Document:

exhibit10a.htm

Exhibit 10(a)

 

AMENDED MANAGEMENT INCENTIVE COMPENSATION PLAN

OF

PROGRESS ENERGY, INC.

 

AS AMENDED September 1, 2010

  

  

  

 

TABLE OF CONTENTS

Page

 

	
 

ARTICLE I

	
 

PURPOSE

	
 

1

	
 

ARTICLE II

	
 

DEFINITIONS

	
 

1

	
 

ARTICLE III

	
 

ADMINISTRATION

	
 

9

	
 

ARTICLE IV

	
 

PARTICIPATION

	
 

9

	
 

ARTICLE V

	
 

AWARDS

	
 

10

	
 

ARTICLE VI

	
 

DISTRIBUTION AND DEFERRAL OF AWARDS

	
 

12

	
 

ARTICLE VII

	
 

TERMINATION OF EMPLOYMENT

	
 

19

	
 

ARTICLE VIII

	
 

MISCELLANEOUS

	
 

19

	
 

EXHIBIT A 

	
 

MICP RELATIVE PERFORMANCE WEIGHTINGS

	
 

EXHIBIT B 

	
 

MANAGEMENT INCENTIVE EXAMPLE

	
 

EXHIBIT C

	
 

PARTICIPATING EMPLOYERS

	
 

FORM OF DESIGNATION OF BENEFICIARY

 

 

  

  

  

 

ARTICLE I

PURPOSE

The purpose of the Management Incentive Compensation Plan (the “Plan”) of Progress Energy, Inc. is to promote the financial interests of the Company, including its growth, by (i) attracting and retaining executive officers and other management-level employees who can have a significant positive impact on the success of the Company; (ii) motivating such personnel to help the Company achieve annual incentive, performance and safety goals; (iii) motivating such personnel to improve their own as well as their business unit/work group’s performance through the effective implementation of human resource strategic initiatives; and (iv) providing annual cash incentive compensation opportunities that are competitive with those of other major corporations.

The Sponsor amends and restates the Plan effective January 1, 2010.  The terms of the amended and restated Plan shall govern the payment of any benefits commencing after January 1, 2010.

 

ARTICLE II

DEFINITIONS

The following definitions are applicable to the Plan:

1. “Achievement Factor”:  The sum of the Weighted Achievement Percentages determined for each of the Performance Measures for the Year.

2. “Award”:  The benefit payable to a Participant hereunder based upon achievement of the Performance Measures and as may be adjusted in accordance with Section 6 of Article V below.

 

  

  

  

 

3. “Affiliated Entity”:  Any corporation or other entity that is required to be aggregated with the Sponsor pursuant to Sections 414(b), (c), (m), or (o) of the Internal Revenue Code of 1986, as amended (the “Code”), but only to the extent required.

4. “Board”:  The Board of Directors of the Sponsor.

5. “Cause”:  Any of the following:

	
(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.

6. “Change in Control”: The earliest of the following dates:

	
(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

 

  

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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

 

  

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(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.

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

 

  

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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.

 

  

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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

 

  

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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 any, for allocations of deferred Awards prior to September 1, 2010 and any Incentive Performance Units.

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.

 

  

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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 Participant for the Year by the payout percentage corresponding to the level of achievement of the Performance Measure as determined for each department or business unit for the Year.

36. “Year”:  A calendar year.

 

  

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ARTICLE III

ADMINISTRATION

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.

A majority of the Compensation Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the members of the Committee without a meeting, shall be the acts of such Committee.

ARTICLE IV

PARTICIPATION

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

 

  

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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.

ARTICLE V

AWARDS

1. Target Award Opportunities.  The following table sets forth Target Award Opportunities, expressed as a percentage of Salary, for various levels of participation in the Plan:

	
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 Managers

Other Managers

Supervisory Personnel

	
 

                 25% and 30%

20%

                           10%, 12%, and 15%

 

*Senior Management Committee level positions.

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

 

  

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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:

 

	 Performance Level	 Payout Percentage
	 Outstanding	 200%
	 Target	 100%
	 Threshold	 50%

 

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 Opportunity times the Achievement Factor applicable to the Participant for the Year.  The amount of the Award of a Participant is subject to further adjustment as provided in Section 6 of this Article V.

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.

 

  

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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.

ARTICLE VI

DISTRIBUTION AND DEFERRAL OF AWARDS

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.

 

  

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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 Participant.  A Participant may not subsequently change the distribution date and form of distribution designated in the initial deferral election.

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

 

  

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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,

 

  

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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 determined as of the Valuation Date next preceding the date of payment to the Participant.  To convert the Performance Units in a Participant’s Performance Unit Subaccount to a cash payment amount, Performance Units shall be multiplied by the closing price of the Sponsor’s Common Stock on the last trading day coincident with or next preceding the applicable Valuation Date.  Except as otherwise provided in Sections 7, 8, 9 and 10 of this Article VI, the deferred amounts will be paid either in a single lump-sum payment or in up to ten (10) annual payments as elected by the Participant at the time of the deferral election.

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

 

  

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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

 

  

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financial hardship).  Any deferral election made with respect to a Plan Award that would otherwise become payable by the next succeeding March 15 shall be cancelled and such Plan Award shall be paid in cash by the next succeeding March 15 pursuant to Section 1.  Incentive Performance Units shall not be subject to early distribution under this Section 10 until five years from March 15 of the Year in which payment would have been made if the Award had not been deferred.

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

 

  

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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.

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).

 

  

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ARTICLE VII

TERMINATION OF EMPLOYMENT

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.

ARTICLE VIII

MISCELLANEOUS

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.

 

  

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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 following the Year in which occurs the Change in Control.  No action to amend, suspend or terminate the Plan shall affect the right of a Participant to the payment of a Plan Award earned prior to the effective date of such action, or permit the acceleration of the time or schedule of any payment of amounts deferred under the Plan (except as provided in regulations under Section 409A).

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.

 

(Signature page follows)

 

  

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IN WITNESS WHEREOF, this instrument has been executed this ___ day of _________, 2010.

PROGRESS ENERGY, INC.

