EXHIBIT 10.31.1

PEPCO HOLDINGS, INC.

SECOND REVISED AND RESTATED

EXECUTIVE AND DIRECTOR DEFERRED COMPENSATION PLAN

 

I. INTRODUCTION

Potomac Electric Power Company (“Pepco”) established the Potomac Electric Power
Company Executive Deferred Compensation Plan (the “Pepco plan”), effective
November 18, 1982, to enable certain executives to supplement their retirement
income by deferring the receipt of compensation for services performed while the
plan was in effect. The Pepco plan was amended from time to time thereafter,
including an amendment to make Directors eligible to participate in the plan. On
March 13, 2002, further amendments were authorized to the Pepco plan to
recognize the intent to consummate a transaction (the “Merger”) by which Pepco
and Conectiv, Inc. (“Conectiv”) will 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 prior to the
Merger. Such amendments include authorization to name Pepco Holdings as the
sponsor of the plan; to change the name of the Pepco plan to reflect the change
in plan sponsorship to amend the definition of “executive” eligible to
participate in the plan; to add an in-service withdrawal feature to the plan;
and to provide an investment option which credits a participant’s account with
increases or decreases in value attributable to phantom units of Pepco Holdings
Common Stock, together with any dividends or stock reinvestment rights
associated with the designated units. The plan was thereafter amended in October
2008 to comply with Section 409A of the Internal Revenue Code and regulations
issued thereunder. Further amendments to the plan were made in December 2011 to
modify the deferral and payment

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elections for Executives and to make certain other conforming changes and
adjustments. The plan is amended and restated in its entirety as set forth
herein and is known as the Pepco Holdings, Inc. Executive and Director Deferred
Compensation Plan. (the “Plan”). The Plan as amended supersedes and replaces in
its entirety all of the terms and conditions of the Plan previously adopted
prior to the date hereof, except (a) with respect to the “Grandfathered
Subaccount,” as described in Section 2.01, and (b) with respect to deferral
elections made prior to December 1, 2011, which were made in accordance with the
terms of the Plan then in effect.

 

II. DEFINITIONS

2.01 “Account” means the bookkeeping account maintained by the Company (i) for
each participating Executive and (ii) for each participating Director, which is
credited with the Executive’s or the Director’s Deferred Compensation, as the
case may be, and with additional amounts in the nature of interest and which is
debited to reflect benefit distributions. Effective as of January 1, 2005, each
Account shall be divided into two (2) subaccounts. The first subaccount (the
“Grandfathered Subaccount”) shall reflect the vested balance of such Account as
of December 31, 2004, adjusted to reflect (i) subsequent earnings or losses
attributable to the hypothetical investment options in which such subaccount is
deemed invested and (ii) any distributions made from such subaccount. The
Grandfathered Subaccount shall be subject to the terms of the Plan as in effect
on October 3, 2004, except to the extent that the terms of this Second Revised
and Restated Plan do not result in a material modification, as determined under
Section 409A of the Internal Revenue Code. The second subaccount (the
“Non-Grandfathered Subaccount”) shall reflect (i) all amounts credited to the
account on and after January 1, 2005, (ii) any amounts which had been credited
to the account prior to January 1, 2005 but which first became vested on or
after January 1, 2005, (iii) all earnings or losses attributable to the
hypothetical investment options in which such subaccount is deemed vested, and
(iv) any distributions made from such subaccount.

 

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2.02 “Agreement” means the participation or deferral agreement (or other
agreement or document having similar purpose or effect) executed by the Company
and an Executive or a Director, as the case may be, which designates the amount
of the Executive’s or the Director’s Deferred Compensation, the time and manner
of benefit distributions, and the Executive’s or the Director’s Beneficiary. In
the event of a conflict between the Agreement and this Plan, the Plan shall
govern.

2.03 “Beneficiary” means any person designated by a participating Executive or a
participating Director to receive benefits under the Plan in the event of the
Executive’s or the Director’s death prior to the completion of all benefit
payments under the Plan. An Executive’s or a Director’s Agreement, as the case
may be, may designate more than one Beneficiary or may designate primary and
contingent Beneficiaries.

2.04 “Board of Directors” means the Board of Directors of Pepco Holdings, Inc.

