Executive Performance Supplemental Retirement Plan

PEPCO HOLDINGS, INC.

EXECUTIVE PERFORMANCE SUPPLEMENTAL RETIREMENT PLAN


The Potomac Electric Power Company Executive Performance Supplemental Retirement Plan (the "Pepco plan") was established, effective January 27, 1994 to provide supplemental retirement benefits to key executives of the Company, based on awards received by such executives under the Executive Incentive Compensation Plan. The Plan was amended from time to time thereafter. On March 28, 2002, further amendments were authorized to the Pepco plan to recognize the intent to consummate a transaction (the "Merger") by which Pepco and Conectiv would become wholly owned subsidiaries of Pepco Holdings, Inc. (the "Company or "Pepco Holdings") and, for the near term future, to maintain for the benefit of the executives of Pepco Holdings and its subsidiaries, the level of benefits provided to such executives by their respective employers prior to the merger. Such amendments include the authorization to name Pepco Holdings as the sponso r of the plan; to change the name of the Pepco plan to reflect the change in plan sponsorship; to amend the section of the plan relating to eligibility to participate; and to delete all references to Pepco's General Retirement Plan, and to replace all such references to Pepco's General Retirement Plan with "the principal defined benefit pension plan of Pepco Holdings or one of its subsidiaries in which the employee participates. The Pepco plan, as amended, is restated herein and is now known as the Pepco Holdings, Inc. Executive Performance Supplemental Retirement Plan.

I. Definitions

1.1 Applicable Executive Incentive Compensation Plan . The principal annual incentive compensation plan in which the Participant participates.

1.2 Applicable Form of Benefit - The type of life annuity which will be provided to a Participant receiving benefits under this Plan. The Plan benefit to be paid to a participant under this Plan shall be in the annuity form elected by the Participant with respect to the Participant's benefit under the Applicable Defined Benefit Pension Plan, except that the variable annuity option under the Pepco General Retirement Plan is not an annuity form available for payment of benefits under this Plan. If a Participant does elect the variable annuity option under the Pepco General Retirement Plan, benefits under this Plan will be paid in the form applicable to the component of the Participant's accrued benefit under the General Retirement Plan which is not payable in variable annuity form. No other benefit options are provided under this Plan.

1.3 Applicable Defined Benefit Pension Plan - The principal defined benefit pension plan of Pepco Holdings or one of its subsidiaries in which the Participant participates. In the case of Participants who participate in Pepco's General Retirement Plan, such term shall also include participation in the Pepco Exempt Surviving Spouse Welfare Plan.

1.4 Committee - The Human Resources Committee of the Board of Directors of the Company.

1.5 Company - Pepco Holdings, Inc. or its successor.

1.6 Eligible Executive - An executive who is described in Section 2.1 of this Plan.

1.7 Exempt Surviving Spouse's Welfare Plan - the welfare plan by the same name which was sponsored by Pepco prior to the Merger.

1.8 General Retirement Plan - the defined benefit pension plan by the same name which was sponsored by Pepco prior to the Merger.

1.9 Participant - An Eligible Executive who has satisfied the conditions described in Section 2.1 and to whom the provisions of Section 2.2 are not applicable.

1.10 Plan - The Pepco Holdings, Inc. Executive Performance Supplemental Retirement Plan.

1.11 SERP - The Pepco Holdings, Inc. Supplemental Executive Retirement Plan.

1.12 Supplemental Benefit Plan - The Pepco Holdings, Inc. Supplemental Benefit Plan.

Any term which is not defined in this section or any other section of the Plan shall have the same meaning as that term has under the Applicable Defined Benefit Pension Plan.

II. Eligibility and Participation

2.1 Any employee of any Pepco Holdings subsidiary as designated by the Chief Executive Officer of the Company (the Chief Executive Officer to be designated by the Board) shall be eligible to participate in this Plan; however, no employee shall be designated a Participant in this Plan if the compensation used to determine benefits under the Applicable Defined Benefit Pension Pan in which the employee participates includes remuneration in excess of such employee's basic rate of compensation..

2.2 An employee shall cease to be a Participant in this Plan and shall not be entitled to any benefits hereunder if the employment of such employee is terminated for any reason, other than death, before the later of (i) the date the employee attains age 59, or (ii) the date the employee first attains either his Early Retirement Date or his Normal Retirement Date under the Applicable Defined Benefit Pension Plan.

2.3 In order to receive benefits under the Plan, a Participant (i) must not have incurred a forfeiture of benefits under Section 2.2 and (ii) must have been an Eligible Executive within the twelve (12) months immediately preceding his actual retirement under the Applicable Defined Benefit Pension Plan, and either (a) have held such position for at least a five year period, or (b) have attained age 65.

III. Retirement Benefits

3.1 This Section 3.1 defines the amount of retirement income which will be paid to a Participant under this Plan to supplement other pension benefits. The amount of retirement benefits payable from this Plan in the Applicable Form of Benefit shall be the difference, if any, between (i) the aggregate amount of the benefits to which such Participant would be entitled under the provisions of the Applicable Defined Benefit Pension Plan, the provisions of the SERP and the provisions of the Supplemental Benefit Plan (expressed in the Applicable Form of Benefit) (a) had the amount of compensation used under the Applicable Defined Benefit Pension Plan to calculate benefits (expressed on an annual basis) been increased by the average of the three highest Awards made to such Participant (or such number of Awards actually made to such Participant if less than three) unde r the Applicable Executive Incentive Compensation Plan (without regard to any deferral of receipt of an Award elected by such Participant) within the five consecutive years immediately preceding the Participant's retirement under the Applicable Defined Benefit Pension Plan and (b)(1) had the amount of the benefits under such plans not been otherwise reduced due to the limitations imposed by Section 415 of the Internal Revenue Code, (2) had any dollar limitation under the Internal Revenue Code on the amount of compensation that may be considered in determining benefits under such plans not been imposed, and (3) had the deferred compensation earned by such Participant which was excluded from the Participant's compensation base used in determining retirement benefits under such plans been included in such compensation base, and (ii) the amount of benefits, if any, to which such Participant is otherwise entitled under the Applicable Defined Benefit Pension Plan, the SERP and the Supplemental Benefit Plan. To the extent that a cost of living adjustment is made to benefits payable under the Applicable Defined Benefit Pension Plan, a comparable and proportional adjustment will be made to the benefits payable herein.

3.2 The monthly benefit provided to a Participant under Section 3.1 shall commence as of the first day of the month on which such Participant begins receipt of retirement benefits under the Applicable Defined Benefit Pension Plan and shall continue for so long as benefits are payable to such Participant (or his surviving spouse) under such Applicable Defined Benefit Pension Plan.

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