By:           ___________________________________

William D. Johnson

Chief Executive Officer

  

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EXHIBIT A

 

MICP RELATIVE PERFORMANCE WEIGHTINGS

 

	

 

POSITION

 

	

 

 COMPANY

EPS

 

	

 

LEGAL ENTITY

EARNINGS

 

	

 

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

	
50%

	
50%

	
–

	
Service Company Department Heads and Managers

	
50%

	
50%

	
–

	
Note:

	
This structure may be modified from time to time as provided in Section 2 of Article V of the Plan.  The Compensation Committee may consider ECIP Goals achievement in determining any reduction of Awards of Participants who are members of the Senior Management Committee.  In addition, the CEO may consider ECIP Goals achievement in determining any reduction of Awards for all other Participants.

 

  

  

  

 

 

EXHIBIT B

 

	
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 %)

	
Achievement

 Factor

	  	  	  	  
	
PGN EPS

	
Target

	
100%

	
50.0%

	
             50.0%

	  	  	  	  
	
Legal Entity Earnings

	
Outstanding

	
200%

	
50.0%

	
            100.0%

	  	  	  	  
	  	
Total achievement factor

	
            150.0%   Would be calculated for each BU

	  
	  	  	  	  	  	  	  	  	  
	
Step 2:  Apply achievement factor to target levels

	  	  	  	  
	  	
Target

%

	
Achievement Factor

	
Initial

Payout %

	  	  	  	  	  
	
Department Head

	
35.0%

	
150.0%

	
52.5%

	  	  	  	  	  
	
Other Section Manager

Section Manager

	
30.0%

25.0%

	
150.0%

150.0%

	
45.0%

37.5%

	  	  	  	  	  
	
Unit Manager

	
20.0%

	
150.0%

	
30.0%

	  	  	  	  	  
	
Supervisor

	
15.0%

	
150.0%

	
22.5%

	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Step 3:  Determine dollars eligible by department:

	  	  	  	  
	  	
 

Salary

	
Target

%

	
Initial

Payout %

	
Calculated Award

	  	  	  	  
	
John Doe, Department Head

	
200,000

	
35.0%

	
52.5%

	
$105,000

	  	  	  	  
	
John Que, Other Section Manager

Jane Doe, Section Manager

	
100,000

100,000

	
30.0%

25.0%

	
45.0%

37.5%

	
45,000

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, Supervisor

	
90,000

	
15.0%

	
22.5%

	
20,250

	  	  	  	  
	  	  	  	  	
$299,250

	  	  	  	  
	
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

%

	
Initial

Payout %

	
Calculated Award

	
Discretionary Adjustment

	
Actual Award

	
Award

%

	  
	
John Doe

	
200,000

	
35.0%

	
52.5%

	
$105,000

	
($12,600)

	
$92,400

	
46.2%

	  
	
John Que,

Jane Doe

	
100,000

100,000

	
30.0%

25.0%

	
45.0%

37.5%

	
45,000

37,500

	
0

5,000

	
45,000

42,500

	
     45.0%

42.5%

	  
	
John Smith

	
120,000

	
25.0%

	
37.5%

	
45,000

	
(3,000)

	
42,000

	
35%

	  
	
Jane Smith

	
80,000

	
20.0%

	
30.0%

	
24,000

	
-

	
24,000

	
30%

	  
	
John Jones

	
75,000

	
20.0%

	
30.0%

	
22,500

	
5,000

	
27,500

	
36.7%

	  
	
Jane Jones

	
90,000

	
15.0%

	
22.5%

	
20,250

	
(3,050)

	
17,200

	
19.11%

	  
	  	  	  	  	
$299,250

	  	
$290,600

	  	  
	  	  	  	  	  	  	  	  	  
	  	  	
Per group executive, department total to spend is $245,600

	  	  
	  	  	
(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, 10%  participants, 12% participants,  and15% participants)

 

  

1

  

 

Discretion based on PDP (core skills and performance goals) , succession planning ratings, and ECIP Goals achievement

Discretionary percentage should reflect a range of +/- TBD% of payout % for group

Steps 1 & 2 (MICP) fund determination) based on legal entities.  Steps 3-5 (MICP allocation) utilize reporting organization/group.

 

  

2

  

 

EXHIBIT C

 

PARTICIPATING EMPLOYERS

Progress Energy Carolinas, Inc.

 

Progress Energy Service Company, LLC

 

Progress Energy Florida, Inc.

 

Progress Energy Ventures, Inc.

 

Progress Fuels Corporation (corporate employees)

 

  

  

  

 

DESIGNATION OF BENEFICIARY

MANAGEMENT INCENTIVE COMPENSATION PLAN

OF

PROGRESS ENERGY, INC.

As provided in the Management Incentive Compensation Plan of Progress Energy, Inc., I hereby designate the following person as my beneficiary in the event of my death before a full distribution of my Deferral Account is made.

PRIMARY BENEFICIARY:

_______________________________

_______________________________

_______________________________

CONTINGENT BENEFICIARY:

_______________________________

_______________________________

_______________________________

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.

DATE: __________________

SIGNATURE OF PARTICIPANT: _________________________________

The Participant named above executed this document in our presence on the date set forth above.

WITNESS:                                                           WITNESS:  ___________________________________exhibit10b.htm

Exhibit 10(b)

 

PROGRESS ENERGY, INC.

 

AMENDED AND RESTATED

 

MANAGEMENT DEFERRED COMPENSATION PLAN

 

 

Adopted as of January 1, 2000

 

(As Revised and Restated effective September 1, 2010)

 

  

  

  

TABLE OF CONTENTS

 

Page

 

	PREAMBLE	 1

 

	
ARTICLE I DEFINITIONS

	 2

	
  

	
1.1

	
Account Balance      

	 2

	
  

	
1.2

	
Additional Deferral Election

	 2

	
  

	
1.3

	
Affiliated Company

	 2

	
  

	
1.4

	
Board

	 2

	
  

	
1.5

	
Board Committee

	 2

	
  

	
1.6

	
Change in Control

	 2

	
  

	
1.7

	
Change of Form Election

	 4

	
  

	
1.8

	
Change-of-Investment Election

	 4

	
  

	
1.9

	
Code

	 4

	
  

	
1.10

	
Committee

	 5

	
  

	
1.11

	
Company

	 5

	
  

	
1.12

	
Company Incentive Plans

	 5

	
  

	
1.13

	
Continuing Directors

	 5

	
  

	
1.14

	
Deemed Investment Return

	 5

	
  

	
1.15

	
Deferral Election

	 5

	
  

	
1.16

	
Deferrals

	 6

	
  

	
1.17

	
Effective Date

	 6

	
  

	
1.18

	
Eligible Employee

	 6

	
  