2.05 “Deferred Compensation” means any remuneration which would otherwise be
currently payable to the Executive or the Director, but which the Executive or
the Director irrevocably agrees to receive on a deferred basis in accordance
with the terms of the Plan.

2.06 “Director” means a member of the Board of Directors.

2.07 “Executive” means such employee of Pepco Holdings or any Pepco Holdings
subsidiary as designated by the Chief Executive Officer of Pepco Holdings (or,
in the case of the Chief Executive Officer, as designated by the Board).

 

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2.08 “Human Resources Committee” shall mean that committee comprised of members
of the Board of Directors, which governs the development of personnel policies
for the Company.

2.09 “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as
amended. References in the Plan to any section of the Internal Revenue Code
shall be deemed to include, as applicable, any amendment or successor provision
to such section, and any Treasury regulations promulgated thereunder.

2.10 “Normal Compensation” with respect to an Executive means the amount of base
salary that would be payable to an Executive for the twelve (12) month period
commencing on the first day of any Plan Year if the Executive were not
participating hereunder. “Normal Compensation” with respect to a Director means
the amount of retainer/fees that would be payable in cash to a Director for the
twelve (12) month period commencing on the first day of any Plan Year if the
Director were not participating hereunder.

2.11 “Plan Year” means the twelve-month period commencing on July 1 of each
calendar year and ending on June 30 of the following calendar year.
Notwithstanding the above, the time period between July 1, 2005 and December 31,
2005 shall be treated as a separate Plan Year and effective as of January 1,
2006, the Plan Year shall constitute the calendar year.

2.12 “Separation from Service” means an Executive’s termination of employment
with the Company and any of its subsidiaries or a Director’s cessation of
participation on the Board of Directors. An Executive who terminates regular
employment or a Director who discontinues participation on the Board of
Directors and who thereafter performs consulting services for the Company on a
part-time basis will nonetheless be deemed to have had a Separation from Service
at the date of termination of regular employment or the date of discontinuance
of participation on

 

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the Board of Directors, as the case may be. For purposes of the
Non-Grandfathered Subaccount, a “Separation from Service” shall mean a
“separation from service” as defined under Section 409A of the Internal Revenue
Code.

2.13 “Unforeseen Financial Emergency” means a severe financial hardship to the
Executive or Director resulting from an illness or accident of the Executive or
Director, the Executive or Director’s spouse, or a dependent (as defined in
Section 152 of the Internal Revenue Code, without regard to Section 152(b)(1),
(b)(2), and (d)(1)(B) of the Internal Revenue Code) of the Executive or
Director, loss of the Executive or Director’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Executive or Director.

 

III. PARTICIPATION

3.01 An Executive or a Director may execute an Agreement and become a
participant in the Plan prior to the first day of any Plan Year. Except as set
forth in Section 5.02, an Executive’s or a Director’s Agreement for a Plan Year
may not be amended or revoked once that Plan Year has commenced, provided that a
participating Executive or a participating Director may at any time change his
Beneficiary designation by providing written notice of such change to the
Company. Notwithstanding the above, any election to participate in the Plan in
respect of the short Plan Year beginning July 1, 2005 and ending December 31,
2005 must be made prior to March 15, 2005.

3.02 An Executive’s or a Director’s Agreement shall relate to (i) compensation
for services performed during the Plan Year to which it relates, (ii) benefit
entitlements otherwise payable in connection with prior deferrals pursuant to
Section 5.01 of the Potomac Electric Power Company Director and Executive
Deferred Compensation Plan, (iii) other remuneration

 

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approved by the Board of Directors as eligible to be deferred under the Plan,
provided that such Agreement shall be entered into prior to the year in which
the Executive or Director begins to perform services related to such
compensation, or (iv) other remuneration approved by the Board of Directors as
eligible to be credited under the Plan by way of a transfer of a deferred
compensation entitlement to this Plan from any other nonqualified deferred
compensation program maintained by the Company (provided that such transfer does
not change the time and form of payment of such deferred compensation).
Notwithstanding the above, any Agreement entered into on or after January 1,
2005 shall be structured so as to comply with the timing of election rules
contained in Section 409A(a)(4) of the Internal Revenue Code, as interpreted by
the Internal Revenue Service through any proposed or final Regulation or other
guidance.

