptable                job performance which has been substantiated in accordance with the                normal                practices and procedures of the                Company. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (a)   | the                date any person or group of persons (within the meaning of Section                13(d)                or 14(d) of the Securities Exchange Act of 1934), excluding employee                benefit plans of the Sponsor, becomes, directly or indirectly, the                “beneficial owner” (as defined in Rule 13d-3 promulgated under the                Securities Act of 1934) of securities of the Sponsor representing                twenty-five percent (25%) or more of the combined voting power of                the                Sponsor’s then outstanding securities (excluding the acquisition of                securities of the Sponsor by an entity at least eighty percent (80%)                of                the outstanding voting securities of which are, directly or indirectly,                beneficially owned by the Sponsor);                or |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | the                date of consummation of a tender offer for the ownership of more                than                fifty percent (50%) of the Sponsor’s then outstanding voting securities;                or |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | the                date of consummation of a merger, share exchange or consolidation                of the                Sponsor with any other corporation or entity regardless of which                entity is                the survivor, other than a merger, share exchange or consolidation                which                would result in the voting securities of the Sponsor outstanding                immediately prior thereto continuing to represent (either by remaining                outstanding or being converted into voting securities of the surviving                or                acquiring entity) more than sixty percent (60%) of the combined voting                power of the voting securities of the Sponsor or such surviving or                acquiring entity outstanding immediately after such merger or                consolidation; or |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | the                date, when as a result of a tender offer or exchange offer for the                purchase of securities of the Sponsor (other than such an offer by                the                Sponsor for its own securities), or as a result of a proxy contest,                merger, share exchange, consolidation or sale of assets, or as a                result of                any combination of the foregoing, individuals who are Continuing                Directors                cease for any reason to constitute at least two-thirds (2/3) of the                members of the Board; or |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | the                date the shareholders of the Sponsor approve a plan of complete                liquidation or winding-up of the Sponsor or an agreement for the                sale or                disposition by the Sponsor of all or substantially all of the Sponsor’s                assets; or |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f)   | the                date of any event which the Board determines should constitute a                Change in                Control. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

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| Participation                                                                              | Target                Award Opportunities |
|--------------------------------------------------------------------------------------------|-------------------------------------------|
| Chief                Executive Officer of Sponsor*                                         | 85%                                       |
| Chief                Operating Officer of Sponsor*                                         | 70%                                       |
| Presidents*/Executive                Vice Presidents*                                      | 55%                                       |
| Senior                Vice Presidents*                                                     | 45%                                       |
| Department                Heads                                                            | 35%                                       |
| Other                Participants:Key                ManagersOther                Managers |  25%20%                              |

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*(Signature      page follows)*

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**MICP      **
**RELATIVE      PERFORMANCE WEIGHTINGS**

| **POSITION**                                                           |  **COMPANY****EPS** | **LEGAL**** ENTITY****EBITDA** |  **ECIP****GOALS** |
|------------------------------------------------------------------------|--------------------------|-------------------------------------|-------------------------|
| SMC                - CEO                                          | 100%                | -                              | -                  |
| SMC                - COO                                          | 45%                 | 55%                            | -                  |
| SMC                - Presidents                                   | 45%                 | 55%                            | -                  |
| SMC                - Service Company CEO                          | 100%                | -                              | -                  |
| SMC                - Non Service Company                          | 35%                 | 65%                            | -                  |
| SMC                - Service Company                              | 100%                | -                              | -                  |
| Non                Service Company Department Heads and Managers  | 25%                 | 50%                            | 25%                |
| Service                Company Department Heads and Managers      | 45%                 | 30%                            | 25%                |

| Note: | This                structure may be modified from time to time as provided in Section                2 of                Article V of the Plan. In addition, the Compensation Committee may                consider ECIP Goals in determining any reduction of Awards of Participants                who are members of the Senior Management                Committee. |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **MANAGEMENT                INCENTIVE EXAMPLE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             (Assumes                preliminary PDP and Succession Planning rates are                complete)                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Step                1: Calculate achievement factor****for                members of a department**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Achievement                Level | Achievement                Percentage | Weighting(see                Pro Rate %) | AchievementFactor |   |   |   |
| PGN                EPS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Target | 100% | 25.0% | 25.0% |   |   |   |
| Legal                entity EBITDA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Outstanding | 200% | 50.0% | 100.0% |   |   |   |
| ECIP                goals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | At                least 7 | 100% | 25.0% | 25.0% |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **Total                achievement factor** | **150.0%**Would                be calculated for each BU |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Step                2:** **Apply                achievement factor to target levels**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Target% | Achievement                Factor | InitialPayout                % |   |   |   |   |
| Department                Head                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 35.0% | 150.0% | 52.5% |   |   |   |   |
| Section                Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 25.0% | 150.0% | 37.5% |   |   |   |   |
| Unit                Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 20.0% | 150.0% | 30.0% |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Step                3:** **Determine                dollars eligible by department:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  Salary | Target% | InitialPayout                % | Calculated                Award |   |   |   |
| John                Doe, Department Head                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 200,000 | 35.0% | 52.5% | 105,000 |   |   |   |
| Jane                Doe, Section Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 100,000 | 25.0% | 37.5% | 37,500 |   |   |   |
| John                Smith, Section Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 120,000 | 25.0% | 37.5% | 45,000 |   |   |   |
| Jane                Smith, Unit Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 80,000 | 20.0% | 30.0% | 24,000 |   |   |   |
| John                Jones, Unit Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 75,000 | 20.0% | 30.0% | 22,500 |   |   |   |
| Jane                Jones, Unit Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 90,000 | 20.0% | 30.0% | 27,000 |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   | 261,000 |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Step                4:** **Provide                each group executive a list of their departments and calculated award                totals.****Allow                them to redistribute dollars based on organization performance within                group.**                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **Step                5:** **Allocate                dollars by group and department:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  Salary | Target% | InitialPayout                % | Calculated                Award | Discretionary                Adjustment | Actual                Award | Award% |
| John                Doe                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 200,000 | 35% | 52.5% | 105,000 | (12,600) | 92,400 | 46.2% |
| Jane                Doe                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 100,000 | 25% | 37.5% | 37,500 | 5,000 | 42,500 | 42.5% |
| John                Smith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 120,000 | 25% | 37.5% | 45,000 | (3,000) | 42,000 | 35% |
| Jane                Smith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 80,000 | 20% | 30.0% | 24,000 | - | 24,000 | 30% |
| John                Jones                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 75,000 | 20% | 30.0% | 22,500 | 5,000 | 27,500 | 36.7% |
| Jane                Jones                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 90,000 | 20% | 30.0% | 27,000 | (10,400) | 16,600 | 18.4% |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   | 261,000 |   | 245,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Per                group executive, department total to spend is $245,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (Step                4) |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| General                notes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| The                departmental sheets would still be rolled into group level sheets                and                reviewed by level as in prior years (all dh’s together, 25% participants,                20% participants)Discretion                based on PDP (core skills and performance goals) and succession planning                ratingsDiscretionary                percentage should reflect a range of +/- TBD% of payout % for                groupSteps                1 & 2 (MICP) fund determination) based on legal entities. Steps 3-5                (MICP allocation) utilize reporting                organization/group. |

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**PARTICIPATING      EMPLOYERS**

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**DESIGNATION      OF BENEFICIARY**

**MANAGEMENT      INCENTIVE COMPENSATION PLAN**

**OF**

**PROGRESS      ENERGY, INC.**

***Management      Incentive Compensation Plan***
* *

***Management      Incentive Compensation Plan***