	
1.19

	
Employee Stock Incentive Plan

	 6

	
  

	
1.20

	
Enrollment Form

	 6

	
  

	
1.21

	
ERISA

	 6

	
  

	
1.22

	
[Reserved]

	 6

	
  

	
1.23

	
Investment Election

	 7

	
  

	
1.24

	
Matching Allocation

	 7

	
  

	
1.25

	
Net Salary

	 7

	
  

	
1.26

	
Participant

	 7

	
  

	
1.27

	
Participant Accounts

	 7

	
  

	
1.28

	
Participant Company Account

	 7

	
  

	
1.29

	
Participant Deferral Account

	 8

	
  

	
1.30

	
Participant Matchable Deferral

	 8

	
  

	
1.31

	
Payment Commencement

	 8

	
  

	
1.32

	
Phantom Investment Fund

	 8

	
  

	
1.33

	
Phantom Funds Account

	 9

	
  

	
1.34

	
Phantom Investment Subaccount

	 9

	
  

	
1.35

	
Phantom Stock Unit

	 9

	
  

	
1.36

	
Plan

	 9

	
  

	
1.37

	
Plan Year

	 9

	
  

	
1.38

	
Plan Year Accounts

	 10

	
  

	
1.39

	
Progress Energy 401(k) Savings & Stock Ownership Plan

	 10

	
  

	
1.40

	
Retirement Date

	 10

	
  

	
1.41

	
Salary

	 10

 

 

  

i

  

 

 

	
  

	
1.42

	
Section 409A

	 10

	
  

	
1.43

	
Separation from Service

	 11

	
  

	
1.44

	
SMC Participant

	 11

	
  

	
1.45

	
Sponsor

	 11

	
  

	
1.46

	
SSERP

	 11

	
  

	
1.47

	
Valuation Date

	11

	
  

	
1.48

	
Value

	11

	
  

	
1.49

	
Years of Service

	12

 

	
ARTICLE II PARTICIPATION

	 13

	
  

	
2.1

	
Eligibility

	13

	
  

	
2.2

	
Commencement of Participation

	13

	
  

	
2.3

	
Annual Participation Agreement

	13

	
  

	
2.4

	
Election of Phantom Investment Subaccounts

	13

 

	
ARTICLE III DEFERRAL ELECTIONS

	 14

	
  

	
3.1

	
Participant Deferred Salary Elections

	14

	
  

	
3.2

	
Matching Allocations

	16

 

	
ARTICLE IV ACCOUNTS

	 17

	
  

	
4.1

	
Maintenance of Accounts

	17

	
  

	
4.2

	
Separate Plan Year Accounts

	17

	
  

	
4.3

	
Phantom Investment Subaccounts

	17

	
  

	
4.4

	
Administration of Deferral Accounts

	17

	
  

	
4.5

	
Administration of Company Accounts

	18

	
  

	
4.6

	
Change of Phantom Investment Subaccounts and Phantom Stock Units

	20

	
  

	
4.7

	
Transferred Accounts

	 20

 

	
ARTICLE V VESTING

	 22

	
  

	
5.1

	
Vesting

	22

 

	
ARTICLE VI DISTRIBUTIONS

	23

	
  

	
6.1

	
Distribution Elections

	23

	
  

	
6.2

	
Change-of-Form Elections and Additional Deferral Elections

	24

	
  

	
6.3

	
Payment

	 25

	
  

	
6.4

	
Unforeseeable Emergency

	25

	
  

	
6.5

	
Separation from Service

	26

	
  

	
6.6

	
Taxes

	 27

	
  

	
6.6

	
Acceleration of Payment

	27

 

	
ARTICLE VII DEATH BENEFITS

	 29

	
  

	
7.1

	
Designation of Beneficiaries

	29

	
  

	
7.2

	
Death Benefit

	29

 

	
ARTICLE VIII CLAIMS

	 30

	
  

	
8.1

	
Claims Procedure

	30

	
  

	
8.2

	
Claims Review Procedure

	30

 

 

  

ii

  

 

	
ARTICLE IX ADMINISTRATION

	 31

	
  

	
9.1

	
Committee

	31

	
  

	
9.2

	
Authority

	31

 

	
ARTICLE X AMENDMENT AND TERMINATION OF THE PLAN

	 33

	
  

	
10.1

	
Amendment of the Plan

	33

	
  

	
10.2

	
Termination of the Plan

	33

	
  

	
10.3

	
No Impairment of Benefits

	33

 

	
ARTICLE XI FUNDING AND CLAIM STATUS

	 34

	
  

	
11.1

	
General Provisions

	34

 

	
ARTICLE XII EFFECT ON EMPLOYMENT OR ENGAGEMENT

	 37

	
  

	
12.1

	
General

	37

 

	
ARTICLE XIII GOVERNING LAW

	 38

	
  

	
13.1

	
General

	38

 

 

	EXHIBIT A	 39

 

                                                                                               

 

  

iii

  

 

PREAMBLE

 

The Progress Energy, Inc. Management Deferred Compensation Plan (the “Plan”) was originally adopted by Carolina Power & Light Company effective as of January 1, 2000, and was transferred to Progress Energy, Inc. (the “Sponsor”) effective August 1, 2000.  The Plan is unfunded and will benefit only a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

The Plan is intended to constitute a non-qualified deferred compensation plan that complies with Section 409A of the Code, related regulations and other guidance (“Section 409A”).  Notwithstanding any provision of the Plan to the contrary, the Plan shall be construed in accordance with Section 409A.

 The Plan as amended and restated effective January 1, 2008 shall govern deferrals under the Plan beginning January 1, 2008.

 

  

  

  

 

ARTICLE I

DEFINITIONS

	
1.1  

	
Account Balance

The value in terms of a dollar amount of a Participant’s Deferral Account or Company Account, as the case may be, as of the last Valuation Date.

	
1.2  

	
Additional Deferral Election

The election by a Participant under Section 6.2 to defer distribution from a Plan Year Account.

	
1.3  

	
Affiliated Company

Any corporation or other entity that is required to be aggregated with the Sponsor pursuant to Sections 414(b), (c), (m), or (o) of the Code.

	
1.4  

	
Board

The Board of Directors of the Sponsor.

	
1.5  

	
Board Committee

The Organization and Compensation Committee of the Board.