 

IV. DEFERRAL OF COMPENSATION - EXECUTIVE AND DIRECTOR RULES

4.01 The deferral of compensation for an Executive shall be made in accordance
with the following provisions and as set forth in the Executive’s Agreement.

A. Before the beginning of each Plan Year, the Executive may elect any or all of
the following four options for deferring compensation, to the extent applicable.
The Executive may make separate elections with respect to base salary and bonus,
and each election shall become irrevocable by December 31 of the year preceding
the year in which services are first performed with respect to the compensation
being deferred:

Option 1 - The Executive may elect to defer an amount of Normal Compensation
(expressed as a percentage of Normal Compensation) on a ratable basis throughout
the Plan Year.

Option 2. - The Executive may elect to defer an amount of Normal Compensation
equal to 6% of Normal Compensation in excess of the lesser of: (a) the limit on

 

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compensation imposed by Section 401(a)(17) of the Internal Revenue Code (i.e.,
$250,000 for 2012); or (b) the limit on pre-tax contributions imposed by
Section 402(g) of the Internal Revenue Code (i.e., $17,000 for 2012) divided by
6%. This amount is intended to provide deferrals in an amount that, absent
limits imposed by the Internal Revenue Code, could otherwise be contributed to
the principal tax-qualified defined contribution plan of the Company or its
Subsidiaries in which the Executive participates and for which matching
contributions would otherwise be made under such defined contribution plan
(assuming the Executive obtained the maximum matching contribution available
under such defined contribution plan).

Option 3 - The Executive may elect to defer such other compensation which would
otherwise be paid to the Executive during the Plan Year or a later Plan Year
provided such compensation has been approved by the Board of Directors in its
sole discretion as eligible to be deferred under the Plan and provided that the
deferral election applies only to compensation for services performed in one or
more Plan Years that occur after the Plan Year in which the election is made,
except as otherwise permitted under Section 409A of the Internal Revenue Code.

Option 4 - Subject to the prior approval of the Board of Directors, which
approval may be granted or withheld in the sole discretion of the Board of the
Directors, the Executive may elect to have the Executive’s Account under this
Plan credited with a deferred compensation entitlement attributable to any other
nonqualified deferred compensation program maintained by the Company, provided
that such transfer will be accompanied by a corresponding elimination of the
Company’s obligation under such other deferred compensation arrangement and
provided further that no such

 

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transfer will be permitted with respect to any deferred compensation entitlement
which would otherwise become payable to the Executive under the terms of such
other nonqualified deferred compensation program within the same calendar year
as the year of the proposed transfer, and provided that such transfer does not
change the time and form of payment of the deferred compensation. Each Executive
who elects Deferred Compensation with respect to a Plan Year shall specify in
his Agreement for such Plan Year the Option or Options which shall apply for
such Plan Year.

B. The Company will credit the Deferred Compensation to the Account of each
participating Executive as of the day such amount would have been paid to the
Executive if the Executive’s Agreement had not been in effect. The Executive may
elect to have the Company credit, on a monthly basis all Deferred Compensation
into the Executive’s Account with an amount in the nature of interest at either
(i) the prime rate quoted by the Chase Manhattan Bank, N.A. (the “Prime Rate”),
as of the last day of the month; (ii) a rate equal to the rate of return with
respect to any one or a combination of the investment funds selected by the
Human Resources Committee (an “Investment Fund Rate”); or (iii) a combination of
the Prime Rate and an Investment Fund Rate. The Prime Rate or the appropriate
Investment Fund Rate(s) shall be credited to the Executive’s Account as of the
last day of each calendar month based on the daily balances in the Account which
are to be adjusted with respect to the Prime Rate or each designated Investment
Fund, as the case may be. The crediting of such interest on a monthly basis
shall continue until such balance in the Executive’s Account has been reduced to
zero by reason of benefit payments under the Plan.