	
1.6  

	
Change in Control

The earliest of the following dates:

	
(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

 

  

2

  

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

 

  

3

  

 

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 Company approve a plan of complete liquidation or winding-up of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

	
(f)  

	
the date of any event which the Board determines should constitute a Change in Control.

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 Board Committee that one of the events set forth in this Section 1.6 has occurred.  Any determination that an event described in this Section 1.6 has occurred shall, if made in good faith on the basis of information available at that time, be conclusive and binding on the Board Committee, the Company, the Participants and their beneficiaries for all purposes of the Plan.

	
1.7  

	
Change of Form Election

The election by a Participant under Section 6.2 to change the form of distribution of a Plan Year Account.

	
1.8  

	
Change-of-Investment Election

The election by a Participant under Section 4.6 to change a Phantom Subaccount for the Participant Deferral Account or Company Account.

	
1.9  

	
Code

The Internal Revenue Code of 1986, as amended, or any successor statute.

  

4

  

 

	
1.10  

	
Committee

The Administrative Committee described in Section 9.1 for administering the Plan.

	
1.11  

	
Company

Progress Energy, Inc. or any successor to it in the ownership of substantially all of its assets and each Affiliated Company that, with the consent of the Board Committee, adopts the Plan and is included in Exhibit A, as in effect from time to time.

	
1.12  

	
Company Incentive Plans

The Sponsor’s Management Incentive Compensation Plan, or any Company sales incentive plans, marketing incentive plans, and any other cash incentive plans as determined by the Committee.

	
1.13  

	
Continuing Directors

The members of the Board at the Effective Date; provided, however, that any person becoming a director subsequent to such whose election or nomination for election was supported by 75% or more of the directors who then comprised Continuing Directors shall be considered to be a Continuing Director.

	
1.14  

	
Deemed Investment Return

The amounts that are credited (or charged) from time to time to each Participant’s Deferral Account and Company Account to reflect deemed investment gains and losses of Phantom Investment Sub accounts.

	
1.15  

	
Deferral Election

An election to defer Salary pursuant to Section 3.1.

  

5

  

 

	
1.16  

	
Deferrals

The deferrals of Salary of a Participant pursuant to Section 3.1.

	
1.17  

	
Effective Date

January 1, 2008.

	
1.18  

	
Eligible Employee

An employee of the Company (a) who is eligible to participate in the Sponsor’s Management Incentive Compensation Plan, or (b) who is eligible to participate in any other eligible Company Incentive Plan and is determined by the Committee to be eligible to be a Participant; and who is not excluded from participation pursuant to Section 2.1(b).

	
1.19  

	
Employee Stock Incentive Plan

The Employee Stock Incentive Plan as adopted by the Board and any successor to such plan which provides additional matching allocations under the Progress Energy 401(k) Savings & Stock Ownership Plan.

	
1.20  

	
Enrollment Form

The enrollment form prepared by the Company which a Participant must execute to have Deferrals with respect to a Plan Year.

	
1.21  

	
ERISA

The Employee Retirement Income Security Act of 1974, as amended.

	
1.22  

	
[Reserved]

 

  

6

  

 

	
1.23  

	
Investment Election

The election by a Participant under Sections 2.4 and 4.6 of the Phantom Investment Sub accounts in which the Participant’s Deferral Accounts and Company Accounts will be allocated.

	
1.24  

	
Matching Allocation

A match allocation to a Participant's Company Account of a Participant’s Matchable Deferrals in accordance with Section 3.2.

	
1.25  

	
Net Salary

The Salary of a Participant projected to be payable (assuming no deferral elections under the Plan or the Progress Energy 401(k) Savings & Stock Ownership Plan) with respect to a Plan Year reduced by the projected Deferrals of a Participant for the Plan Year under the Plan.

	
1.26  

	
Participant

An Eligible Employee participating in the Plan pursuant to Article II.

	
1.27  

	
Participant Accounts

The aggregate of a Participant’s Deferral Account and Participant’s Company Accounts.

	
1.28  

	
Participant Company Account

The notational bookkeeping account maintained under Sections 4.1 and 4.5 to record Matching Allocations on behalf of a Participant and the Deemed Investment Return thereon pursuant to the provisions of the Plan.

  

7

  

 

	
1.29  

	
Participant Deferral Account

The notational bookkeeping account maintained under Section 4.1 of the Plan to record Deferrals of a Participant and the Deemed Investment Return thereon pursuant to the provisions of the Plan.

	
1.30  

	
Participant Matchable Deferral

6% of the amount of Deferrals of a Participant for a Plan Year but no greater than 6% of (A-B) where A is the compensation limit under Section 401(a)(17) of the Code for the Plan Year and B is the Net Salary of a Participant for the Plan Year (with any negative differences equating to $0 for purposes of this calculation); provided, however, that the Participant Matchable Deferrals for an SMC Participant for a Plan Year shall be an amount equal to 6% of (C – D) where C is the projected Salary of a Participant for the Plan Year and D is the compensation limit under Section 401(a)(17) of the Code for the Plan Year.  Participant Matchable Deferrals for a Plan Year shall be determined for each payroll period during the Plan Year based on projected Matchable Deferrals for the entire Plan Year.

	
1.31  

	
Payment Commencement

The date payments are to commence with respect to a Plan Year Account in accordance with Section 6.1.

	
1.32  

	
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, or as otherwise selected by the 

  

8

  

Committee, exclusive of Phantom Stock Units which shall not be a deemed investment option under this Plan for Deferrals made after September 1, 2010.

 

	
1.33  

	
Phantom Funds Account

Notational bookkeeping accounts maintained under the Plan at the direction of the Committee representing allocations of Participants of Phantom Investment Subaccounts in a Phantom Investment Fund.

	
1.34  

	
Phantom Investment Subaccount

A notational bookkeeping account maintained under the Plan at the direction of the Committee representing a deemed investment in one or more Phantom Investment Funds as directed by the Participant under Sections 2.4 and 4.6, and which may include Phantom Stock Units for Deferrals made prior to September 1, 2010 and for Matching Allocations made prior to January 1, 2003.

	
1.35  

	
Phantom Stock Unit

A hypothetical share of common stock of the Sponsor or its parent company, as applicable.

	
1.36  

	
Plan

The Progress Energy, Inc. Management Deferred Compensation Plan as set forth herein and as amended from time to time.

	
1.37  

	
Plan Year

The twelve (12) consecutive month periods beginning January 1 and ending the following December 31 commencing with the Effective Date.

  

9

  

 

	
1.38  

	
Plan Year Accounts

The separate Participant Deferral Account and Participant Company Account maintained under the Plan pursuant to Section 4.2 with respect to a Participant for each Plan Year a Participant has Deferrals.

	
1.39  

	
Progress Energy 401(k) Savings & Stock Ownership Plan

The Progress Energy 401(k) Savings & Stock Ownership Plan of the Company adopted by the Board, as amended from time to time, and any successor to such plan.

	
1.40  

	
Retirement Date

The date a Participant retires from the Company on or after attaining (i) age 65 with 5 years of service, (ii) age 55 with 15 years of service, (iii) 35 years of service, or (iv) eligibility for retirement under the SSERP if covered under such plan.

	
1.41  

	
Salary

The amount of an Eligible Employee's regular annual base salary, payable from time to time by the Company prior to a Deferral Election under the Plan and prior to any deferral election under the Progress Energy 401(k) Savings & Stock Ownership Plan.

	
1.42  

	
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.

  

10

  

 

	
1.43  

	
Separation from Service

A participant separates from service if the Participant dies, retires or otherwise has a “termination of employment” with the Company, as defined for purposes of Section 409A.

	
1.44  

	
SMC Participant

A senior executive officer of the Company who is a member of the “Senior Management Committee” of the Sponsor.

	
1.45  

	
Sponsor

Progress Energy, Inc. and its successors in interest.

	
1.46  

	
SSERP

The Supplemental Senior Executive Retirement Plan of the Company.

	
1.47  

	
Valuation Date

The last day of each calendar month and such other dates as selected by the Committee, in its sole discretion.

	
1.48  

	
Value

The value of an account maintained under the Plan based on the fair market value of notational investments of Phantom Investment Subaccounts and Phantom Stock Units, as the case may be, as of the last Valuation Date.  For purposes of calculating Value as of the end of a Plan Year, accrued but unallocated Incentive Matching Allocations shall be taken into consideration with respect to Participant Company Accounts.

  

11

  

 

	
1.49  

	
Years of Service

Years of service of a Participant as calculated under the Progress Energy 401(k) Savings & Stock Ownership Plan.

  

12

  

ARTICLE II

PARTICIPATION

	
2.1  

	
Eligibility

(a) Participation in the Plan shall be limited to Eligible Employees.

(b) The Committee, in its sole discretion, may at any time limit the participation of an Eligible Employee in the Plan so as to assure that the Plan will not be subject to the provisions of parts 2, 3 and 4 of Title I of ERISA.

	
2.2  

	
Commencement of Participation

An Eligible Employee who is not a Participant may elect to become a Participant as of the first day of a Plan Year by completing and submitting an Enrollment Form to the Sponsor’s designated agent by November 30 prior to the first day of the Plan Year as of which participation is to commence.

	
2.3  

	
Annual Participation Agreement

Each Participant shall complete a new Enrollment Form with respect to a Plan Year by November 30 prior to the commencement of the Plan Year.  If the Participant does not complete such form and submit it to the Sponsor’s designated agent by November 30, the Participant will have no Deferrals for the following Plan Year.

	
2.4  

	
Election of Phantom Investment Subaccounts

Each Participant shall elect on his Enrollment Form the allocation of his Plan Year Participant Deferral Account among the Phantom Investment Subaccounts.

  

13

  

ARTICLE III

DEFERRAL ELECTIONS

	
3.1  

	
Participant Deferred Salary Elections

(a) A Participant completing an Enrollment Form in accordance with Sections 2.2 or 2.3 may make an election, pursuant to this Section 3.1, to defer his or her Salary (a “Deferral Election”) in accordance with the Plan.  A Deferral Election shall apply only to the Participant’s Salary for the Plan Year specified in the Enrollment Form.

(b) The amount of Salary that may be deferred by a Participant shall be based on their target incentive level under the Sponsor’s Management Incentive Compensation Plan (“MICP”); or, for Participants in Company Incentive Plans other than the MICP, their target incentive level assuming that they participated in the MICP.  Deferral Elections shall be made on the Enrollment Form for the applicable Plan Year pursuant to the following limitations:

(i) A Participant who is (or would be) eligible for a bonus at the 10%, 12%, or 15% of salary target incentive level (the “Target”) for the Plan Year under the MICP may defer up to 10% of Salary.

(ii) A Participant who is (or would be) eligible for a bonus at the 20% of salary target incentive level (the “Target”) for the Plan Year under the MICP may defer up to 15% of Salary.

  

14

  

(iii) A Participant who is (or would be) eligible for a bonus at the 25% of salary Target for the Plan Year under the MICP may defer up to 25% of Salary.

(iv) A Participant who is (or would be) eligible for a bonus at the 35% or more of salary Target under the MICP may defer up to 50% of Salary.

All Deferrals shall be in increments of 5% of Salary.  The minimum projected Deferrals for a Plan Year for a Participant who commences Deferrals after the beginning of a Plan Year in accordance with Section 2.2 shall be $1,000.

(c) A Deferral Election once made with respect to a Plan Year, cannot be changed or revoked.  In the case of a new Participant, the Deferral Election will apply only to amounts that are both paid after the election is made and earned for services performed after the election is made.  The amount of Salary that is deferred pursuant to a Deferral Election will reduce the Participant Salary proportionately throughout the applicable Plan Year or, in the case of a new Participant, throughout the portion of the Plan Year to which the Deferral Election is applicable.

(d) A dollar amount equal to the Salary deferred pursuant to this Section 3.1 (“Deferrals”) at each applicable payroll date shall be credited to the Participant’s Deferral Account within ten business days following the applicable payroll date.

  

15

  

 

	
3.2  

	
Matching Allocations

A Participant who has made a Deferral Election with respect to a Plan Year and has Participant Matchable Deferrals for such Plan Year shall receive a credit to his Participant Company Account of a Matching Allocation for such Plan Year.  The Matching Allocation with respect to a Plan Year shall equal 100% of the Participant Matchable Deferrals.  Matching Allocations shall be credited to the Participant Company Account within ten business days following the applicable payroll date, based on a pro-rata portion of projected Matchable Deferrals for the Plan Year applicable to each payroll period during the Plan Year.

  

16

  

ARTICLE IV

ACCOUNTS

	
4.1  

	
Maintenance of Accounts

The Committee shall maintain a Participant Deferral Account and a Participant Company Account for each Participant.  There shall be credited to a Participant's Deferral Account all Deferrals by a Participant under the Plan and there shall be credited to a Participant's Company Account all Matching Allocations with respect to a Participant under the Plan in accordance with Sections 3.2 and 3.3.