 

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The Executive may also elect to have the investment return applicable to all or
part of any Deferred Compensation credited to the Executive’s Account determined
by reference to phantom shares of Pepco Holdings Common Stock (“Common Stock”).
In order to initially determine the number of shares of Common Stock which will
serve as the basis for adjusting the value of an Executive’s account, the full
amount of Deferred Compensation to be credited with an investment return based
upon phantom shares shall be divided by the average of the high and low sales
prices of the Common Stock on the New York Stock Exchange on the second business
day prior to the date upon which the Executive’s Account is to be credited with
such Deferred Compensation. The resulting number will represent the number of
phantom shares to be credited to such Executive’s Account. For purposes of
determining the value of the Executive’s Account which is attributable to
phantom shares, each phantom share shall be deemed to have a value of one share
of Common Stock and any time a dividend payment is made with respect to a share
of Common Stock, an equivalent amount shall be added to the account of the
Executive with respect to each phantom share then credited to the Account. All
such dividend equivalent amounts added to the Executive’s Account shall be
expressed in the form of phantom shares or fractions thereof.

C. If the Executive elects to defer base salary under Option 2, the Company
shall credit to the Executive’s Account, at the time each deferral is credited
to the Executive’s Account, a matching contribution credit with respect to the
amount deferred. The amount of the matching contribution credit shall be
determined by applying the matching contribution formula that would apply to the
Executive if the deferrals under this Plan had, instead, been made under the
principal tax-qualified defined contribution plan of the Company or its
Subsidiaries in which the Executive participates (determined without regard to
any limitations imposed on

 

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compensation or contributions by the Internal Revenue Code but assuming the
Executive contributed the maximum amount permitted under the Internal Revenue
Code to the tax-qualified plan).

D. The Company shall furnish each participating Executive with an annual report
showing the balance in the Executive’s Account as of June 30 of each year.
Effective as of December 31, 2005, the annual report will be prepared as of the
December 31st of each calendar year.

4.02 The deferral of Normal Compensation for a Director shall be made in
accordance with the following provisions:

A. Before the beginning of each Plan Year, each Director may elect to defer an
amount of retainer/fees constituting such Director’s Normal Compensation for the
Plan Year. Such election shall remain in effect until the Director provides
written notification of cancellation of a previous election with respect to a
succeeding Plan Year. The Agreement may specify that the Director’s
retainer/fees will be reduced by the elected amount of the Deferred Compensation
on a ratable basis throughout the Plan Year (expressed as a percentage of cash
retainer/fees). In addition, subject to the prior approval of the Board of
Directors, which approval may be granted or withheld in the sole discretion of
the Board of Directors, a Director may elect to have the Director’s Account
under this Plan credited with a deferred compensation entitlement attributable
to any other nonqualified deferred compensation program maintained by the
Company, provided that such transfer will be accompanied by a corresponding
elimination of the Company’s obligation under such other deferred compensation
arrangement and provided further that no such transfer will be permitted with
respect to an deferred compensation entitlement which would otherwise become
payable to the Director under the terms of such other

 

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nonqualified deferred compensation program within the same calendar year as the
year of the proposed transfer. Such transfer shall not change the time and form
of payment of the deferred compensation.

B. The Company will credit the Deferred Compensation to the Account of each
participating Director as of the day such amount would have been paid to the
Director if the Director’s Agreement had not been in effect. A Director may
elect to have any Deferred Compensation which would otherwise have been paid to
the Director in the form of cash had no deferral election been made expressed in
the form of phantom shares by so advising the Human Resources Committee as part
of the Director’s Agreement. The full amount of Deferred Compensation to be
credited in the form of phantom shares shall be divided by the average of the
high and low sale prices of the Common Stock on the New York Stock Exchange on
the second business day prior to the date upon which the Director’s Account is
to be credited with such Deferred Compensation. The resulting number will
represent the number of phantom shares to be credited to such Director’s
Account. For purposes of determining the value of the Director’s Account which
is attributable to phantom shares, each phantom share shall be deemed to have a
value of one share of Common Stock and any time a dividend payment is made with
respect to a share of Common Stock, an equivalent amount shall be added to the
account of the Director with respect to each phantom share then credited to the
Account. All such dividend equivalent amounts added to the Director’s Account
shall be expressed in the form of phantom shares or fractions thereof.