	
4.2  

	
Separate Plan Year Accounts

The Committee shall maintain a separate Participant Deferral Account and Participant Company Account for each Plan Year a Participant has Deferrals (separately a “Plan Year Deferral Account” and a “Plan Year Company Account” and together the “Plan Year Account”).

	
4.3  

	
Phantom Investment Subaccounts

The Committee shall maintain separate Phantom Investment Sub-accounts representing deemed investments in Phantom Investment Funds as directed by the Participant.  Phantom Investment Sub-accounts shall be valued as of each Valuation Date based on the notional investments of each such account, pursuant to rules and procedures adopted by the Committee.

	
4.4  

	
Administration of Deferral Accounts

(a) A Participant's Deferral Accounts shall be comprised in total, of units in Phantom Investment Sub-accounts.

(b) Participants shall allocate their Deferrals among Phantom Investment Sub-accounts pursuant to elections under Section 2.4.

  

17

  

(c) The Value of that portion of a Participant’s Deferral Account allocated to a Phantom Investment Sub-account shall be changed on each Valuation Date to reflect the new Value of the Phantom Investment Sub-account.

(d) The interest of a Participant’s Deferral Account in a Phantom Investment Sub-account shall be stated in a unit value or dollar amount, as determined by the Committee.

	
4.5  

	
Administration of Company Accounts

(a) A Participant’s Company Account shall be comprised of Phantom Investment Fund units which shall be recorded in Phantom Investment Subaccounts.  Effective September 1, 2010, all Matching Allocations shall be recorded in Phantom Investment Subaccounts as elected by the Participant for his Plan Year Participant Deferral Account, or in the event the Participant has not made an election, the Matching Allocations shall be recorded in the phantom stable value fund.  Prior to September 1, 2010, to the extent Matching Allocations are initially deemed to be invested in Phantom Stock Units, the number of Phantom Stock Units will be determined on the date of each allocation under the Plan based on the closing price of a share of common stock of the Sponsor on the New York Stock Exchange on the date of each allocation.  To the extent the Matching Allocations are initially deemed to be invested in one or more Phantom Investment Funds (other than Phantom Stock Units), the number of units in these Phantom Investment Funds will be determined on the date of each allocation under the Plan, using the closing price of the units of the underlying investment 

  

18

  

fund on which the Phantom Investment Fund is based, on the date of each allocation.

(b) The number of Phantom Stock Units allocated to a Participant’s Company Account shall be adjusted periodically to reflect the deemed reinvestment of dividends on Sponsor common stock in additional Phantom Stock Units.

(c) In the event there is any change in the common stock of the Sponsor, through merger, consolidation, reorganization, recapitalization (other than pursuant to bankruptcy proceedings), stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, dividend in kind or other like change in capital structure (an “Adjustment Event”), the number of Phantom Stock Units subject to the Plan shall be adjusted by the Committee in its sole judgment so as to give appropriate effect to such Adjustment Event.  Any fractional units resulting from such adjustment may be eliminated.  Each successive Adjustment Event shall result in the consideration by the Committee of whether any adjustment to the number of Phantom Stock Units subject to the Plan is necessary in the Committee’s judgment.  Issuance of common stock or securities convertible into common stock for value will not be deemed to be an Adjustment Event unless otherwise expressly determined by the Committee.

  

19

  

 

	
4.6  

	
Change of Phantom Investment Subaccounts and Phantom Stock Units

(a) A Participant may elect to reallocate the value of his Phantom Investment Subaccounts comprising his Deferral Account among other Phantom Investment Subaccounts and change the allocation of future Deferrals among Phantom Investment Subaccounts once per calendar month pursuant to uniform rules and procedures adopted by the Committee.  Provided, however, that Participants may not reallocate the value of his Phantom Investment Subaccounts into Phantom Stock Units.

(b) A Participant may elect to reallocate Phantom Investment Subaccounts comprising his Company Account once per calendar month pursuant to uniform rules adopted by the Committee.  Provided, however, that Participants may not reallocate the value of his Phantom Investment Subaccounts into Phantom Stock Units.

	
4.7  

	
Transferred Accounts

(a) Effective as of the Effective Date, the Value of a SMC Participant’s Company Account shall include the value of such Participant’s deferral account as of such date (being a “Transferred Account”) under the Carolina Power & Light Executive Deferred Compensation Plan, but only to the extent the Participant acknowledges in writing he has no further interest in the Executive Deferred Compensation Plan.

(b) Effective on the Effective Date, the Value of any Participant’s Company Account shall include the value of such Participant’s additional benefits

  

20

  

(currently recorded as phantom Company stock units) granted under Article VIII.2. (also being a “Transferred Account”) under the Company’s Deferred Compensation Plan for Key Management Employees, but only to the extent the Participant acknowledges in writing that he has no further interest in these benefits in the Company’s Deferred Compensation Plan for Key Management Employees.

(c) The total value of the Transferred Accounts as described in this Section 4.7 shall be deemed a vested Company Account for all purposes of the Plan.

  

21

  

ARTICLE V

VESTING

	
5.1  

	
Vesting

A Participant’s Deferral Accounts and Participants Company Accounts shall be 100% vested at all times.

  

22

  

ARTICLE VI

DISTRIBUTIONS

	
6.1  

	
Distribution Elections

A Participant when making a Deferral Election pursuant to an Enrollment Form with respect to a Plan Year shall elect on such Enrollment Form (a) to defer the payment of his Plan Year Accounts with respect to such Plan Year, in accordance with the Plan until (i) the April 1 following the date that is five years from the last day of such Plan Year, (ii) the April 1 following the Participant’s Retirement or (iii) the April 1 following the first anniversary of the Participant’s Retirement (each a “Payment Commencement Date”) and (b) to provide for the payment of such Plan Year Account in the form of (i) a lump sum or (ii) approximately equal installments over a period extending from two years to ten years (by paying a fraction of the account balance each year during such period), as elected by the Participant.  Except as otherwise provided in this Article VI, such elections may not be changed or revoked.  Notwithstanding the foregoing, 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 of deferred amounts shall not be made pursuant to an election under Section 6.1(a)(ii) above 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).  Such payment shall commence within 60 days following the six-month delay period.  In the event payments to the Participant under this Plan shall be delayed for six months following the termination of the Participant as provided in this paragraph (b), the Participant (if then living) shall receive a

  

23

  

lump sum payment as of the first day of the seventh month following the termination of employment in an amount equal to six times the monthly payment due to the Participant under this Plan, in addition to the monthly payment then due to the Participant.