With respect to any Deferred Compensation credited to the Account of a Director
which is not credited in the form of phantom shares, the Company will, in
addition, credit the Director’s Account on a monthly basis with an amount in the
nature of interest at a rate equal to

 

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(i) the Prime Rate, as of the last day of the month, (ii) the Investment Fund
Rate, or (iii) a combination of the Prime Rate and the Investment Fund Rate. The
appropriate rate or rates of interest shall be credited to the Director’s
Account as of the last day of each calendar month based on the daily balances in
the Account which are to be adjusted with respect to the Prime Rate or each
designated Investment Fund Rate, as the case may be. The crediting of such
interest on a monthly basis shall continue until such balance in the Director’s
Account has been reduced to zero by reason of benefit payments under the Plan.

C. The Company shall furnish each participating Director with an annual report
showing the balance in the Director’s Account as of June 30 of each year.
Effective as of December 31, 2005, the annual report will be prepared as of the
December 31st of each calendar year.

D. Subject to compliance with applicable law (including Section 16 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
Section 409A of the Internal Revenue Code), the Company may establish and may
amend, from time to time, a procedure pursuant to which a Director may
prospectively modify the manner in which his Account is credited with an
investment return, as between the alternatives of phantom shares and such other
investments as may be provided for by the Plan from time to time.

 

V. PAYMENT OF BENEFITS

5.01 Except as otherwise provided in this Article V, the payment of benefits to
a participating Executive shall commence as of the date specified by the
Executive in the Executive’s Agreement under one of the following options:
(i) on the first day of the month following the Executive’s Separation from
Service; (ii) on January 31 of calendar year following Separation from Service;
(iii) on January 31 of the calendar year following the later of the year

 

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of the Executive’s Separation from Service or attainment of an age specified in
the Agreement; or (iv) on January 31 of the calendar year specified in the
Agreement, which may not be earlier than the second calendar year following the
calendar year which includes the first day of the Plan Year for which the
Agreement is made. Except as otherwise provided in this Article V, the payment
of benefits to a participating Director shall commence as of the date specified
by the Director in the Director’s Agreement under one of the following options:
(i) on the first day of the month following the Director’s Separation from
Service; (ii) on January 31 of the calendar year following the year of the
Director’s Separation from Service; (iii) on January 31 of the calendar year
following the later of the year of the Director’s Separation from Service or
attainment of an age specified in the Agreement; or (iv) on January 31 of the
calendar year specified in the Agreement, which may not be earlier than the
second calendar year following the calendar year which includes the first day of
the Plan Year for which the Agreement is made. Notwithstanding the above, if an
individual who then qualifies as a “specified employee”, as defined in
Section 409A(a)(2)(B)(i) of the Internal Revenue Code, incurs a Separation from
Service for any reason other than death and becomes entitled to a distribution
from this Plan (other than from the Grandfathered Subaccount) as a result of
such Separation from Service, no such distribution otherwise payable to such
specified employee during the first six (6) months after the date of such
Separation from Service, shall, to the extent required by
Section 409A(a)(2)(B)(i), be paid to such specified employee until the date
which is one day after the date which is six (6) months after the date of such
Separation from Service (or, if earlier, the date of death of the specified
employee).

5.02 As specified in the Executive’s or the Director’s Agreement, as the case
may be, benefits shall be paid (i) in a lump sum in cash in an amount equal to
the Executive’s or the

 