	
6.2  

	
Change-of-Form Elections and Additional Deferral Elections

(a) Any Participant who has made elections under Section 6.1 with respect to amounts deferred before January 1, 2005, may change such elections pursuant to this Section 6.2(a) as in effect prior to January 1, 2005, unless such provisions are materially modified after October 3, 2004.  For this purpose, an amount is considered deferred before January 1, 2005, if the amount is earned and vested before such date.  Such Participant may elect at least one year prior to the Payment Commencement Date with respect to such Plan Year Accounts a new Payment Commencement Date that either is five years from the then current Payment Commencement Date or otherwise is permitted under Section 6.1(a)(ii) or (iii).  Only one such Additional Deferral Election will be permitted with respect to Plan Year Accounts relating to a particular Plan Year.  In addition, the Participant may elect to change the form of distribution to any of the forms permitted under Section 6.1(b) by completing a Change-of-Form Elections with respect to Plan Year Accounts at least one year prior to the applicable Payment Commencement Date for such accounts.

(b) Any elections made under Section 6.1 with respect to amounts deferred after December 31, 2004, shall be irrevocable except as permitted by rules promulgated under Section 409A and consented to by the Committee.

  

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6.3  

	
Payment

Upon occurrence of an event specified in the Participant’s distribution election under Section 6.1 (a “Distribution Event”) with respect to Plan Year Accounts, as modified by any applicable subsequent Additional Deferral Election under Section 6.2, the Account Balance of a Participant’s Plan Year Accounts shall be paid by the Company to the Participant in the form elected under Section 6.1.  Such payments shall commence within 60 days following the occurrence of the Distribution Event.

	
6.4  

	
Unforeseeable Emergency

In case of an unforeseeable emergency, a Participant may request the Committee, on a form to be provided by the Committee or its delegate, that payment of the vested portion of Participant Accounts be made earlier than the date provided under the Plan.

An “unforeseeable emergency” shall mean 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.

The Committee shall consider any requests for payment under this Section 6.4 on a uniform and nondiscriminatory basis and in accordance with the standards of interpretation described in Section 409A.  If the request is granted, the amounts distributed will not exceed the amounts necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as result of the distribution, after

  

25

  

taking into account the extent to which such hardship is or may be relieved by reason of the cessation of Deferrals for the Plan Year in which the distribution is made and through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent such liquidation would not itself cause severe financial hardship).

In the event of a hardship determination by the Committee, the Company shall pay out in a lump sum to the Participant such portion of the Participant Accounts as determined by the Committee and Deferrals by the Participant for the Plan Year in which the hardship distribution is made shall cease.

	
6.5  

	
Separation from Service

In the event of the Separation from Service of a Participant with the Company and any parent, subsidiary or affiliate for any reason, prior to the Retirement or death of the Participant, the vested portion of the Participant Accounts of such Participant shall be paid in a lump sum to such Participant based on the Value of such accounts as of the Valuation Date coincident with or immediately preceding the date of distribution.  Such payment shall be made within 60 days following the Participant’s termination date as determined under the Company’s normal administrative practices.  The nonvested portion of a terminated Participant’s Company Account shall be forfeited by the Participant.  In the event of the Separation from Service of a SMC Participant for whom no Deferral Election was made for a Plan Year, any Matching Allocation, and Deemed Investment Return allocated to such Participant shall be distributed to the Participant following termination of employment in accordance with this Section 6.5.  In the event of the Retirement of a Participant prior to the Payment Commencement Date elected by the

  

26

  

Participant under Section 6.1(a)(i) with respect to a Plan Year Account, distribution of such account shall commence no later than April 1 following the first anniversary of the Participant’s Retirement.  Notwithstanding the foregoing, 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 of deferred amounts 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).  Such payment shall commence within 60 days following the six-month delay period.

6.6           Taxes

The Company shall report Deferrals in the year they occur as required by Section 6041 and Section 6051 of the Code.  The Company shall deduct from all payments under the Plan federal, state and local income and employment taxes, as required by applicable law.  Deferrals will be taken into account for purposes of any tax or withholding obligation under the Federal Insurance Contributions Act and Federal Unemployment Tax Act in the year of the Deferrals, as required by Sections 3121(v) and 3306(r) of the Code and the regulations thereunder.  Amounts required to be withheld in the year of the Deferrals pursuant to Sections 3121(v) and 3306(r) shall be withheld out of current wages or other compensation paid by the Company to the Participant.

6.7           Acceleration of Payment

The acceleration of the time or schedule of any payment due under the Plan is prohibited except as provided in regulations and administrative guidance provided under Section 409A of the Code.  It is not an acceleration of the time or schedule of 

  

27

  

payment if the Company waives or accelerates the vesting requirements applicable to a benefit under the Plan.

  

28

  

ARTICLE VII

DEATH BENEFITS

	
7.1  

	
Designation of Beneficiaries

The Participant’s beneficiary under this Plan entitled to receive benefits under the Plan in the event of the Participant’s death shall be designated by the Participant on a form provided by the Committee.  In the absence of such designation or in the event the designated beneficiary has predeceased the Participant, the beneficiary shall be deemed the estate of the Participant.

	
7.2  

	
Death Benefit

In the event of the death of a Participant prior to the payout of his Participant Accounts, the Value of the remaining portion of the Participant Accounts shall be paid by the Company in a lump sum to the Participant’s beneficiary (as defined under Section 7.1) based on the Value of such accounts on the Valuation Date immediately following the date of death.  Payment shall be made within 60 days following such Valuation Date pursuant to rules and procedures adopted by the Committee.

  

29

  

ARTICLE VIII

CLAIMS

	
8.1  

	
Claims Procedure

If any Participant or his or her beneficiary has a claim for benefits which is not being paid, such claimant may file with the Committee a written claim setting forth the amount and nature of the claim, supporting facts, and the claimant’s address.  The Committee shall notify each claimant of its decision in writing by registered or certified mail within sixty (60) days after its receipt of a claim or, under special circumstances, within ninety (90) days after its receipt of a claim.  If a claim is denied, the written notice of denial shall set forth the reasons for such denial, refer to pertinent Plan provisions on which the denial is based, describe any additional material or information necessary for the claimant to realize the claim, and explain the claims review procedure under the Plan.