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Director’s Account balance as of the benefit commencement date, or (ii) in a
series of approximately equal monthly or annual installments, as computed by the
Company, over a period of between two (2) and fifteen (15) years with the final
payment equaling the then remaining balance in the Executive’s or the Director’s
Account. If annual installments are elected by the Executive or the Director,
such annual installments shall be payable on the benefit commencement date and
each succeeding January 31 during the payment period. Notwithstanding a
specification of installment payments in an Executive’s or Director’s Agreement,
as the case may be, if the balance in the Executive’s or the Director’s Account
as of the benefit commencement date is less than one thousand dollars
($1,000.00), the Company shall instead make a lump sum payment of that amount on
that date to the extent permitted under the plan aggregation rules under
Treasury Regulation section 1.409A-3(j)(4)(v). Except as provided below, the
time for payment of benefits to an Executive or a Director may be modified by
the Executive or Director by the filing of a written election prior to the
beginning of the calendar year in which benefits would otherwise become payable
under the existing Agreement. Notwithstanding the above, (i) any delay in the
time and any change in the form of a distribution from the Non-Grandfathered
Subaccount (A) may not take effect until at least 12 months after the date the
election is made, (B) must involve a further deferral of not less than five
(5) years from the date such payment would otherwise be made (except for a
payment made due to the death, disability (as defined under Section 409A of the
Internal Revenue Code) or Unforeseen Financial Emergency of the electing
Executive or Director, as the case may be, and (C) must be made, in the case of
payments otherwise scheduled to be made at a specified time or pursuant to a
fixed schedule, at least 12 months prior to the date such payments were
originally scheduled to be made; and (ii) no amendment or other modification may
be made to a prior election with respect to the payment of Deferred Compensation
that has been credited in the form of phantom shares unless such amendment or
modification is approved by the Committee.

 

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5.03 An Executive may apply to the Human Resources Committee for early
distribution of all or any part of his Grandfathered Subaccount which is not
subject to Section 409A of the Internal Revenue Code. Any such early
distribution shall be made in a single lump sum, provided that ten percent
(10%) of the amount withdrawn in such early distribution shall be forfeited
prior to payment of the remainder to the Executive. An Executive may not elect
an early distribution hereunder if he has received an early distribution or a
distribution under Section 5.05 within the previous twelve (12) months. In the
event an Executive’s early distribution is submitted within sixty (60) days
after a Change in Control (as may be defined in an agreement between the
Executive and the Company or in a plan in which the Executive participates) or
an elimination of an investment alternative under the Plan that the Human
Resources Committee determines is a substantial detriment to the Executive, the
forfeiture penalty shall be reduced to five percent (5%).

5.04 In the event that a participating Executive or a participating Director
dies before the benefit commencement date, the Company shall make benefit
payments to the Executive’s or the Director’s Beneficiary or Beneficiaries in an
aggregate amount equal to twice the balance credited to the Account of the
participating Executive or participating Director, as the case may be,
immediately prior to such individual’s death. An amount equal to such
participant’s Account balance will be paid on the first of the month following
the Executive’s or the Director’s death and payment of the remaining amount of
the death benefit will commence as of January 31 of the calendar year following
the Executive’s or the Director’s death in accordance with the method of payment
under Section 5.02 specified in the Executive’s or the Director’s Agreement. In
the

 

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event that a participating Executive or a participating Director dies after the
benefit commencement date, any remaining benefit payments shall be paid to the
Executive’s or the Director’s Beneficiary or Beneficiaries at the same time the
amounts would have been paid to the Executive or Director. In the event that no
Beneficiary survives the Executive or the Director, an amount equal to the
remaining balance in the Executive’s or Director’s Account (or two times the
Account balance if death occurs prior to the benefit commencement date) shall be
paid to the estate of the Executive or the Director, as the case may be, in a
lump sum within thirty (30) days following the date on which the Company is
notified of the Beneficiary’s death.

5.05 Notwithstanding the foregoing, the Company may at any time make a lump sum
payment to an Executive or Director (or surviving Beneficiary) equal to part or
all of the balance in the Executive’s or Director’s Account, as the case may be,
upon a showing of a financial emergency caused by circumstances beyond the
control of the Executive or Director (or surviving Beneficiary) which would
result in serious financial hardship if such payment were not made. The
determination whether such emergency exists shall be made in the sole discretion
of the Board of Directors of the Company, the amount of the payment shall be
limited to the amount necessary to meet the financial emergency, and any
remaining balance in the Executive’s or Director’s Account shall be paid at the
time and in the manner otherwise set forth in the Executive’s or Director’s
Agreement, as the case may be. However, no payment shall be made with respect to
the Non-Grandfathered Subaccount unless the financial emergency constitutes an
Unforeseeable Emergency and the payment satisfies the conditions in Treasury
Regulation Section 1.409A-3(i)(3).

5.06 In the event that a participating Executive or Director ceases to be an
employee or Director of the Company and becomes a proprietor, officer, partner,
employee, or otherwise

 

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becomes affiliated with any business or entity that is in competition with the
Company, or becomes employed by any governmental agency’ having jurisdiction
over the affairs of the Company, the Company reserves the right in the sole
discretion of its Board of Directors to make an immediate lump sum payment to
the Executive or the Director in an amount equal to the balance in the
Executive’s or the Director’s Account at that time, to the extent that such
payment is permitted under Section 409A of the Internal Revenue Code.

5.07 If an Executive or a Director has entered into two (2) or more Agreements
with respect to different Plan Years which specify different benefit
commencement dates under Section 5.01 or different methods of payment under
Section 5.02, the Company will separately account for the Deferred Compensation
attributable to each such Agreement and distribute the amounts covered by each
Agreement in accordance with the terms thereof.

 

VI. RIGHTS OF PARTICIPANTS AND BENEFICIARIES

6.01 Nothing contained in this Plan or any Agreement and no action taken
hereunder shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Executive, any Director, any
Beneficiary or any other person; provided the Company has established a grantor
trust (Trust No. 3 originally executed on November 28, 2001) to hold assets to
secure the Company’s obligations to participants under the Plan if the
establishment of such a trust does not result in the Plan being “funded” for
purposes of the Internal Revenue Code. Except to the extent provided through a
grantor trust established under the provisions of the preceding sentence, any
compensation deferred under the Plan shall continue for all purposes to be a
part of the general funds of the Company. To the extent that any person acquires
a right to receive payments from the Company under this Plan, such right shall
be no greater than the right of any unsecured general creditor of the Company.

 

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6.02 The right of any Executive, Director, Beneficiary, or other person to
receive benefits under the Plan may not be assigned, transferred, pledged or
encumbered except by will or the laws of descent and distribution, nor shall it
be subject to attachment or other legal process of whatever nature.

6.03 If the Company finds that any person to whom any payment is payable under
the Plan is unable to care for his or her affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a parent, or a brother or sister, or
to any person deemed by the Company to have incurred expense for the person who
is otherwise entitled to payment, and, after making such payment, no amount
shall be due with respect to such benefit under the Plan.

6.04 Notwithstanding the foregoing, with respect to any participant who is an
officer, director or stockholder subject to Section 16 of the Exchange Act, the
portion of any Account creditable to phantom shares shall be subject to such
restrictions, limitations and other conditions as the Human Resources Committee
may deem necessary or appropriate to ensure that Plan transactions are not
subject to the short-swing profit liability requirements of Section 16(b) of the
Exchange Act.

 

VII. MISCELLANEOUS

7.01 This Plan may be amended, suspended or terminated at any time by the
Company; provided, however, that no amendment, suspension or termination shall
have the effect of impairing the rights of (i) participating Executives or their
Beneficiaries or (ii) participating Directors or their Beneficiaries, with
respect to amounts credited to their Accounts before the date of the amendment,
suspension or termination.

 

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7.02 To the extent required by law, the Company shall withhold federal or state
income or payroll taxes from benefit payments hereunder and shall furnish the
recipient and the applicable governmental agency or agencies with such reports,
statements, or information as may be legally required in connection with such
benefit payments.

7.03 This Plan is intended, and shall be interpreted, to comply with
Section 409A of the Internal Revenue Code (except with respect to the
Grandfathered Subaccount). However, the Company shall not be liable to any
Executive or Director (or Beneficiary thereof) for any tax the Executive or
Director (or Beneficiary thereof) might owe as a result of participating in this
Plan. The installment payment option under the Plan is treated as the
entitlement to a single payment for purposes of Treasury Regulation section
1.409A-2(b)(2)(iii).

7.04 This Plan and all Agreements hereunder shall be construed in accordance
with and governed by the laws of the State of Delaware, without reference to
principles of conflict of laws, except as may be preempted by Federal law.

IN WITNESS WHEREOF, the Company has caused this version of the Plan to be signed
on which version reflects all modifications made to the Plan through such date
of execution.

 

ATTEST     Pepco Holdings, Inc. By:  

/s/ Jane K. Storero

    By:  

/s/ Joseph M. Rigby

  Jane K. Storero       Joseph M. Rigby   Secretary       Chairman of the Board,
President and Chief Executive Officer

 

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