	
8.2  

	
Claims Review Procedure

A claimant whose claim has been denied, or such claimant’s duly authorized representative, may file, within sixty (60) days after notice of such denial is received by the claimant, a written request for review of such claim by the Committee.  If a request is so filed, the Committee shall review the claim and notify the claimant in writing of its decision within sixty (60) days after receipt of such request.  In special circumstances, the Committee may extend for up to sixty (60) additional days the deadline for its decision.  The notice of the final decision of the Committee shall include the reasons for its decision and specific references to the Plan provisions on which the decision is based.  The decision of the Committee shall be final and binding on all parties.

  

30

  

ARTICLE IX

ADMINISTRATION

	
9.1  

	
Committee

The Administrative Committee consisting of not less than three (3) or more than seven (7) persons appointed by the Board Committee or its delegate to administer the Plan.

	
9.2  

	
Authority

(a) The Committee shall have the exclusive right to interpret the Plan to the maximum extent permitted by law, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan, including the determination under Section 9.2(b) herein. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan.

(b) The Committee may delegate to one or more agents, or to the Company such administrative duties as it may deem advisable.  The Committee may employ such legal or other counsel and consultants as it may deem desirable for the administration of the Plan and may rely upon any opinion or determination received from counsel or consultant.

(c) No member of the Committee shall be directly or indirectly responsible or otherwise liable for any action taken or any failure to take action as a member of the Committee, except for such action, default, exercise or failure to exercise resulting from such member’s gross negligence or willful misconduct.  No member of the Committee shall be liable in any way for the acts or defaults of

  

31

  

any other member of the Committee, or any of its advisors, agents or representatives.

(d) The Company shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his or her own activities relating to the Committee, except for expenses and liabilities arising out of a member’s gross negligence or willful misconduct.

(e) The Company shall furnish to the Committee all information the Committee may deem appropriate for the exercise of its powers and duties in the administration of the Plan.  The Committee shall be entitled to rely on any information provided by the Company without any investigation thereof.

(f) No member of the Committee may act, vote or otherwise influence a decision of such Committee relating to his or her benefits, if any, under the Plan.

  

32

  

ARTICLE X

AMENDMENT AND TERMINATION OF THE PLAN

	
10.1  

	
Amendment of the Plan

The Plan may be wholly or partially amended or otherwise modified at any time by the Board or the Board Committee consistent with the requirements of Section 409A of the Code.

	
10.2  

	
Termination of the Plan

The Plan may be terminated at any time by written action of the Board or the Board Committee or by the Committee as provided under the Plan; provided, that termination of the Plan shall not affect the distribution of the Participant Accounts (except as otherwise permitted under Section 409A of the Code).  Notwithstanding the foregoing, the Plan may be terminated and Participant Accounts distributed to Participants within twelve months of a “change in control event” as defined for purposes of Section 409A of the Code.

	
10.3  

	
No Impairment of Benefits

Notwithstanding the provisions of Sections 10.1 and 10.2, no amendment to or termination of the Plan shall impair any rights to benefits which theretofore accrued hereunder; provided, however, the payout of all Plan benefits on termination of the Plan, if permitted pursuant to Section 10.2, or a change of any Phantom Investment Funds or creation of a substitute for Phantom Investment Funds as a result of a Plan amendment or action of the Committee shall not constitute an impairment of any rights or benefits.

  

33

  

ARTICLE XI

FUNDING AND CLAIM STATUS

	
11.1  

	
General Provisions

(a) The Company shall make no provision for the funding of any Participant Accounts payable hereunder that (i) would cause the Plan to be a funded plan for purposes of Section 404(a)(5) of the Code or for purposes of Title I of ERISA, or (ii) would cause the Plan to be other than an “unfunded and unsecured promise to pay money or other property in the future” under Treasury Regulations § 1.83-3(e); and, except in the case of a Change in Control of the Sponsor, the Company shall have no obligation to make any arrangements for the accumulation of funds to pay any amounts under this Plan.  Subject to the restrictions of this Section 11.1(a), the Company, in its sole discretion, may establish one or more grantor trusts described in Treasury Regulations § 1.677(a)-1(d) to accumulate funds to pay amounts under this Plan, provided that the assets of such trust(s) shall be required to be used to satisfy the claims of the Company’s general creditors in the event of the Company’s bankruptcy or insolvency.

(b) In the case of a Change in Control that is not a “change in the financial health” of the Company, as defined for purposes of  Section 409A, the Company shall, subject to the restrictions in this paragraph and in Section 11.1(a), 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 beneficiary) the net present value as of the date on which the Change in Control occurs, of the benefits to which Participants (or their beneficiaries) would be entitled pursuant to

  

34

  

the terms of the Plan if the Value of their Participant Account would be paid in a lump sum upon the Change of Control.

(c) In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Participant, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company’s creditors.

(d) Participants, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Participants or of their beneficiaries.

(e) Participants 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 a trust of any kind, or a fiduciary relationship between the Company and any Participant, 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 with respect to a Participant shall be paid from the general funds of the Company employing such Participant.

  

35

  

(f)           The foregoing provisions of this Article XI notwithstanding, the Company shall establish no grantor trust if its assets are includable in the income of Participants thereby pursuant to Section 409A(b).

  

36

  

ARTICLE XII

EFFECT ON EMPLOYMENT OR ENGAGEMENT

	
12.1  

	
General

Nothing contained in the Plan shall affect, or be construed as affecting, the terms of employment or engagement of any Participant except to the extent specifically provided herein.  Nothing contained in the Plan shall impose, or be construed as imposing, an obligation on the Company to continue the employment or engagement of any Participant.

  

37

  

ARTICLE XIII

GOVERNING LAW

 

	
13.1  

	
General

 

The Plan and all actions taken in connection with the Plan 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.

IT WITNESS WHEREOF, this instrument has been executed this _______ day of ____________, 2010.

                        PROGRESS ENERGY, INC.

                        By:           ______________________________

                        William D. Johnson

                        Chief Executive Officer

  

38

  

 

EXHIBIT A

 

Progress Energy Service Company, LLC

 

Progress Energy Carolinas, Inc.

Progress Energy Ventures, Inc.

 

Progress Energy Florida, Inc.

 

Progress Fuels Corporation (corporate employees only)

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